31896 Federal Register / Vol. 63, No. 112 /Thursday, June 11, 1998 /Rules and Regulations

the Commission has determined that

this final rule does not have sufficient

Federalism implications to warrant the

preparation of a Federalism Assessment.

Executive Order 12988 Civil Justice

Reform

This rule meets the applicable

standards set forth in sections 3(a) and

3(b)(2) of E.O. 12988.

List of Subjects in 8 CFR Part 212

Administrative practice and

procedure, Aliens, Immigration.

Accordingly, the interim rule

amending 8 CFR part 212, which was

published in the Federal Register at 61

FR 36610–36611 on July 12, 1996, is

adopted as a final rule without change.

Dated: May 14, 1998.

Doris Meissner,

Commissioner, Immigration and

Naturalization Service.

[FR Doc. 98–15542 Filed 6–10–98; 8:45 am]

BILLING CODE 4410–10–M

SMALL BUSINESS ADMINISTRATION

13 CFR Parts 121, 125, and 126

HUBZone Empowerment Contracting

Program

AGENCY: Small Business Administration.

ACTION: Final rule.

SUMMARY: The HUBZone Act of 1997,

Title VI of Public Law 105–135, enacted

on December 2, 1997 (111 Stat. 2592),

created the HUBZone Empowerment

Contracting Program (hereinafter ‘‘the

HUBZone Program’’). This final rule

adds a new Part 126 to Title 13 of the

Code of Federal Regulations to

implement the HUBZone program.

DATES: The effective date of this rule is

September 9, 1998. However, at the

conclusion of the congressional review,

if the effective date has been changed,

the Small Business Administration

(SBA) will publish a document in the

Federal Register to establish the actual

effective date or to terminate the rule.

FOR FURTHER INFORMATION CONTACT:

Michael McHale, Assistant

Administrator, Office of Procurement

Policy and Liaison, 409 Third Street,

SW, Washington, DC 20416, (202) 205–

6731.

SUPPLEMENTARY INFORMATION: On April

2, 1998, SBA published a proposed rule

to implement the HUBZone program.

See 63 FR 16148. The proposed rule set

forth the program requirements for

qualification as a HUBZone small

business concern (HUBZone SBC), the

federal contracting assistance available

to qualified HUBZone SBCs, and other

aspects of this program. SBA published

a technical correction on April 14, 1998.

See 63 FR 18150.

The public comment period closed on

May 4, 1998. SBA received 35 comment

letters on the proposed rule. This final

rule includes changes based on some of

the comments received.

Section-by-Section Analysis

The conforming amendments to Part

121 of this title remain as proposed.

However, SBA has added a second

conforming amendment to Part 125 of

this title. Section 125.2 of this title must

be amended to include HUBZone

contracts in the contracts reviewed by

SBA’s procurement center

representatives.

A new part 126 is added to Title 13

of the Code of Federal Regulations to

implement the HUBZone program.

Section 126.100 explains that the

purpose of the HUBZone program is to

provide federal contracting assistance

for qualified small business concerns

(SBC) located in historically

underutilized business zones in an

effort to increase employment

opportunities and investment in those

areas. SBA received no comments

concerning this section and it remains

as proposed.

Section 126.101 lists the departments

and agencies affected directly by the

HUBZone program. SBA received no

comments concerning this section and it

remains as proposed.

Section 126.102 describes the effect

the HUBZone program will have on the

8(d) subcontracting program. The

HUBZone Act of 1997 amended section

8(d) of the Small Business Act, 15

U.S.C. 637(d), to include qualified

HUBZone SBCs in the formal

subcontracting plans required by 8(d) of

the Small Business Act and described in

section 125.3 of this title. Two

comments on this section stated that

SBA has not adequately addressed how

SBA will implement the inclusion of

qualified HUBZone SBCs in the 8(d)

subcontracting assistance program. SBA

refers commenters to changes made to

section 125.3 of this title, concerning

SBA’s 8(d) subcontracting program, to

implement the inclusion of qualified

HUBZone SBCs in this program.

Changes to the Federal Acquisition

Regulation also will need to be made to

further implement these changes. This

section remains as proposed.

Section 126.103 defines terms that are

important to the HUBZone program.

SBA received comments regarding

several of the proposed definitions.

In defining some terms essential to

the HUBZone program, the HUBZone

Act of 1997 relied upon definitions

provided by other federal agencies. This

final rule cross-references those

definitions for use in connection with

the HUBZone program.

HUBZone definition: The HUBZone

Act defines a HUBZone as ‘‘a

historically underutilized business zone

which is in an area located within one

or more qualified census tracts,

qualified non-metropolitan counties, or

lands within the external boundaries of

an Indian reservation.’’ Further, the

HUBZone Act states that the term

‘‘qualified census tract’’ has the

meaning given that term in

§ 42(d)(5)(C)(ii)(I) of the Internal

Revenue Code. This section of the

Internal Revenue Code refers to the lowincome housing credit program

maintained by the Department of

Housing and Urban Development

(HUD). The Secretary of HUD designates

the qualified census tracts by Notice

published periodically in the Federal

Register. These notices are titled

‘‘Statutorily Mandated Designation of

Qualified Census Tracts and Difficult

Development Areas for Section 42 of the

Internal Revenue Code of 1986.’’ The

most recent Notice may be found at 59

FR 53518 (1994). The rule includes a

cross-reference to § 42(d)(5)(C)(ii)(I) of

the Internal Revenue Code.

Qualified non-metropolitan counties

definition: The term qualified nonmetropolitan counties is based on the

most recent data available concerning

median household income and

unemployment rates. The Bureau of

Census of the Department of Commerce

gathers the data regarding median

household income and the Bureau of

Labor Statistics of the Department of

Labor gathers the data regarding

unemployment rates. The public can

find the information from the Bureau of

Census at any local Federal Depository

Library. To find the nearest Federal

Depository Library, call toll-free (888)

293–6498. The information from the

Bureau of Labor Statistics is available

for public inspection at the U.S.

Department of Labor, Bureau of Labor

Statistics, Division of Local Area

Unemployment Statistics office in

Washington, D.C. (the text of the rule

lists the complete address). Again, the

rule cross-references this information to

provide guidance in determining

whether or not a small business concern

is located in a HUBZone.

Qualified census tract definition: The

terms qualified census tract and

qualified non-metropolitan counties are

based on statistics gathered periodically

by various federal agencies. The census

reflects changes every 10 years, while

unemployment statistics are calculated
Federal Register / Vol. 63, No. 112 /Thursday, June 11, 1998 /Rules and Regulations 31897

annually. Changes in either can generate

changes in the areas that qualify as

HUBZones—even as often as annually.

Several commenters requested that

SBA make various changes to these

definitions that create HUBZones.

Several comments stated that the

definitions are unfair because

communities that need the assistance of

the HUBZone program will not get it

because they do not fall within one of

the definitions of HUBZone, especially

small rural states and rural counties.

One commenter stated that the criteria

should include actual population and

employment trends in a particular area.

Another commenter stated that a

definition based on poverty rates would

be more appropriate in an inner-city

community that does not contain low

income housing. Some commenters

suggested alternative definitions. For

example, one comment suggested that

SBA use Department of Commerce’s

Economic Development

Administration’s designation of ‘‘Long

Term Economic Deteriorated Areas’’ as

one definition of HUBZone. Two

comments suggested that areas in which

an active SBA Certified Development

Company operates should be considered

HUBZones. The definition of HUBZone

is based on statutory language in the

HUBZone Act of 1997 and, therefore,

SBA has no authority to modify it. The

definitions remain as proposed.

Lands within the external boundaries

of an Indian reservation definition: The

HUBZone Act of 1997 does not define

‘‘lands within the external boundaries of

an Indian reservation.’’ For purposes of

the HUBZone program, SBA proposed a

definition of ‘‘Indian reservation’’ used

in the Bureau of Indian Affairs’’ (BIA)

regulations and the rule includes a

cross-reference to 25 CFR 151.2(f). The

BIA definition of ‘‘Indian reservation’’

includes ‘‘that area of land over which

the tribe is recognized by the United

States as having governmental

jurisdiction, except that, in the State of

Oklahoma or where there has been a

final judicial determination that a

reservation has been disestablished or

diminished, Indian reservation means

that area of land constituting the former

reservation of the tribe as defined by the

Secretary [of the Interior or authorized

representative].’’ 25 CFR 151.2(f). BIA’s

definition of ‘‘tribe’’ includes Alaska

Native entities. See 25 CFR 81.1(w).

Indian reservation definition: Several

commenters objected to the proposed

definition of ‘‘Indian reservation’’ by

reference to a Bureau of Indian Affairs

regulation. One commenter said that

using BIA’s definition is inappropriate

because it includes only federally

recognized Indian tribes and that SBA

should include in the definition staterecognized tribes and individual Indians

residing on ‘‘former Indian lands.’’ One

comment stated that the BIA definition

should not control because it restricts

the definition to lands over which the

tribes exercise governmental

jurisdiction and there are pockets of

land within the outermost boundaries of

a reservation that were allotted to

individual Indians and therefore passed

out of tribal ownership and control,

creating a ‘‘checkerboard’’ pattern. This

commenter suggested that the phrase

‘‘lands within the external boundaries of

an Indian reservation’’ includes those

pockets of land, even though those

pockets are not considered part of the

reservation itself.

SBA has decided to keep the

definition of ‘‘Indian reservation’’ as

proposed. SBA believes that its use of a

definition of ‘‘Indian reservation’’

created by the Federal agency

responsible for Indian affairs is

appropriate. SBA believes that if

Congress had intended to include other

than federally recognized Indian tribes

or Indian land not part of an Indian

reservation, Congress would have

expressly stated that in the HUBZone

Act of 1997.

However, to accommodate the

‘‘checkerboard’’ pattern of ownership,

SBA has added a definition for the term

‘‘lands within the external boundaries of

an Indian reservation.’’ The definition

states that all lands within the outside

perimeter of an Indian reservation,

whether tribally owned and governed or

not, are included in the scope of ‘‘lands

within the external boundaries of an

Indian reservation’’ and, therefore, are

in a HUBZone.

Contract opportunity definition: SBA

has redefined contract opportunity in

light of several comments received

which point out practical difficulties

with the proposed rule and its reliance

on goal achievement statistics. After

further consideration of the issue, SBA

has chosen to eliminate goaling

statistics to define HUBZone contracting

opportunities. That approach was

considered impractical by procuring

agencies and, therefore, was not likely

to encourage the use of HUBZone

contracting. In resolving this issue, SBA

balanced HUBZone contracting with the

stated Congressional purpose in the

Small Business Act of maximizing 8(a)

contracting, where practicable. In effect,

SBA has replaced the three percent

limitation on HUBZone set-aside

contracting with revised provisions at

§ 126.607 which create a priority for

HUBZone firms which are also 8(a)

participants and other 8(a) participants.

No limitation on the amount of

HUBZone contracting would then

apply. This approach is also consistent

with comments asking for a clear order

of precedence regarding HUBZone

contracting. In terms of priority, this

approach would also retain consistency

with the existing Defense Federal

Acquisition Regulation Supplement.

SBA anticipates that the HUBZone

statutory goals will be readily achieved

by this approach, and that there will

now be no regulatory impediment to

exceeding those goals.

County definition: SBA has added a

definition of ‘‘county’’ to make clear

that county equivalents are considered

counties for purposes of the ‘‘nonmetropolitan county’’ definition of

HUBZone.

Employee definition: Two

commenters suggested alternative

definitions for ‘‘employee.’’ One stated

that the proposed definition is limiting

and should be expanded to include

temporary employees. Another

commenter recommended that SBA use

the term ‘‘full-time equivalent’’ in lieu

of ‘‘employee.’’ The purpose behind the

definition as proposed was to focus on

those jobs that best fulfill the statutory

purpose of the HUBZone Act of 1997.

This is why SBA specifically excluded

temporary and leased employees and

independent contractors from the

definition. SBA also sought to

encourage the maximum number of jobs

by allowing companies to count parttime employees but only where their

combined hours added up to at least 40

hours per week. This definition remains

as proposed.

HUBZone small business concern

definition: One commenter objected that

the 100 percent ownership requirement

is too rigid. Two commenters noted that

this requirement may be especially

difficult for publicly-held corporations

to meet. SBA considers that the

statutory language in the HUBZone Act

of 1997 requires that the HUBZone SBC

be 100 percent owned and controlled by

U.S. citizens. This definition remains as

proposed.

HUBZone 8(a) concern definition:

SBA has added a definition for

HUBZone 8(a) concerns to provide

guidance in applying § 126.607.

Principal office definition: The six

comments received on this definition

stated either that: (1) the ‘‘principal

office’’ may change contract-by-contract

for certain types of businesses with onsite contract performance (e.g.,

construction, trash removal); or (2) the

term ‘‘principal office’’ is generally

understood to mean the central

headquarters or center of operations of

the business, not where most of the

businesses’ employees are located.
31898 Federal Register / Vol. 63, No. 112 /Thursday, June 11, 1998 /Rules and Regulations

Suggestions for alternative definitions

included ‘‘where the company performs

its general and administrative business

functions,’’ ‘‘central headquarters or

center of operations,’’ and ‘‘where the

greatest proportion of the concern’s

labor cost is incurred.’’

According to the HUBZone Act of

1997, a HUBZone SBC’s principal office

must be located in a HUBZone. SBA

crafted the definition to fulfill the

statutory purpose of hiring residents in

HUBZones by encouraging businesses to

move to or expand their business

operations in a HUBZone (as opposed to

just their headquarters, which may be

where only a few employees work). As

a result, SBA declines to accept these

suggested changes. SBA acknowledges

that for some types of businesses, their

‘‘principal office’’ may change contract

by contract. However, this should not

prevent those businesses from meeting

the terms of this definition and

participating in the HUBZone program.

SBA has retained the definition as

proposed.

Reside definition: Several comments

stated that it is unclear how SBA or the

qualified HUBZone SBC will determine

an employee’s intent to reside in a

HUBZone indefinitely. One commenter

suggested that the criteria be more

stringent than voter registration, noting

that persons may have a voter

registration in a state where they have

not lived for some time. Another

commenter stated that it will be a

burden on SBA to check on residency

and voting registration.

SBA has retained the definition as

proposed. According to the HUBZone

Act of 1997, at least 35 percent of a

qualified HUBZone SBC’s employees

must reside in a HUBZone. SBA’s

definition requires either of two means

of indicating a permanent residence in

the HUBZone (living there for 180 days

or more or being a registered voter),

along with ‘‘intent to remain there

indefinitely.’’ SBA believes that the

HUBZone SBC can readily obtain

documentation regarding its employees’

length of residency or voting registration

in order to meet this definition. SBA

also believes that a HUBZone SBC

reasonably may rely on its employees’

representation of their intent to remain

in the HUBZone indefinitely.

Section 126.200 contains the

HUBZone eligibility requirements. In

general, as described in the regulations,

the company must be a small business

concern; the company must be owned

and controlled by one or more persons

each of whom is a citizen of the United

States; the principal office of the

concern must be located in a HUBZone;

at least 35 percent of the concern’s

employees must reside in a HUBZone;

the concern must attempt to maintain

this percentage during the performance

of any HUBZone contract; and the

concern must comply with certain

contract performance requirements in

connection with HUBZone contracts. To

be counted as residing in the HUBZone,

an employee either must be registered to

vote in the HUBZone or have resided in

the HUBZone for a period of not less

than 180 days.

SBA received two general comments

on this section. One commenter

recommended that large businesses be

included in the HUBZone program in

order to encourage further economic

growth within HUBZones. SBA

considers the statutory language in the

HUBZone Act of 1997 to include only

small business concerns in the

HUBZone program. Another commenter

suggested that the 35-percent residency

requirement will have a

disproportionately adverse affect on

smaller HUBZones which may not have

an adequate pool of individuals residing

within the HUBZone to hire as

employees in order to meet the 35-

percent requirement. SBA does not

consider the statutory language in the

HUBZone Act of 1997 to allow any

exception to this 35-percent

requirement. As a result, SBA did not

incorporate either of these suggestions.

In addition, SBA received six

comments suggesting that the phrase

‘‘attempt to maintain’’ the appropriate

percentage of employees who reside in

a HUBZone is not appropriate language.

Commenters suggested that SBA should

strengthen the language to make it

mandatory. SBA declines to accept this

recommendation because the phrase

‘‘attempt to maintain’’ comes directly

from section 3(p)(5)(A)(i)(II) of the Small

Business Act, as amended by section

602(a) of the HUBZone Act of 1997.

This language remains the same as in

the proposed section.

For additional clarity and to ensure

consistency with section 126.304, SBA

has inserted all of the statutory

requirements into this section.

Section 126.201 describes who is

considered to own a HUBZone SBC.

SBA received no comments concerning

this section and it remains as proposed.

Section 126.202 explains who is

considered to control a HUBZone SBC.

SBA received no comments on this

section and it remains as proposed.

Section 126.203 states that a

HUBZone SBC must meet SBA’s size

standards for its primary industry

classification as defined in Part 121 of

this title. SBA asked for comments on a

proposal to set a minimum size standard

of at least 16 employees and a maximum

size standard of one-half of the

procurement assistance size standard for

initial qualification only. SBA received

22 comments addressing these issues.

Minimum size standard of 16

employees: SBA received two comments

in support of this idea and 13 comments

in opposition. The reasons behind the

opposition were primarily that the size

standard would (1) be an unnecessary

barrier to start-up businesses; (2) unduly

burden rural states where many

businesses are under 16 employees; (3)

eliminate opportunities for businesses

most likely to create new jobs; (4)

negatively affect some types of

businesses that do not carry 16 full-time

employees (e.g., retailers, service

providers); and (5) eliminate from

eligibility those businesses with fewer

than 16 employees that already are

located in HUBZones. One commenter

noted that SBA’s own statistics show

that about 80 percent of small business

concerns have fewer than 10 employees,

so the overwhelming majority of small

businesses would be excluded from the

program under this minimum size

standard. The commenter further noted

that the impact would be even greater

on minority- and women-owned

concerns which tend to be smaller and

have fewer employees. The commenter

stated that the HUBZone statute did not

give SBA discretion to add limitations

to the statutory definition. Other

commenters stated that HUBZones

could benefit from businesses of any

size.

Maximum size standard at time of

initial qualification of one-half of the

procurement assistance size standard:

SBA received two comments in support

and five in opposition. One opposing

commenter stated that this approach

would reduce the number of contracts

available for award to qualified

HUBZone SBCs. This reduction would

hinder procuring agencies’ ability to

reach the HUBZone contracting goal and

reduce the benefit to HUBZone

communities. Additionally, this

commenter believed that there are

certain industries in which most of the

businesses would be over one-half of the

size standard for that industry. The

commenter observed that SBA’s

rationale stated that the HUBZone

program is not a business development

program so SBA should not be

concerned with whether a firm grows

out of its size standard due to receiving

HUBZone contracts. Rather, SBA should

be concerned primarily with

accomplishing the statutory purpose of

job creation and investment in

HUBZones.

Two commenters believed that

providing an exception to the one-half
Federal Register / Vol. 63, No. 112 /Thursday, June 11, 1998 /Rules and Regulations 31899

size standard for 8(a) participants and

women-owned businesses (WOBs)

might not survive legal challenge. SBA

also received four comments in support

of including Indian-owned businesses

as another exception to a one-half size

standard. SBA received another

comment stating that SBA should deem

Indian-owned businesses 8(a)

participants for purposes of this

program. This commenter also stated

that 8(a) participants owned by white

women or white men and WOBs owned

by white women should not receive the

benefit of this exception to the

maximum one-half size standard.

SBA has carefully considered all of

these comments on this issue and has

decided not to impose either a

minimum size standard of 16 employees

or a maximum one-half size standard for

initial qualification for the program. As

a result, § 126.203 remains as proposed

with regard to what size standards apply

to HUBZone SBCs.

Under § 126.203(a), if SBA cannot

verify that a concern is small, SBA may

deny the concern status as a qualified

HUBZone SBC or request a formal size

determination from the responsible

Government Contracting Area Director

or designee. SBA received no comments

on this section and it remains as

proposed.

Section 126.204 provides that

qualified HUBZone SBCs may have

affiliates so long as the affiliates are

qualified HUBZone SBCs, 8(a)

participants, or WOBs. SBA received

two comments in opposition to the

proposed rule regarding affiliation. Both

commenters opposed restricting

allowable affiliation to only specified

types of SBCs. One commenter noted

that there is no similar restriction under

the 8(a) program. Another commenter

suggested expanding allowable

affiliation to include any other SBC.

SBA has considered these comments but

has declined to accept these

recommendations. For the reasons

stated in the preamble to the proposed

rule, SBA continues to believe the

regulation as proposed is appropriate.

The regulation remains as proposed.

Section 126.205 explains that WOBs,

8(a) participants, and small

disadvantaged business concerns (SDBs)

also can qualify as HUBZone SBCs if

they meet the requirements set forth in

this part. SBA received two comments

on this section. One stated that the

section adds nothing substantive. The

other stated that allowing firms to

qualify under more than one

‘‘preference’’ program likely will result

in higher contracting costs to the

government. SBA believes that the

HUBZone Act of 1997 does not permit

excluding any other types of SBCs (i.e.,

SDBs, WOBs, 8(a) participants, etc.)

from participating in the HUBZone

program. As a result, SBA retains the

section as proposed.

Section 126.206 states the conditions

under which non-manufacturers can

qualify as HUBZone SBCs. SBA

received five comments concerning this

section. Three stated that the section

does not specifically require that the

HUBZone SBC non-manufacturer

supply the products of a manufacturer

that is located in a HUBZone and that

meets the employee residency

requirement. Four comments stated that

the term ‘‘regular dealer’’ is obsolete and

suggested SBA use the term ‘‘nonmanufacturer’’ or ‘‘dealer’’ instead.

SBA has modified the section to state

that the non-manufacturer must use a

manufacturer that is a qualified

HUBZone SBC. SBA believes this

requirement will further enhance the

impact of HUBZone contracting on job

creation in HUBZones. Also, SBA has

replaced the term ‘‘regular dealer’’ with

‘‘non-manufacturer’’ throughout Part

126. This term is consistent with current

law and practice in government

contracting, including § 121.406(b) of

this title (SBA’s non-manufacturer rule).

To show an equivalency, SBA notes in

this section that the HUBZone Act of

1997 uses the term ‘‘regular dealer.’’

Section 126.207 explains that a

qualified HUBZone SBC may have

offices or facilities located in another

HUBZone or even outside a HUBZone.

However, in order to qualify as a

HUBZone SBC, the concern’s principal

office must be located in a HUBZone.

SBA addresses the comments it received

referring to this section under other

sections. This section remains as

proposed.

Sections 126.300 through 126.306

describe how a concern is certified as a

qualified HUBZone SBC. Those sections

explain how SBA certifies a concern for

the program, when the certification

takes place, and whether a concern can

certify itself.

Several commenters addressed the

certification process as a whole. One

commenter suggested that the mere

existence of a certification process

might discourage participation in the

program. Another feared that selfcertification risked fraud and abuse and

asked SBA to specify when it would

seek further information or pursue

verification. A third commenter

suggested that the period between selfcertifications should be three years, not

one year. That commenter believed that

annual re-certification would be

burdensome to the HUBZone SBCs.

SBA has retained these sections

essentially as proposed. Both the selfcertification and the verification

portions of the HUBZone program are

based upon the HUBZone Act of 1997.

SBA modeled its annual certification

process on the 8(a) program where

experience has demonstrated that

waiting longer than one year postpones

addressing too many significant changes

in a concern’s eligibility. A longer

period would allow too many

substantive changes to occur, whether

voluntary or involuntary, without SBA’s

knowledge. Although there may be

qualified HUBZone SBCs that do not

experience changes in the course of a

three-year period, SBA’s program

experience suggests that one year is the

optimum period between selfcertifications.

Section 126.300 describes how SBA

will certify a concern as a qualified

HUBZone SBC. One comment suggested

that SBA should not rely solely on the

submitter’s information and should

modify its procedure based upon a

review of various state and local

empowerment programs’ certification

processes. This commenter believed that

lack of verification might result in

protests.

SBA has retained the section as

proposed. SBA believes that the

application process, including an

applicant’s representations and SBA’s

ability to request additional information

to verify those representations, along

with the program examination process,

adequately addresses the commenter’s

concerns.

Section 126.301 states that only SBA

may certify a qualified HUBZone SBC.

Section 126.302 prescribes when a

concern may apply for certification and

section 126.303 provides the address

where concerns must file their

certifications. SBA received no

comments on these sections and

therefore they are retained without

change.

Section 126.304 sets forth what a

concern must submit to be certified by

SBA as a qualified HUBZone SBC. Two

commenters raised concerns about the

language governing a concern’s

application and submissions to SBA.

The first commenter observed that SBA

should move paragraphs (a)(4) and (a)(5)

of this section (setting forth the ‘‘good

faith efforts’’ requirement to maintain

the 35 percent residence standard and

ensuring that limitations on

subcontracting are met, respectively) to

other sections. SBA has not adopted this

recommendation because paragraphs

(a)(4) or (a)(5) contain representations

that the concern is required to make in

the application process. The second
31900 Federal Register / Vol. 63, No. 112 /Thursday, June 11, 1998 /Rules and Regulations

commenter was concerned with the

substantive requirements. Those are

dealt with in the discussion of § 126.500

and § 126.700, respectively.

SBA has revised § 126.304(a) to

eliminate unnecessary verbiage and to

add a cross-reference to § 126.700 for

more complete details regarding

contract performance requirements.

Section 126.304(b) explains that if a

concern is applying for certification

based on a location ‘‘within the external

boundaries of an Indian reservation,’’ it

must submit official documentation

from the Bureau of Indian Affairs Land

Titles and Records Office governing

their area that confirms that the concern

is located within the external

boundaries of an Indian reservation.

This additional requirement is

necessary because, although the

qualified census tracts and qualified

non-metropolitan counties are

contained in databases available in an

electronic format, the data concerning

Indian reservations is available only

through the BIA Land Titles and

Records Offices, not in an electronic

format. Consequently, concerns

applying for HUBZone status based on

location within the external boundaries

of an Indian reservation must submit the

additional documentation. SBA has

added a sentence to this subsection

stating that if BIA is unable to verify

whether a business is located within the

external boundaries of an Indian

reservation, applicants should contact

SBA.

SBA intends to develop electronic

data for lands within the external

boundaries of an Indian reservation. If

SBA succeeds in this effort, it may be

able to eliminate this requirement in the

future′.

One commenter recommended that ‘‘a

letter signed by an official’’ of BIA be

required instead of ‘‘official

documentation from the appropriate

Bureau of Indian Affairs (BIA) Land

Titles and Records Office with

jurisdiction over the concern’s area

* * *.’’ The commenter suggested that

the proposed provision was more

complex than necessary and would

create potential delays and hindrances

for Alaska Native applicants. Another

commenter noted that specifying a

particular BIA office might create

problems if BIA reorganized.

SBA has retained the section as

proposed. The section requires ‘‘official

documentation,’’ which may include a

letter. BIA, in consultation with SBA,

will decide what documentation best

meets this requirement, provides

efficient service for applicants, and

protects the government against fraud

and abuse. SBA does not expect Alaska

Native applicants to encounter unusual

or unexpected delays and hindrances in

obtaining BIA approval and, therefore,

has not modified the section. Although

BIA may restructure itself, the function

which that office provides to HUBZone

applicants would be transferred to a

successor office. SBA believes that

specifying the name of the BIA office is

the most accurate procedure.

Another commenter recommended

adding the Form 912 (‘‘Statement of

Personal History’’) to the list of required

items in § 126.304(c). SBA declined to

adopt this recommendation for three

reasons. First, any listing of forms runs

the risk of omitting others. Moreover, as

presently worded, the subsection

already requires the concern to ‘‘submit

the forms, attachments, and any

additional information required by

SBA.’’ Thus, SBA already is authorized

to request any form it may deem

appropriate. Finally, specifying a form

by its number would necessitate another

formal rulemaking procedure to modify

the section in the event a form number

changes.

Section 126.305 explains the format

for certifications to SBA and § 126.306

describes how SBA will process the

certifications. Section 126.307 states

where SBA will maintain the List and

§ 126.308 explains what a concern can

do in the event SBA inadvertently omits

a qualified HUBZone SBC from the List.

SBA received no comments on any of

these sections and therefore they remain

as proposed.

Section 126.309 provides a procedure

for declined or de-certified concerns to

seek certification at a later date. One

commenter objected that the

certification process lacks the

procedural due process safeguards

(rights of appeals and reconsideration)

that are present in the 8(a) program.

SBA has retained this section as

proposed (except for a clarifying word)

because a firm does not enter or depart,

or participate in the HUBZone program

in the same way it does with the 8(a)

program. The 8(a) program not only

helps program participants to obtain

federal contracts but also provides

ongoing support from SBA program staff

to assist participants in their business

development. There is a definite entry

date, normally a nine-year term, and

there is a termination. The HUBZone

program merely determines a concern’s

eligibility to be placed on a list that may

permit it to obtain federal contracts.

There is no other SBA support available

to HUBZone SBCs through the

HUBZone program; Congress designed

the program to foster community

development, not the development of

individual concerns.

Four commenters addressed the oneyear waiting period imposed on

declined or de-certified concerns. One

recommended that ‘‘reservation-based

concerns’’ be exempt from the one-year

waiting period before reapplying.

Another suggested that a 30–60 day

period was more appropriate. Two other

commenters believed a one-year period

might be appropriate for intentional

misrepresentations or fraud but not for

unintentional or minor technical errors.

SBA will not decline applicants for

technical errors or problems easily

remedied by supplying clarifying

information. Instead, SBA will screen

out such errors and problems during the

application process and will work with

applicants who wish to overcome the

errors or omissions. SBA is aware that

difficulties might arise and § 126.306(b)

specifically authorizes SBA to request

that the concern provide additional

information or that it clarify the

information contained in its submission.

SBA considered the comments

received and has decided to retain the

one-year waiting period. SBA chose the

one-year period to give HUBZone SBCs

a reasonable period of time within

which to make the changes or

modifications that are necessary to

enable them to qualify for the HUBZone

program, and at the same time to allow

SBA to administer the HUBZone

program effectively with available

resources.

Sections 126.400 through 126.405

discuss program examinations,

including who will conduct program

exams, what the examiners will review,

and when examinations will be

conducted. In addition, these sections

set out the action SBA may take when

it cannot verify a concern’s eligibility

and what action SBA will take once it

has verified a concern’s eligibility.

Qualified HUBZone SBCs have an

obligation to maintain relevant

documentation for six years.

Proposed § 126.401(b) required that

qualified HUBZone SBCs retain all

documentation demonstrating that it

satisfied program qualifying

requirements for six years. One

commenter believed that SBA should

require HUBZone concerns to maintain

relevant documents for three years. SBA

has decided to retain this section as

proposed in order not to hinder

enforcement. Many relevant statutes

have statutes of limitation much longer

than three years.

Sections 126.402 and 126.403 set

forth when SBA may conduct program

examinations and state that SBA may

require additional information from a

HUBZone SBC. SBA received no
Federal Register / Vol. 63, No. 112 /Thursday, June 11, 1998 /Rules and Regulations 31901

comments on these sections and has

retained them as proposed.

Section 126.404 discusses the action

SBA may take if it is unable to verify a

HUBZone SBC’s eligibility. One

commenter suggested adding language

to make clear that the AA/HUB’s

decision on de-certification is final. SBA

has adopted this recommendation and

inserted language in § 126.404(c) stating

that the AA/HUB’s decision is the final

Agency decision. Although SBA

received no comments on § 126.404(b)

(which governs the situation when SBA

is unable to verify a qualified HUBZone

SBC’s eligibility), it added language to

clarify the rule. Subsection (a) provides

that SBA will notify the concern in

writing that it is no longer eligible and

subsection (b) granted the concern ‘‘10

business days to respond to the

notification.’’ SBA has modified

subsection (b) to make clear that the 10-

day period runs from the date the

concern receives SBA’s letter of

notification.

Sections 126.500 through 126.503 set

forth how a concern maintains its

qualified HUBZone SBC status; a

qualified HUBZone SBC’s ongoing

obligation to SBA and the consequences

for failure to uphold that obligation; the

length of time a concern may qualify as

a HUBZone SBC; and when SBA may

remove a concern from the List.

Specifically, a concern wishing to

remain on the List must self-certify

annually to SBA that it remains a

qualified HUBZone SBC. This selfcertification must take place within 30

days after each annual anniversary of

their date of certification.

One commenter pointed out that two

sentences in §§ 126.500 and 126.502 are

inconsistent. SBA has modified the

language in §§ 126.500(a) and 126.502 to

clarify how long a concern may remain

on the List. SBA eliminated the second

sentence in § 126.500(a) because it

answered a question that is not posed in

this section and there is a more

complete and correct answer in

§ 126.502. Section 126.500(a) only

addresses a HUBZone SBCs

responsibilities for maintaining its

status whereas § 126.502 speaks directly

to the time limit for inclusion on SBA’s

List. SBA also corrects the crossreferences listed in § 126.502 by adding

§ 126.200 and eliminating § 126.503.

Section 126.500 states the

requirements for a qualified HUBZone

SBC to maintain its status. Two

commenters objected that the proposed

regulations did not adequately address

the situation when an area that had

previously qualified as a HUBZone

ceases to be a HUBZone. Both

commenters noted that the regulations

do not indicate how or when the

HUBZone SBCs in that area would be

notified. One also suggested that the

three-year grandfathering period should

be extended to a five-year minimum.

SBA has eliminated the

‘‘grandfathering’’ provision (in section

126.502) after careful re-examination.

SBA believes that it is consistent with

congressional intent to not afford

HUBZone program benefits to concerns

in a location when that location no

longer meets the definition of

‘‘HUBZone.’’ Congress elected to tie the

HUBZone definition to data which is

well-known to be vulnerable to change.

Therefore, the SBA website will

endeavor to provide detailed statistical

data to aid concerns in assessing the

likelihood of a change in designation in

the future.

In the proposed rule, § 126.600

through 126.616 explained the general

conditions applicable to HUBZone

contracts. Based on the comments

received regarding these sections, SBA

has revised some of these regulations.

Section 126.600 states that HUBZone

contracts are contracts awarded to a

qualified HUBZone SBC through sole

source awards, set-aside awards based

on competition restricted to qualified

HUBZone SBCs, or awards to qualified

HUBZone SBCs through full and open

competition after a price evaluation

preference in favor of qualified

HUBZone SBCs. SBA received no

comments on this section; therefore, the

section remains as proposed.

Section 126.601 provides the

additional requirements that a qualified

HUBZone SBC must meet in order to

bid on a HUBZone contract. SBA

received comments with different views

on this section. Two commenters

suggested that SBA does not have the

authority to require a certification to the

contracting officer in order to bid on a

HUBZone contract. Additionally, the

commenters observed that the

certifications required appear contrary

to § 4301, ‘‘Elimination of Certain

Certification Requirements,’’ in the

Clinger-Cohen Act of 1996. The

HUBZone Act of 1997 gives the

Administrator the authority to establish

appropriate certification procedures by

regulation. Furthermore, the ClingerCohen Act of 1996 eliminated certain,

but not all, certifications and none of

those eliminated relate to small business

concerns. Finally, the certifications

required by this section are consistent

with other SBA programs for federal

contracting assistance (8(a), SDB, and

WOB).

One commenter was concerned that

§ 126.601(c) implies that each party to a

HUBZone joint venture must itself be a

qualified HUBZone SBC. This is not the

case. As stated in § 126.616(a), a

qualified HUBZone SBC may enter into

a joint venture with one or more other

qualified HUBZone SBCs, 8(a)

participants, or women-owned

businesses, for the purpose of

performing a specific HUBZone

contract. Section 126.601(c) simply

requires that each qualified HUBZone

SBC that is a party to a joint venture

make the applicable certifications

separately. The List includes the names

of individual concerns that SBA has

certified as qualified HUBZone SBCs—

not joint ventures. In order for the

contracting officer to ensure that each

qualified HUBZone SBC that is a party

to the joint venture is on the List, each

concern must certify under its own

name.

Finally, one commenter suggested

that manufacturers that will provide a

product to non-manufacturers and meet

the requirements of § 126.601(d) should

be on the List of Qualified HUBZone

SBCs. SBA has changed this section to

specify that manufacturers must also be

qualified HUBZone SBCs.

Consequently, such firms are listed.

Section 126.602 clarifies that a

qualified HUBZone SBC must ‘‘attempt

to maintain’’ the employee residency

percentage during performance of any

HUBZone contract.

SBA received a comment stating that

the limitation originally listed in

§ 126.602(b) also is listed in § 126.700,

but the other subcontracting limitations

listed in § 126.700 are not listed here.

Additionally, numerous commenters

challenged the authority and the ability

of contracting officers to effectively

monitor and enforce the requirements in

proposed § 126.602 (a) and (b). Proposed

§ 126.602(c) set forth that requirement.

Many comments indicated that SBA is

in a better position than the contracting

officer to monitor and enforce these

requirements. Further, requiring the

contracting officer to enforce these

requirements is inconsistent with other

SBA programs (including 8(a) and small

business set-asides).

After considering these comments,

SBA has revised this section to provide

that enforcement of § 126.602 will be

the responsibility of SBA and SBA will

monitor compliance in accordance with

§§ 126.400–126.505 of this title.

Violations of § 126.700 may be grounds

for termination of the contract at the

election of the contracting officer. The

contracting officer’s responsibility can

generally be met by obtaining an

appropriate representation from the

potential awardee. SBA will propose

modifications to the FAR that will add

this requirement as a new contract
31902 Federal Register / Vol. 63, No. 112 /Thursday, June 11, 1998 /Rules and Regulations

clause, making it a requirement of

contract performance. As revised, this

section is consistent with other SBA

programs. SBA has further revised this

section by eliminating proposed

§ 126.602(c).

Section 126.603 states that HUBZone

certification does not guarantee receipt

of HUBZone contracts. SBA received no

comments on this section; therefore, it

remains as proposed.

Section 126.604 provides that the

contracting officer determines whether a

HUBZone contract opportunity exists.

Two commenters suggested that SBA

revise this section to add that the

contacting officer will make this

decision with the advice and

recommendation of the procuring

agency’s Director, Office of Small and

Disadvantaged Business Utilization and

either the agency’s small business

technical advisor or SBA’s procurement

center representative (PCR). Existing

provisions of the FAR already require

the contracting officer to work with

those individuals, consequently, this

section remains as proposed.

One commenter expressed concern

that such decisions by the contracting

officers should be tracked for the first

two years of program implementation.

SBA will track the number and dollar

amounts of contracts awarded to

qualified HUBZone SBCs for the

duration of the program. Additionally,

as discussed further in connection with

§ 126.611, if a contracting officer

receives a recommendation from SBA’s

PCR and decides not to make an award

to a qualified HUBZone SBC either on

a HUBZone sole source or set-aside

basis, the contracting officer must notify

SBA’s PCR or the AA/HUB, and

ultimately the Administrator may

appeal the contracting officer’s decision.

Section 126.605 lists those

requirements which are not available as

HUBZone contracts. One commenter

recommended that SBA amend

§ 126.605 to exclude all acquisitions at

or under the simplified acquisition

threshold including all procurements

with an estimated value under $2,500

(micro-purchases). SBA does not agree

completely with this suggestion. SBA

has reconsidered the proposed

exclusion as to requirements between

$2,500 and $100,000. SBA now believes,

after further review, that only

contracting actions below the

micropurchase threshold should not be

available for HUBZone set-aside

procedures because to include them

would be impractical and would likely

cause no meaningful impact in terms of

job creation. Moreover, it would

discourage the use of purchase cards to

make small purchases. This does not

mean that HUBZone firms could not

provide goods and services at the

micropurchase level, only that their

HUBZone status would be incidental to

the contracting action.

Additionally, SBA has determined

that the proposed exclusion of contracts

above $2,500 and at or below $100,000

should be changed. SBA believes these

contracts represent too significant a

block of potential HUBZone contracting

actions to exclude them from the

program. At the same time, SBA is

mindful of the significant benefits of

simplified acquisition procedures which

also include a reservation for small

business. Accordingly, the final rule

does not exclude contracts above the

micropurchase threshold and below the

simplified acquisition threshold, but

makes the use of HUBZone contracting

optional for such contracts. Revised

§ 126.608 makes this clear.

Two commenters recommended that

small business set-asides be excluded

from HUBZone contracts. SBA declines

to accept this recommendation since a

very significant segment of government

contracting requirements would be lost

to HUBZones. As indicated, only

contracts below the micropurchase

threshold have been excluded in the

final rule.

Finally, one commenter asked what

the effect of the HUBZone program

would be on the Small Business

Competitiveness Demonstration

program. SBA has reviewed this issue

and has decided to include

requirements which fall within the

Small Business Competitiveness

Demonstration Program in § 126.605.

Exclusion of such procurements from

the HUBZone program would result in

a significant loss of contract

requirements in many labor intensive

industries, including construction,

refuse collection and non-nuclear ship

repair.

SBA has retained § 126.605 (a) and (b)

as proposed, amended subsection (c) to

exclude contracts below the

micropurchase threshold, and deleted

§ 126.605(d) as no longer necessary in

light of the changed definition of

contract opportunity in § 126.103.

Section 126.606 states that a

contracting officer may request that SBA

release an 8(a) requirement for award as

a HUBZone contract. SBA will release

only where neither the incumbent nor

any other 8(a) participant can perform

the requirement and where the 8(a)

program will not be adversely affected.

One commenter suggested that SBA

release an 8(a) requirement if a

HUBZone SBC can perform the work as

an 8(a) participant would. SBA believes

such a modification would adversely

affect the 8(a) program. Furthermore, the

legislative history includes numerous

statements of congressional intent

indicating that the HUBZone program

should not adversely affect the 8(a)

program. SBA declines to accept this

recommendation and this section is

retained as proposed.

Section 126.607 describes when a

contracting officer must set aside a

requirement for qualified HUBZone

SBCs. SBA has changed the heading for

§ 126.607 to now apply more generally

to HUBZone contracting. For the

reasons discussed above in connection

with the changes to the ‘‘contract

opportunity’’ definition, this section

now establishes a priority first for

qualified HUBZone 8(a) concerns and

then other 8(a) concerns. After these

preferences, the contracting officer must

use a HUBZone set-aside competition

when possible. Section 126.607 has

been revised to accomplish these

changes, while preserving the guidance

to contracting officers with respect to

consulting SBA’s List of Qualified

HUBZone SBCs to locate at least two

such firms which are likely to compete.

One commenter suggested that SBA

add the term ‘‘responsible’’ before

‘‘qualified HUBZone SBCs’’ in

subsection (c)(1) (proposed subsection

(a)(1)). The comment describes this as a

‘‘vital element.’’ The HUBZone Act of

1997 does not include the term

‘‘responsible’’ in the applicable

provision. However, SBA agrees that

responsibility is a vital element in the

contracting officer’s decision and has

revised the section to include the term.

SBA has eliminated the proposed

§ 126.608 and has created a new

§ 126.608 to address commenters’

concerns with respect to Simplified

Acquisition Threshold procedures. As

indicated above, the new § 126.608

clarifies that Simplified Acquisition

Threshold procedures can be used for

HUBZone contracting. SBA eliminated

the proposed § 126.608 because it was

merely restating general procurement

practices. SBA did not intend to create

special rules to be followed in the

HUBZone context where a competition

results in only one or no acceptable

offer received.

Section 126.609 now explains what

the contracting officer must do if a

contracting opportunity does not exist

for competition among qualified

HUBZone SBCs. SBA has clarified this

section. Section 126.609 now refers

specifically to § 126.607, and provides

guidance to contracting officers if a

contract opportunity does not exist for

competition among qualified HUBZone

SBCs. SBA received numerous
Federal Register / Vol. 63, No. 112 /Thursday, June 11, 1998 /Rules and Regulations 31903

comments on the issue of order of

precedence generally.

Sixteen commenters stated that SBA

exceeded its authority in proposed

§§ 126.608 and 126.609 by creating an

order of precedence among SBA

programs and directing the contracting

officer to make certain types of awards

(either sole source or full and open

competition). The commenters also

stated that the two provisions are

‘‘confusing,’’ ‘‘contradictory,’’ and

‘‘inconsistent.’’ However, many of the

commenters stated that SBA has the

authority to create an order of

precedence within SBA programs, but

the implementation of any such order

should be left to the FAR. One

commenter endorsed the order of

precedence as proposed and another

commenter suggested a priority for 8(a).

SBA believes that it is within its

authority to create an order of

precedence among SBA’s programs;

therefore SBA has made the order of

precedence in this rule mandatory.

However, SBA agrees that the

procurement methods a contracting

officer uses in other respects should be

left to the contracting officer in

accordance with existing procedures set

out in the FAR. As indicated, § 126.608

has been eliminated in its proposed

form. SBA has revised § 126.609 to be

consistent with that approach. SBA has

revised § 126.609 to make the order of

precedence mandatory. In light of

revisions to § 126.607, that section is

now simply referred to, and the

remaining priorities are identified in

§ 126.609.

Section 126.610 states that SBA may

appeal a contracting officer’s decision

not to reserve a procurement for award

as a HUBZone contract. One commenter

recommended that SBA expand this

right of appeal to include contracting

officer decisions that adversely affect

8(a) participants. However, the right of

the Administrator to appeal the

contracting officer’s decision not to

reserve a requirement for award as a

HUBZone contract is the only appeal

right provided by the HUBZone Act of

1997. Thus, the text remains as

proposed.

Section 126.611 describes the process

for SBA’s appeal of a contracting

officer’s decision not to reserve a

procurement for award as a HUBZone

contract. One commenter indicated that

this section did not clearly identify

when a contracting officer must notify

SBA of such a decision. Also, five

commenters suggested that requiring the

contracting officers to notify SBA every

time they decided not to reserve a

procurement for award as a HUBZone

contract imposes a ‘‘significant

administrative burden’’ on the

procurement process and on contracting

officers. One commenter suggested

including the HUBZone notification

requirement in the documentation

reviewed by SBA’s PCR. The commenter

felt that if an acquisition is not reviewed

by a PCR, a separate HUBZone

notification should not be required.

Another commenter suggested that the

contracting officer should notify the

PCR only if she or he decides not to set

aside a contract opportunity.

Presently, both the FAR and § 125.2 of

this title discuss the process by which

the contracting officer notifies SBA of

such decisions in other small business

set-aside programs. SBA has modified

slightly subsection 126.611(a). It now

provides that the contracting officer

must notify the SBA’s PCR of a decision

not to reserve a procurement for award

as a HUBZone contract when the

contracting officer rejects a PCR’s

recommendation to make a requirement

available. As previously proposed, if

SBA intends to appeal the decision,

SBA must notify the contracting officer

within five days of receipt of the

notification. SBA expects this

notification to be in accordance with the

procedures that presently exist in the

FAR and 13 CFR 125.2. Sections

126.611(b), (c) and (d) are unchanged.

Section 126.612 states when a

contracting officer may award a sole

source contract to a qualified HUBZone

SBC. One comment suggested that SBA

add a new paragraph to this section to

provide that where unemployment

exceeds 20 percent on an Indian

reservation, the anticipated contract

award price limits in subsections (b)(1)

and (2) do not apply. Three other

commenters argued that the limits in

subsections (b)(1) and (2) should not

apply to Indian reservation-based

businesses. The limitations on sole

source requirements set out in

subsections (b)(1) and (2) of this section

are taken directly from section

31(b)(2)(A) of the Small Business Act, as

amended by section 602(b)(1) of the

HUBZone Act of 1997. The statute did

not include any exceptions to these

limitations. Consequently, SBA does not

have the authority to provide such an

exception. Section 126.612 remains

essentially as proposed (there are some

minor clarifying word changes).

SBA received 18 comments

addressing proposed §§ 126.613 and

126.614. The comments focused on two

issues: (1) SBA’s interpretation of the

HUBZone price evaluation preference as

flawed, and (2) whether concerns

should be allowed to take advantage of

‘‘dual status’’ (HUBZone SBC and SDB).

Proposed § 126.613 explains how the

HUBZone price evaluation preference

affects the bid of a qualified HUBZone

SBC in full and open competition. In a

full and open competition, a contracting

officer must deem the price offered by

a qualified HUBZone SBC to be lower

than the price offered by another offeror

(other than another small business

concern) if the price offered by the

qualified HUBZone SBC is not more

than 10 percent higher than the price

offered by the otherwise lowest,

responsive, and responsible offeror.

This section includes an example of the

application of the HUBZone price

evaluation preference. The example has

been revised to make it more clear that

the preference applies to benefit

HUBZone SBCs only where the

HUBZone SBC would receive the award.

The comments regarding the

HUBZone price evaluation preference

suggested that according to the

HUBZone Act of 1997, the preference

should never displace the offer of

another small business concern.

Commenters suggested that in the

example included in this section, the

small business concern submitting the

$100 offer should receive the award. In

other words, the HUBZone price

evaluation preference should do no

more than eliminate the lowest,

responsive, responsible offeror that is a

large business, leaving the small

business concern as the new lowest,

responsive, responsible offeror which

would receive the award. One

commenter suggested using the term

‘‘apparent successful offeror’’ instead of

‘‘lowest, responsive, and responsible

offeror.’’ Responsibility is determined

later in the acquisition process and not

at the time the offers are evaluated. SBA

did not change the term. The term

‘‘lowest, responsive, and responsible

offeror’’ is taken directly from the

statute.

SBA does not interpret section

31(b)(3) of the Small Business Act, as

amended by section 602(b) of the

HUBZone Act of 1997, in this way. SBA

interprets this statutory language to

require that the lowest offer from a

qualified HUBZone SBC displace the

lowest, responsive, responsible offeror

that is a large business, and replace that

offeror with that HUBZone SBC. This

would result in the HUBZone SBC

receiving the award, in the example

included in this section of the rule.

SBA does not agree that a small

business concern that is not a qualified

HUBZone SBC can benefit from the

HUBZone price evaluation preference.

SBA believes that this result is contrary

to the intent and goals of the HUBZone

program.
31904 Federal Register / Vol. 63, No. 112 /Thursday, June 11, 1998 /Rules and Regulations

Proposed § 126.614 described how a

contracting officer must apply both

HUBZone and SDB price evaluation

preferences in a full and open

competition in some detail and with an

example. The comments SBA received

on this section generally agreed that

SBA’s ‘‘methodology is flawed’’ and that

the proposed application would result

in an award to a qualified HUBZone/

SDB at a ‘‘differential above 20

percent.’’ Two comments suggested that

statutory authority does not allow

payment of differentials above 20

percent. Commenters also stated that

SBA’s methodology does not take into

account exceptions to the application of

the SDB price evaluation preference

(e.g., otherwise successful offers of

eligible products under the Trade

Agreements Act when the acquisition

meets or exceeds a certain dollar

threshold). The consensus of the

commenters concerned with process

was that SBA regulations should

contain a broad policy statement

regarding the HUBZone price evaluation

preference and SBA should leave the

actual implementation to the FAR.

In addition, SBA also received

numerous comments dealing with the

substance of the issue and whether dual

status should be permitted at all. There

were four in favor of allowing dual

status and seven against. The comments

in favor stated that dual status will

encourage more minority-owned

concerns to compete for federal

contracts in HUBZones and create jobs;

will assist SDBs in competing against

qualified HUBZone SBCs; and would

avoid harm to the SDB program. The

opposing comments stated that concerns

should be required to select one status

or the other at the time they submit their

offer on a contract because the

application of multiple preferences is

too confusing; would not work with

negotiated procurements; would make it

extremely difficult for a contracting

officer to declare a price to be fair and

reasonable; and would provide an unfair

competitive advantage in favor of the

‘‘dual status’’ concerns.

SBA has considered these comments

carefully and has decided not to change

its position in the final rule. As a result,

SBA has eliminated proposed § 126.614

from the final rule. Nothing in the

HUBZone Act requires that the

HUBZone program displace a

contracting activity’s authority or

responsibilities regarding any other

programs designed to promote the

development of small, small

disadvantaged, or women-owned small

businesses. Therefore, SBA has

implemented the HUBZone program in

such a way that any preference a

concern receives under this program

must be added to the preference it may

receive pursuant to other statutory or

regulatory programs.

However, SBA has decided not to

prescribe how a contracting officer must

apply the two types of preferences in a

full and open competition, leaving the

mechanics for implementation in the

FAR.

As a result, SBA has revised § 126.614

to merely state the principle that firms

which are both qualified HUBZone

SBCs and SDBs must receive the benefit

of both.

Section 126.615 states that a large

business may not participate as a prime

contractor on a HUBZone contract but

may participate as a subcontractor to an

otherwise qualified HUBZone SBC. SBA

received no comments on this section

and it remains as proposed.

Section 126.616 describes the

circumstances in which a contracting

officer may award a HUBZone contract

to a joint venture. This section also

explains that a qualified HUBZone SBC

may enter into a joint venture with one

or more qualified HUBZone SBCs, 8(a)

participants, or WOBs for the purpose of

performing a specific HUBZone

contract. One commenter argued that

SBA should allow qualified HUBZone

SBCs to joint venture with large

businesses because the ability to joint

venture with ‘‘big business’’ will bring

jobs to HUBZones more rapidly. SBA

declines to accept this recommendation

because the HUBZone program is

intended to provide contracting

assistance to small, not large, business.

If qualified HUBZone SBCs joint

venture with large businesses, then the

benefits of the program would flow to

large businesses in addition to small.

Additionally, SBA has found that in

recent history small businesses create

more jobs annually than large

businesses. Thus, SBA has not modified

this section in the final rule.

In the proposed rule, SBA specifically

requested comments on whether

HUBZone contract opportunities should

be limited to certain types of contracts.

For example, should HUBZone

contracts only be available for industries

that are considered ‘‘labor intensive’’?

Three commenters specifically

addressed the issue. One commenter

stated that, based on the intention of the

program (creating jobs in HUBZones),

restricting the types of contracts to labor

intensive industries would be

reasonable and would ensure that the

HUBZone program is targeted at

contracts with the greatest potential for

creating jobs. However, the other

commenters adamantly opposed the

idea. These commenters argued that

such a limitation would exclude

participation by small business

concerns that Congress intended to

include in the program. Further, the

commenters stated that there appears to

be no statutory justification for

imposing any limit on the types of

industries involved in the program.

Finally, the commenters noted that the

term ‘‘labor intensive’’ is subjective and

such a limitation would be problematic

both in administration of the program

and enforcement. As a result, SBA has

not included any such limitation in the

final rule.

SBA also asked commenters to

discuss whether HUBZone contract

opportunities should be limited to those

not now awarded to SBCs and to make

suggestions for ways in which HUBZone

implementation can better help

government contracting activities meet

their SDB and WOB goals. SBA received

no comments specifically addressing

these issues.

SBA has retained §§ 126.700 through

127.703, as proposed. SBA received four

comments on § 126.700 which

addressed the amount of subcontracting

that is allowed by general construction

and special trade contractors.

Specifically, three commenters

questioned the provisions in the

proposed rule that requires general

construction firms to spend at least 15

percent of the cost of contract

performance for personnel on the

concern’s employees or the employees

of other qualified HUBZone SBCs.

Special trade contractors have the same

requirement except that their

performance percentage is 25 percent.

Although these percentages are less than

the standards applied for servicing and

manufacturing firms, these standards

represent conventional industry

practices and, therefore, remain

unchanged.

One commenter proposed that large

firms be authorized to perform up to 75

percent of manufacturing as a

subcontractor on contracts that are

performed on Indian reservations. This

proposal is inconsistent with the clear

language of the HUBZone legislation

which states that not less than 50

percent of the cost of manufacturing

supplies (not including the cost of

materials) will be incurred in

connection with the performance of the

contract in a HUBZone by one or more

HUBZone small business concerns.

Section 126.702 provides a process by

which representatives of national trade

or industry groups may request a change

in subcontracting percentage for specific

industry groups (as defined by two-digit

major group industry codes). One

commenter suggested that SBA revise
Federal Register / Vol. 63, No. 112 /Thursday, June 11, 1998 /Rules and Regulations 31905

§ 126.702 to permit individual

businesses to request changes in the

subcontracting percentage limitations.

SBA declines to accept this

recommendation. SBA wants to insure

that such requests reflect the views of a

large number of businesses before

invoking the procedures for changing

the percentages. SBA received no

comments regarding proposed

§§ 126.701 and 126.703; however, as

stated above, SBA has eliminated the

subcontracting percentage and has

modified these sections accordingly.

Section 126.800 addresses protests

relating to a small business concern’s

HUBZone status. This section explains

who may file a protest; what the protest

must contain; how and where a protest

must be filed; who decides the protest;

and what appeal rights are available.

One commenter recommended that the

SDB language in the 8(a) program

should be applied to the HUBZone

program to forestall frivolous protests

under § 126.800. SBA has declined to

accept this recommendation as

unnecessary. Although the SDB and the

HUBZone provisions in this title are

organized differently, there is little

substantive difference between them.

Section 126.800(b) permits any

‘‘interested party’’ to protest a HUBZone

SBC’s status. As defined in § 126.103, an

‘‘interested party’’ may be any of the

same three entities which are listed in

§ 124.603, the SDB provision. Although

expressed differently, the effect of the

two provisions is the same. The

difference between the SDB and

HUBZone procedures lies in the fact

that the HUBZone regulations separate

out sole source procurements for

different treatment. HUBZone

regulations permit only the SBA or the

contracting officer to file protests in

those cases. The SDB protest procedures

do not do so because there are no SDB

sole source contracts.

Three commenters urged that the

protest procedures set forth in § 126.800

should permit any small business that is

prevented from competing for a sole

source contract to protest the proposed

awardee’s qualified HUBZone status.

(SBA changed ‘‘apparent successful

offeror’’ to ‘‘proposed awardee’’ to more

accurately reflect the fact that there is

no competition in a sole source

procurement.) SBA has retained the

section as proposed. Third parties may

not protest a sole source award because

they have no stake in the contract, or

‘‘standing.’’ In other types of

procurements, a competitor who

protests an award may have standing to

get the award if its protest is successful.

In sole source procurements, however,

there are no ‘‘competitors’’ because of

the nature of the procurement.

Although other concerns may not

‘‘protest’’ an award, they may notify

SBA if they have information that a

HUBZone SBC is not qualified for any

reason. SBA, in its sole discretion, may

pursue a program examination of that

concern pursuant to § 126.402.

Although that course of action might not

halt an award, third parties with

pertinent information about a proposed

awardee also are encouraged to notify

the contracting officer or SBA directly to

urge that a formal protest be filed.

Section 126.801 sets forth the

procedure for submitting a protest of a

HUBZone SBC’s status. Three

commenters asked whether a protestor

may combine concurrent size and status

protests in a single letter and rely upon

SBA to divide up the protests

procedurally. SBA has added a phrase

to make clear that existing size

regulations require a protestor to file a

size protest with the contracting officer.

Protestors must direct protests relating

to HUBZone status to SBA.

One commenter suggested replacing

the phrase ‘‘unsuccessful offeror’’ in

§ 126.801(c)(1) with the phrase

‘‘interested party’’ to conform to the

language used in § 126.800. SBA accepts

this recommendation and makes this

change. SBA notes that § 126.800(b)

authorizes ‘‘any interested party’’ to

protest the status of a qualified

HUBZone SBC. SBA believes it is

internally consistent as well as

substantively correct to change

‘‘unsuccessful offeror’’ to ‘‘interested

party’’ in § 126.801(c)(1).

Section 126.802 states who decides a

HUBZone status protest. SBA received

no comments on this section and has

decided to keep the section as proposed.

SBA received one comment on

§ 126.803, which explains SBA’s

processing of protests. The commenter

suggested that SBA define ‘‘public

interest’’ and that the award decision

should be made, or approved, at a

higher level than contracting officer.

SBA based this section on the FAR

(§§ 12.302(h)(1) and 19.505(f)) and it is

consistent with the recently proposed

SDB protest procedures. As a result,

SBA declines to accept this

recommendation.

Section 126.804 notes that SBA will

decide all protests not otherwise

dismissed and § 126.805 sets forth the

appeal rights that are available. SBA

received no comments on either of these

sections and has retained them as

proposed.

Section 126.900 prescribes the

penalties applicable under the

HUBZone program including

procurement and non-procurement

suspension or debarment, as well as

applicable civil and criminal penalties.

SBA received one comment which

observed that HUBZone SBCs would not

be penalized under § 126.900 during the

year they are certified. This commenter

stated further that SBA appeared to have

no ability to halt contract performance

by a HUBZone SBC losing its

certification during the year. SBA has

retained the section as proposed. This

section allows the imposition of

substantial penalties on a concern at any

time that SBA discovers the concern has

made misrepresentations about its status

as a qualified HUBZone SBC. In

addition, SBA has authority to notify a

contracting agency that a HUBZone SBC

is no longer qualified but SBA does not

have authority to require that agency to

terminate the contract. Contract

termination (whether for convenience or

default) is governed by the FAR.

Compliance With Executive Orders

12612, 12778, and 12866, the

Regulatory Flexibility Act (5 U.S.C. 601

et seq.), and the Paperwork Reduction

Act (44 U.S.C. Ch. 35)

SBA certifies that this rule is a major

rule within the meaning of Executive

Order 12866, and has a significant

economic impact on a substantial

number of small entities within the

meaning of the Regulatory Flexibility

Act, 5 U.S.C. 601 et seq. SBA submits

the following economic analysis

prepared pursuant to Executive Order

12866 and Initial Regulatory Flexibility

Analysis (IRFA) prepared pursuant to

the Regulatory Flexibility Act.

In making its determination that this

rule is a major rule and has a significant

economic impact on a substantial

number of small entities, SBA used the

definition of small business set forth in

13 CFR Part 121.

The HUBZone Act of 1997, Title VI of

Public Law 105–135, 111 Stat. 2592

(December 2, 1997), creates the

HUBZone program and directs the

Administrator of SBA to promulgate

regulations to implement it. The rule

sets forth the program requirements for

qualification as a HUBZone SBC, the

federal contracting assistance available

to qualified HUBZone SBCs, and other

aspects of this program.

The HUBZone program will benefit

SBCs by increasing the number of

federal government contracts awarded

to them. There is a statutory

requirement that HUBZone SBCs

receive three percent of contract dollars.

SBA received no additional information

from the public during the comment

period on the impact of the proposed

rule on all small businesses. The
31906 Federal Register / Vol. 63, No. 112 /Thursday, June 11, 1998 /Rules and Regulations

program also will benefit HUBZone

communities by providing much needed

jobs and investment in those

communities.

Prior to submitting an offer on a

HUBZone contract, an interested small

business must apply to SBA for

certification as a qualified HUBZone

SBC. The concern must submit

information relating to its eligibility for

the program, including supporting

documentation. Once a concern is

certified as a qualified HUBZone SBC, it

must self-certify annually to SBA that

there has been no material change in its

circumstances that would affect

eligibility. The information required for

certification consists of general

information about the business. The

Paperwork Reduction Act aspect of this

certification is that each concern will be

able to complete the certification

application in one hour or less.

The HUBZone program is different

from existing government contracting

programs because it focuses on job

creation in high unemployment and

poverty-level communities. Commenters

requested that SBA discuss the impact

of the HUBZone program on other

contracting/procurement assistance

programs. One commenter specifically

raised the issue of the interaction

between the HUBZone program and the

previously proposed Empowerment

Contracting program by the Department

of Commerce in May 1997. The

Department of Commerce did not and

will not publish a final rule which

would implement the empowerment

contracting program. Two commenters

raised the issue of the competition

between HUBZone concerns and 8(a)

participants owned by Community

Development Companies. These 8(a)

participants will be treated as any other

8(a) participant.

The small entities affected by this rule

are those who fit within the definition

of a small business concern as defined

by SBA in 13 CFR part 121 and new part

126 and who participate in government

contracting. Because the program is

new, SBA cannot estimate precisely the

number or classes of small entities that

this rule will affect. However, as

explained below, SBA estimates that

more than 30,000 SBCs will apply for

certification as qualified HUBZone

SBCs.

Based on 1992 census data and

making reasonable extrapolations to

account for growth in recent years, SBA

estimates that there are approximately

five million businesses with employees

in the United States; of this number,

approximately 4.9 million—or 98

percent—are considered small. Clearly,

not all of the businesses who are

considered small seek to participate in

federal government contracting or will

seek to participate in the HUBZone

program. Currently, there are

approximately 170,000 SBCs registered

on PRO-Net, SBA’s database of SBCs

actively seeking federal government

contracts. While PRO-Net is not a

perfect measure of businesses that may

be interested in contracting with the

government, it is the most accurate

measure currently available to SBA.

The number of entities that seek

certification as qualified HUBZone SBCs

will depend, first, on the number of

businesses located in HUBZones. The

potential number of HUBZones is

significant. Based on the data available,

there are approximately 61,000 census

tracts in the United States; of those

tracts, about 7,000—or 11 percent—are

qualified census tracts for purposes of

the HUBZone program. In addition,

there are approximately 3,000 nonmetropolitan counties in the United

States; of those counties, about 900—or

30 percent—are qualified nonmetropolitan counties for purposes of

the HUBZone program. SBA believes

that there are 310 Indian reservations

and 217 Alaska Native villages. Based

on combining the qualified census tract

and qualified non-metropolitan county

data, SBA estimates that approximately

12 percent of the census tracts and nonmetropolitan counties in the United

States will qualify as HUBZones.

If all small businesses interested in

Federal procurement were evenly

distributed geographically, then

approximately 12 percent of the 170,000

SBCs registered on PRO-Net—or

20,000—would be located in

HUBZones. However, SBA believes that

a much higher number of small business

are located in qualified census tracts

than in qualified non-metropolitan

counties; therefore, SBA adjusts this

number upward and estimates that

25,000 SBCs (or 15 percent of all SBCs)

will be both interested in Federal

procurement and located in HUBZones.

However, as stated above, the number of

concerns registered on PRO-Net may not

reflect the entire universe of small

businesses that are interested in

contracting with the government.

The incentives available through

participation in the program could,

moreover, result in additional SBCs

relocating to HUBZone areas. SBA is

unable to predict the impact of this

factor on the total number of qualified

HUBZone SBCs, but estimates that

roughly 30,000 concerns that are either

now HUBZone SBCs or will become

HUBZone SBCs as a result of these

incentive effects will apply for

certification. As discussed above, these

30,000 HUBZone SBCs will be spread

over about 7000 census tracts, about 900

non-metropolitan counties, 310 Indian

reservations and 217 Alaska Native

villages.

Because the HUBZone program is

new, SBA also cannot estimate precisely

the economic impact the rule may have

on the economy. According to the

Congressional Budget Office (CBO), in

1996 the federal agencies specified in

the HUBZone Act contracted for more

than 90 percent of all federal

procurement obligations. (143 Cong.

Rec. S8976 (daily ed. September 9,

1997)). In FY 1996, the federal

government spent $197.6 billion on the

procurement of goods and services. The

government awarded small businesses

$41.1 billion in direct contract actions—

21 percent of the total $197.6 billion in

federal procurement.

The HUBZone Act of 1997 amends

the Small Business Act to increase the

Government-wide federal contracting

goal for SBCs from 20 percent to 23

percent of all federal prime contracts. In

addition, the HUBZone Act sets the

government contracting goal for

HUBZone SBCs initially at one percent

of all federal prime contracts with a

gradual increase to three percent by the

year 2003. Thus, by 2003, assuming the

participating agencies reach the three

percent contracting goal, HUBZone

SBCs may be awarded approximately $6

billion in federal contract actions (three

percent of the approximately $200

billion procurement budget).

Contracts for the purchase of Federal

Government goods and services under

the HUBZone program would operate in

the following three ways: (1) a contract

award to a qualified HUBZone small

business concern can be made by a

procuring agency if a contracting

opportunity exists and it determines

that two or more qualified HUBZone

small business concerns will submit

offers for the contract and the award can

be made at a fair market price; (2)

consistent with other criteria, a

contracting officer can award a sole

source contract to a qualified HUBZone

small business concern if it submits a

reasonable and responsive offer and is

determined by the appropriate agency

contracting officer to be a responsible

contractor. Sole-source contracts cannot

exceed $5 million for manufacturing

contracts and $3 million for all other

contract opportunities; and (3) a 10

percent Price Evaluation Preference in

full and open competition can be made

on behalf of the Qualified HUBZone

small business concern if its offer is not

more than 10 percent higher than the

other offeror, so long as it is not a small

business concern.
Federal Register / Vol. 63, No. 112 /Thursday, June 11, 1998 /Rules and Regulations 31907

In addition to the procurement

contract awards available to qualified

HUBZone concerns, the HUBZone

program will have other effects on the

economy including the possibility of

increased costs to the government. CBO

anticipates that implementation of the

HUBZone program will increase the

incidence of sole source contracting.

According to CBO, about 19 percent of

federal procurement is awarded through

sole source contracts. It is not possible

to project any increase in sole source

awards at this time, and there might not

be any increase in sole source awards at

all. Instead, qualified HUBZone SBCs

might receive sole source awards that

would otherwise go to large businesses

or other small businesses.

CBO also estimates that implementing

the HUBZone program would

significantly increase discretionary

spending for the federal agencies

affected by the program. According to

CBO, ‘‘[s]uch costs could total tens of

millions of dollars each year, but CBO

cannot estimate such costs precisely.’’

(143 Cong. Rec. S8976 (daily ed.

September 9, 1997)). CBO anticipated

that these additional costs would stem

from both additional administrative

responsibilities for SBA and other

federal agencies, as well as the likely

increased use of sole source contracting.

SBA is not in a position to shed much

additional light on this subject. SBA has

received an appropriation of $2 million

in FY 1998 to begin implementing the

program and has requested $4 million

for FY 1999. No other cost information

is available at the present time.

Assessing whether the government will

have a net cost from this program is very

subjective. It is at least possible that

increased competition from HUBZone

SBCs will cause competing concerns to

lower prices thereby reducing

government procurement costs (perhaps

substantially).

While it is at least possible that

increased competition from HUBZone

SBCs will cause competing concerns, it

is useful to perform an informal

sensitivity analysis on the possible

implications for increased Federal

Government contracting costs that

derive from the description of

contracting procedures under the

HUBZone program. Calculations here

assume that the program is fully in

effect in the year 2003 and that

HUBZone contracts are at the level

(from above) of $6 billion. If all

HUBZone contracts are awarded to

qualified HUBZone SBCs in

competitions in which two or more

qualified HUBZone SBCs submit offers

and the award is made at a fair market

price, then the additional cost to the

Federal Government could be close to

zero. But, as noted above, there are

expected to be about 30,000 HUBZone

SBCs competing for contracts and they

are expected to be spread over about

7000 census tracts and about 900 nonmetropolitan counties, so the likelihood

of this always happening is not large.

The second possibility is that all

HUBZone contracts would be awarded

as sole source contracts to qualified

HUBZone SBCs that submit reasonable

and responsive offers and are

determined by the appropriate

contracting officer to be responsible

contractors. (The sole-source contracts

could not exceed $5 million for

manufacturing contracts and $3 million

for all other contract opportunities.) The

extra costs to the Federal Government in

this case would be the additional costs

over competitive awards to the Federal

Government that are usually associated

with sole source contracting. The third

possibility is that all HUBZone contracts

would be awarded at a 10 percent Price

Evaluation Preference in full and open

competition. One could assume that the

SBC offer is exactly 10 percent higher

than other (non SBC) offers. In this

unlikely case, the additional cost to the

Federal Government is $600 million per

year or 10 percent of $6 billion, the

amount by which the SBC offer would

exceed other non-SBC offers that did not

receive preference.

Under all of these circumstances, SBA

has determined that this final rule is a

major rule within the meaning of E.O.

12866, and has a significant impact on

a substantial number of small entities

within the meaning of the Regulatory

Flexibility Act.

For purposes of the Paperwork

Reduction Act, 44 U.S.C. Ch. 35, SBA

certifies that this final rule imposes new

reporting or recordkeeping requirements

on concerns applying to be certified as

qualified HUBZone SBCs. The rule

requires such concerns to submit

evidence that they meet the eligibility

requirements set forth in the rule; once

certified, in order to remain on the List

a concern must self-certify annually to

SBA that it remains qualified; and

qualified HUBZone SBCs must notify

SBA immediately of any material

change in circumstances which could

affect their eligibility.

For purposes of Executive Order

12612, SBA certifies that this rule has

no federalism implications warranting

the preparation of a Federalism

Assessment.

For purposes of Executive Order

12778, SBA certifies that it has drafted

this rule, to the extent practicable, in

accordance with the standards set forth

in section 2 of that Order.

(Catalog of Federal Domestic Assistance

Programs, No. 59.009)

List of Subjects

13 CFR Part 121

Government procurement,

Government property, Grant programsbusiness, Individuals with disabilities,

Loan programs-business, Small

businesses.

13 CFR Part 125

Government contracts, Government

procurement, Reporting and

recordkeeping requirements, Research,

Small businesses, Technical assistance.

13 CFR Part 126

Administrative practice and

procedure, Government procurement,

Reporting and recordkeeping

requirements, Small businesses.

Accordingly, for the reasons set forth

above, SBA amends Title 13, Code of

Federal Regulations (CFR), as follows:

PART 121—[AMENDED]

1. The authority citation for 13 CFR

part 121 is revised to read as follows:

Authority: Pub. L. 105–135 sec. 601 et seq.,

111 Stat. 2592; 15 U.S.C. 632(a), 634(b)(6),

637(a) and 644(c); and Pub. L. 102–486, 106

Stat. 2776, 3133.

§ 121.401 [Amended]

2. Section 121.401 is amended by

deleting the word ‘‘and’’ before ‘‘Federal

Small Disadvantaged Business

Programs,’’ adding a comma after

‘‘Federal Small Disadvantaged Business

Programs,’’ and adding the following

language at the end of the sentence:

‘‘and SBA’s HUBZone program’’.

3. Section 121.1001 is amended by

redesignating paragraph (a)(5) as (a)(6)

and by adding the following new

paragraph (a)(5) to read as follows:

§ 121.1001 Who may initiate a size protest

or a request for formal size determination?

(a) Size Status Protests. * * *

(5) For SBA’s HUBZone program, the

following entities may protest in

connection with a particular HUBZone

procurement:

(i) Any concern that submits an offer

for a specific HUBZone set-aside

contract;

(ii) Any concern that submitted an

offer in full and open competition and

its opportunity for award will be

affected by a price evaluation preference

given a qualified HUBZone SBC;

(iii) The contracting officer; and

(iv) The Associate Administrator for

Government Contracting, or designee.

* * * * *

4. Section 121.1008 is amended by

revising paragraph (a) to read as follows:
31908 Federal Register / Vol. 63, No. 112 /Thursday, June 11, 1998 /Rules and Regulations

§ 121.1008 What happens after SBA

receives a size protest or a request for a

formal size determination?

(a) When a size protest is received, the

SBA Government Contracting Area

Director, or designee, will promptly

notify the contracting officer, the

protested concern, and the protestor that

a protest has been received. In the event

the size protest pertains to a

requirement involving SBA’s HUBZone

Program, the Government Contracting

Area Director will advise the AA/HUB

of receipt of the protest. In the event the

size protest pertains to a requirement

involving SBA’s SBIR Program, the

Government Contracting Area Director

will advise the Assistant Administrator

for Technology of the receipt of the

protest. SBA will provide a copy of the

protest to the protested concern along

with a blank SBA Application for Small

Business Size Determination (SBA Form

355) by certified mail, return receipt

requested, or by any overnight delivery

service that provides proof of receipt.

SBA will ask the protested concern to

respond to the allegations of the

protestor.

* * * * *

PART 125—[AMENDED]

5. The authority section for 13 CFR

part 125 is revised to read as follows:

Authority: Pub. L. 105–135 sec. 601 et seq.,

111 Stat. 2592; 15 U.S.C. 634(b)(6), 637, and

644; 31 U.S.C. 9701, 9792.

6. Section 125.2 is amended by

revising the second sentence in

paragraph (a)(1) to read as follows:

§ 125.2 Prime contracting assistance.

(a) * * *

(1) * * * PCRs review all acquisitions

not set aside for small businesses,

including HUBZone small business

concerns, to determine whether a setaside would be appropriate. * * *

* * * * *

7. Section 125.3 is amended by

revising paragraphs (b) and (c) and by

revising the last sentence of paragraph

(d) to read as follows:

§ 125.3 Subcontracting assistance.

(a) * * *

(b) Upon determination of the

successful subcontract offeror on a

subcontract for which a small business,

small disadvantaged business, and/or a

HUBZone small business received a

preference, but prior to award, the

prime contractor must inform each

unsuccessful offeror in writing of the

name and location of the apparent

successful offeror and if the successful

offeror was a small business, small

disadvantaged business, or HUBZone

business. This applies to all

subcontracts over $10,000.

(c) SBA Commercial Market

Representatives (CMRs) facilitate the

process of matching large prime

contractors with small, small

disadvantaged, and HUBZone

subcontractors. CMRs identify, develop,

and market small businesses to the

prime contractors and assist the small

concerns in obtaining subcontracts.

(d) * * * Source identification means

identifying those small, small

disadvantaged, and HUBZone concerns

which can fulfill the needs assessed

from the opportunity development

process.

PART 126—[ADDED]

8. Add a new part 126 to read as

follows:

PART 126—HUBZONE PROGRAM

Subpart A—Provisions of General

Applicability

126.100 What is the purpose of the

HUBZone program?

126.101 Which government departments or

agencies are affected directly by the

HUBZone program?

126.102 What is the effect of the HUBZone

program on the section 8(d)

subcontracting program?

126.103 What definitions are important in

the HUBZone program?

Subpart B—Requirements to be a Qualified

Hubzone SBC

126.200 What requirements must a concern

meet to receive SBA certification as a

qualified HUBZone SBC?

126.201 For this purpose, who does SBA

consider to own a HUBZone SBC?

126.202 Who does SBA consider to control

a HUBZone SBC?

126.203 What size standards apply to

HUBZone SBCs?

126.204 May a qualified HUBZone SBC

have affiliates?

126.205 May WOBs, 8(a) participants or

SDBs be qualified HUBZone SBCs?

126.206 May non-manufacturers be

qualified HUBZone SBCs?

126.207 May a qualified HUBZone SBC

have offices or facilities in another

HUBZone or outside a HUBZone?

Subpart C—Certification

126.300 How may a concern be certified as

a qualified HUBZone SBC?

126.301 Is there any other way for a

concern to obtain certification?

126.302 When may a concern apply for

certification?

126.303 Where must a concern file its

certification?

126.304 What must a concern submit to

SBA?

126.305 What format must the certification

to SBA take?

126.306 How will SBA process the

certification?

126.307 Where will SBA maintain the List

of qualified HUBZone SBCs?

126.308 What happens if SBA inadvertently

omits a qualified HUBZone SBC from the

List?

126.309 How may a declined or de-certified

concern seek certification at a later date?

Subpart D—Program Examinations

126.400 Who will conduct program

examinations?

126.401 What will SBA examine?

126.402 When may SBA conduct program

examinations?

126.403 May SBA require additional

information from a HUBZone SBC?

126.404 What happens if SBA is unable to

verify a qualified HUBZone SBC’s

eligibility?

126.405 What happens if SBA verifies

eligibility?

Subpart E—Maintaining Hubzone Status

126.500 How does a qualified HUBZone

SBC maintain HUBZone status?

126.501 What are a qualified HUBZone

SBC’s ongoing obligations to SBA?

126.502 Is there a limit to the length of time

a qualified HUBZone SBC may be on the

List?

126.503 When is a concern removed from

the List?

Subpart F—Contractual Assistance

126.600 What are HUBZone contracts?

126.601 What additional requirements must

a qualified HUBZone SBC meet to bid on

a contract?

126.602 Must a qualified HUBZone SBC

maintain the employee residency

percentage during contract performance?

126.603 Does HUBZone certification

guarantee receipt of HUBZone contracts?

126.604 Who decides if a contract

opportunity for HUBZone set-aside

competition exists?

126.605 What requirements are not

available for HUBZone contracts?

126.606 May a contracting officer request

that SBA release an 8(a) requirement for

award as a HUBZone contract?

126.607 When must a contracting officer set

aside a requirement for qualified

HUBZone SBCs?

126.608 Are there HUBZone contracting

opportunities below the simplified

acquisition threshold?

126.609 What must the contracting officer

do if a contracting opportunity does not

exist for competition among qualified

HUBZone SBCs?

126.610 May SBA appeal a contracting

officer’s decision not to reserve a

procurement for award as a HUBZone

contract?

126.611 What is the process for such an

appeal?

126.612 When may a contracting officer

award sole source contracts to a qualified

HUBZone SBC?

126.613 How does a price evaluation

preference affect the bid of a qualified

HUBZone SBC in full and open

competition?
Federal Register / Vol. 63, No. 112 /Thursday, June 11, 1998 /Rules and Regulations 31909

126.614 How does a contracting officer treat

a concern that is both a qualified

HUBZone SBC and an SDB in a full and

open competition?

126.615 May a large business participate on

a HUBZone contract?

126.616 What requirements must a joint

venture satisfy to bid on a HUBZone

contract?

Subpart G—Contract Performance

Requirements

126.700 What are the subcontracting

percentages requirements under this

program?

126.701 Can these subcontracting

percentages requirements change?

126.702 How can the subcontracting

percentages requirements be changed?

126.703 What are the procedures for

requesting changes in subcontracting

percentages?

Subpart H—Protests

126.800 Who may protest the status of a

qualified HUBZone SBC?

126.801 How does one file a HUBZone

status protest?

126.802 Who decides a HUBZone status

protest?

126.803 How will SBA process a HUBZone

status protest?

126.804 Will SBA decide all HUBZone

status protests?

126.805 What are the procedures for

appeals of HUBZone status

determinations?

Subpart I—Penalties

126.900 What penalties may be imposed

under this part?

Authority: Pub. L. 105–135 sec. 601 et seq.,

111 Stat. 2592; 15 U.S.C. 632(a).

Subpart A—Provisions of General

Applicability

§ 126.100 What is the purpose of the

HUBZone program?

The purpose of the HUBZone program

is to provide federal contracting

assistance for qualified SBCs located in

historically underutilized business

zones in an effort to increase

employment opportunities, investment,

and economic development in such

areas.

§ 126.101 Which government departments

or agencies are affected directly by the

HUBZone program?

(a) Until September 30, 2000, the

HUBZone program applies only to

procurements by the following

departments and agencies:

(1) Department of Agriculture;

(2) Department of Defense;

(3) Department of Energy;

(4) Department of Health and Human

Services;

(5) Department of Housing and Urban

Development;

(6) Department of Transportation;

(7) Department of Veterans Affairs;

(8) Environmental Protection Agency;

(9) General Services Administration;

and

(10) National Aeronautics and Space

Administration.

(b) After September 30, 2000, the

HUBZone program will apply to all

federal departments and agencies which

employ one or more contracting officers

as defined by 41 U.S.C. 423(f)(5).

§ 126.102 What is the effect of the

HUBZone program on the section 8(d)

subcontracting program?

The HUBZone Act of 1997 amended

the section 8(d) subcontracting program

to include qualified HUBZone SBCs in

the formal subcontracting plans

described in § 125.3 of this title.

§ 126.103 What definitions are important in

the HUBZone program?

Administrator means the

Administrator of the United States

Small Business Administration (SBA).

AA/8(a)BD means SBA’s Associate

Administrator for 8(a) Business

Development.

AA/HUB means SBA’s Associate

Administrator for the HUBZone

Program.

ADA/GC&8(a)BD means SBA’s

Associate Deputy Administrator for

Government Contracting and 8(a)

Business Development.

Certify means the process by which

SBA determines that a HUBZone SBC is

qualified for the HUBZone program and

entitled to be included in SBA’s ‘‘List of

Qualified HUBZone SBCs.’’

Citizen means a person born or

naturalized in the United States. SBA

does not consider holders of permanent

visas and resident aliens to be citizens.

Concern means a firm which satisfies

the requirements in §§ 121.105(a) and

(b) of this title.

Contract opportunity means a

situation in which a requirement for a

procurement exists, none of the

exclusions from § 126.605 applies, and

any applicable conditions in § 126.607

are met.

County means the political

subdivisions recognized as a county by

a state or commonwealth or which is an

equivalent political subdivision such as

a parish, borough, independent city, or

municipio, where such subdivisions are

not subdivisions within counties.

County unemployment rate is the rate

of unemployment for a county based on

the most recent data available from the

United States Department of Labor,

Bureau of Labor Statistics. The

appropriate data may be found in the

DOL/BLS publication titled

‘‘Supplement 2, Unemployment in

States and Local Areas.’’ This

publication is available for public

inspection at the Department of Labor,

Bureau of Labor Statistics, Division of

Local Area Unemployment Statistics

located at 2 Massachusetts Ave., NE,

Room 4675, Washington D.C. 20212. A

copy is also available at SBA, Office of

AA/HUB, 409 3rd Street, SW,

Washington D.C. 20416.

De-certify means the process by which

SBA determines that a concern is no

longer a qualified HUBZone SBC and

removes that concern from its List.

Employee means a person (or persons)

employed by a HUBZone SBC on a fulltime (or full-time equivalent),

permanent basis. Full-time equivalent

includes employees who work 30 hours

per week or more. Full-time equivalent

also includes the aggregate of employees

who work less than 30 hours a week,

where the work hours of such

employees add up to at least a 40 hour

work week. The totality of the

circumstances, including factors

relevant for tax purposes, will

determine whether persons are

employees of a concern. Temporary

employees, independent contractors or

leased employees are not employees for

these purposes.

Example 1: 4 employees each work 20

hours per week; SBA will regard that

circumstance as 2 full-time equivalent

employees.

Example 2: 1 employee works 20 hours per

week and 1 employee works 15 hours per

week; SBA will regard that circumstance as

not a full-time equivalent.

Example 3: 1 employee works 15 hours per

week, 1 employee works 10 hours per week,

and 1 employee works 20 hours per week;

SBA will regard that circumstance as 1 fulltime equivalent employee.

Example 4: 1 employee works 30 hours per

week and 2 employees each work 15 hours

per week; SBA will regard that circumstance

as 1 full-time equivalent employee.

HUBZone means a historically

underutilized business zone, which is

an area located within one or more

qualified census tracts, qualified nonmetropolitan counties, or lands within

the external boundaries of an Indian

reservation. See other definitions in this

section for further details.

HUBZone small business concern

(HUBZone SBC) means a concern that is

small as defined by § 126.203, is

exclusively owned and controlled by

persons who are United States citizens,

and has its principal office located in a

HUBZone.

HUBZone 8(a) concern means a

concern that is certified as an 8(a)

program participant and which is also a

qualified HUBZone SBC.

Indian reservation has the meaning

used by the Bureau of Indian Affairs in

25 CFR 151.2(f). This definition refers
31910 Federal Register / Vol. 63, No. 112 /Thursday, June 11, 1998 /Rules and Regulations

generally to land over which a ‘‘tribe’’

has jurisdiction, and ‘‘tribe’’ includes

Alaska Native entities under 25 CFR

81.1(w).

Interested party means any concern

that submits an offer for a specific

HUBZone sole source or set-aside

contract, any concern that submitted an

offer in full and open competition and

its opportunity for award will be

affected by a price evaluation preference

given a qualified HUBZone SBC, the

contracting activity’s contracting officer,

or SBA.

Lands within the external boundaries

of an Indian reservation includes all

lands within the outside perimeter of an

Indian reservation, whether tribally

owned and governed or not. For

example, land that is individually

owned and located within the outside

perimeter of an Indian reservation is

‘‘lands within the external boundaries of

an Indian reservation.’’ By contrast, an

Indian-owned parcel of land that is

located outside the perimeter of an

Indian reservation is not ‘‘lands within

the external boundaries of an Indian

reservation.’’

List refers to the database of qualified

HUBZone SBCs that SBA has certified.

Median household income has the

meaning used by the Bureau of the

Census, United States Department of

Commerce, in its publication titled,

‘‘1990 Census of Population, Social and

Economic Characteristics,’’ Report

Number CP–2, pages B–14 and B–17.

This publication is available for

inspection at any local Federal

Depository Library. For the location of

a Federal Depository library, call tollfree (888) 293–6498 or contact the

Bureau of the Census, Income Statistics

Branch, Housing and Economic

Statistics Division, Washington D.C.

20233–8500.

Metropolitan statistical area means an

area as defined in section 143(k)(2)(B) of

the Internal Revenue Code of 1986,

(Title 26 of the United States Code).

Non-metropolitan has the meaning

used by the Bureau of the Census,

United States Department of Commerce,

in its publication titled, ‘‘1990 Census of

Population, Social and Economic

Characteristics,’’ Report Number CP–2,

page A–9. This publication is available

for inspection at any local Federal

Depository Library. For the location of

a Federal Depository Library, call tollfree (888) 293–6498 or contact the

Bureau of the Census, Population

Distribution Branch, Population

Division, Washington D.C. 20233–8800.

Person means a natural person.

Pursuant to the Alaska Native Claims

Settlement Act, 43 U.S.C. 1626(e),

Alaska Native Corporations and any

direct or indirect subsidiary

corporations, joint ventures, and

partnerships of a Native Corporation are

deemed to be owned and controlled by

Natives, and are thus persons.

Principal office means the location

where the greatest number of the

concern’s employees at any one location

perform their work.

Qualified census tract has the

meaning given that term in section

42(d)(5)(C)(ii)(I) of the Internal Revenue

Code (Title 26 of the United States

Code).

Qualified HUBZone SBC means a

HUBZone SBC that SBA certifies as

qualified for federal contracting

assistance under the HUBZone program.

Qualified non-metropolitan county

means any county that:

(1) Based on the most recent data

available from the Bureau of the Census

of the Department of Commerce—

(i) Is not located in a metropolitan

statistical area; and

(ii) In which the median household

income is less than 80 percent of the

non-metropolitan State median

household income; or

(2) Based on the most recent data

available from the Secretary of Labor,

has an unemployment rate that is not

less than 140 percent of the statewide

average unemployment rate for the State

in which the county is located.

Reside means to live in a primary

residence at a place for at least 180 days,

or as a currently registered voter, and

with intent to live there indefinitely.

Small disadvantaged business (SDB)

means a concern that is small pursuant

to part 121 of this title, and is owned

and controlled by socially and

economically disadvantaged

individuals, tribes, Alaska Native

Corporations, Native Hawaiian

Organizations, or Community

Development Corporations.

Statewide average unemployment rate

is the rate based on the most recent data

available from the Bureau of Labor

Statistics, United States Department of

Labor, Division of Local Area

Unemployment Statistics, 2

Massachusetts Ave., NE., Room 4675,

Washington, D.C. 20212. A copy is also

available at SBA, Office of AA/HUB,

409 3rd Street, SW., Washington DC

20416.

Women-owned business (WOB) means

a concern that is small pursuant to part

121 of this title, and is at least 51

percent owned and controlled by

women.

Subpart B—Requirements to be a

Qualified HUBZone SBC

§ 126.200 What requirements must a

concern meet to receive SBA certification

as a qualified HUBZone SBC?

(a) The concern must be a HUBZone

SBC as defined in § 126.103; and

(b) At least 35 percent of the concern’s

employees must reside in a HUBZone,

and the HUBZone SBC must certify that

it will attempt to maintain this

percentage during the performance of

any HUBZone contract it receives.

When determining the percentage of

employees that reside in a HUBZone, if

the percentage results in a fraction

round up to the nearest whole number,

Example 1: A concern has 25 employees,

35 percent or 8.75 employees must reside in

a HUBZone. Thus, 9 employees must reside

in a HUBZone.

Example 2: A concern has 95 employees,

35 percent or 33.25 employees must reside in

a HUBZone. Thus, 34 employees must reside

in a HUBZone.

and

(c) The HUBZone SBC must certify

that it will ensure that it will comply

with certain contract performance

requirements in connection with

contracts awarded to it as a qualified

HUBZone SBC, as set forth in § 126.700.

§ 126.201 For this purpose, who does SBA

consider to own a HUBZone SBC?

An owner of a HUBZone SBC is a

person who owns any legal or equitable

interest in such HUBZone SBC. More

specifically:

(a) Corporations. SBA will consider

any person who owns stock, whether

voting or non-voting, to be an owner.

SBA will consider options to purchase

stock to have been exercised. SBA will

consider the right to convert debentures

into voting stock to have been exercised.

(b) Partnerships. SBA will consider a

partner, whether general or limited, to

be an owner if that partner owns an

equitable interest in the partnership.

(c) Sole proprietorships. The

proprietor is the owner.

(d) Limited liability companies. SBA

will consider each member to be an

owner of a limited liability company.

Example 1: All stock of a corporation is

owned by U.S. citizens. The president of the

corporation, a non-U.S. citizen, owns no

stock in the corporation, but owns options to

purchase stock in the corporation. SBA will

consider the option exercised, and the

corporation is not eligible to be a qualified

HUBZone SBC.

Example 2: A partnership is owned 99.9

percent by persons who are U.S. citizens, and

0.1 percent by someone who is not. The

partnership is not eligible because it is not

100 percent owned by U.S. citizens.
Federal Register / Vol. 63, No. 112 /Thursday, June 11, 1998 /Rules and Regulations 31911

§ 126.202 Who does SBA consider to

control a HUBZone SBC?

Control means both the day-to-day

management and long-term

decisionmaking authority for the

HUBZone SBC. Many persons share

control of a concern, including each of

those occupying the following positions:

officer, director, general partner,

managing partner, and manager. In

addition, key employees who possess

critical licenses, expertise or

responsibilities related to the concern’s

primary economic activity may share

significant control of the concern. SBA

will consider the control potential of

such key employees on a case by case

basis.

§ 126.203 What size standards apply to

HUBZone SBCs?

(a) At time of application for

certification. A HUBZone SBC must

meet SBA’s size standards for its

primary industry classification as

defined in § 121.201 of this title. If SBA

is unable to verify that a concern is

small, SBA may deny the concern status

as a qualified HUBZone SBC, or SBA

may request a formal size determination

from the responsible Government

Contracting Area Director or designee.

(b) At time of contract offer. A

HUBZone SBC must be small within the

size standard corresponding to the SIC

code assigned to the contract.

§ 126.204 May a qualified HUBZone SBC

have affiliates?

Yes. A qualified HUBZone SBC may

have affiliates so long as the affiliates

are also qualified HUBZone SBCs, 8(a)

participants, or WOBs.

§ 126.205 May WOBs, 8(a) participants or

SDBs be qualified HUBZone SBCs?

Yes. WOBs, 8(a) participants, and

SDBs can qualify as HUBZone SBCs if

they meet the additional requirements

in this part.

§ 126.206 May non-manufacturers be

qualified HUBZone SBCs?

Yes. Non-manufacturers (referred to

in the HUBZone Act of 1997 as ‘‘regular

dealers’’) may be certified as qualified

HUBZone SBCs if they meet all the

requirements set forth in § 126.200 and

they can demonstrate that they can

provide the product or products

manufactured by qualified HUBZone

SBCs. ‘‘Non-manufacturer’’ is defined in

§ 121.406(b)(1) of this title.

§ 126.207 May a qualified HUBZone SBC

have offices or facilities in another

HUBZone or outside a HUBZone?

Yes. A qualified HUBZone SBC may

have offices or facilities in another

HUBZone or even outside a HUBZone

and still be a qualified HUBZone SBC.

However, in order to qualify, the

concern’s principal office must be

located in a HUBZone.

Subpart C—Certification

§ 126.300 How may a concern be certified

as a qualified HUBZone SBC?

A concern must apply to SBA for

certification. The application must

include a representation that it meets

the eligibility requirements described in

§ 126.200 and must submit relevant

supporting information. SBA will

consider the information provided by

the concern in order to determine

whether the concern qualifies. SBA, in

its sole discretion, may rely solely upon

the information submitted to establish

eligibility, or may request additional

information, or may verify the

information before making a

determination. If SBA determines that

the concern is a qualified HUBZone

SBC, it will issue a certification to that

effect and add the concern to the List.

§ 126.301 Is there any other way for a

concern to obtain certification?

No. SBA certification is the only way

to qualify for HUBZone program status.

§ 126.302 When may a concern apply for

certification?

A concern may apply to SBA and

submit the required information

whenever it can represent that it meets

the eligibility requirements, subject to

§ 126.309. All representations and

supporting information contained in the

application must be complete and

accurate as of the date of submission.

The application must be signed by an

officer of the concern who is authorized

to represent the concern.

§ 126.303 Where must a concern file its

certification?

The concern must file its certification

with the AA/HUB, U.S. Small Business

Administration, 409 Third Street, SW,

Washington, DC 20416.

§ 126.304 What must a concern submit to

SBA?

(a) To be certified by SBA as a

qualified HUBZone SBC, a concern

must represent to SBA that under the

definitions set forth in § 126.103:

(1) It is a small business concern that

is both owned only by United States

citizens and controlled only by United

States citizens;

(2) Its principal office is located in a

HUBZone;

(3) Not less than 35 percent of its

employees reside in a HUBZone;

(4) It will use good faith efforts to

ensure that a minimum percentage of 35

percent of its employees continue to

reside in a HUBZone so long as SBA

certifies it as qualified and during the

performance of any contract awarded to

it on the basis of its status as a qualified

HUBZone SBC; and

(5) It will ensure that, where it enters

into subcontracts to aid in performance

of any prime contracts awarded to it

because of its status as a qualified

HUBZone SBC, it will incur not less

than a certain minimum percentage of

certain contract costs as set forth in

§ 126.700.

(b) If the concern is applying for

HUBZone status based on a location

within the external boundaries of an

Indian reservation, the concern must

submit with its application for

certification official documentation

from the appropriate Bureau of Indian

Affairs (BIA) Land Titles and Records

Office with jurisdiction over the

concern’s area, confirming that it is

located within the external boundaries

of an Indian reservation. BIA lists the

Land Titles and Records Offices and

their jurisdiction in 25 CFR 150.4 and

150.5. In cases where BIA is unable to

verify whether the business is located

within the external boundaries of an

Indian reservation, applicants should

contact the AA/HUB and SBA will

assist them.

(c) In addition to these

representations, the concern must

submit the forms, attachments, and any

additional information required by SBA.

§ 126.305 What format must the

certification to SBA take?

A concern must submit the required

information in either a written or

electronic application form provided by

SBA. An electronic application must be

sufficiently authenticated for

enforcement purposes.

§ 126.306 How will SBA process the

certification?

(a) The AA/HUB is authorized to

approve or decline certifications. SBA

will receive and review all

certifications, but SBA will not process

incomplete packages. SBA will make its

determination within 30 calendar days

after receipt of a complete package

whenever practicable. The decision of

the AA/HUB is the final agency

decision.

(b) SBA will base its certification on

facts existing on the date of submission.

SBA, in its sole discretion, may request

additional information or clarification of

information contained in the

submission at any time.

(c) If SBA approves the application,

SBA will send a written notice to the
31912 Federal Register / Vol. 63, No. 112 /Thursday, June 11, 1998 /Rules and Regulations

concern and automatically enter it on

the List described in § 126.307.

(d) A decision to deny eligibility must

be in writing and state the specific

reasons for denial.

§ 126.307 Where will SBA maintain the List

of qualified HUBZone SBCs?

SBA maintains the List at its Internet

website at http://www.sba.gov/HUB.

Requesters also may obtain a copy of the

List by writing to the AA/HUB at U.S.

Small Business Administration, 409

Third Street, SW, Washington, DC

20416 or via e-mail at aahub@sba.gov.

§ 126.308 What happens if SBA

inadvertently omits a qualified HUBZone

SBC from the List?

A HUBZone SBC that has received

SBA’s notice of certification, but is not

on the List within 10 business days

thereafter should immediately notify the

AA/HUB in writing at U.S. Small

Business Administration, 409 Third

Street, SW, Washington, DC 20416 or

via e-mail at aahub@sba.gov. The

concern must appear on the List to be

eligible for HUBZone contracts.

§ 126.309 How may a declined or decertified concern seek certification at a later

date?

A concern that SBA has declined or

de-certified may seek certification no

sooner than one year from the date of

decline or de-certification if it believes

that it has overcome all reasons for

decline through changed circumstances,

and is currently eligible.

Subpart D—Program Examinations

§ 126.400 Who will conduct program

examinations?

SBA field staff or others designated by

the AA/HUB will conduct program

examinations.

§ 126.401 What will SBA examine?

(a) Eligibility. Examiners will verify

that the qualified HUBZone SBC met the

requirements set forth in § 126.200 at

the time of its application for

certification and at the time of

examination.

(b) Scope of review. Examiners may

review any information related to the

HUBZone SBC qualifying requirements,

including documentation related to the

location and ownership of the concern,

the employee percentage requirements,

and the concern’s attempt to maintain

this percentage. The qualified HUBZone

SBC must document each employee’s

residence address through employment

records. The examiner also may review

property tax, public utility or postal

records, and other relevant documents.

The concern must retain documentation

demonstrating satisfaction of the

employee residence and other

qualifying requirements for 6 years from

date of submission to SBA.

§ 126.402 When may SBA conduct

program examinations?

SBA may conduct a program

examination at the time the concern

certifies to SBA that it meets the

requirements of the program or at any

other time while the concern is on the

List or subsequent to receipt of

HUBZone contract benefits. For

example, SBA may conduct a program

examination to verify eligibility upon

notification of a material change under

§ 126.501. Additionally, SBA, in its sole

discretion, may perform random

program examinations to determine

continuing compliance with program

requirements, or it may conduct a

program examination in response to

credible information calling into

question the HUBZone status of a small

business concern. For protests to the

HUBZone status of a small business

concern in regard to a particular

procurement, see § 126.800.

§ 126.403 May SBA require additional

information from a HUBZone SBC?

Yes. At the discretion of the AA/HUB,

SBA has the right to require that a

HUBZone SBC submit additional

information as part of the certification

process, or at any time thereafter. If SBA

finds a HUBZone SBC is not qualified,

SBA will de-certify the concern and

delete its name from the List. SBA may

choose to pursue penalties against any

concern that has made material

misrepresentations in its submissions to

SBA in accordance with § 126.900.

§ 126.404 What happens if SBA is unable

to verify a qualified HUBZone SBC’s

eligibility?

(a) Authorized SBA headquarters

personnel will first notify the concern in

writing of the reasons why it is no

longer eligible.

(b) The concern will have 10 business

days from the date that it receives

notification to respond.

(c) The AA/HUB will consider the

reasons for proposed de-certification

and the concern’s response before

making a decision whether to de-certify.

The AA/HUB’s decision is the final

agency decision.

§ 126.405 What happens if SBA verifies

eligibility?

If SBA verifies that the concern is

eligible, it will amend the date of

certification on the List to reflect the

date of verification.

Subpart E—Maintaining Hubzone

Status

§ 126.500 How does a qualified HUBZone

SBC maintain HUBZone status?

(a) Any qualified HUBZone SBC

wishing to remain on the List must selfcertify annually to SBA that it remains

a qualified HUBZone SBC.

(b) Concerns wishing to remain in the

program without any interruption must

self-certify their continued eligibility to

SBA within 30 calendar days after each

annual anniversary of their date of

certification. Failure to do so will result

in SBA de-certifying the concern. The

concern then would have to submit a

new application for certification under

§§ 126.300 through 126.306.

(c) The self-certification to SBA must

be in writing and must represent that

the circumstances relative to eligibility

which existed on the date of

certification showing on the List have

not materially changed.

§ 126.501 What are a qualified HUBZone

SBC’s ongoing obligations to SBA?

The concern must immediately notify

SBA of any material change which

could affect its eligibility. The

notification must be in writing, and

must be sent or delivered to the AA/

HUB to comply with this requirement.

Failure of a qualified HUBZone SBC to

notify SBA of such a material change

will result in immediate de-certification

and removal from the List, and SBA

may seek the imposition of penalties

under § 126.900. If the concern later

becomes eligible for the program, the

concern must apply for certification

pursuant to §§ 126.300 through 126.309

and must include with its application

for certification a full explanation of

why it failed to notify SBA of the

material change. If SBA is not satisfied

with the explanation provided, SBA

may decline to certify the concern

pursuant to § 126.306.

§ 126.502 Is there a limit to the length of

time a qualified HUBZone SBC may be on

the List?

There is no limit to the length of time

a qualified HUBZone SBC may remain

on the List so long as it continues to

follow the provisions of §§ 126.200,

126.500, and 126.501.

§ 126.503 When is a concern removed

from the List?

If SBA determines at any time that a

HUBZone SBC is not qualified, SBA

may de-certify the HUBZone SBC,

remove the concern from the List, and

seek imposition of penalties pursuant to

§ 126.900. An adverse finding in the

resolution of a protest also may result in

de-certification and removal from the
Federal Register / Vol. 63, No. 112 /Thursday, June 11, 1998 /Rules and Regulations 31913

List, and the imposition of penalties

pursuant to § 126.900. Failure to notify

SBA of a material change which could

affect a concern’s eligibility will result

in immediate de-certification, removal

from the List, and SBA may seek the

imposition of penalties under § 126.900.

Subpart F—Contractual Assistance

§ 126.600 What are HUBZone contracts?

HUBZone contracts are contracts

awarded to a qualified HUBZone SBC

through any of the following

procurement methods:

(a) Sole source awards to qualified

HUBZone SBCs;

(b) Set-aside awards based on

competition restricted to qualified

HUBZone SBCs; or

(c) Awards to qualified HUBZone

SBCs through full and open competition

after a price evaluation preference in

favor of qualified HUBZone SBCs.

§ 126.601 What additional requirements

must a qualified HUBZone SBC meet to bid

on a contract?

(a) In order to submit an offer on a

specific HUBZone contract, a concern

must be small under the size standard

corresponding to the SIC code assigned

to the contract.

(b) At the time a qualified HUBZone

SBC submits its offer on a specific

contract, it must certify to the

contracting officer that

(1) It is a qualified HUBZone SBC

which appears on SBA’s List;

(2) There has been no material change

in its circumstances since the date of

certification shown on the List which

could affect its HUBZone eligibility; and

(3) It is small under the SIC code

assigned to the procurement.

(c) If bidding as a joint venture, each

qualified HUBZone SBC must make the

certifications in paragraphs (b)(1), (2),

and (3) of this section separately under

its own name.

(d) A qualified HUBZone SBC which

is a non-manufacturer may submit an

offer on a contract for supplies if it

meets the requirements under the nonmanufacturer rule as defined in

§ 121.406(b) of this title and if the small

manufacturer is also a qualified

HUBZone SBC.

§ 126.602 Must a qualified HUBZone SBC

maintain the employee residency

percentage during contract performance?

The qualified HUBZone SBC must

attempt to maintain the required

percentage of employees who reside in

a HUBZone during the performance of

any contract awarded to the concern on

the basis of HUBZone status. ‘‘Attempt

to maintain’’ means making substantive

and documented efforts to maintain that

percentage such as written offers of

employment, published advertisements

seeking employees, and attendance at

job fairs. HUBZone contracts are

described more fully in § 126.600.

Enforcement of this paragraph will be

the responsibility of SBA, which will

monitor the requirement in accordance

with §§ 126.400 through 126.405.

§ 126.603 Does HUBZone certification

guarantee receipt of HUBZone contracts?

No. Qualified HUBZone SBCs should

market their capabilities to appropriate

procuring agencies in order to increase

their prospects of having a requirement

set aside for HUBZone contract award.

§ 126.604 Who decides if a contract

opportunity for HUBZone set-aside

competition exists?

The contracting officer for the

contracting activity makes this decision.

§ 126.605 What requirements are not

available for HUBZone contracts?

A contracting activity may not make

a requirement available for a HUBZone

contract if:

(a) The contracting activity otherwise

would fulfill that requirement through

award to Federal Prison Industries, Inc.

under 18 U.S.C. 4124 or 4125, or to

Javits-Wagner-O’Day Act participating

non-profit agencies for the blind and

severely disabled, under 41 U.S.C. 46 et

seq., as amended; or

(b) An 8(a) participant currently is

performing that requirement or SBA has

accepted that requirement for

performance under the authority of the

section 8(a) program, unless SBA has

consented to release of the requirement

from the section 8(a) program; or

(c) The requirement is at or below the

micropurchase threshold.

§ 126.606 May a contracting officer

request that SBA release an 8(a)

requirement for award as a HUBZone

contract?

Yes. However, SBA will grant its

consent only where neither the

incumbent nor any other 8(a)

participant(s) can perform the

requirement, and where the section 8(a)

program will not be adversely affected.

The SBA official authorized to grant

such consent is the AA/8(a)BD.

§ 126.607 When must a contracting officer

set aside a requirement for qualified

HUBZone SBCs?

(a) The contracting officer first must

review a requirement to determine

whether it is excluded from HUBZone

contracting pursuant to § 126.605.

(b) The contracting officer must

identify qualified HUBZone 8(a)

concerns and other 8(a) concerns. The

contracting officer must give first

priority to qualified HUBZone 8(a)

concerns.

(c) After determining that neither

paragraph (a) or (b) of this section apply,

the contracting officer must set aside the

requirement for competition restricted

to qualified HUBZone SBCs if the

contracting officer:

(1) Has a reasonable expectation, after

reviewing SBA’s list of qualified

HUBZone SBCs that at least two

responsible qualified HUBZone SBCs

will submit offers; and

(2) Determines that award can be

made at fair market price.

§ 126.608 Are there HUBZone contracting

opportunities below the simplified

acquisition threshold?

Yes. If the requirement is below the

simplified acquisition threshold, the

contracting officer should set-aside the

requirement for consideration among

qualified HUBZone SBCs using

simplified acquisition procedures.

§ 126.609 What must the contracting

officer do if a contracting opportunity does

not exist for competition among qualified

HUBZone SBCs?

If a contract opportunity for

competition among qualified SBCs does

not exist under the provisions of

§ 126.607, the contracting officer must

first consider the possibility of making

an award to a qualified HUBZone SBC

on a sole source basis, and then to a

small business under small business setaside procedures, in that order of

precedence. If the criteria are not met

for any of these special contracting

authorities, then the contracting officer

may solicit the procurement through

another appropriate contracting method.

§ 126.610 May SBA appeal a contracting

officer’s decision not to reserve a

procurement for award as a HUBZone

contract?

The Administrator may appeal a

contracting officer’s decision not to

make a particular requirement available

for award as a HUBZone sole source or

a HUBZone set-aside contract.

§ 126.611 What is the process for such an

appeal?

(a) Notice of appeal. When the

contracting officer rejects a

recommendation by SBA’s Procurement

Center Representative to make a

requirement available for award as a

HUBZone contract, he or she must

notify the Procurement Center

Representative as soon as practicable. If

the Administrator intends to appeal the

decision, SBA must notify the

contracting officer no later than five

business days after receiving notice of

the contracting officer’s decision.
31914 Federal Register / Vol. 63, No. 112 /Thursday, June 11, 1998 /Rules and Regulations

(b) Suspension of action. Upon receipt

of notice of SBA’s intent to appeal, the

contracting officer must suspend further

action regarding the procurement until

the head of the contracting activity

issues a written decision on the appeal,

unless the head of the contracting

activity makes a written determination

that urgent and compelling

circumstances which significantly affect

the interests of the United States compel

award of the contract.

(c) Deadline for appeal. Within 15

business days of SBA’s notification to

the contracting officer, SBA must file its

formal appeal with the head of the

contracting activity or that agency may

consider the appeal withdrawn.

(d) Decision. The contracting activity

must specify in writing the reasons for

a denial of an appeal brought under this

section.

§ 126.612 When may a contracting officer

award sole source contracts to a qualified

HUBZone SBC?

A contracting officer may award a sole

source contract to a qualified HUBZone

SBC only when the contracting officer

determines that:

(a) None of the provisions of

§§ 126.605 or 126.607 apply;

(b) The anticipated award price of the

contract, including options, will not

exceed:

(1) $5,000,000 for a requirement

within the SIC codes for manufacturing;

or

(2) $3,000,000 for a requirement

within all other SIC codes;

(c) Two or more qualified HUBZone

SBCs are not likely to submit offers;

(d) A qualified HUBZone SBC is a

responsible contractor able to perform

the contract; and

(e) Contract award can be made at a

fair and reasonable price.

§ 126.613 How does a price evaluation

preference affect the bid of a qualified

HUBZone SBC in full and open

competition?

Where a contracting officer will award

a contract on the basis of full and open

competition, the contracting officer

must deem the price offered by a

qualified HUBZone SBC to be lower

than the price offered by another offeror

(other than another small business

concern) if the price offered by the

qualified HUBZone SBC is not more

than 10 percent higher than the price

offered by the otherwise lowest,

responsive, and responsible offeror.

Example: In a full and open competition,

a qualified HUBZone SBC submits an offer of

$98; another small business concern submits

an offer of $100; and a large business submits

an offer of $93. The lowest, responsive,

responsible offeror would be the large

business. However, the contracting officer

must apply the HUBZone price evaluation

preference. If the qualified HUBZone SBC’s

offer is not more than 10 percent higher than

the large business’s offer, the contracting

officer must deem the qualified HUBZone

SBC’s price as lower than the price of the

large business. In this example, the qualified

HUBZone SBC’s price is not more than 10

percent higher than the large business’s price

and, consequently, the qualified HUBZone

SBC displaces the large business as the

lowest, responsive, and responsible offeror. If

the HUBZone SBC offer were $101, the award

would go to the large business at $93. If the

HUBZone SBC will not benefit from the

preference, the preference is not applied to

change an offer.

§ 126.614 How does a contracting officer

treat a concern that is both a qualified

HUBZone SBC and an SDB in a full and

open competition?

A concern that is both a qualified

HUBZone SBC and an SDB must receive

the benefit of both the HUBZone price

evaluation preference described in

§ 126.614 and the SDB price evaluation

preference described in 10 U.S.C. 2323

and the Federal Acquisition

Streamlining Act, section 7102(a)(1)(B),

Public Law 103–355, in a full and open

competition.

§ 126.615 May a large business participate

on a HUBZone contract?

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.

§ 126.616 What requirements must a joint

venture satisfy to bid on a HUBZone

contract?

A joint venture may bid on a

HUBZone contract if the joint venture

meets all of the following requirements:

(a) HUBZone joint venture. A

qualified HUBZone SBC may enter into

a joint venture with one or more other

qualified HUBZone SBCs, 8(a)

participants, or WOBs for the purpose of

performing a specific HUBZone

contract.

(b) Size of concerns. A joint venture

of at least one qualified HUBZone SBC

and an 8(a) participant or a womanowned small business concern may

submit an offer for a HUBZone contract

so long as each concern is small under

the size standard corresponding to the

SIC code assigned to the contract,

provided:

(1) For a procurement having a

revenue-based size standard, the

procurement exceeds half the size

standard corresponding to the SIC code

assigned to the contract; and

(2) For a procurement having an

employee-based size standard, the

procurement exceeds $10 million.

(c) Performance of work. The

aggregate of the qualified HUBZone

SBCs to the joint venture, not each

concern separately, must perform the

applicable percentage of work required

by § 126.700.

Subpart G—Contract Performance

Requirements

§ 126.700 What are the subcontracting

percentages requirements under this

program?

(a) Subcontracting percentage

requirements. A qualified HUBZone

SBC prime contractor can subcontract

part of a HUBZone contract provided:

(1) In the case of a contract for

services (except construction), the

qualified HUBZone SBC spends at least

50 percent of the cost of the contract

performance incurred for personnel on

the concern’s employees or on the

employees of other qualified HUBZone

SBCs;

(2) In the case of a contract for general

construction, the qualified HUBZone

SBC spends at least 15 percent of the

cost of contract performance incurred

for personnel on the concern’s

employees or the employees of other

qualified HUBZone SBCs;

(3) In the case of a contract for

construction by special trade

contractors, the qualified HUBZone SBC

spends at least 25 percent of the cost of

contract performance incurred for

personnel on the concerns’ employees

or the employees of other qualified

HUBZone SBCs; and

(4) In the case of a contract for

procurement of supplies (other than a

procurement from a regular dealer in

such supplies) the qualified HUBZone

SBC spends at least 50 percent of the

manufacturing cost (excluding the cost

of materials) on performing the contract

in a HUBZone. One or more qualified

HUBZone SBCs may combine to meet

this subcontracting percentage

requirement.

(b) Definitions. Many definitions

applicable to this section can be found

in § 125.6 of this title.

§ 126.701 Can these subcontracting

percentages requirements change?

Yes. The Administrator may change

the subcontracting percentage

requirements if the Administrator

determines that such action is necessary

to reflect conventional industry

practices.
Federal Register / Vol. 63, No. 112 /Thursday, June 11, 1998 /Rules and Regulations 31915

§ 126.702 How can the subcontracting

percentage requirements be changed?

Representatives of a national trade or

industry group (as defined by two-digit

Major Group industry codes) may

request a change in subcontracting

percentage requirements for that

industry. Changes in subcontracting

percentage requirements may be

requested only for categories defined by

two-digit Major Group industry codes in

the Standard Industry Classification

(SIC) Code system. SBA will not

consider requests from anyone other

than a representative of a national trade

or industry group or requests for

changes for four-digit SIC Code

categories.

§ 126.703 What are the procedures for

requesting changes in subcontracting

percentages?

(a) Format of request. There is no

prescribed format, but the requester

should try to demonstrate to the

Administrator that a change in

percentage is necessary to reflect

conventional industry practices, and

should support its request with

information including, but not limited

to:

(1) Information relative to the

economic conditions and structure of

the entire national industry;

(2) Market data, technical changes in

the industry and industry trends;

(3) Specific reasons and justifications

for the change in the subcontracting

percentage;

(4) The effect such a change would

have on the federal procurement

process; and

(5) Information demonstrating how

the proposed change would promote the

purposes of the HUBZone Program.

(b) Notice to public. Upon an

adequate preliminary showing to SBA,

SBA will publish in the Federal

Register a notice of its receipt of a

request that it consider a change in the

subcontracting percentage requirements

for a particular industry for HUBZone

contracts. The notice will identify the

group making the request, and give the

public an opportunity to submit to the

Administrator information and

arguments in both support and

opposition.

(c) Comments. Once SBA has

published a notice in the Federal

Register, it will afford a period of not

less than 60 days for public comment.

(d) Decision. SBA will render its

decision after the close of the comment

period. If it decides against a change, it

will publish notice of its decision in the

Federal Register. Concurrent with the

notice, SBA will advise the requester of

its decision in writing. If it decides in

favor of a change, SBA will propose an

appropriate change to this part in

accordance with proper rulemaking

procedures.

Subpart H—Protests

§ 126.800 Who may protest the status of a

qualified HUBZone SBC?

(a) For sole source procurements. SBA

or the contracting officer may protest

the proposed awardee’s qualified

HUBZone SBC status.

(b) For all other procurements. Any

interested party may protest the

apparent successful offeror’s qualified

HUBZone SBC status.

§ 126.801 How does one file a HUBZone

status protest?

(a) General. The protest procedures

described in this part are separate from

those governing size protests and

appeals. All protests relating to whether

a qualified HUBZone SBC is a ‘‘small’’

business for purposes of any Federal

program are subject to part 121 of this

title and must be filed in accordance

with that part. If a protester protests

both the size of the HUBZone SBC and

whether the concern meets the

HUBZone qualifying requirements set

forth in § 126.200, SBA will process

each protest concurrently, under the

procedures set forth in part 121 of this

title and this part.

(b) Format. Protests must be in writing

and state all specific grounds for the

protest. A protest merely asserting that

the protested concern is not a qualified

HUBZone SBC, without setting forth

specific facts or allegations, is

insufficient.

(c) Filing. (1) An interested party

other than a contracting officer or SBA

must submit its written protest to the

contracting officer.

(2) A contracting officer and SBA

must submit their protest to the AA/

HUB.

(3) Protestors may deliver their

protests in person, by facsimile, by

express delivery service, or by U.S. mail

(postmarked within the applicable time

period).

(d) Timeliness. (1) An interested party

must submit its protest by close of

business on the fifth business day after

bid opening (in sealed bid acquisitions)

or by close of business on the fifth

business day after notification by the

contracting officer of the apparent

successful offeror (in negotiated

acquisitions).

(2) Any protest received after the time

limits is untimely.

(3) Any protest received prior to bid

opening or notification of intended

award, whichever applies, is premature.

(e) Referral to SBA. The contracting

officer must forward to SBA any nonpremature protest received,

notwithstanding whether he or she

believes it is sufficiently specific or

timely. The contracting officer must

send protests to AA/HUB, U.S. Small

Business Administration, 409 3rd Street,

SW, Washington, DC 20416.

§ 126.802 Who decides a HUBZone status

protest?

The AA/HUB or designee will

determine whether the concern has

qualified HUBZone status.

§ 126.803 How will SBA process a

HUBZone status protest?

(a) Notice of receipt of protest. (1)

SBA immediately will notify the

contracting officer and the protestor of

the date SBA receives a protest and

whether SBA will process the protest or

dismiss it in accordance with § 126.804.

(2) If SBA determines the protest is

timely and sufficiently specific, SBA

will notify the protested HUBZone SBC

of the protest and the identity of the

protestor. The protested HUBZone SBC

may submit information responsive to

the protest within 5 business days.

(b) Time period for determination. (1)

SBA will determine the HUBZone status

of the protested HUBZone SBC within

15 business days after receipt of a

protest.

(2) If SBA does not contact the

contracting officer within 15 business

days, the contracting officer may award

the contract, unless the contracting

officer has granted SBA an extension.

(3) The contracting officer may award

the contract after receipt of a protest if

the contracting officer determines in

writing that an award must be made to

protect the public interest.

(c) Notice of determination. SBA will

notify the contracting officer, the

protestor, and the protested concern of

its determination.

(d) Effect of determination. The

determination is effective immediately

and is final unless overturned on appeal

by the ADA/GC&8(a)BD, pursuant to

§ 126.805. If SBA upholds the protest,

SBA will de-certify the concern as a

qualified HUBZone SBC. If SBA denies

the protest, after considering the merits

of the protest, SBA will amend the date

of certification on the List to reflect the

date of protest decision.

§ 126.804 Will SBA decide all HUBZone

status protests?

SBA will decide all protests not

dismissed as premature, untimely or

non-specific.
31916 Federal Register / Vol. 63, No. 112 /Thursday, June 11, 1998 /Rules and Regulations

§ 126.805 What are the procedures for

appeals of HUBZone status

determinations?

(a) Who may appeal. The protested

HUBZone SBC, the protestor, or the

contracting officer may file appeals of

protest determinations with SBA’s

ADA/GC&8(a)BD.

(b) Timeliness of appeal. SBA’s ADA/

GC&8(a)BD must receive the appeal no

later than 5 business days after the date

of receipt of the protest determination.

SBA will dismiss any appeal received

after the five-day period.

(c) Method of Submission. The party

appealing the decision may deliver its

appeal in person, by facsimile, by

express delivery service, or by U.S. mail

(postmarked within the applicable time

period).

(d) Notice of appeal. The party

bringing an appeal must provide notice

of the appeal to the contracting activity

contracting officer and either the

protested HUBZone SBC or original

protestor, as appropriate.

(e) Grounds for appeal. (1) SBA will

re-examine a protest determination only

if there was a clear and significant error

in the processing of the protest or if the

AA/HUB failed completely to consider

a significant fact contained within the

information supplied by the protestor or

the protested HUBZone SBC.

(2) SBA will not consider additional

information or changed circumstances

that were not disclosed at the time of

the AA/HUB’s decision or that are based

on disagreement with the findings and

conclusions contained in the

determination.

(f) Contents of appeal. The appeal

must be in writing. The appeal must

identify the protest determination being

appealed and set forth a full and

specific statement as to why the

decision is erroneous or what significant

fact the AA/HUB failed to consider.

(g) Completion of appeal after award.

An appeal may proceed to completion

even after award of the contract that

prompted the protest, if so desired by

the protested HUBZone SBC, or where

SBA determines that a decision on

appeal is meaningful.

(h) Decision. The ADA/GC&8(a)BD

will make its decision within 5 business

days of its receipt, if practicable, and

will base its decision only on the

information and documentation in the

protest record as supplemented by the

appeal. SBA will provide a copy of the

decision to the contracting officer, the

protestor, and the protested HUBZone

SBC, consistent with law. The ADA/

GC&8(a)BD’s decision is the final agency

decision.

Subpart I—Penalties

§ 126.900 What penalties may be imposed

under this part?

(a) Suspension or debarment. The

Agency debarring official may suspend

or debar a person or concern pursuant

to the procedures set forth in part 145

of this title. The contracting agency

debarring official may debar or suspend

a person or concern under the Federal

Acquisition Regulation, 48 CFR Part 9,

subpart 9.4.

(b) Civil penalties. Persons or

concerns are subject to civil remedies

under the False Claims Act, 31 U.S.C.

3729–3733, and under the Program

Fraud Civil Remedies Act, 31 U.S.C.

3801–3812, and any other applicable

laws.

(c) Criminal penalties. Persons or

concerns are subject to severe criminal

penalties for knowingly misrepresenting

the HUBZone status of a small business

concern in connection with

procurement programs pursuant to

section 16(d) of the Small Business Act,

15 U.S.C. 645(d), as amended; 18 U.S.C.

1001; and 31 U.S.C. 3729–3733. Persons

or concerns also are subject to criminal

penalties for knowingly making false

statements or misrepresentations to SBA

for the purpose of influencing any

actions of SBA pursuant to section 16(a)

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

645(a), as amended, including failure to

correct ‘‘continuing representations’’

that are no longer true.

Dated: June 5, 1998.

Aida Alvarez,

Administrator.

[FR Doc. 98–15581 Filed 6–10–98; 8:45 am]

BILLING CODE 8025–01–P

DEPARTMENT OF TRANSPORTATION

Federal Aviation Administration

14 CFR Part 39

[Docket No. 98–CE–55–AD; Amendment 39–

10590; AD 98–13–02]

RIN 2120–AA64

Airworthiness Directives; Raytheon

Aircraft Company Models 35, A35, B35,

and 35R Airplanes

AGENCY: Federal Aviation

Administration, DOT.

ACTION: Final rule; request for

comments.

SUMMARY: This amendment adopts a

new airworthiness directive (AD) that

applies to Raytheon Aircraft Company

(Raytheon) Models 35, A35, B35, and

35R airplanes (commonly referred to as

Beech Models 35, A35, B35, and 35R

airplanes). This AD requires fabricating

a placard that restricts the never exceed

speed (Vne) to no more than 144 miles

per hour (MPH) or 125 knots (KTS)

indicated airspeed (IAS), and installing

this placard on the instrument panel

within the pilot’s clear view. This AD

also requires marking a red line on the

airspeed indicator glass at 144 MPH

(125 KTS), marking a white slippage

mark on the outside surface of the

airspeed indicator between the glass and

case, and inserting a copy of this AD

into the Limitations Section of the

airplane flight manual (AFM). This AD

is the result of several occurrences of inflight vibration on the affected

airplanes. The actions specified by this

AD are intended to prevent in-flight

vibrations caused by the affected

airplanes operating at excessive speeds,

which could result in airplane damage

and possible loss of control of the

airplane.

DATES: Effective July 7, 1998.

Comments for inclusion in the Rules

Docket must be received on or before

August 10, 1998.

ADDRESSES: Submit comments in

triplicate to the Federal Aviation

Administration (FAA), Central Region,

Office of the Regional Counsel,

Attention: Rules Docket No. 98–CE–55–

AD, Room 1558, 601 E. 12th Street,

Kansas City, Missouri 64106.

Information that relates to this AD

may be examined at the Federal

Aviation Administration (FAA), Central

Region, Office of the Regional Counsel,

Attention: Rules Docket No. 98–CE–55–

AD, Room 1558, 601 E. 12th Street,

Kansas City, Missouri 64106.

FOR FURTHER INFORMATION CONTACT: Mr.

Steve Litke, Aerospace Engineer,

Wichita Aircraft Certification Office,

FAA, 1801 Airport Road, Mid-Continent

Airport, Wichita, Kansas 67209;

telephone: (316) 946–4127; facsimile:

(316) 946–4407.

SUPPLEMENTARY INFORMATION:

Discussion

The FAA has recently received

reports of several incidents of in-flight

vibrations on Raytheon Models 35, A35,

B35, and 35R airplanes (commonly

referred to as Beech Models 35, A35,

B35, and 35R airplanes).

These incidents are unrelated to AD

94–20–04, Amendment 39–9032 (59 FR

49785, September 30, 1994), which

currently requires, among other things,

balancing the ruddervators (off the

airplane) anytime the ruddervator is

repaired or repainted on Raytheon 35

series airplanes. Of the 10 incidents

since AD 94–20–04 became effective, 7