Federal Register / Vol. 63, No. 125 /Tuesday, June 30, 1998 /Rules and Regulations 35767

whether the Agency’s determination is

arbitrary, capricious, or contrary to law.

As long as the Agency’s determination

is reasonable, the Administrative Law

Judge must uphold it on appeal.

(c) The administrative record must

contain all documents that are relevant

to the determination on appeal before

the Administrative Law Judge and upon

which the SBA decision-maker relied.

The administrative record, however,

need not contain all documents

pertaining to the petitioner. For

example, the administrative record in a

termination proceeding need not

include the Participant’s entire business

plan file, documents pertaining to

specific 8(a) contracts, or the firm’s

application for participation in the 8(a)

BD program if they are unrelated to the

termination action. The petitioner may

object to the absence of a document,

previously submitted to or sent by SBA,

which the petitioner believes was

erroneously omitted from the

administrative record.

(d) Where the Agency files its answer

to the appeal petition after the date

specified in § 134.206, the

Administrative Law Judge may decline

to consider the answer and base his or

her decision solely on a review of the

administrative record.

(e) The Administrative Law Judge

may remand a case to the AA/8(a)BD

(or, in the case of a denial of a request

for waiver under § 124.515 of this title,

to the Administrator) for further

consideration if he or she determines

that, due to the absence in the written

administrative record of the reasons

upon which the determination was

based, the administrative record is

insufficiently complete to decide

whether the determination is arbitrary,

capricious or contrary to law, or where

it is clearly apparent from the record

that SBA made an erroneous factual

finding (e.g., SBA double counted an

asset of an individual claiming

disadvantaged status) or a mistake of

law (e.g., SBA applied the wrong

regulatory provision in evaluating the

case). Such a remand will be for a

period of 10 working days.

§ 134.407 Evidence beyond the record and

discovery.

(a) The Administrative Law Judge

may not admit evidence beyond the

written administrative record nor permit

any form of discovery unless he or she

first determines that the petitioner,

upon written submission, has made a

substantial showing, based on credible

evidence and not mere allegation, that

the Agency determination in question

may have resulted from bad faith or

improper behavior.

(1) Prior to any such determination,

the Administrative Law Judge must

permit SBA to respond in writing to any

allegations of bad faith or improper

behavior.

(2) Upon a determination by the

Administrative Law Judge that the

petitioner has made such a substantial

showing, the Administrative Law Judge

may permit appropriate discovery, and

accept relevant evidence beyond the

written administrative record, which is

specifically limited to the alleged bad

faith or improper behavior.

(b) A determination by the

Administrative Law Judge that the

required showing set forth in paragraph

(a) of this section has been made does

not shift the burden of proof, which

continues to rest with the petitioner.

§ 134.408 Decision on appeal.

(a) A decision of the Administrative

Law Judge under this subpart is the final

agency decision, and is binding on the

parties.

(b) The Administrative Law Judge

shall issue a decision, insofar as

practicable, within 90 days after an

appeal petition is filed. If the

Administrative Law Judge does not

issue a decision within 90 days after an

appeal petition is filed, he or she must

indicate the reason that the 90-day time

limit has not been met in the decision,

when issued.

(c) The Administrative Law Judge

may reconsider an appeal decision

within 20 days of the decision if there

is a clear showing of an error of fact or

law material to the decision.

Dated: February 13, 1998.

Aida Alvarez,

Administrator.

[FR Doc. 98–17196 Filed 6–26–98; 8:45 am]

BILLING CODE 8025–01–P

SMALL BUSINESS ADMINISTRATION

13 CFR Part 124

8(a) Business Development/Small

Disadvantaged Business Status

Determinations

AGENCY: Small Business Administration.

ACTION: Final rule.

SUMMARY: In response to the Department

of Justice’s review of Federal

procurement affirmative action

programs and amendments to the

Federal Acquisition Regulation to

implement a government-wide small

disadvantaged business (SDB) program,

the Small Business Administration

(SBA) issues this final rule establishing

the procedural framework for certifying

firms as SDBs and for processing

protests challenging the disadvantaged

status of a firm claiming to be an SDB.

DATES: Effectove Dates. The

amendments made by this rule to

subpart A of 13 CFR part 124 are

effective on June 30, 1998. Sections

124.1001 through 124.1016 of subpart B

of 13 CFR part 124 are effective on

August 24, 1998. With the exeptions of

§§ 124.1017(b) and 124.1020(c)(2),

§§ 124.1017 through 124.1024 of subpart

B of 13 CFR part 124 are effective on

October 1, 1998. Sections 124.1017(b)

and 124.1020(c)(2) of subpart B of 13

CFR part 124 are effective on January 1,

1999.

Compliance Dates. SBA will begin to

accept and process applications for SDB

certifications as of August 24, 1998.

FOR FURTHER INFORMATION CONTACT:

Calvin Jenkins, Deputy Associate

Deputy Administrator for Government

Contracting and Minority Enterprise

Development, at (202) 205–6459.

SUPPLEMENTARY INFORMATION: On May 9,

1997, the Department of Defense (DOD),

the General Services Administration

(GSA), and the National Aeronautics

and Space Administration (NASA)

proposed amendments to the Federal

Acquisition Regulation (FAR)

concerning programs for small

disadvantaged business concerns. 62 FR

25786. The amendments were intended

to conform to a Department of Justice

(DOJ) proposal to reform affirmative

action in Federal procurement (see 61

FR 26042) and to comply with the

constitutional standards established by

the Supreme Court in Adarand

Constructors, Inc. v. Pena, 115 S.Ct.

2097 (1995). The proposed amendments

to the FAR included procedures by

which a firm claiming to be owned and

controlled by one or more

disadvantaged individuals could certify

its status as a small disadvantaged

business (SDB) concern for purposes of

receiving a benefit as an SDB in

connection with a Federal procurement.

The proposed FAR change also

contained procedures by which an

interested party may protest a small

business concern’s disadvantaged status

to the Small Business Administration

(SBA). In response to and in

conjunction with the DOJ and FAR

reform proposals, on August 14, 1997,

SBA published in the Federal Register,

62 FR 43584, a proposed rule to amend

13 CFR part 124. Subpart A of the

proposed part 124 dealt with changes

pertaining to the 8(a) Business

Development (8(a) BD) program which

is authorized by sections 7(j)(10) and

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

636(j)(10), 637(a). Subpart B of proposed
35768 Federal Register / Vol. 63, No. 125 /Tuesday, June 30, 1998 /Rules and Regulations

part 124 dealt with SBA’s role in the

certification and protest of small

disadvantaged businesses, as

contemplated by the DOJ and FAR

proposals. SBA is finalizing the vast

majority of subpart A of 13 CFR part 124

as a separate rulemaking action. This

rule finalizes subpart B of 13 CFR part

124, discussing fully all substantive

comments received regarding subpart B

in response to the August 14, 1997

proposed rule. This rule also makes four

changes to subpart A of 13 CFR part 124

in order to take into account the effect

that benchmark achievement, explained

below, may have on the 8(a) BD

program.

As recommended in the DOJ review of

Federal affirmative action procurement

programs, subpart B of part 124 as set

forth in this rule describes standards

and procedures by which a firm can

apply to be recognized as a small

disadvantaged business (SDB). Under

the rule, SBA, or, where SBA deems it

appropriate, SBA-approved state

agencies, private sector organizations or

business concerns (called Private

Certifiers), will determine whether a

firm is owned and controlled by

specified individuals claiming to be

disadvantaged. Where a Private Certifier

determines ownership and control, the

Private Certifier will issue a written

decision as to whether the applicant is

actually owned and controlled by the

individuals identified as claiming

disadvantaged status, and will forward

the application along with a copy of its

decision to SBA for further processing

as to the other aspects of SDB eligibility.

Where the Private Certifier finds that the

applicant is not owned and controlled

by the individuals claiming

disadvantaged status, its decision will

state the specific reasons for the finding,

and inform the applicant of its right to

appeal the decision to SBA’s Office of

Hearings and Appeals (OHA). Where

SBA determines ownership and control,

SBA will first determine whether the

applicant is owned and controlled by

the individual(s) claiming to be

disadvantaged. If SBA determines that

the applicant is not owned and

controlled by the individual(s) claiming

disadvantaged status, SBA will issue a

written decision addressing only the

ownership and control issues. If SBA

determines that the applicant is owned

and controlled by the individual(s)

claiming disadvantaged status, SBA will

issue a single written decision as to

whether the applicant qualifies as an

SDB. Such a decision will include the

ownership and control of the firm, the

size status of the firm, and the

disadvantaged status of those

individuals claiming to be

disadvantaged. An applicant may

appeal SBA’s determination that it is

not owned and controlled by those

individuals claiming disadvantaged

status, or its decision that one or more

of the individuals claiming

disadvantaged status are not actually

disadvantaged to OHA. An applicant

may also request a formal size

determination with the applicable SBA

Government Contracting Area Office.

Individuals who are members of

certain designated groups are presumed

to be socially and economically

disadvantaged. SBA will consider

evidence presented to it which is

contrary to the presumptions, and may

seek further information from the

applicant individuals. Other individuals

must submit a narrative statement

identifying personally how their entry

into or advancement in the business

world has been impaired because of

their individual social disadvantage,

and how their ability to compete in the

free enterprise system has been

impaired due to diminished capital and

credit opportunities. These procedures

are completely separate from the 8(a) BD

requirements. The rule describes

procedures for listing and removing

firms from an SBA-maintained on-line

register of certified SDBs. With respect

to the 8(a) BD program, the rule also

provides regulatory authority for SBA,

in its discretion, to limit program entry,

accelerate program graduation, and limit

the numbers of 8(a) contracts available

when the benchmarks referred to in the

FAR are achieved in particular

industries.

SBA has attempted to write the

regulations in plain English.

Discussion of Public Comment

SBA received several comments

concerning the application of

benchmarks to the 8(a) BD program.

Some comments questioned the

methodology of establishing

benchmarks. Neither the proposed rule

nor this final rule addresses the way in

which benchmarks will be developed.

As such, those comments are not

relevant to this rulemaking, and SBA

makes no changes in response to them.

A few comments expressed concern

about the actions SBA may take when

the benchmark is exceeded in a

particular industry (i.e., SBA may

decide not to accept an application for

the 8(a) BD program from a concern in

that industry (§ 124.108(f)); SBA may

accelerate graduation of Participants

(§ 124.302(d)); or SBA may elect not to

accept a requirement as an 8(a) contract

(§ 124.504(d)). While the regulations

give SBA discretion to take any of those

actions in appropriate circumstances,

they do not mandate that such actions

be taken in any case. In considering

whether to take action under these

provisions, the SBA Administrator will

weigh the business development

purposes of the program in every case.

Part 124, subpart B: Subpart B of the

August 14, 1997 proposed rule defined

what an SDB is and set forth the

procedures by which a firm can be

recognized as an SDB. Each of the

significant comments received regarding

subpart B and the changes made to

subpart B are identified below.

Proposed § 124.1001 defined an SDB

as a business which is owned and

controlled by one or more

disadvantaged individuals. One

commenter noted that this omitted

references to certain entities which are

considered disadvantaged. SBA agrees

with this comment, and this final rule

changes § 124.1001 to make clear that

firms owned and controlled by the

following entities, i.e., Alaska Native

Corporations (ANCs), Community

Development Corporations (CDCs),

Indian tribes (tribes) or Native Hawaiian

Organizations (NHOs), are considered

disadvantaged.

Proposed § 124.1002(d) would have

required SBA to consider the

‘‘character’’ of each individual claiming

disadvantaged status in determining

whether a firm qualified as an SDB.

Upon further reflection, SBA does not

believe that SBA should look at the

character of the firm or individuals

claiming disadvantaged status as part of

its SDB determination. The requirement

that a firm and its principals possess

‘‘good character’’ should be a

responsibility issue to be determined by

the contracting officer in connection

with each contract for which the firm is

the apparent successful offeror, and

should have no bearing on whether a

firm should be classified as an SDB. As

such, SBA has deleted that requirement

from this final rule.

Proposed § 124.1002(b)(4) listed as a

requirement for SDB status (relating to

DOD, NASA and Coast Guard

procurements) the additional

requirement that a majority of the SDB’s

earnings accrue directly to the

disadvantaged individuals. One

commenter questioned why this

restriction applied only to DOD, NASA

and the Coast Guard. The reason for the

limited applicability is that the

restriction appears in the authorizing

legislation for the SDB program

applying to DOD, NASA and Coast

Guard (see section 1207 of the Defense

Acquisition Improvement Act of 1986,

Public Law 99–661), but not in the

authorizing legislation for the
Federal Register / Vol. 63, No. 125 /Tuesday, June 30, 1998 /Rules and Regulations 35769

Government-wide SDB program (see

section 7102 of the Federal Acquisition

Streamlining Act of 1994, Public Law

103–355). This rule is consistent with

this statutory distinction.

Proposed § 124.1002(f)(4) required

that a majority of a joint venture’s

earnings must accrue directly to

disadvantaged individuals and entities.

One commenter noted that this

provision could be read to impose an

additional requirement on ANCs that

would be contrary to 43 U.S.C. 1626(e).

SBA does not believe this to be true

because the provision was meant to

apply to SDBs owned by disadvantaged

individuals and not to those owned by

tribes, ANCs, CDCs or NHOs.

Nevertheless, SBA has deleted this

provision from the final rule because it

is contract specific and should not affect

whether a firm should be considered an

SDB generally.

The final rule deletes proposed

§ 124.1002(g), the requirement that an

SDB must perform certain specified

percentages of work with its own

employees. Upon further deliberation,

SBA believes that this requirement is a

contract specific requirement and does

not belong in the regulations defining

what an SDB is. SBA has added a new

paragraph (g) clarifying that the

ownership restrictions contained in

§§ 124.105(g) and (h) do not apply to

SDB eligibility. Those restrictions apply

to the 8(a) BD program because it is a

business development program.

Proposed §§ 124.1003 through

124.1009 set forth various requirements

relating to Private Certifiers. The

proposed rule stated that Private

Certifiers would perform determinations

of ownership and control and that SBA

would perform such determinations

where ‘‘a Private Certifier is not

reasonably available.’’ SBA received

several comments on the proposed use

of Private Certifiers. One commenter

stated that the use of Private Certifiers

provided a quick and cost effective

certification process. Several

commenters were concerned about the

required qualifications, if any, of the

Private Certifiers, the procedures to be

used by them in the certification

process, and the monitoring of the

Private Certifiers. One commenter

strongly disagreed with the use of

Private Certifiers to determine

ownership and control in any case, and

believed that SBA was better suited for

this responsibility.

Upon further deliberation, SBA does

not believe it is prudent to limit its

ability to perform ownership and

control determinations only to

situations where Private Certifiers are

not available. The final rule still

authorizes SBA to approve Private

Certifiers and for Private Certifiers to

perform ownership and control

determinations in appropriate

circumstances. However, it will be

within SBA’s discretion as to when and

to what extent Private Certifiers will be

utilized in the SDB certification process.

A firm seeking to be certified as an SDB

should contact its local SBA field office

to learn whether to submit its SDB

application to SBA or to a Private

Certifier. SBA’s Homepage on the

Internet will also identify this

information.

In addition, in response to concerns

about SBA’s monitoring Private

Certifiers, the final rule (§ 124.1003)

provides that SBA will establish

standards regarding qualifications,

monitoring, procedures and use, if any,

of Private Certifiers. SBA will establish

these standards in the document

approving an organization or concern as

a Private Certifier.

Proposed § 124.1004 described how

an organization or business concern

becomes a Private Certifier. The SBA

received five comments regarding this

proposed section. One commenter

stated that training should be

mandatory. While SBA believes that

training will be necessary in many

cases, it may not be needed in every

case. As such, SBA has retained its

flexibility to require training where

appropriate. A second commenter stated

that a monitoring system should be

developed. SBA agrees and has

provided for SBA monitoring in

§ 124.1003. A third commenter stated

that the Private Certifiers should be

nonprofit organizations or governmental

agencies and not private sector

organizations. SBA considered this

comment, but has decided not to restrict

Private Certifiers in this way. Nonprofit

organizations and state and local

governmental agencies may apply and

be granted status as Private Certifiers.

However, SBA does not believe that

those are the only entities reasonably

capable of providing this service. Such

a restriction is unnecessary and would

be contrary to policies that generally

encourage competition.

Proposed § 124.1004(f) prohibited a

Private Certifier from certifying any

company with which it has other

business dealings, but did not specify a

timeframe for limiting such dealings or

what types of activities SBA was in fact

attempting to limit. Upon further

deliberation, SBA believes that this

regulation should provide the general

authority for SBA to prohibit conflicts of

interest between a Private Certifier and

those firms that come to it seeking an

ownership and control determination

and protect the integrity of the Private

Certifier decision-making process. SBA

believes that the document (e.g.,

contract) that authorizes an entity to act

as a Private Certifier should detail the

specific conditions or limitations on

other business transactions between the

Private Certifier and those firms for

which it performs an ownership and

control determination. These

restrictions may pertain to past

relationships (so that a Private Certifier

could not process an SDB application

for a firm with which it had certain

business dealings in the past) or to

future transactions (so that the Private

Certifier could not engage in certain

business relationships with a firm for a

specified period of time after processing

the firm’s SDB application). SBA does

not intend to preclude a Private Certifier

from making a determination with

respect to a firm’s SDB status for both

federal and state/local SDB programs.

That is not the type of ‘‘other business

transactions’’ that this regulation is

intended to prohibit.

Proposed § 124.1005 allowed Private

Certifiers to charge a reasonable fee to

process the firm’s determination of

ownership and control. There were two

comments on this section. The first

commenter noted that the language was

confusing. SBA revised the language in

the first sentence in response to this

comment. The second commenter, a

Federal agency, stated that the fee

should be the same whether or not the

applicant receives SDB certification.

SBA agrees and has adopted this

language in the final regulation. In

addition, SBA has amended this section

to provide that SBA may charge a fee to

process ownership and control

determinations where SBA performs

ownership and control determinations.

From time to time, SBA will publish a

Notice in the Federal Register

identifying any fee that SBA decides to

charge to process a firm’s determination

of ownership and control. Any funds

received by SBA to make these

determinations will be remitted

promptly to the Treasury of the United

States as miscellaneous receipts.

Proposed § 124.1008 explained the

process to become certified as an SDB.

SBA received several comments on this

proposed section. Three comments

supported the proposed language, and

stated that this section would improve

the efficiency of the process and reduce

paperwork. A few comments addressed

the need for a method of monitoring the

Private Certifiers and their fees. As

noted above, § 124.1003 of the final rule

provides authority for SBA to include

specific monitoring provisions in the
35770 Federal Register / Vol. 63, No. 125 /Tuesday, June 30, 1998 /Rules and Regulations

document approving an organization or

concern to be a Private Certifier.

One commenter questioned the

automatic inclusion of current 8(a) BD

Participants as SDBs. SBA continues to

believe that such inclusion is proper.

An 8(a) BD concern’s continuing

eligibility as an SDB will be reviewed as

part of the concern’s annual review for

the 8(a) BD program.

The final rule also removes all

references in § 124.1008 to procuring

agencies as certifiers. All SDB

certifications will be made by SBA and

its Private Certifiers.

One commenter specifically requested

that an ANC-owned firm be permitted to

apply for SDB status through the SBA

Anchorage Office. To address this

concern, SBA has added language to

§ 124.1008(a)(1) allowing SBA flexibility

to direct where applications should be

made.

Proposed § 124.1008(b) listed the

required forms and documents to be

submitted by the applicant for SDB

certification. One commenter, noted that

the required ‘‘small business self

certification’’ should be included in this

section. SBA does not adopt this

comment. SBA concluded that it was

not necessary to detail every form or

piece of information that SBA might

request from an SDB applicant. Instead,

the final rule condenses § 124.1008(b) to

provide that an SDB applicant must

submit the same forms and attachments

required by SBA when applying to the

8(a) BD program. This change gives SBA

the flexibility to request whatever

information is needed to make an

informed decision.

SBA has clarified throughout this

section that ownership and control

determinations may be made by either

SBA, or where SBA deems it

appropriate, by Private Certifiers. SBA

has added a new § 124.1008(d)(3) giving

SBA the discretion in any case to

analyze and determine whether a firm is

owned and controlled by one or more

individuals claiming disadvantage. SBA

believes that this paragraph provides

needed flexibility to the regulation to

ensure that the SDB certification process

runs smoothly in all circumstances. The

final rule also adds a new

§ 124.1008(d)(4) which authorizes SBA’s

program office to re-evaluate an

ownership and control decision by a

Private Certifier where SBA receives

credible evidence that the Private

Certifier has substantially disregarded

the applicable eligibility criteria. This

provision provides to SBA the authority

to quickly correct a determination that

it believes to be clearly contrary to the

eligibility requirements, and should

promote more consistent decisions.

Proposed § 124.1008(e) was originally

entitled ‘‘SDB Certification.’’ A

commenter stated that this was

misleading in light of the fact that

subsection (e) dealt with disadvantaged

status. SBA agrees and has renamed

subsection (e) ‘‘Disadvantaged

determination.’’

Proposed § 124.1008(e)(1) stated that

those claiming disadvantaged status

who are members of a designated group

are presumed to be socially and

economically disadvantaged. A Federal

agency commenter suggested deleting

the phrase ‘‘and economically

disadvantaged,’’ contained in

§ 124.1008(e)(1) as inconsistent with

proposed § 124.1002(c), which requires

a net worth of less than $750,000. SBA

does not agree that the language

contained in § 124.1008(e)(1) conflicts

with the monetary requirement of

§ 124.1002(c), and believes that

eliminating the presumption for

economic disadvantage would be

contrary to the underlying statutory

authority. The presumption of

disadvantage for Federal SDB programs

is based on the authority set forth in

section 8(d) of the Small Business Act,

15 U.S.C. § 637(d). Section 8(d)(3)(C)(ii)

clearly authorizes a presumption of both

social and economic disadvantaged for

members of certain designated groups.

When members of the designated groups

represent to SBA that they are

disadvantaged, as part of a firm’s

application for SDB status, they

represent that they meet the $750,000

net worth requirement for economic

disadvantage. Absent credible evidence

to the contrary, SBA will accept this

representation because of the statutory

presumption. Accordingly, SBA did not

change the presumption in the final

rule.

The final rule adds a new

§ 124.1008(e)(2)(ii). This provision

states the obligations of the Private

Certifier in the application process

concerning individuals who are not

members of a designated group.

Proposed §§ 124.1008(e)(2) (ii) through

(f) have been renumbered for easier

understanding and subsection (f) has

been renamed ‘‘SDB Determination.’’

Proposed § 124.1008(e)(2)(ii) stated

that if one or more of the individuals

upon whose status the Private Certifier

relied in making its ownership and

control decision is not disadvantaged,

the Private Certifier would reject the

firm’s application for SDB status. One

commenter stated that this language

should be clarified to state that the firm

would be rejected only if the

disadvantaged status of that individual

was needed to establish ownership and

control. SBA agrees, and has amended

renumbered § 124.1008(f)(2) to include

this language.

The final rule also adds a new

§ 124.1008(i). This new paragraph

provides that if a firm applying for SDB

certification has a current, valid

certification as a disadvantaged business

enterprise (DBE) from a Department of

Transportation (DOT) recipient, SBA

may adopt the DBE certification as an

SDB certification when determined to

be appropriate.

Proposed § 124.1009 did not provide

a procedure to remand an application

back to a Private Certifier. A Federal

agency commenter expressed concern

that there was no such procedure in

place when OHA overruled the Private

Certifier’s decision regarding ownership

and control by those claiming

disadvantaged status. SBA has revised

§ 124.1009 to remedy this omission.

SBA has also expanded and clarified the

procedures that will apply to an appeal

of a decision of a Private Certifier in

§ 124.1009, and those relating to an

appeal of an SBA decision in

§ 124.1008(f).

Proposed § 124.1010 provided that a

firm could not represent itself as an SDB

concern for purposes of receiving

procurement preferences if it was not on

the SBA-maintained list of qualified

SDBs. SBA has amended this section to

coincide with the final version of the

FAR to provide that a firm may

represent itself as an SDB if it has

submitted an application for

certification and that application is

pending either at SBA or with a Private

Certifier. The final rule further provides

that SBA will make a determination on

SDB status within 15 days where an

SDB applicant is determined to be the

successful offeror on a contract. In the

event that SBA fails to make a

determination within 15 days, the firm

will not be eligible for award, and the

procuring activity will award to another

offeror.

Proposed § 124.1012 stated that a firm

may reapply for certification 12 months

after the date of the final SBA decision

to decline the application. One

commenter requested that the period for

reapplication begin from the date of

submission of the application, rather

than denial. SBA does not agree with

this suggestion, and has made no

change.

Proposed § 124.1013 listed the criteria

SBA would use to delete names on the

SDB register. A Federal agency

commenter noted that recent graduates

of the 8(a) BD program are reviewed for

social and economic disadvantage each

year, through their final year of

participation and, therefore, it is

unnecessarily burdensome to require
Federal Register / Vol. 63, No. 125 /Tuesday, June 30, 1998 /Rules and Regulations 35771

them to apply for SDB certification

immediately. SBA agreed and adopted

this suggestion by adding a new

§ 124.1014, which clarifies how long an

SDB certification lasts, and specifically

allows a firm that has graduated from

the 8(a) BD program to remain on the

SBA-maintained list of qualified SDBs

for a period of three years from the date

of its last annual review in the 8(a) BD

program.

Proposed § 124.1014 (§ 124.1015 in

the final rule) addressed the effect of

receiving an SDB certification. Proposed

§ 124.1014(d) stated that a firm must

submit a new application every three

years to remain on the SDB register. One

commenter noted that a contract award

that is not successfully challenged (i.e.,

the SDB status is upheld) should obviate

the need for applying for a new

certification. SBA agreed with this

comment and has incorporated it in the

new § 124.1014, dealing with how long

an SDB certification lasts. The final rule

provides that SDB status will run three

years from the date SBA determines a

firm to be disadvantaged in connection

with a protest challenging its SDB

status. This extension of SDB status

applies only where SBA determines a

firm to be an SDB on the merits. A

firm’s SDB status will not be extended

where SBA merely dismisses a protest

against it for some procedural reason

(e.g., lack of timeliness or specificity). In

addition, SBA added a new paragraph to

clarify that 8(a) BD graduated firms will

remain on the qualified list of SDBs for

a period of three years from the date of

their last annual review in the 8(a) BD

program.

The final rule adds a new § 124.1016,

authorizing SBA, in the absence of a

protest, to re-evaluate the SDB status of

a firm that is certified as an SDB where

SBA receives credible evidence calling

into question a firm’s eligibility as an

SDB. SBA added this section in

response to a comment that was

concerned about the possibility of a firm

remaining on the list of qualified SDBs

where it was clear that it no longer

qualified as an SDB because no one had

protested its SDB status. This section

also provides that an SDB firm has an

affirmative obligation to report any

changes in ownership or control or any

other circumstances that could

adversely affect the firm’s eligibility for

SDB status to SBA.

The final rule adds a new

§ 124.1021(c) to clarify that SBA will

consider a protest against a previously

certified SDB which is an apparent

successful offeror only where the protest

presents credible evidence that the

firm’s circumstances have materially

changed since SBA certified it as an

SDB, or credible evidence that the firm’s

SDB application contained false or

misleading information. SBA believes

that this change is needed to give value

to the SDB certification process.

Without such a change, a firm’s status

as ‘‘disadvantaged’’ could be repeatedly

challenged despite SBA ruling in its

favor on one protest and despite its

ownership and control remaining

unchanged. Such challenges would

impose a significant and costly burden

on a firm having to defend its SDB

status, as well as on SBA, and serve no

useful purpose. SBA has also made

conforming amendments to

§§ 124.1015(c) and 124.1018(d) to

recognize the limited right to protest the

SDB status of a concern that has

received an SDB certification from SBA.

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 has determined that this rule is

not a major rule as defined by Executive

Order 12866 in that it is not likely to

have an annual economic effect of $100

million or more on the economy, result

in a major increase in costs or prices, or

have a significant adverse effect on

competition or the United States

economy. SBA has determined that this

rule may have 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. A summary of the Regulatory

Flexibility Analysis follows. For a copy

of the complete analysis, contact Calvin

Jenkins, Deputy Associate Deputy

Administrator for Government

Contracting and Minority Enterprise

Development, at (202) 205–6459.

Executive Order 12866

On May 9, 1997, the Department of

Defense, the General Services

Administration, and the National

Aeronautics and Space Administration

proposed amendments to the Federal

Acquisition Regulation (FAR)

concerning programs for small

disadvantaged business concerns. 62 FR

25786. The amendments were intended

to conform to a Department of Justice

(DOJ) proposal to reform affirmative

action in Federal procurement (see 61

FR 26042) and to comply with the

constitutional standards established by

the Supreme Court in Adarand

Constructors, Inc. v. Pena, 115 S.Ct.

2097 (1995). The DOJ proposal

addresses federal contracting with

SDBs. Full implementation of the DOJ

proposal requires revisions to the FAR,

as well as regulatory changes by SBA

and the Department of Commerce. For a

full economic analysis of the changes to

be made by the implementation of a

government-wide SDB program, please

refer to the analysis published with the

FAR rule.

This final rule addresses only SBA’s

responsibilities under the SDB program.

In brief summary, this rule requires SBA

to (1) certify SDB concerns, including

those owned by non-designated group

members, and establish and maintain an

updated list of qualified SDBs; and (2)

resolve protests made challenging the

eligibility of firms as SDBs for Federal

procurement requirements. It also

authorizes SBA to establish and oversee

a national network of private entities to

determine, where SBA deems it

appropriate, whether firms seeking to be

certified as SDBs are owned and

controlled by individuals claiming to be

socially and economically

disadvantaged.

SBA’s determination that this rule is

not a major rule within the meaning of

Executive Order 12866 is based on its

analysis of the costs of implementing its

responsibilities under the governmentwide SDB program.

SBA has examined current

information on procurement patterns,

including the bidding behavior of small

and small disadvantaged businesses to

estimate the number of firms that will

seek to be certified for the SDB program.

In the first year, SBA estimates that

about 30,000 firms will seek to be

certified as SDBs. Current 8(a) firms

(approximately 6,000 in number) meet

all the tests for qualifying as SDBs, and

will automatically be certified as SDBs.

Where SBA approves and authorizes

a Private Certifier to make ownership

and control determinations of firms

seeking SDB certification, a Private

Certifier may charge a reasonable fee for

screening applications for completeness

and for processing the ownership and

control portion of applications. At the

present time, it is uncertain to what

extent Private Certifiers will be

approved or used to make ownership

and control determinations. SBA will

make those determinations initially. The

regulations authorize SBA to charge a

fee in the future following a notice in

the Federal Register. Should SBA elect

to charge a fee, the notice will provide

information as to the amount and when

it will be charged.

SBA projects the impact of this

program, based on this analysis, on

those small businesses seeking to

become certified SDBs, will be less than

$15 million. This analysis is an estimate

of costs for the first year of the program.

Absent material changes or a successful

protest, a certification of SDB status will
35772 Federal Register / Vol. 63, No. 125 /Tuesday, June 30, 1998 /Rules and Regulations

last three years. Firms claiming to be

SDBs will certify that they continue to

meet all applicable eligibility criteria for

any federal contract during the threeyear period.

Summary of the Analysis Prepared

Pursuant to the Regulatory Flexibility

Act

SBA believes that this rule may have

a significant impact on a substantial

number of small businesses. In fiscal

year 1996, the federal government spent

$197.6 billion on the procurement of

goods and services. Small businesses

were awarded $41.1 billion in prime

contracts, representing approximately a

21 percent share of the total federal

contract dollars. SDBs were awarded

$10.3 billion in federal contracts, about

5 percent of all federal contract dollars.

In addition, the federal contract dollars

that went to SDBs was about 25 percent

of all federal dollars that went to small

businesses for the same period.

There are approximately 180,000

small firms registered on PRO-Net,

SBA’s database of small businesses

actively seeking federal government

contracts. SBA estimates that 30,000

small businesses will apply to be

certified as SDBs in the first year of the

program. This is a substantial number of

small disadvantaged businesses

interested in bidding on federal

government contracts. In the proposed

rule issued on August 14, 1998 (62 FR

43584–43628), SBA stated its intent to

use Private Certifiers to determine

‘‘ownership and control’’ for purposes

of the small and disadvantaged business

program. We received no comments

from the public concerning the

economic impact of using Private

Certifiers on small business. Although it

is uncertain whether SBA will use

Private Certifiers, SBA estimates, based

on the fees charged by Private Certifiers

for similar services, that the cost of a

certification would range from $500 to

$1,000. Similarly, if SBA elects to

charge fees for certification, the fees

would be equivalent to the fees charged

by Private Certifiers. We have no

estimates of the size of the small

businesses that will apply to be certified

or the value of the contracts that these

small businesses will receive. Therefore,

we cannot determine precisely the

significance of the economic impact on

small businesses.

For purposes of the Paperwork

Reduction Act of 1995 (Public Law 104–

13), this rule imposes new reporting or

recordkeeping requirements on firms

applying to be certified as SDBS. The

rule requires such firms to submit

evidence that they are owned and

controlled by one or more

disadvantaged individuals. It further

requires the individuals claiming to be

disadvantaged to submit representations

of group membership and

disadvantaged status or evidence of

disadvantaged status to SBA. Once

certified as an SDB, this rule does not

require an SDB to report any other

information to SBA or to maintain

additional records.

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 this rule is

drafted, to the extent practicable, in

accordance with the standards set forth

in Section 2 of that Order.

List of Subjects in 13 CFR Part 124

Government procurement, Hawaiian

Natives, Minority businesses, Reporting

and recordkeeping requirements,

Technical assistance, Tribally-owned

concerns.

Accordingly, for the reasons set forth

above, SBA amends Title 13, Code of

Federal Regulations (CFR), as follows:

PART 124—[AMENDED]

1. The authority citation for 13 CFR

part 124 continues to read as follows:

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

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

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

101–574, and 42 U.S.C. 9815.

2. Section 124.108 is amended by

adding the following paragraph (f):

§ 124.108 What other eligibility

requirements apply for individuals or

businesses?

* * * * *

(f) Achievement of benchmarks.

Where actual participation by

disadvantaged businesses in a particular

SIC Major Group exceeds the

benchmark limitations established by

the Department of Commerce, SBA, in

its discretion, may decide not to accept

an application for 8(a) BD participation

from a concern whose primary industry

classification falls within that Major

Group.

3. Section 124.302 is amended by

adding the following paragraph (d):

§ 124.302 What is early graduation?

* * * * *

(d) Benchmark achievement. SBA

may graduate a Participant prior to the

expiration of its program term where the

Participant has substantially achieved

the targets, objectives and goals of its

business plan as adjusted under

§ 124.403(d) and its primary industry

classification falls within a SIC Major

Group in which the benchmarks

described in § 124.403(d) have been

achieved.

4. Section 124.403 is amended by

adding paragraph (d) to read as follows:

§ 124.403 How is a business plan updated

and modified?

* * * * *

(d) Benchmark achievement. Where

actual participation by disadvantaged

businesses in a particular SIC Major

Group exceeds the benchmark

limitations established by the

Department of Commerce for that Major

Group, SBA may adjust the targets,

objectives and goals contained in the

business plans of Participants whose

primary industry classification falls

within that Major Group. Any

adjustment will take into account

projected decreases in 8(a) and SDB

contracting opportunities.

5. Section 124.504 is amended by

redesignating paragraph (d) as

paragraph (e), and by adding a new

paragraph (d) to read as follows:

§ 124.504 What circumstances limit SBA’s

ability to accept a procurement for award as

an 8(a) contract?

* * * * *

(d) Benchmark achievement. Where

actual participation by disadvantaged

businesses in a SIC Major Group

exceeds the benchmark limitations

established by the Department of

Commerce for that Major Group, SBA

may elect not to accept a requirement

having a SIC code within the Major

Group that is offered to SBA for award

as an 8(a) contract. In determining

whether to accept a requirement in such

a case, SBA will consider the

developmental needs of Participants

and other anticipated contracting

opportunities available to them.

* * * * *

6. Subpart B to part 124 is revised to

read as follows:

Subpart B—Eligibility, Certification,

and Protests Relating to Federal Small

Disadvantaged Business Programs

124.1001 General applicability.

124.1002 What is a Small Disadvantaged

Business (SDB)?

124.1003 What is a Private Certifier?

124.1004 How does an organization or

business concern become a Private

Certifier?

124.1005 Can a fee be charged to a firm to

process the firm’s application for SDB

certification?

124.1006 Is there a list of Private Certifiers?

124.1007 How long may an organization or

business concern be a Private Certifier?

124.1008 How does a firm become certified

as an SDB?
Federal Register / Vol. 63, No. 125 /Tuesday, June 30, 1998 /Rules and Regulations 35773

124.1009 How does a firm appeal a decision

of a Private Certifier?

124.1010 Can a firm represent itself to be an

SDB if it has not yet been certified as an

SDB?

124.1011 What is a misrepresentation of

SDB status?

124.1012 Can a firm reapply for SDB

certification?

124.1013 Is there a list of certified SDBs?

124.1014 How long does an SDB

certification last?

124.1015 What is the effect of receiving an

SDB certification?

124.1016 Can SBA re-evaluate the SDB

status of a firm after SBA certifies it to

be SDB?

124.1017 Who may protest the

disadvantaged status of a concern?

124.1018 When will SBA not decide an

SDB protest?

124.1019 Who decides disadvantaged status

protests?

124.1020 What procedures apply to

disadvantaged status protests?

124.1021 What format, degree of specificity,

and basis does SBA require to consider

an SDB protest?

124.1022 What will SBA do when it

receives an SDB protest?

124.1023 How does SBA make

disadvantaged status determinations in

considering an SDB protest?

124.1024 Appeals of disadvantaged status

determinations.

Subpart B—Eligibility, Certification,

and Protests Relating to Federal Small

Disadvantaged Business Programs

§ 124.1001 General applicability.

(a) This subpart defines a Small

Disadvantaged Business (SDB). It also

sets forth procedures by which a firm

can apply to be recognized as an SDB,

including procedures to be used by

private sector entities approved by SBA

for determining whether a particular

concern is owned and controlled by one

or more disadvantaged individuals or

Alaska Native Corporations (ANCs),

Community Development Corporations

(CDCs), Indian tribes (tribes) or Native

Hawaiian Organizations (NHOs).

Finally, this subpart establishes

procedures by which SBA determines

whether a particular concern qualifies

as an SDB in response to a protest

challenging the concern’s status as

disadvantaged. Unless specifically

stated otherwise, the phrase ‘‘socially

and economically disadvantaged

individuals’’ in this subpart includes

tribes, ANCs, CDCs, and NHOs.

(b) Only small firms that are owned

and controlled by socially and

economically disadvantaged individuals

are eligible to participate in Federal SDB

price evaluation adjustment, evaluation

factor or subfactor, monetary

subcontracting incentive, or set-aside

programs, or SBA’s section 8(d)

subcontracting program.

(c) In order for a concern to represent

that it is an SDB as a prime contractor

for purposes of a Federal Government

procurement, it must have:

(1) Received a certification from SBA

that it qualifies as an SDB; or

(2) Submitted an application for SDB

certification to SBA or a Private

Certifier, and must not have received a

negative determination regarding that

application from SBA or the Private

Certifier.

(d) A firm cannot represent itself to be

an SDB concern in order to receive a

preference as an SDB for any Federal

subcontracting program if it is not on

the SBA-maintained list of qualified

SDBs.

§ 124.1002 What is a Small Disadvantaged

Business (SDB)?

(a) Reliance on 8(a) criteria. In

determining whether a firm qualifies as

an SDB, the criteria of social and

economic disadvantage and other

eligibility requirements established in

subpart A of this part apply, including

the requirements of ownership and

control and disadvantaged status, unless

otherwise provided in this subpart.

Qualified Private Certifiers must use the

8(a) criteria applicable to ownership and

control in determining whether a

particular firm is actually owned and

controlled by one or more individuals

claiming disadvantaged status.

(b) SDB eligibility criteria. A small

disadvantaged business (SDB) is a

concern:

(1) Which qualifies as small under

part 121 of this title for the size standard

corresponding to the applicable four

digit Standard Industrial Classification

(SIC) code.

(i) For purposes of SDB certification,

the applicable SIC code is that which

relates to the primary business activity

of the concern;

(ii) For purposes related to a specific

Federal Government contract, the

applicable SIC code is that assigned by

the contracting officer to the

procurement at issue;

(2) Which is at least 51 percent

unconditionally owned by one or more

socially and economically

disadvantaged individuals as set forth in

§ 124.105. For the requirements relating

to tribes and ANCs, NHOs, or CDCs, see

§§ 124.109, 124.110, and 124.111,

respectively.

(3) Except for tribes, ANCs, NHOs,

and CDCs, whose management and

daily business operations are controlled

by one or more socially and

economically disadvantaged

individuals. For the requirements

relating to tribes and ANCs, NHOs, or

CDCs, see §§ 124.109, 124.110, and

124.111, respectively.

(4) Which, for purposes of SDB

procurement mechanisms authorized by

10 U.S.C. 2323 (such as price evaluation

adjustments, evaluation factors or

subfactors, monetary subcontracting

incentives, or SDB set-asides) relating to

the Department of Defense, NASA and

the Coast Guard only, has the majority

of its earnings accruing directly to the

socially and economically

disadvantaged individuals.

(c) Disadvantaged status. In assessing

the personal financial condition of an

individual claiming economic

disadvantage, his or her net worth must

be less than $750,000 after taking into

account the exclusions set forth in

§ 124.104(c)(2).

(d) Additional eligibility criteria.

Except for tribes, ANCs, CDCs and

NHOs, each individual claiming

disadvantaged status must be a citizen

of the United States.

(e) Potential for success not required.

The potential for success requirement

set forth in § 124.107 does not apply as

an eligibility requirement for an SDB.

(f) Joint ventures. Joint ventures are

permitted for SDB procurement

mechanisms (such as price evaluation

adjustments, evaluation factors or

subfactors, monetary subcontracting

incentives, or SDB set-asides), provided

that the requirements set forth in this

paragraph are met.

(1) The disadvantaged participant(s)

to the joint venture must have:

(i) Received an SDB certification from

SBA; or

(ii) Submitted an application for SDB

certification to SBA or a Private

Certifier, and must not have received a

negative determination regarding that

application.

(2) For purposes of this paragraph, the

term joint venture means two or more

concerns forming an association to

engage in and carry out a single, specific

business venture for joint profit. Two or

more concerns that form an ongoing

relationship to conduct business would

not be considered ‘‘joint venturers’’

within the meaning of this paragraph,

and would also not be eligible to be

certified as an SDB. The entity created

by such a relationship would not be

owned and controlled by one or more

socially and economically

disadvantaged individuals. Each

contract for which a joint venture

submits an offer will be evaluated on a

case by case basis.

(3) Except as set forth in 13 CFR

121.103(f)(3), a concern that is owned

and controlled by one or more socially

and economically disadvantaged
35774 Federal Register / Vol. 63, No. 125 /Tuesday, June 30, 1998 /Rules and Regulations

individuals entering into a joint venture

agreement with one or more other

business concerns is considered to be

affiliated with such other concern(s) for

size purposes. If the exception does not

apply, the combined annual receipts or

employees of the concerns entering into

the joint venture must meet the

applicable size standard corresponding

to the SIC code designated for the

contract.

(4) An SDB must be the managing

venturer of the joint venture, and an

employee of the managing venturer

must be the project manager responsible

for performance of the contract.

(5) The joint venture must perform

any applicable percentage of work

required of SDB offerors, and the SDB

joint venturer(s) must perform a

significant portion of the contract.

(g) Ownership restrictions for nondisadvantaged individuals. The

ownership restrictions set forth in

§ 124.105 (g) and (h) for nondisadvantaged individuals and concerns

do not apply for purposes of

determining SDB eligibility.

§ 124.1003 What is a Private Certifier?

A Private Certifier is an organization

or business concern approved by SBA to

determine whether firms are owned and

controlled by one or more individuals

claiming disadvantaged status. SBA may

elect to arrange for one or more Private

Certifiers to perform certain functions in

the SDB Certification process. When

that election is made, the provisions of

§§ 124.1004 through 124.1007 will

apply. SBA will establish more detailed

standards regarding qualifications,

monitoring, procedures and use, if any,

of Private Certifiers in specific contracts

or agreements between SBA and the

Private Certifiers.

§ 124.1004 How does an organization or

business concern become a Private

Certifier?

(a) SBA may execute contracts or

agreements with organizations or

business concerns seeking to become

Private Certifiers. Any such contract or

agreement will include provisions for

the oversight, monitoring, and

evaluation of all certification activities

by SBA.

(b) The organization or business

concern must demonstrate a knowledge

of SBA’s regulations regarding

ownership and control, as well as

business organizations and the legal

principles affecting their ownership and

control generally, including stock

issuances, voting rights, convertability

of debt to equity, options, and powers

and responsibilities of officers and

directors, general and limited partners,

and limited liability members.

(c) The organization or concern must

also, along with its principals,

demonstrate good character. Good

character does not exist for these

purposes if the organization or concern

or any of its principals:

(1) Is debarred or suspended under

any Federal procurement or nonprocurement debarment and suspension

regulations; or

(2) Has been indicted or convicted for

any criminal offense or suffered a civil

judgment indicating a lack of business

integrity.

(d) As a condition of approval, SBA

may require that appropriate officers

and/or key employees of the concern

attend a training session on SBA’s rules

and requirements.

(e) An organization or concern

seeking to become a Private Certifier

must agree to provide access to SBA of

its books and records when requested,

including records pertaining to its

certification activities. Once SBA

approves the organization or concern to

be a Private Certifier, SBA may review

this information, as well as the

decisions of the Private Certifier, in

determining whether it will renew or

extend the term of the Private Certifier,

or terminate the Private Certifier for

cause.

(f) SBA will include in any contract

or agreement document authorizing an

entity to act as a Private Certifier

appropriate conditions to prohibit

conflicts of interests between the Private

Certifier and the firms for which it

processes SDB applications and to

protect the integrity of the decisionmaking process.

§ 124.1005 Can a fee be charged to a firm

to process the firm’s application for SDB

certification?

(a) With SBA’s approval, a Private

Certifier may charge a reasonable fee to

a firm in order to screen the firm’s

application for completeness and to

process a determination of ownership

and control. The fee must be for actual

services rendered and must not be

related to whether or not the business

concern is found to be owned and

controlled by one or more individuals or

entities claiming disadvantaged status.

(b) Where SBA makes the

determination of ownership and control,

SBA may collect a fee comparable to

that which would be charged by a

Private Certifier. From time to time,

SBA will publish a Notice in the

Federal Register identifying any fee that

SBA will charge to process a firm’s

determination of ownership and control.

SBA will promptly remit any funds

received pursuant to this section to the

Treasury of the United States as

miscellaneous receipts.

§ 124.1006 Is there a list of Private

Certifiers?

SBA will maintain a list of approved

Private Certifiers on SBA’s Home Page

on the Internet. Any interested person

may also obtain a copy of the list from

the local SBA district office.

§ 124.1007 How long may an organization

or business concern be a Private Certifier?

(a) SBA’s approval document will

specify how long the organization or

concern may be a Private Certifier. The

initial contract or agreement will have a

base period of one year, and may

include option years or renewal

provisions.

(b) SBA may terminate a contract or

agreement with an organization or

business concern which is a Private

Certifier for the convenience of the

Government at any time, and may

terminate the contract or agreement for

default where appropriate. Specific

grounds for termination for default

include, but are not limited to:

(1) Charging improper, unreasonable

or contingent fees in violation of

§ 124.1005;

(2) Engaging in prohibited business

transactions with the firms for which it

processes SDB applications in violation

of § 124.1004(f); or

(3) A demonstrated record of

ownership and control determinations

that are overturned on appeal by SBA’s

Office of Hearings and Appeals (OHA)

or by SBA as part of an SDB protest.

§ 124.1008 How does a firm become

certified as an SDB?

Any firm may apply to be certified as

an SDB. SBA’s field offices will provide

further information and required

application forms to any firm interested

in SDB certification. In order to become

certified as an SDB, a firm must apply

to SBA or, if directed by SBA, to a

Private Certifier. The application must

include evidence demonstrating that the

firm is owned and controlled by one or

more individuals claiming

disadvantaged status, along with

certifications or narratives regarding the

disadvantaged status of such

individuals. See paragraph (e)(1) of this

section. The firm also must submit

information necessary for a size

determination. See § 121.1008. Current

8(a) BD Participants do not need to

submit applications for SDB status.

These concerns automatically qualify as

SDBs by virtue of their status as 8(a) BD

concerns. An 8(a) Participant’s

continuing eligibility as an SDB will be
Federal Register / Vol. 63, No. 125 /Tuesday, June 30, 1998 /Rules and Regulations 35775

reviewed as part of the concern’s 8(a)

annual review.

(a) Filing an SDB application. (1) An

interested firm must first submit a

complete application to SBA’s Assistant

Administrator for Small Disadvantaged

Business Certification and Eligibility

(AA/SDBCE), Small Business

Administration, 409 3rd Street, SW,

Washington, DC 20416, or to a specific

SBA field office or an approved Private

Certifier if directed by SBA.

(2) The firm must identify which

individual(s) or entities are claiming

disadvantaged status.

(b) Required forms. Each firm seeking

to be certified as an SDB must submit

those forms and attachments required

by SBA when applying for admission to

the 8(a) BD program. These forms and

attachments may include, but not be

limited to, financial statements, Federal

personal and business tax returns and

personal history statements. The

application package may be in the form

of an electronic application.

(c) Application processing. (1) SBA or

a Private Certifier will advise each

applicant generally within 15 days after

the receipt of an application whether

the application is complete and suitable

for evaluation and, if not, what

additional information or clarification is

required. If the application is not

complete, SBA or the Private Certifier

will return the application to the firm,

and will notify the firm that it may

reapply when its application is

complete.

(2) The burden is on the applicant to

demonstrate that those individuals

claiming disadvantaged status own and

control the concern.

(d) Ownership and control decision.

SBA or a Private Certifier will determine

whether those individuals claiming

disadvantaged status own and control

the applicant firm within 30 days of

receipt of a complete application

package, whenever practicable..

(1) Where a Private Certifier

determines ownership and control, the

Private Certifier will issue a written

decision as to whether the applicant is

owned and controlled by the

individuals identified as claiming

disadvantaged status.

(i) If the Private Certifier finds that the

applicant is owned and controlled by

the individuals claiming disadvantaged

status, the Private Certifier will forward

the application to SBA along with a

copy of its ownership and control

determination and the information

required by paragraph (e)(2)(ii) of this

section, where appropriate.

(ii) If the Private Certifier finds that

the applicant is not owned and

controlled by the individuals claiming

disadvantaged status, its decision must

state the specific reasons for the finding,

and inform the applicant of its right to

appeal the decision to SBA pursuant to

§ 124.1009.

(2) Where SBA determines ownership

and control, SBA will first determine

whether the applicant is owned and

controlled by the individual(s) claiming

to be disadvantaged. If SBA determines

that the applicant is not owned and

controlled by the individual(s) claiming

disadvantaged status, SBA will issue a

written decision addressing only the

ownership and control issues. If SBA

determines that the applicant is owned

and controlled by the individual(s)

claiming disadvantaged status, SBA will

issue a single written decision as to

whether the applicant qualifies as an

SDB. Such a determination will include

the ownership and control of the firm,

the size status of the firm, and the

disadvantaged status of those

individuals claiming to be

disadvantaged.

(3) In its sole discretion, SBA may

analyze and determine whether a firm is

owned and controlled by one or more

individuals claiming disadvantaged

status notwithstanding the availability

of a Private Certifier to make such a

decision.

(4) SBA reserves the right to reevaluate an approved decision on

ownership and control by a Private

Certifier in a case where it has credible

evidence that the Private Certifier has

substantially disregarded the eligibility

criteria.

(e) Disadvantaged determination.

Once a concern receives a decision

finding that it is owned and controlled

by those individuals or entities claiming

disadvantaged status (either through an

initial determination or on appeal), SBA

will determine whether the other

eligibility criteria are met, and, if so,

will include the SDB on the SBAmaintained list of qualified SDBs. SBA

will make this determination within 30

days of receiving an SDB application, if

practicable.

(1) Members of designated groups. (i)

Those individuals claiming

disadvantaged status that are members

of the same designated groups that are

presumed to be socially disadvantaged

for purposes of SBA’s 8(a) BD program

(see § 124.103(b)) are presumed to be

socially and economically

disadvantaged for purposes of SDB

certification. These individuals must

represent that they are members of one

of the designated groups, that they are

identified as a member of one of the

designated groups, that their net worth

is less than $750,000 after taking into

account the exclusions set forth in

§ 124.104(c)(2), and that they are

citizens of the United States.

(ii) Absent credible evidence to the

contrary, SBA may accept these

representations as true and certify the

firm as an SDB.

(2) Individuals not members of

designated groups. (i) Each individual

claiming disadvantaged status who is

not a member of one of the designated

groups must submit a statement

identifying personally how his or her

entry into or advancement in the

business world has been impaired

because of personally specific factors

(see § 124.103(c)), and how his or her

ability to compete in the free enterprise

system has been impaired due to

diminished capital and credit

opportunities (see §§ 124.103(c) and

124.104).

(ii) Where a Private Certifier

determines ownership and control, the

Private Certifier must also review the

disadvantaged status submission and

any other required information, and

send to SBA the following:

(A) An executive summary and

analysis of the disadvantaged status

submission;

(B) The application and all supporting

documentation; and

(C) A certification that the application

is complete and suitable for evaluation.

(3) Concerns owned by tribes, ANCs,

CDCs, or NHOs: SBA will process SDB

applications from concerns owned and

controlled by tribes, ANCs, CDCs, or

NHOs in the same way as those from

concerns owned by individuals who are

members of designated groups.

(f) SDB Determination. (1) If SBA’s

AA/SDBCE determines that the

individual(s) claiming disadvantage are

disadvantaged and other eligibility

criteria are met, he or she will certify

the firm as an SDB.

(2) If SBA’s AA/SDBCE determines

that one or more of the individuals

claiming to be disadvantaged is not

disadvantaged and their disadvantaged

status is required to establish

disadvantaged ownership and control of

the applicant, or any of the other

eligibility criteria are not met, he or she

will reject the firm’s application for SDB

certification. The AA/SDBCE will issue

a written decision setting forth SBA’s

reasons for decline.

(3) Pursuant to part 134 of this title,

a firm may appeal to OHA the AA/

SDBCE’s decision that one or more of

the individuals claiming disadvantaged

status is not disadvantaged, or, where

SBA determines ownership and control,

that those claiming disadvantaged status

do not own and control the applicant.

(See § 124.1009 for appeals from

decisions by Private Certifiers.)
35776 Federal Register / Vol. 63, No. 125 /Tuesday, June 30, 1998 /Rules and Regulations

(i) The firm must serve SBA’s

Associate General Counsel for General

Law with a copy of the appeal.

(ii) OHA will determine whether

SBA’s decision in either case was

arbitrary, capricious, or contrary to law.

OHA’s review is limited to the facts that

were before SBA at the time of its

decision and any arguments submitted

in or in response to the appeal. OHA

will not consider any facts beyond those

that were already presented to SBA

unless the administrative judge

determines that manifest injustice

would occur if the appeal were limited

to the record.

(4) A firm may also request a formal

size determination pursuant to part 121

of this title where SBA finds that the

firm is not small.

(g) Current 8(a) BD program

participants. Any firm that is currently

a Participant in SBA’s 8(a) BD program

need not seek an ownership and control

determination or apply to SBA for a

separate certification as an SDB. SBA

will certify current 8(a) BD Participants

as SDBs, and automatically include

them on the list of qualified SDBs.

(h) 8(a) BD graduates. SBA will

automatically certify a firm that has

graduated from the SBA’s 8(a) BD

program to be an SDB, provided SBA

determined that the firm continued to

be eligible for the 8(a) BD program as

part of an annual review within the last

three years. (See § 124.1014(b)).

(i) Certification by DOT recipient. If a

firm applying for SDB certification has

a current, valid certification as a

disadvantaged business enterprise (DBE)

from a Department of Transportation

(DOT) recipient, SBA may adopt the

DBE certification as an SDB certification

when determined by the AA/SDBCE or

designee to be appropriate.

§ 124.1009 How does a firm appeal a

decision of a Private Certifier?

Where a Private Certifier performs an

ownership and control determination

and finds that a firm is not owned and

controlled by the individual(s) claiming

disadvantaged status, the firm may

appeal that decision to OHA pursuant to

part 134 of this title. The firm must

serve SBA’s Associate General Counsel

for General Law and the applicable

Private Certifier with a copy of the

appeal.

(a) The Private Certifier must submit

to OHA the full record upon which its

decision was based within two days of

receiving notification that an appeal has

been filed.

(b) The Private Certifier and SBA may

each elect to appear or not appear in an

appeal proceeding.

(c) OHA’s review is limited to the

facts that were before the Private

Certifier at the time of its final decision

and any arguments submitted in or in

response to the appeal. OHA will not

consider any facts beyond those that

were already presented to the Private

Certifier unless the administrative judge

determines that manifest injustice

would occur if the appeal were limited

to the record.

(d) OHA will decide whether it

believes that the facts support by a

preponderance of the evidence the

Private Certifier’s determination

regarding ownership and control.

(e) Where the facts presented in the

record leave significant doubt as to

whether the petitioner is or is not

owned and controlled by one or more

individuals claiming to be

disadvantaged, the administrative judge

may remand the case to the Private

Certifier for reconsideration in accord

with his or her remand order.

(f) If OHA finds that the firm is owned

and controlled by the individual(s)

claiming disadvantaged status, OHA

will refer the application to SBA for

further processing. If OHA finds that the

firm is not owned and controlled by

such individual(s), the administrative

judge will state the reasons for that

decision, which will be the final

decision of the Agency.

§ 124.1010 Can a firm represent itself to be

an SDB if it has not yet been certified as

an SDB?

(a) General rule. Except as set forth in

paragraph (d) of this section, a firm may

represent itself to be an SDB concern in

order to receive a preference as an SDB

for any Federal procurement program if

it has submitted a complete application

for SDB certification to SBA or a Private

Certifier and it has not received a

negative determination regarding that

application from SBA or the Private

Certifier. A firm that has received a

negative determination of ownership

and control or a negative determination

regarding its disadvantaged status and is

awaiting the resolution of its appeal of

that determination may not represent

itself to be an SDB.

(b) Where applicant becomes

successful offeror. If a concern becomes

the apparent successful offeror on a

contract for which it would receive a

benefit for being an SDB while its

application for SDB certification is

pending, either at SBA or a Private

Certifier, the contracting officer for the

particular contract must immediately

inform SBA’s AA/SDBCE. SBA will

then prioritize the firm’s SDB

application and make a determination

regarding the firm’s status as an SDB

within 15 days from the date that SBA

received the contracting officer’s

notification.

(1) Where the apparent successful

offeror’s completed application is

pending an ownership and control

determination with a Private Certifier,

the concern must inform SBA which

Private Certifier has its application. SBA

will immediately contact the Private

Certifier to require the Private Certifier

to complete its ownership and control

determination within 5 days of SBA’s

notification. In appropriate

circumstances, SBA may undertake to

make the determination itself, and may

recoup the cost of the determination

from the Private Certifier.

(2) If requested to do so by the

procuring activity contracting officer,

SBA will determine whether other

offerors are SDBs where they have

represented that their completed

applications for SDB status are pending

at SBA or a Private Certifier and they

could receive the award if SBA

determines that the apparently

successful offeror is not an SDB.

(3) If the contracting officer does not

receive an SBA determination within 15

calendar days after the SBA’s receipt of

the notification, the contracting officer

will presume that the apparently

successful offeror, and any other

offerors referred to SBA in connection

with the same procurement by the

contracting officer, are not

disadvantaged, and will make award

accordingly, unless the contracting

officer grants an extension to the 15-day

response period.

(c) Representation as SDB for

statistical purposes. A firm may

represent itself as an SDB concern for

general statistical purposes without

regard to any application for SDB

certification or its inclusion on the SBAmaintained list of qualified SDB’s.

(d) Subcontracting programs. Only

firms that are on the SBA-maintained

list of qualified SDBs may represent

themselves as SDB concerns in order to

receive a preference as an SDB for any

Federal subcontracting program.

§ 124.1011 What is a misrepresentation of

SDB status?

(a) Any person or entity that

misrepresents a firm’s status as a ‘‘small

business concern owned and controlled

by socially and economically

disadvantaged individuals’’ (‘‘SDB

status’’) in order to obtain an 8(d) or

SDB contracting opportunity or

preference will be subject to the

penalties imposed by section 16(d) of

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

645(d), as well as any other penalty

authorized by law.
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(b) A representation of SDB status by

any firm that SBA has found not to be

an SDB (either in connection with an

SDB application or protest) will be

deemed a misrepresentation of SDB

status, unless and until the firm

reapplies for and obtains SDB

certification.

§ 124.1012 Can a firm reapply for SDB

certification?

(a) A concern which has been denied

SDB certification may reapply for

certification at any time 12 months or

more after the date of the most recent

final decision of SBA to decline its

application (either on appeal of an

ownership and control determination,

or a negative finding of disadvantaged

status).

(b) A concern which received a

decision that it was not owned and

controlled by the individual(s) claiming

disadvantaged status from a Private

Certifier and does not appeal that

decision to OHA may apply for a new

ownership and control determination at

any time.

§ 124.1013 Is there a list of certified SDBs?

(a) If SBA certifies a firm to be an

SDB, SBA will enter the name of the

firm into an SBA-maintained central online register, such as PRO-Net.

(b) The register of SDBs will contain

the names of all firms that are currently

certified to be SDBs, including the

names of all firms currently

participating in SBA’s 8(a) BD program.

(c) On a continuing basis, SBA will

delete from the on-line register those

firms that have:

(1) Graduated or been terminated from

SBA’s 8(a) BD program for any reason

and have not otherwise received SDB

certification (see, §§ 124.1008(h) and

124.1014(b) for treatment of 8(a)

graduates);

(2) Been determined not to be an SDB

in response to an SDB protest brought

under § 124.1017; or

(3) Other than current 8(a)

Participants, not received a renewed

SDB certification after being on the

register for three years (see

§ 124.1014(c)).

§ 124.1014 How long does an SDB

certification last?

(a) Once SBA certifies a firm to be an

SDB by placing it on the list of qualified

SDBs, the firm will generally remain on

the SBA-maintained list of certified

SDBs for a period of three years from the

date of its certification.

(1) A firm’s SDB certification will

extend beyond three years where SBA

finds the firm to be an SDB:

(i) On the merits in connection with

a particular protest (see

§ 124.1023(h)(2));

(ii) In connection with an SBAinitiated SDB determination (see

§ 124.1016(a)(2)); or

(iii) As part of an 8(a) BD annual

review.

(2) Where SBA finds a firm not to be

an SDB in connection with an SDB

protest, an SBA-initiated SDB

determination, or an 8(a) BD annual

review, SBA will immediately decertify

the firm as an SDB and remove it from

the qualified list of SDBs.

(b) A firm that graduates from the 8(a)

BD program will remain on the list of

certified SDBs for a period of three years

from the date of its last annual review.

(c) To remain on the SDB register after

three years, a firm whose status as an

SDB has not been upheld in connection

with a protest or an SBA-initiated SDB

determination, or has not been certified

as an eligible 8(a) Participant as part of

an annual review, must submit a new

application and receive a new

certification.

§ 124.1015 What is the effect of receiving

an SDB certification?

(a) A firm that is certified to be an

SDB may represent itself as an SDB for

such purposes as Federal price

evaluation adjustments, evaluation

factors or subfactors, monetary

subcontracting incentive programs,

section 8(d) subcontracts, SDB setasides, or any other programs which

accept an SBA certification. A

contracting officer may award a contract

based on a firm’s representation that it

is a certified SDB absent a protest that

the protested concern’s circumstances

have materially changed since SBA

certified it as an SDB, or that the

protested concern’s SDB application

contained false or misleading

information (see § 124.1018(d)).

(b) For purposes of a particular

Federal procurement, the firm must

represent that it is both disadvantaged

and small at the time it submits its

initial offer including price (see part 121

of this title). At the same time, the firm

must also represent that no material

change has occurred in its SDB status

since its SDB certification, or from the

date of its application for SDB

certification if its application has not yet

been processed, and must specifically

represent that the net worth of the

disadvantaged individuals (not

including concerns owned by tribes,

ANCs, CDCs, or NHOs) upon whom the

SDB certification was based still does

not exceed $750,000.

(c) A firm’s status as ‘‘disadvantaged’’

or ‘‘small’’ may be protested pursuant to

§§ 124.1017 through 124.1021 and

§§ 121.1001 through 121.1005,

respectively, despite the presence of the

firm on the SDB register, provided the

protest contains specific allegations that

the firm’s circumstances have materially

changed since SBA certified it as an

SDB, or that the firm’s SDB application

contained false or misleading

information.

§ 124.1016 Can SBA re-evaluate the SDB

status of a firm after SBA certifies it to be

SDB?

(a) SBA may initiate an SDB

determination whenever it receives

credible information calling into the

question a firm’s eligibility as an SDB,

including an adverse determination

from a DOT recipient of the firm’s status

as a DBE. Upon its completion of an

SDB determination, SBA will issue a

written decision regarding the SDB

status of the questioned firm.

(1) If SBA finds that the firm does not

qualify as an SDB, SBA will decertify

the firm as an SDB, and immediately

remove the firm from the list of

qualified SDBs. The firm may appeal

SBA’s decision to OHA consistent with

the provisions of § 124.1008(f) and part

134 of this chapter.

(2) If SBA finds that the firm

continues to qualify as an SDB, the

determination remains in effect for three

years from the date of the decision

under the same conditions as if the

concern had been granted SDB

certification under § 124.1008.

(b) An SDB firm must report within

10 days to the AA/SDBCE any changes

in ownership and control or any other

circumstances which could adversely

affect its eligibility as an SDB.

§ 124.1017 Who may protest the

disadvantaged status of a concern?

(a) In connection with a requirement

for which the apparent successful

offeror has invoked an SDB evaluation

adjustment or an SDB set-aside, the

following entities may protest the

disadvantaged status of the apparent

successful offeror:

(1) Any other concern which

submitted an offer for that requirement,

unless the contracting officer has found

the concern to be non-responsive or

outside the competitive range, or SBA

has previously found the protesting

concern to be ineligible for the

requirement at issue;

(2) The procuring activity contracting

officer; or

(3) SBA.

(b) In connection with an 8(d)

subcontract, or a requirement for which

the apparent successful offeror received

an evaluation adjustment for proposing
35778 Federal Register / Vol. 63, No. 125 /Tuesday, June 30, 1998 /Rules and Regulations

one or more SDB subcontractors, the

procuring activity contracting officer or

SBA may protest the disadvantaged

status of a proposed subcontractor.

Other interested parties may submit

information to the contracting officer or

SBA in an effort to persuade the

contracting officer or SBA to initiate a

protest.

(c) An interested party seeking to

protest both the disadvantaged status

and size of an apparent successful SDB

offeror must submit two separate

protests, one as to disadvantaged status

pursuant to this subpart, and one as to

size pursuant to part 121 of this title. An

interested party seeking to protest only

size of an apparent successful SDB

offeror must submit a size protest to the

contracting officer pursuant to part 121.

§ 124.1018 When will SBA not decide an

SDB protest?

(a) SBA will not decide a protest as to

disadvantaged status of any concern

other than the apparent successful

offeror.

(b) SBA will not normally consider a

post award protest. SBA may consider a

post award protest in its discretion

where it determines that a protest

decision after award would have a

practical effect (e.g., where the

contracting officer agrees to terminate

the contract if the protest is sustained).

(c) SBA will not decide an untimely

protest (see § 124.1020(c)).

(d) SBA will not decide a non-specific

protest or one that does not present

credible evidence that the protested

concern’s circumstances have materially

changed since SBA certified it as an

SDB, or that the protested concern’s

SDB application contained false or

misleading information (see § 124.1021).

(e) An interested party may appeal

SBA’s dismissal of a protest for lack of

specificity, timeliness, or a basis upon

which SBA will consider a protest to

SBA’s Deputy Associate Deputy

Administrator for Government

Contracting and Minority Enterprise

Development (DADA/GC&MED)

pursuant to § 124.1024.

§ 124.1019 Who decides disadvantaged

status protests?

In response to a protest challenging

the disadvantaged status of a concern,

the SBA’s AA/SDBCE will determine

whether the concern is disadvantaged.

§ 124.1020 What procedures apply to

disadvantaged status protests?

(a) General. The protest procedures

described in this section are separate

and distinct from those governing size

protests and appeals. All protests

relating to whether a concern is a

‘‘small’’ business for purposes of any

Federal program, including SDB setasides and SDB evaluation adjustments,

must be filed and processed pursuant to

part 121 of this title.

(b) Filing. (1) All protests challenging

the disadvantaged status of a concern

with respect to a particular Federal

procurement requirement must be

submitted in writing to the procuring

activity contracting officer, except in

cases where the contracting officer or

SBA initiates a protest.

(2) Any contracting officer who

initiates a protest must submit the

protest in writing to SBA in accord with

paragraph (c) of this section.

(3) In cases where SBA initiates a

protest, the protest must be submitted in

writing to the AA/SDBCE and

notification provided in accord with

§ 124.1022(a).

(c) Timeliness of protest. (1) SDB

evaluation adjustment and set-aside

protests. (i) General. In order for a

protest to be timely, it must be received

by the contracting officer prior to the

close of business on the fifth day,

exclusive of Saturdays, Sundays and

legal holidays, after the bid opening

date for sealed bids, or after the receipt

from the contracting officer of

notification of the identity of the

prospective awardee in negotiated

acquisitions.

(ii) Oral protests. An oral protest

relating to an SDB set-aside or SDB

evaluation adjustment made to the

contracting officer within the allotted 5-

day period will be considered a timely

protest only if the contracting officer

receives a confirming letter postmarked,

FAXed, or delivered no later than one

calendar day after the date of such oral

protest.

(iii) Protests of contracting officers or

SBA. The time limitations in paragraph

(c)(1)(i) of this section do not apply to

contracting officers or SBA, and they

may file protests before or after awards,

except to the extent set forth in

paragraph (c)(3) of this section.

(iv) Untimely protests. A protest

received after the time limits set forth in

this paragraph (c)(1) will be dismissed

by SBA.

(2) Section 8(d) protests. In

connection with an 8(d) subcontract, the

contracting officer or SBA must submit

a protest to the AA/SDBCE prior to the

completion of performance by the

intended 8(d) subcontractor.

(3) Premature protests. A protest in

connection with any procurement

which is submitted by any person,

including the contracting officer, before

bid opening or notification of intended

award, whichever applies, will be

considered premature, and will be

returned to the protestor without action.

A contracting officer that receives a

premature protest must return it to the

protestor without submitting it to the

SBA.

(d) Referral to SBA. (1) Any

contracting officer who receives a

protest that is not premature must

promptly forward it to the SBA’s AA/

SDBCE, 409 3rd Street, SW,

Washington, DC 20416.

(2) A contracting officer’s referral of a

protest to SBA must contain the

following:

(i) The written protest and any

accompanying materials;

(ii) The date on which the protest was

received by the contracting officer;

(iii) A copy of the protested concern’s

selfrepresentation as an SDB, and the

date of such self-representation; and

(iv) The date of bid opening or the

date on which notification of the

apparent successful offeror was sent to

all unsuccessful offerors, as applicable.

§ 124.1021 What format, degree of

specificity, and basis does SBA require to

consider an SDB protest?

(a) Format. An SDB protest need not

be in any specific format in order for

SBA to consider it.

(b) Specificity. A protest must be

sufficiently specific to provide

reasonable notice as to all grounds upon

which the protested concern’s

disadvantaged status is challenged.

(1) SBA will dismiss a protest that

merely asserts that the protested

concern is not disadvantaged, without

setting forth specific facts or allegations.

(2) The contracting officer must

forward to SBA any non-premature

protest received, notwithstanding

whether he or she believes it is

sufficiently specific or timely.

(c) Basis. SBA will consider a protest

challenging whether the apparent

successful offeror is owned and

controlled by one or more socially and

economically disadvantaged

individuals, including whether one or

more of the individuals claiming

disadvantaged status is in fact socially

or economically disadvantaged, only if

the protest presents credible evidence

that the firm’s circumstances have

materially changed since SBA certified

it as an SDB, or that the firm’s SDB

application contained false or

misleading information.

§ 124.1022 What will SBA do when it

receives an SDB protest?

(a) Upon receipt of a protest

challenging the disadvantaged status of

a concern, the AA/SDBCE, or designee,

will immediately notify the protestor

and the contracting officer of the date

the protest was received and whether it
Federal Register / Vol. 63, No. 125 /Tuesday, June 30, 1998 /Rules and Regulations 35779

will be processed or dismissed for lack

of timeliness or specificity.

(b) In cases where the protest is timely

and sufficiently specific, the AA/

SDBCE, or designee, will also

immediately advise the protested

concern of the protest and forward a

copy of it to the protested concern.

(1) The AA/SDBCE, or designee, is

authorized to ask the protested concern

to provide any or all of the following

information and documentation,

completed so as to show the

circumstances existing on the date of

self-representation: SBA Form 1010A,

‘‘Statement of Personal Eligibility’’ for

each individual claiming disadvantaged

status; SBA Form 1010B, ‘‘Statement of

Business Eligibility;’’ SBA Form 413,

‘‘Personal Financial Statement,’’ for

each individual claiming disadvantaged

status; information as to whether the

protested concern, or any of its owners,

officers or directors, have applied for

admission to or participated in the

SBA’s 8(a) BD program and if so, the

name of the company which applied or

participated and the date of the

application or entry into the program;

business tax returns for the last two

completed fiscal years prior to the date

of self-representation; personal tax

returns for the last two years prior to the

date of self-representation for all

individuals claiming disadvantaged

status, all officers, all directors and for

any individual owning at least 10% of

the business entity; annual business

financial statements for the last two

completed fiscal years prior to the date

of self-representation; a current monthly

or quarterly business financial statement

no older than 90 days; articles of

incorporation; corporate by-laws;

partnership agreements; limited liability

company articles of organization; and

any other relevant information as to

whether the protested concern is

disadvantaged.

(2) SBA’s disadvantaged status

determination need not be limited to

consideration only of the issues raised

in the protest. SBA may consider other

applicable criteria.

(3) Unless the protest presents

specific credible information which

calls into question the veracity of

application or other documents

previously submitted to SBA by a

current Participant in SBA’s 8(a) BD

program, SBA will allow the Participant

to submit, in lieu of the information

specified in paragraph (b)(1) of this

section, a sworn affidavit or declaration

that circumstances concerning the

ownership and control of the business

and the disadvantaged status of its

principals have not changed since its

application or entry into the program or

its most recent annual review, and a

copy of its most recently completed

annual review.

(i) If the ownership or control of the

business or the disadvantaged status of

any principals have changed, the

protested concern must comply with

paragraph (b)(1) of this section.

(ii) An affidavit or declaration may be

allowed only if SBA admitted the

protested concern to the 8(a) BD

program, or conducted an annual review

of the protested concern, during the

12month period preceding the date on

which SBA receives the protest, and if

proceedings to suspend, terminate or

early graduate the concern from the 8(a)

BD program are not pending.

(c) Within 10 working days of the date

that notification of the protest was

received from the AA/SDBCE or

designee, the protested concern must

submit to the AA/SDBCE or designee,

by personal delivery, FAX, or mail, the

information and documentation

requested pursuant to paragraph (b)(1)

of this section or the affidavit permitted

by paragraph (b)(2) of this section.

Materials submitted must be received by

the close of business on the 10th

working day.

(1) SBA will consider only materials

submitted timely, and the late or nonsubmission of materials needed to make

a disadvantaged status determination

may result in sustaining the protest.

(2) The burden is on the protested

concern to demonstrate its

disadvantaged status, whether or not it

is currently shown on the list of

qualified SDBs.

(3) The protested concern must timely

submit to SBA any information it deems

relevant to a determination of its

disadvantaged status.

§ 124.1023 How does SBA make

disadvantaged status determinations in

considering an SDB protest?

(a) General. The AA/SDBCE, or

designee, will determine a protested

concern’s disadvantaged status within

15 working days after receipt of a

protest. If the procuring activity

contracting officer does not receive an

SBA determination within 15 working

days after the SBA’s receipt of the

protest, the contracting officer may

presume that the challenged offeror is

disadvantaged, unless the SBA requests

and the contracting officer grants an

extension to the 15-day response period.

(b) Award after protest. (1) After

receiving a protest involving an offeror

being considered for award, the

contracting officer shall not award the

contract until:

(i) The SBA has made an SDB

determination, or

(ii) 15 working days have expired

since SBA’s receipt of a protest and the

contracting officer has not agreed to an

extension of the 15-day response period.

(2) Notwithstanding paragraph (b)(1)

of this section, the contracting officer

may award a contract after the receipt of

an SDB protest where he or she

determines in writing that an award

must be made to protect the public

interest.

(c) Withdrawal of protest. If a protest

is withdrawn, SBA will not complete a

new disadvantaged status

determination, and a previous SDB

certification will stand.

(d) Basis for determination. (1) Except

with respect to a concern which is a

current Participant in SBA’s 8(a) BD

program and is authorized under

§ 124.1022(b)(3) to submit an affidavit

concerning its disadvantaged status, the

disadvantaged status determination will

be based on the protest record,

including reasonable inferences

therefrom, as supplied by the protestor,

protested concern, SBA or others.

(2) SBA may in its discretion make a

part of the protest record information

already in its files, and information

submitted by the protestor, the protested

concern, the contracting officer, or other

persons contacted for additional specific

information.

(e) Disadvantaged status. In

evaluating the social and economic

disadvantage of individuals claiming

disadvantaged status, SBA will consider

the same information and factors set

forth in §§ 124.103 and 124.104. As

provided in § 124.1002(c), individuals

claiming disadvantaged status must

have a net worth that is less than

$750,000, after taking into account the

exclusions set forth in § 124.104(c)(2).

(f) Disadvantaged status

determination. SBA will render a

written determination including the

basis for its findings and conclusions.

(g) Notification of determination.

After making its disadvantaged status

determination, the SBA will

immediately notify the contracting

officer, the protestor, and the protested

concern of its determination. SBA will

promptly provide by certified mail,

return receipt requested, a copy of its

written determination to the same

entities, consistent with law.

(h) Results of an SBA disadvantaged

status determination. A disadvantaged

status determination becomes effective

immediately.

(1) If the concern is found not to be

disadvantaged, the determination

remains in full force and effect unless

reversed upon appeal by SBA’s DADA/

GC&MED, or designee, pursuant to

§ 124.1024, or the concern is certified to
35780 Federal Register / Vol. 63, No. 125 /Tuesday, June 30, 1998 /Rules and Regulations

be an SDB under § 124.1008. The

concern is precluded from applying for

SDB certification for 12 months from the

date of the final agency decision

(whether by the AA/SDBCE, or

designee, without an appeal, or by the

DADA/GC&MED, or designee, on

appeal).

(2) If the concern is found to be

disadvantaged, the determination

remains in full force and effect unless

and until reversed upon appeal by

SBA’s DADA/GC&MED, or designee,

pursuant to § 124.1024. A final Agency

decision (whether by the AA/SDBCE, or

designee, without an appeal, or by the

DADA/GC&MED, or designee, on

appeal) finding the protested concern to

be an SDB remains in effect for three

years from the date of the decision

under the same conditions as if the

concern had been granted SDB

certification under § 124.1008.

§ 124.1024 Appeals of disadvantaged

status determinations.

(a) Who may appeal. Appeals of

protest determinations may be filed

with the SBA’s DADA/GC&MED by the

protested concern, the protestor, or the

contracting officer.

(b) Timeliness of appeal. An appeal

must be in writing and must be received

by the DADA/GC&MED no later than 5

working days after the date of receipt of

the protest determination. SBA will

dismiss any appeal received after the

five-day time period.

(c) Notice of appeal. Notice of the

appeal must be provided by the party

bringing an appeal to the procuring

activity contracting officer and either

the protested concern or original

protestor, as appropriate.

(d) Grounds for appeal. SBA will

reexamine a protest determination only

if there was a clear and significant error

in the processing of the protest, or if the

AA/SDBCE, or designee, failed to

consider a significant material fact

contained within the information

supplied by the protestor or the

protested concern. SBA will not

consider protest determination appeals

based on additional information or

changed circumstances which were not

disclosed at the time of the decision of

the AA/SDBCE or designee, or which

are based on disagreement with the

findings and conclusions contained in

the determination.

(e) Contents of appeal. No specific

format is required for the appeal.

However, the appeal must identify the

protest determination which is

appealed, and set forth a full and

specific statement as to why the

determination is erroneous under

paragraph (c) of this section.

(f) Completion of appeal after award.

An appeal may proceed to completion

even though an award of the SDB

acquisition or other procurement

requirement which prompted the

protest has been made, if so desired by

the protested concern, or where SBA

determines that a decision on appeal

would have a material impact on

contracting decisions, such as where the

contracting officer agrees:

(1) In the case where an award is

made to a concern other than the

protested concern, to terminate the

contract and award to the protested

concern if the appeal finds that the

protested concern is disadvantaged; or

(2) In the case where an award is

made to the protested concern, to

terminate the contract if the appeal

finds that the protested concern is not

disadvantaged.

(g) The appeal will be decided by the

DADA/GC&MED, within 5 working days

of its receipt, if practicable.

(h) The appeal decision will be based

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 concern, consistent with

law.

(i) The decision of the DADA/

GC&MED, is the final decision of the

SBA, and cannot be further appealed to

OHA.

Dated: March 6, 1998.

Aida Alvarez,

Administrator.

[FR Doc. 98–17195 Filed 6–26–98; 8:45 am]

BILLING CODE 8025–01–P