Federal Register / Vol. 70, No. 167 / Tuesday, August 30, 2005 / Rules and Regulations 51243 

Housing Enterprise Oversight hereby 

amends 12 CFR part 1780 as follows: 

PART 1780—RULES OF PRACTICE 

AND PROCEDURE 

■ 1. The authority citation for part 1780 

is revised to read as follows: 

Authority: 12 U.S.C. 4501, 4513(b), 4517, 

4521, 4631–4641. 

■ 2. Revise Subpart E of part 1780 to 

read as follows: 

Subpart E—Civil Money Penalty 

Inflation Adjustments 

§ 1780.80 Inflation adjustments. 

The maximum amount of each civil 

money penalty within OFHEO’s 

jurisdiction is adjusted in accordance 

with the Federal Civil Penalties 

Inflation Adjustment Act of 1990, as 

amended by the Debt Collection 

Improvement Act of 1996 (28 U.S.C. 

2461 note) as follows: 

U.S. code citation Description 

New adjusted 

maximum 

penalty amount 

12 U.S.C. 4636(b)(1) ................................. First Tier ................................................................................................................... 6,500 

12 U.S.C. 4636(b)(2) ................................. Second Tier (Executive Officer or Director) ............................................................ 11,000 

12 U.S.C. 4636(b)(2) ................................. Second Tier (Enterprise) ......................................................................................... 32,500 

12 U.S.C. 4636(b)(3) ................................. Third Tier (Executive Officer or Director) ................................................................ 130,000 

12 U.S.C. 4636(b)(3) ................................. Third Tier (Enterprise) ............................................................................................. 1,275,000 

§ 1780.81 Applicability. 

The inflation adjustments in § 1780.80 

apply to civil money penalties assessed 

in accordance with the provisions of 12 

U.S.C. 4636 for violations occurring 

after the effective date, August 30, 2005. 

Dated: August 25, 2005. 

Stephen A. Blumenthal, 

Acting Director, Office of Federal Housing 

Enterprise Oversight. 

[FR Doc. 05–17232 Filed 8–29–05; 8:45 am] 

BILLING CODE 4220–01–U 

SMALL BUSINESS ADMINISTRATION 

13 CFR Parts 121, 124, 125 and 126 

RIN 3245–AF31 

HUBZone, Government Contracting, 

8(a) Business Development and Small 

Business Size Standard Programs 

AGENCY: U.S. Small Business 

Administration (SBA). 

ACTION: Interim rule with request for 

comments. 

SUMMARY: This interim rule amends 

SBA’s HUBZone, 8(a) Business 

Development, Government Contracting 

and Size Standard regulations to 

implement provisions of the Small 

Business Act including the 

Consolidated Appropriations Act, 2005, 

specifically, Subtitle E of Division K 

entitled the Small Business 

Reauthorization and Manufacturing 

Assistance Act of 2004. Consistent with 

the new statutory requirements under 

Subtitle E, this interim rule: Amends the 

definitions of the terms ‘‘business 

concern,’’ ‘‘affiliation,’’ ‘‘HUBZone 

small business concern’’ and ‘‘qualified 

HUBZone small business concern;’’

amends the HUBZone eligibility 

requirements for tribally-owned 

HUBZone concerns; extends qualified 

HUBZone areas to include military base 

closure areas for a period of five years; 

revises the definition of a ‘‘qualified 

non-metropolitan county;’’ extends the 

redesignation period for HUBZone areas 

through the release of the 2010 census 

data; and provides a five percent 

HUBZone evaluation price preference 

for agricultural commodities in 

international food aid procurements. 

Pursuant to the Administrative 

Procedure Act, SBA has determined that 

there is good cause to issue this rule as 

an interim rule with an immediate 

effective date. However, SBA 

encourages and will consider all timely 

public comments in developing the final 

rule. 

DATES: This interim rule is effective 

August 30, 2005. Comments must be 

received on or before October 31, 2005. 

ADDRESSES: You may submit comments, 

identified by RIN #3245–AF31, by any 

of the following methods: 

Internet: http://www.regulations.gov. 

Follow the instructions for submitting 

comments. E-mail: hubzone@sba.gov. 

Fax: (202) 481–5593. 

Mail or Hand Deliver: Michael 

McHale, Associate Administrator for the 

HUBZone Program, 409 Third Street, 

SW., Washington, DC, 20416. 

FOR FURTHER INFORMATION CONTACT: 

Sheryl J. Swed, Office of Government 

Contracting, at (202) 205–6413 or by 

e-mail at: sheryl.swed@sba.gov. 

SUPPLEMENTARY INFORMATION: 

A. Statutory Authority 

On December 8, 2004, the President 

signed into law the Consolidated 

Appropriations Act, 2005, Public Law 

108–447 which contained the Small 

Business Reauthorization and 

Manufacturing Assistance Act of 2004 

(the Reauthorization Act). Subtitle E of 

the Reauthorization Act amended 

certain provisions of the Small Business 

Act, 15 U.S.C. 631 et. seq., that govern 

the HUBZone program and the 

definition of small agricultural 

cooperative. 

1. Section 151 of the Reauthorization 

Act 

In particular, Section 151 of the 

Reauthorization Act relaxed the 

statutory requirement that a HUBZone 

small business concern (SBC) must be 

entirely owned by U.S. citizens. 

Congress concluded that this statutory 

mandate precluded small business 

owners from taking advantage of 

available forms of business 

organizations that limit the personal 

liability of business owners. It also 

precluded ownership by small 

agricultural cooperatives that operate in 

rural HUBZones, and thereby deprived 

those communities of the economic 

benefits of increased HUBZone 

contracting opportunities. 

As a result, Section 151 of the 

Reauthorization Act amended the 

definition of ‘‘HUBZone SBC’’ in section 

3(p)(3)(A) of the Small Business Act, 15 

U.S.C 632(p)(3)(A), to require that SBCs 

eligible for HUBZone certification be 51 

percent (instead of 100 percent) owned 

and controlled by U.S. citizens. It also 

added a new section 3(p)(3)(E) to the 

Small Business Act, 15 U.S.C 

632(p)(3)(E), to include as HUBZone 

SBCs small agricultural cooperatives or 

SBCs wholly or partially-owned by 

small agricultural cooperatives 

organized and incorporated in the 

United States. Also in connection with 

agricultural cooperatives, Section 151 

further amended Section 3(j) of the 

Small Business Act, 15 U.S.C. 632(j), to 

require that small agricultural 

cooperatives be treated as business 

concerns for purposes of the Small 

51244 Federal Register / Vol. 70, No. 167 / Tuesday, August 30, 2005 / Rules and Regulations 

Business Act. This section also states 

that when determining size, SBA should 

not include the income or employees of 

the underlying members of the 

cooperative. Because SBA’s programs 

and services were created for the benefit 

of the small business community, SBA 

interprets this section to mean that the 

members of any small agricultural 

cooperative applying for SBA assistance 

must also qualify as a small business 

concern or small agricultural 

cooperative in order to qualify for SBA 

assistance. To interpret the statute 

otherwise would circumvent the 

Agency’s mission. 

In addition, Section 151 of the 

Reauthorization Act expanded the 

employee residency requirement for 

tribally-owned HUBZone SBCs. 

Previously, the Small Business Act did 

not mandate that tribally-owned 

concerns maintain a principal office in 

a qualified HUBZone and hire at least 

35 percent of their employees from any 

HUBZone area, as is the requirement for 

other HUBZone SBCs. Instead, section 

3(p)(5)(A)(i)(I)(bb) of the Small Business 

Act, 15 U.S.C. 632(p)(5)(A)(i)(I)(bb), 

required that at least 35 percent of the 

tribally-owned HUBZone SBC’s 

employees performing a HUBZone 

contract must reside within an Indian 

Reservation governed by one or more of 

the tribal government owners or an 

adjoining HUBZone. Although that 

requirement was originally intended to 

encourage economic development of 

tribes, Congress determined that, over 

time, it had the unintended 

consequence of limiting the kinds of 

contracts that tribally-owned concerns 

could perform and of inhibiting their 

potential synergies with other business 

organizations. 

To remedy the disparity this separate 

employee residency requirement created 

for tribally-owned HUBZone SBCs (as 

compared to other HUBZone SBCs), 

Section 151 of the Reauthorization Act 

added as an option for tribally-owned 

concerns the same residency and 

principal office requirement that applies 

to other HUBZone SBCs. As amended, 

Section 3(p)(5)(A)(i)(I)(aa) of the Small 

Business Act, 15 U.S.C. 

632(p)(5)(A)(i)(I)(aa), now allows 

tribally-owned concerns the option of 

either maintaining their principal office 

in a HUBZone and hiring at least 35 

percent of their employees from any 

HUBZone area, or complying with the 

existing separate requirement that 35 

percent of their employees performing a 

HUBZone contract reside within an 

Indian Reservation governed by one or 

more of the tribal government owners or 

adjoining HUBZone. 

2. Section 152 of the Reauthorization 

Act 

In Section 152 of the Reauthorization 

Act, Congress provided three basic 

amendments to expand the areas that 

qualify as HUBZones. First, Section 152 

added new Sections 3(p)(1)(E) and 

3(p)(4)(D) to the Small Business Act, 15 

U.S.C. 632(p)(1)(E), 632(p)(4)(D), to 

authorize military base closure areas 

that have undergone final closure to be 

treated as qualified HUBZones for a 

period of five years. Congress 

recognized that many base closure areas 

are not located in qualified HUBZones, 

and therefore do not benefit from the job 

creation and economic revitalization 

potential of the HUBZone program. 

Second, Section 152 revised the 

statutory definition of ‘‘qualified nonmetropolitan county’’ in Section 

3(p)(4)(B)(ii)(II) of the Small Business 

Act, 15 U.S.C. 632(p)(4)(B)(ii)(II). Under 

the previous definition, some of the 

poorest rural communities in states with 

high unemployment did not qualify as 

a HUBZone based on unemployment 

because the unemployment 

qualification was based solely on the 

statewide unemployment average. 

Accordingly, Section 152 revised the 

definition of ‘‘qualified nonmetropolitan county’’ to allow for a 

comparison of a county’s 

unemployment rate to the lower of the 

statewide or the national average, in 

determining eligibility. 

Third, Section 152 of the 

Reauthorization Act expanded qualified 

HUBZones by extending the 

redesignation period for HUBZone areas 

through the public release of the 2010 

census data. The previous statutory 

definition of ‘‘redesignated area’’ in 

Section 3(p)(4)(C) of the Small Business 

Act, 15 U.S.C. 632(p)(4)(C), allowed 

those areas that no longer qualify as 

HUBZones to remain in the program for 

a period of three years. Congress 

determined that this three-year 

grandfather period did not provide 

sufficient time for firms to recoup a 

return on their investment in locating 

their businesses in qualified HUBZone 

areas, adjusting their ownership 

structure, and recruiting HUBZone 

residents as employees. To allow firms 

additional time to reap the benefits of 

their HUBZone investment, Section 152 

extended the redesignation period until 

the later of the date on which the 

Census Bureau publicly releases the first 

results from the 2010 decennial census 

or 3 years after the date on which the 

area ceased to qualify as a HUBZone. 

3. Section 153 of the Reauthorization 

Act 

Finally, in Section 153 of the 

Reauthorization Act, Congress provided 

a five percent HUBZone evaluation 

price preference in international food 

aid procurements by the Secretary of 

Agriculture. Congress explained that the 

previously authorized price evaluation 

preference regime may have made it 

more difficult for non-HUBZone SBCs to 

compete in food aid tender auctions 

and, in turn, may have had the 

unintended effect of diminishing the 

competitive supplier base. Section 153 

therefore amended Section 31(b)(3) of 

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

657a(b)(3), to apply a five percent price 

evaluation preference on the first 20 

percent of U.S. Department of 

Agriculture’s procurements of 

commodities used for international food 

aid export operations. 

This interim rule amends Parts 121, 

124, 125 and 126 of SBA’s regulations 

to adopt the specific statutory changes 

provided under Subtitle E of the 

Reauthorization Act. In accordance with 

the express statutory language and 

declared legislative purposes of those 

changes, this interim rule amends the 

exceptions to SBA’s affiliation rules in 

13 CFR 121.103 and the definition of 

business concern in § 121.105; for 

consistency purposes, amends 

§§ 124.503 and 126.607 to incorporate 

the preference for HUBZone, 8(a) and 

service disabled veterans (SDV) over 

small business set-asides set forth in 

SBA’s SDV regulations, clarifies the 

definition of ‘‘employee’’ for the 

HUBZone program in § 125.6; adds new 

definitions and amends existing 

definitions in § 126.103; amends the 

employee residency requirement for 

tribally-owned HUBZone SBCs and 

adds the requirements for small 

agricultural cooperatives to be 

considered qualified HUBZone SBCs in 

§ 126.200; amends the corporate stock 

ownership example to reflect the change 

in ownership requirements in § 126.201; 

amends § 126.204 to include 

agricultural cooperatives; clarifies the 

application of requirements for SBCs 

applying for HUBZone status based on 

a location in a qualified base closure 

area in § 126.304; amends the price 

evaluation preference for agricultural 

commodities in § 126.613 and 

reorganizes and clarifies § 126.700 to 

make it consistent with SBA’s other 

regulations regarding contractor 

performance requirements. 

B. Section-by-Section Analysis 

Statutory changes to the definition of 

small agricultural cooperative require 

Federal Register / Vol. 70, No. 167 / Tuesday, August 30, 2005 / Rules and Regulations 51245 

SBA to add another exception to its 

affiliation rule in § 121.103 and to 

modify its definition of business 

concern in § 121.105. 

To make the HUBZone regulations 

consistent with SBA’s recently 

published SDV regulations, SBA is 

adding paragraph (j) to § 124.503 and 

revising § 126.607 to incorporate 

contracting preferences for HUBZone, 

8(a) and SDV over small business setasides. This change will ensure 

consistent guidance throughout 13 CFR 

Chapter 1. 

To clarify the definition of 

‘‘employee’’ as it relates to the 

HUBZone program, SBA is adding more 

explicit language to § 125.6(e)(6) to 

indicate that for purposes of the 

HUBZone program, the definition of 

‘‘employee’’ in § 126.103 controls. 

SBA is adding several new definitions 

in § 126.103 to implement the statutory 

changes under the Reauthorization Act. 

To incorporate the new statutory 

requirement for the treatment of military 

base closure areas as qualified 

HUBZones, SBA is adding a definition 

for the terms ‘‘base closure area’’ and 

‘‘qualified base closure area’’ in 

§ 126.103. With respect to the term 

‘‘base closure area,’’ the interim rule 

adopts the identical definition of that 

term provided in the amended Section 

3(p)(4)(D) of the Small Business Act, 15 

U.S.C. 632(p)(4)(D). Under that 

definition, a ‘‘base closure area’’ means 

lands within the external boundaries of 

a military installation that were closed 

through a privatization process under 

specified authority. To accommodate 

the statutory five-year period in which 

a base closure area qualifies as a 

HUBZone, the interim rule adds the 

new term ‘‘qualified base closure area,’’

which limits the qualifying period of a 

base closure area to five years from the 

date of final closure of the base or five 

years from the date of signing of the 

legislation, December 8, 2004. SBA will 

rely on the Department of Defense, 

Office of Economic Adjustment, as the 

authority to determine whether a base is 

closed. 

In addition, since the amended 

Section 3(p)(3)(E) of the Small Business 

Act, 15 U.S.C. 632(p)(3)(E), now 

authorizes ownership in a HUBZone 

SBC by small agricultural cooperatives 

organized or incorporated in the U.S., 

this interim rule adds a definition for 

the term ‘‘small agricultural 

cooperative.’’ Amended § 126.103 

adopts the existing definition of a 

‘‘small agricultural cooperative’’

provided in Section 3(j) of the Small 

Business Act, 15 U.S.C. 632(j). That 

definition makes clear that in 

determining size, an agricultural 

cooperative is considered a ‘‘business 

concern’’ and that the income or 

employees of any member of the 

cooperative is not included in the 

calculation of size. The definition of 

‘‘small agricultural cooperative’’ in 

§ 126.103 further indicates that any 

entity other than an SBC, small 

cooperative or U.S. citizen may not be 

a member of a small agricultural 

cooperative. 

SBA is also revising the definition of 

several existing terms in § 126.103. With 

respect to base closure areas, SBA is 

amending the definition of ‘‘HUBZone’’

in § 126.103, to include a ‘‘qualified 

base closure area’’ as a designated 

HUBZone. In implementing the 

statutory changes regarding ownership 

of HUBZone SBCs by U.S. citizens and 

by small agricultural cooperatives, SBA 

is amending the definition of a 

‘‘HUBZone small business concern.’’ As 

expressly provided in the amended 

Section 3(p)(3)(A) of the Small Business 

Act, 15 U.S.C. 632(p)(3)(A), SBA is 

amending the definition of a ‘‘HUBZone 

SBC’’ in § 126.103, to include a SBC that 

is at least 51 percent owned and 

controlled by one or more U.S. citizens. 

Likewise, as expressly provided in the 

amended Section 3(p)(3)(E) of the Small 

Business Act, 15 U.S.C. 632(p)(3)(E), the 

interim rule amends the definition of 

‘‘HUBZone SBC’’ to include SBCs that 

are small agricultural cooperatives 

organized or incorporated in the United 

States, wholly owned by one or more 

small agricultural cooperatives or 

partially owned by one or more small 

agricultural cooperatives organized or 

incorporated in the United States, 

provided that all other owners are small 

business concerns or U.S. citizens. 

Also in connection with § 126.103, 

SBA is amending the definition of the 

term ‘‘qualified non-metropolitan 

county,’’ to incorporate the new 

statutory definition of the term in 

Section 3(p)(4)(B)(ii)(II) of the Small 

Business Act, 15 U.S.C. 

632(p)(4)(B)(ii)(II). Consistent with that 

definition, the interim rule revises the 

definition of a ‘‘qualified nonmetropolitan county’’ to allow a 

comparison between the statewide 

unemployment average and the national 

average in determining whether a nonmetropolitan county qualifies as a 

HUBZone based on unemployment. 

SBA is also amending the definition 

of ‘‘redesignated area’’ in § 126.103, in 

accordance with the statutory 

amendments of the term in Section 

3(p)(4)(C) of the Small Business Act, 15 

U.S.C. 632(p)(4)(C). Under the revised 

§ 126.103, a ‘‘redesignated area’’ is 

defined as the later of the date on which 

the Census Bureau publicly releases the 

first results from the 2010 decennial 

census or three years after the date on 

which the area ceased to qualify as a 

HUBZone. 

With respect to the new eligibility 

requirements for tribally-owned 

concerns under Section 3(p)(5)(A)(i)(I) 

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

632(p)(5)(A)(i)(I), SBA is amending 

§ 126.200, which provides the eligibility 

requirements for such concerns. As 

amended, § 126.200 now allows triballyowned concerns located in qualified 

HUBZones the option of either 

maintaining their principal office in a 

HUBZone and hiring at least 35 percent 

of their employees from any HUBZone 

area, or of complying with the existing 

separate requirement that 35 percent of 

their employees performing a HUBZone 

contract reside within an Indian 

Reservation governed by one or more of 

the tribal government owners or 

adjoining HUBZone. 

SBA is also adding the requirements 

for small agricultural cooperatives to 

§ 126.200(c) in accordance with Section 

3(p)(5)(A)(i)(I) of the Small Business 

Act, 15 U.S.C. 632(p)(5)(A)(i)(I). To be a 

qualified HUBZone SBC, a small 

agricultural cooperative must meet the 

ownership requirements of 15 U.S.C. 

632(p)(3)(E), have a principal office 

located in a HUBZone and employ at 

least 35% of its employees from a 

HUBZone. 

The examples in §§ 126.200(b)(1) and 

126.201(a) have also been amended to 

reflect the new requirement that SBCs 

be at least 51% owned and controlled 

by U.S. citizens. 

Section 126.204, relating to SBA’s 

consideration of affiliates when 

determining qualified HUBZone SBC’s, 

has also been amended to provide an 

exception for agricultural cooperatives 

in accordance with Section 3(j) of the 

Small Business Act, 15 U.S.C. 632(j). 

The statutory definition of agricultural 

cooperative in the Small Business Act 

provides that when determining the size 

of a cooperative, SBA may not include 

the income or employees of the 

cooperative members. 15 U.S.C. 632(j). 

This means the cooperative and its 

members are not considered affiliated 

by virtue of their membership in the 

cooperative. 

SBA is amending § 126.304 to 

describe the process for verifying the 

specific areas that are considered 

‘‘qualified base closure areas.’’ The 

interim rule adds a new § 126.304(d), 

which explains that concerns applying 

for HUBZone status based on a location 

within a qualified base closure area 

must use SBA’s List of Qualified Base 

Closure Areas to verify that the location 

is within a qualified base closure area. 

51246 Federal Register / Vol. 70, No. 167 / Tuesday, August 30, 2005 / Rules and Regulations 

The HUBZone map will be modified to 

reflect these areas. It also describes the 

information concerns may submit to 

SBA if they believe the List fails to 

identify a particular location as a 

qualified base closure area. 

SBA is making a technical correction 

to § 126.503 by changing the word 

‘‘may,’’ found in subparagraph (c), to 

‘‘will’’ in order to be consistent with the 

language of § 126.803(d). Section 

126.503(c) cross references § 126.803, 

therefore the language in both sections 

needs to be consistent. 

SBA is amending § 126.613 to 

incorporate the new statutory price 

evaluation preference for international 

food aid procurements provided under 

Section 31(b)(3) of the Small Business 

Act, 15 U.S.C. 657a(b)(3). The amended 

§ 126.613 provides a 5% price 

evaluation preference on the first 20% 

of the USDA procurements for 

commodities used for international food 

aid export operations. 

Finally, SBA is making a technical 

correction to § 126.700 by changing the 

citation from § 125.6(b) to § 125.6(c) and 

further clarifying the section by 

reorganizing the paragraphs and adding 

more explicit language in order to be 

consistent with § 125.6(c) and the Small 

Business Act. As currently drafted, 

§ 126.700 is a source of confusion for 

many SBCs and this confusion may lead 

to misapplication of SBA’s regulations 

resulting in the award of subcontracts to 

non-qualified HUBZone concerns. It is 

also inconsistent with § 125.6 and 

§ 3(p)(5)(C) of the Small Business Act as 

it incorrectly requires that for 

construction contracts a qualified 

HUBZone SBC must perform 50% of the 

cost of the contract and at least 15% (or 

25% depending on type of contract) of 

the cost of contract for personnel. As 

currently drafted, the two percentages 

do not measure the same base, that is, 

one relates to the overall cost of the 

contract and one to the cost of the 

contract incurred for personnel. This 

discrepancy was never intended and is 

not consistent with the requirements of 

the Small Business Act. To clarify this 

inconsistency, this rule changes the 

current performance of work 

requirement for construction contracts 

from ‘‘at least 50% of the contract’’ to 

‘‘at least 50% of the cost of contract 

incurred for personnel.’’ This standard 

is what is referenced throughout the 

Small Business Act (see §§ 3(p)(5)(C), 

8(a)(14)(A) and 15(o)) and in § 125.6 of 

SBA’s regulations, and the change to 

one standard ensures consistency 

throughout SBA’s regulations. More 

explicit language was also added to 

clarify the relationship between the 

prime and subcontracting performance 

of work requirements by stating that not 

more than 50% of the cost of contract 

incurred for personnel may be 

subcontracted to a non-qualified 

HUBZone SBC. 

Although SBA is issuing this rule as 

an interim rule with an immediate 

effective date, it encourages public 

comments on these regulatory 

amendments. In developing the final 

rule, SBA will consider all timely 

comments received. 

C. Justification for Publication as an 

Interim Rule 

In general, SBA publishes a proposed 

rule for public comment before issuing 

a final rule, in accordance with the 

Administrative Procedure Act and SBA 

regulations. 5 U.S.C. 553, and 13 CFR 

101.108. The Administrative Procedure 

Act provides an exception to this 

standard rulemaking process when an 

agency finds good cause to adopt a rule 

without prior public participation. 5 

U.S.C 553(b)(3)(B). The good cause 

requirement is satisfied when prior 

public participation is impracticable, 

unnecessary, or contrary to the public 

interest. Under such circumstances, an 

agency may publish an interim rule 

without soliciting prior public 

comment. 

SBA has determined that there is good 

cause to issue this rule without prior 

notice and opportunity for public 

comment because it is impracticable, 

unnecessary, and contrary to the public 

interest to do so under the present 

circumstances. As discussed above, 

Congress amended several HUBZone 

provisions in the Small Business Act to 

expand the program’s reach over the 

Nation’s economically distressed 

communities and to eliminate unduly 

restrictive HUBZone requirements that 

impede the achievement of the 

HUBZone goals. These statutory 

changes became effective on December 

8, 2004. 

As a result of these recent legislative 

amendments, important provisions of 

SBA’s existing HUBZone, Government 

Contracting, 8(a) Business Development 

and Size Standard regulations are now 

inconsistent with governing sections of 

the Small Business Act. It is both 

unnecessary and impracticable to 

provide advance notice and public 

participation in implementing the 

recent statutory changes because SBA is 

simply adopting the identical 

amendments mandated by the 

Reauthorization Act and ensuring 

consistency with existing provisions of 

the Small Business Act, and any delay 

in revising the inconsistent provisions 

in SBA’s existing regulations will 

hamper the proper application of 

important HUBZone requirements. In 

addition, immediate implementation of 

the statute is in the public interest, since 

the legislative amendments expand the 

opportunities for HUBZone contracting. 

Specifically, the time it will take to 

afford prior public participation in this 

rulemaking will deprive newly eligible 

firms and economically depressed 

communities of the needed economic 

benefits of the HUBZone program, and 

will frustrate the ability of Federal 

contracting agencies to utilize the 

expanded program to achieve the 

statutory HUBZone procurement goal. 

Accordingly, SBA has determined 

that there is good cause to issue this rule 

without prior public participation. SBA 

does, however, encourage the public to 

comment on the interim rule, especially 

the clarifications to § 126.700 and will 

consider all timely comments in 

preparing the final rule. 

D. Justification for Immediate Effective 

Date of Interim Rule 

The Administrative Procedure Act 

requires that ‘‘publication or service of 

a substantive rule shall be made not less 

than 30 days before its effective date, 

except * * * as otherwise provided by 

the agency for good cause found and 

published with the rule.’’ 5 U.S.C. 

553(d)(3). SBA has determined that 

there is good cause for an immediate 

effective date of this interim rule, 

instead of observing the 30-day period 

between publication and effective date. 

As discussed more fully above in the 

Justification of Publication of Interim 

Rule, any delay in the effective date of 

this interim rule will unduly perpetuate 

existing inconsistencies between certain 

provisions of SBA’s HUBZone 

regulations and sections of the Small 

Business Act. It will also hinder the 

accomplishment of the HUBZone goals. 

E. Compliance With Executive Orders 

12866, 12988, and 13132, the 

Paperwork Reduction Act (44 U.S.C. 

Ch. 35), and the Regulatory Flexibility 

Act (5 U.S.C. 601–602) 

OMB determined that this rule 

constitutes a ‘‘significant regulatory 

action’’ under Executive Order 12866. 

SBA’s Regulatory Impact Analysis is set 

forth below. 

Regulatory Impact Analysis 

1. General Considerations 

a. Is there a need for the regulatory 

action? 

SBA has determined that this 

regulatory action is necessary. SBA is 

statutorily authorized to administer the 

HUBZone program and is required to 

implement all statutory changes to the 

Federal Register / Vol. 70, No. 167 / Tuesday, August 30, 2005 / Rules and Regulations 51247 

program. The Reauthorization Act 

amended several provisions of the Small 

Business Act governing the HUBZone 

program. To implement these statutory 

changes, SBA must amend its existing 

HUBZone regulations. The amendments 

are also necessary and appropriate to 

better serve the needs of small business 

concerns (SBCs) and the statutory goals 

of the HUBZone program. There are no 

practical alternatives to this 

implementation of the statutory 

changes. 

b. What is the baseline? 

SBA considered several baselines in 

formulating this interim rule. These 

include the existing HUBZone program 

regulations and definitions that the 

interim rule revises; the estimated 

universe of potential HUBZone SBCs; 

the existing statutory requirements; the 

achievement of the three percent 

HUBZone contracting goal; and the 

current procurement practices of 

Federal agencies. 

It is difficult to obtain precise 

quantitative estimates of the impact 

these changes might have on these 

baseline criteria. However, SBA 

estimates that adoption of this interim 

rule will increase the number of 

HUBZone SBCs, increase the number of 

HUBZone procurement actions by 

Federal agencies, and result in better 

and more efficient administration of the 

program. Ultimately, the program would 

move closer to meeting its statutory 

objectives of creating jobs and infusing 

capital into distressed communities. 

c. Were there any alternatives? 

There are no alternatives to 

implementing the statutorily mandated 

provisions detailed in the interim rule. 

The amendments of the Reauthorization 

Act, require SBA to amend the 

HUBZone regulations so that they will 

conform to the new statutory provisions. 

The regulatory amendments also 

facilitate the growth of the program to 

Congressionally-established levels, 

better serve the program’s small 

business participants, and assist in 

accommodating the procurement needs 

of Federal agencies. 

2. Benefit Estimates 

The most significant benefits to 

implementing the changes included in 

this interim rule are: 

a. Increased benefits to both small 

businesses and Federal agencies. 

SBA believes that the changes in this 

interim rule will increase the base 

number of small businesses in the 

HUBZone program and increase the 

program’s viability and utilization by 

Federal agencies. These two effects are 

mutually dependent in that the more 

firms that are in the program, the more 

Federal agencies will use the program. 

Furthermore, when more Federal 

agencies use the program, more 

concerns will want to take advantage of 

the contract assistance available under 

the program. According to available 

data, there are an estimated 220 

counties to be added as a result of this 

new legislation. In addition, over 150 

locations may be designated as 

HUBZone locations as a result of 

military base closures. As these areas 

are defined by the Department of 

Defense, they will be posted on the 

HUBZone Web site and map. 

b. Greater administrative efficiency 

and program integrity. 

Because the amendments in this 

interim rule relax some of the previous 

program requirements, the interim rule 

will likely streamline and improve the 

effective administration of the HUBZone 

program. It will also enhance SBA’s 

ability to administer the program with 

existing resources and better focus the 

program benefits on the businesses that 

operate in areas of low income or high 

unemployment. 

c. Greater contracting efficiency for 

Federal agencies. 

SBA believes that by increasing the 

level of activity and participation in the 

HUBZone program, it will increase 

economic savings to the Federal 

government on HUBZone awards. In 

particular, an increase in the number of 

eligible HUBZone concerns will provide 

procuring agencies with a larger base of 

HUBZone vendors. This will ultimately 

reduce the cost of HUBZone contracts 

through increased competition among 

HUBZone SBCs. 

3. Cost Estimates 

SBA expects that as a result of this 

interim rule, there will be significant 

increases in the number of concerns 

participating in the HUBZone program 

and in the number of HUBZone contract 

dollars. To the extent that this 

materializes, there may be attendant 

cost increases to the government in 

terms of the costs of goods and services 

and slightly increased administrative 

costs. However, existing provisions of 

the Federal Acquisition Regulation 

concerning the determination of ‘‘fair 

and reasonable’’ pricing will mitigate 

any significant monetary costs to the 

government as a result of this interim 

rule. SBA does not believe these 

changes will result in significantly 

higher costs to HUBZone SBCs because 

the amendments do not create 

additional burdens or restrictions on 

SBCs. 

4. Other Considerations, Including 

Distributional Effects, Equity 

Considerations and Uncertainty 

SBA anticipates that the distribution 

of contracts among different 

procurement vehicles will change. NonHUBZone concerns currently 

participating in the Federal marketplace 

will be affected economically as a result 

of their ineligibility to compete for 

HUBZone contracts. These costs will 

vary based on the goods and services 

provided by newly eligible HUBZone 

SBCs. In some industries there may be 

very little impact, while in other 

industries there may be a substantial 

impact. 

Large Federal prime contractors may 

experience some decrease in contract 

opportunities as Federal agencies 

increase their utilization of the 

HUBZone program. However, these 

changes are insignificant in light of the 

magnitude of Federal procurement 

versus HUBZone procurement. The 

Federal government spent $277 billion 

on goods and services in fiscal year 

2003. Of this amount, $3.4 billion, or 

1.23% of total procurements, was 

awarded to HUBZone firms. This level 

is significantly lower than the $8.3 

billion that would have been awarded to 

HUBZone firms if the 3% goal set by 

Congress for the program had been 

achieved. 

5. Conclusion 

Most of the benefits of this interim 

rule will accrue to HUBZone 

communities. Expanded eligibility for 

SBCs and designated areas and 

increased HUBZone contacting should 

result in more Federal contract dollars 

going to distressed communities. 

Overall, SBA believes that increasing 

the efficiency and access to the 

HUBZone program to both Federal 

agencies and small businesses will 

result in increased use of the program 

and a higher probability that the 

HUBZone program will meet its 

objectives to create jobs and increase 

capital investment in HUBZone 

communities. 

SBA has determined that this interim 

rule does not impose additional 

reporting or recordkeeping requirements 

under the Paperwork Reduction Act, 44 

U.S.C., chapter 35. 

This interim rule meets applicable 

standards set forth in §§ 3(a) and 3(b)(2) 

of Executive Order 12988, Civil Justice 

Reform, to minimize litigation, 

eliminate ambiguity, and reduce 

burden. This action does not have 

retroactive or preemptive effect. 

This interim rule will not have 

substantial direct effects on the States, 

51248 Federal Register / Vol. 70, No. 167 / Tuesday, August 30, 2005 / Rules and Regulations 

on the relationship between the Federal 

government and the States, or on the 

distribution of power and 

responsibilities among the various 

levels of government. Therefore, for the 

purposes of Executive Order 13132, 

SBA determines that this rule has no 

federalism implications warranting 

preparation of a federalism assessment. 

Because this rule has been issued as 

an interim final, there is no requirement 

for SBA to prepare a Regulatory 

Flexibility Act analysis. 

List of Subjects in 13 CFR Parts 121, 

124, 125 and 126 

Administrative practice and 

procedure, Government procurement, 

Small businesses. 

■ For the reasons set forth above, SBA 

amends 13 CFR parts 121, 124, 125, and 

126, as follows: 

PART 121—SMALL BUSINESS SIZE 

REGULATIONS 

■ 1. The authority citation for part 121 

is revised to read as follows: 

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

634(b)(6), 636(b), 637(a), 644(c) and 662(5); 

Sec. 304, Pub. L. 103–403, 108 Stat. 4175, 

4188; Pub. L. 105–135 sec. 601 et seq., 111 

Stat. 2592; Pub. L. 106–24, 113 Stat. 39. 

■ 2. Amend § 121.103 to add a new 

paragraph (b)(7) to read as follows: 

§ 121.103 How does SBA determine 

affiliation? 

* * * * * 

(b) * * * 

(7) The member shareholders of a 

small agricultural cooperative, as 

defined in the Agricultural Marketing 

Act (12 U.S.C. 1141j), are not considered 

affiliated with the cooperative by virtue 

of their membership in the cooperative. 

* * * * * 

■ 3. Revise § 121.105(a) to read as 

follows: 

§ 121.105 How does SBA define ‘‘business 

concern or concern’’

(a)(1) Except for small agricultural 

cooperatives, a business concern eligible 

for assistance from SBA as a small 

business is a business entity organized 

for profit, with a place of business 

located in the United States, and which 

operates primarily within the United 

States or which makes a significant 

contribution to the U.S. economy 

through payment of taxes or use of 

American products, materials or labor. 

(a)(2) A small agricultural cooperative 

is an association (corporate or 

otherwise) acting pursuant to the 

provisions of the Agricultural Marketing 

Act (12 U.S.C.A. 1141j) whose size does 

not exceed the size standard established 

by SBA for other similar agricultural 

small business concerns. A small 

agricultural cooperative’s member 

shareholders are not considered to be 

affiliates of the cooperative by virtue of 

their membership in the cooperative. 

However, a business concern or 

cooperative that does not qualify as 

small under this part may not be a 

member of a small agricultural 

cooperative. 

* * * * * 

PART 124—8(a) BUSINESS 

DEVELOPMENT/SMALL 

DISADVANTAGED BUSINESS STATUS 

DETERMINATIONS 

■ 3a. The authority citation for part 124 

continues to read as follows: 

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

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

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

101–574, and 42 U.S.C. 9815. 

■ 4. Amend § 124.503 to add a new 

paragraph (j) as follows: 

§ 124.503 How does SBA accept a 

procurement for award through the 8(a) BD 

program? 

* * * * * 

(j) The contracting officer should 

consider setting aside the requirement 

for HUBZone, 8(a) or SDVO SBC 

participation before considering to set 

aside the requirement as a small 

business set-aside. 

PART 125—GOVERNMENT 

CONTRACTING PROGRAMS 

■ 4a. The authority citation for part 125 

continues to read as follows: 

Authority: 15 U.S.C. 634(b)(6), 637, 744, 

and 657f; 31 U.S.C. 9701, 9702. 

■ 5. Revise § 125.6(e)(6) to read as 

follows: 

§ 125.6 Prime contractor performance 

requirements (limitations on 

subcontracting). 

* * * * * 

(e) * * * 

(6) Personnel. Individuals who are 

‘‘employees’’ under § 121.106 of this 

chapter except for purposes of the 

HUBZone program, where the definition 

of ‘‘employee’’ is found in § 126.103 of 

this chapter. 

* * * * * 

PART 126—HUBZONE PROGRAM 

■ 6. The authority citation of part 126 is 

revised to read as follows: 

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

and 657a. 

■ 7. Amend § 126.103 as follows: 

■ A. Add the terms and definitions for 

‘‘Base closure area,’’ ‘‘Qualified base 

closure area,’’ and ‘‘Small agricultural 

cooperative;’’ and 

■ B. Revise the definitions of 

‘‘HUBZone,’’ paragraph (ii) of the 

definition of ‘‘Qualified nonmetropolitan county,’’ ‘‘Redesignated 

area’’ and paragraphs (1), (5), (6), and (7) 

of the definition for ‘‘HUBZone small 

business concern (HUBZone SBC).’’

The added and revised terms read as 

follows: 

§ 126.103 What definitions are important in 

the HUBZone Program? 

* * * * * 

Base closure area means lands within 

the external boundaries of a military 

installation that were closed through a 

privatization process under the 

authority of: 

(1) The Defense Base Closure and 

Realignment Act of 1990 (part A of title 

XXIX of division B of Public Law 101–

510; 10 U.S.C. 2687 note); 

(2) Title II of the Defense 

Authorization Amendments and Base 

Closure and Realignment Act (Pub. L. 

100–526; 10 U.S.C. 2687 note); 

(3) 10 U.S.C. 2687; or 

(4) Any other provision of law 

authorizing or directing the Secretary of 

Defense or the Secretary of a military 

department to dispose of real property 

at the military installation for purposes 

relating to base closures of 

redevelopment, while retaining the 

authority to enter into a leaseback of all 

or a portion of the property for military 

use. 

* * * * * 

HUBZone means a historically 

underutilized business zone, which is 

an area located within one or more: 

(1) Qualified census tracts; 

(2) Qualified non-metropolitan 

counties; 

(3) Lands within the external 

boundaries of an Indian reservation; 

(4) Qualified base closure area; or 

(5) Redesignated area. 

HUBZone small business concern 

(HUBZone SBC) means an SBC that is: 

(1) At least 51% owned and 

controlled by 1 or more persons, each of 

whom is a United States citizen; 

* * * * * 

(5) An SBC that is owned in part by 

one or more Indian Tribal Governments 

or in part by a corporation that is wholly 

owned by one or more Indian Tribal 

Governments, if all other owners are 

either United States citizens or SBCs; 

(6) An SBC that is wholly owned by 

a CDC or owned in part by one or more 

CDCs, if all other owners are either 

United States citizens or SBCs; or 

(7) An SBC that is a small agricultural 

cooperative organized or incorporated 

Federal Register / Vol. 70, No. 167 / Tuesday, August 30, 2005 / Rules and Regulations 51249 

in the United States, wholly owned by 

one or more small agricultural 

cooperatives organized or incorporated 

in the United States or owned in part by 

one or more small agricultural 

cooperatives organized or incorporated 

in the United States, provided that all 

other owners are small business 

concerns or United States citizens. 

* * * * * 

Qualified base closure area means a 

base closure area for a period of 5 years 

either from December 8, 2004, or from 

the date of final base closure, whichever 

is later. 

* * * * * 

Qualified non-metropolitan county 

* * * * * 

(ii) The unemployment rate is not less 

than 140 percent of the average 

unemployment rate for the United 

States or for the State in which such 

county is located, whichever is less, 

based on the most recent data available 

from the Secretary of Labor. 

* * * * * 

Redesignated area means any census 

tract or any non-metropolitan county 

that ceases to be a qualified HUBZone, 

except that such census tracts or nonmetropolitan counties may be 

‘‘redesignated areas’’ only until the later 

of: 

(1) The date on which the Census 

Bureau publicly releases the first results 

from the 2010 decennial census; or 

(2) Three years after the date on 

which the census tract or nonmetropolitan county ceased to be so 

qualified. The date on which the census 

tract or non-metropolitan county ceases 

to be qualified is the date that the 

official government data, which affects 

the eligibility of the HUBZone, is 

released to the public. 

* * * * * 

Small agricultural cooperative means 

an association (corporate or otherwise), 

comprised exclusively of other small 

agricultural cooperatives, small business 

concerns, or U.S. citizens, pursuant to 

the provisions of the Agricultural 

Marketing Act, 12 U.S.C. 1141j, whose 

size does not exceed the applicable size 

standard pursuant to part 121 of this 

chapter. In determining such size, an 

agricultural cooperative is treated as a 

‘‘business concern’’ and its member 

shareholders are not considered 

affiliated with the cooperative by virtue 

of their membership in the cooperative. 

* * * * * 

■ 8. Amend § 126.200 to revise 

paragraphs (a)(3) and (b)(1)(i), and to 

add paragraphs (c) and (d) to read as 

follows: 

§ 126.200 What requirements must a 

concern meet to receive SBA certification 

as a qualified HUBZone SBC? 

(a) * * * 

(3) Other Requirements. The concern 

must either: 

(i) Maintain a principal office located 

in a HUBZone and ensure that at least 

35% of its employees reside in a 

HUBZone as provided in paragraph 

(b)(4) of this section; or 

(ii) Certify that when performing a 

HUBZone contract, at least 35% of its 

employees engaged in performing that 

contract will reside within any Indian 

reservation governed by one or more of 

the Indian Tribal Government owners, 

or reside within any HUBZone 

adjoining such Indian reservation. A 

HUBZone and Indian reservation are 

adjoining when the two areas are next 

to and in contact with each other; and 

(iii) The concern will ‘‘attempt to 

maintain’’ (see § 126.103) that 

applicable employment percentage 

stated above during the performance of 

any HUBZone contract it receives. 

(b) * * * 

(1) * * * 

(i) The concern must be at least 51% 

unconditionally and directly owned and 

controlled by persons who are United 

States citizens; 

Example: A concern that is a 

partnership owned 50% by an 

individual who is a United States 

citizen and 50% by someone who is not, 

is not an eligible concern because it is 

not at least 51% owned by United States 

citizens. 

* * * * * 

(c) Concerns owned by small 

agricultural cooperatives. (1) 

Ownership. (i) A small agricultural 

cooperative organized or incorporated 

in the United States; 

(ii) A small business concern wholly 

owned by one or more small agricultural 

cooperatives organized or incorporated 

in the United States; or 

(iii) A small business concern owned 

in part by one or more small agricultural 

cooperatives organized or incorporated 

in the United States, provided that all 

other owners are small business 

concerns or United States citizens. 

(2) Size. The small agricultural 

cooperative must meet the size standard 

corresponding to its primary industry 

classification as defined in part 121 of 

this chapter. However, in determining 

such size, an agricultural cooperative is 

treated as a ‘‘business concern’’ and its 

member shareholders are not considered 

affiliated with the cooperative by virtue 

of their membership in the cooperative. 

(3) Principal office. The cooperative’s 

principal office must be located in a 

HUBZone. 

(4) Employees. At least 35% of the 

cooperative’s employees must reside in 

a HUBZone. When determining the 

percentage of employees that reside in 

a HUBZone, if the percentage results in 

a fraction, round up to the nearest 

whole number. 

(5) Contract Performance. The 

concern must represent, as provided in 

the application, that it will ‘‘attempt to 

maintain’’ (see § 126.103) having 35% of 

its employees reside in a HUBZone 

during the performance of any 

HUBZone contract it receives. 

(d) Subcontracting. The concern must 

represent, as provided in the 

application, that it will ensure that it 

will comply with certain contract 

performance requirements in 

connection with contracts awarded to it 

as a qualified HUBZone SBC, as set 

forth in § 126.700. 

* * * * * 

■ 9. Amend § 126.201 by revising the 

example following paragraph (a) to read 

as follows: 

§ 126.201 Who does SBA consider to own 

a HUBZone SBC? 

* * * * * 

(a) * * * 

Example: U.S. citizens own all of the 

stock of a corporation. A corporate 

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

stock in the corporation but owns 

options to purchase stock in the 

corporation. SBA will consider the 

options exercised and the individual to 

be an owner. Therefore, if that corporate 

officer has options to purchase 50% or 

more of the corporate stock, pursuant to 

§ 126.200, the corporation would not be 

eligible to be a qualified HUBZone SBC 

because it is not at least 51% owned and 

controlled by persons who are U.S. 

citizens. 

* * * * * 

■ 10. Revise § 126.204 to read as 

follows: 

§ 126.204 May a qualified HUBZone SBC 

have affiliates? 

A concern may have affiliates 

provided that the aggregate size of the 

concern and all of its affiliates is small 

as defined in part 121 of this title, 

except as otherwise provided for small 

agricultural cooperatives in § 126.103. 

■ 11. Amend § 126.304 to redesignate 

the current paragraph (c) as paragraph 

(d), and to add a new paragraph (c) to 

read as follows: 

§ 126.304 What must a concern submit to 

SBA? 

* * * * * 

(c) Concerns applying for HUBZone 

status based on a location within a 

qualified base closure area must use 

51250 Federal Register / Vol. 70, No. 167 / Tuesday, August 30, 2005 / Rules and Regulations 

SBA’s List of Qualified Base Closure 

Areas (located at http://www.sba.gov/ 

hubzone) to verify that the location is 

within a qualified base closure area. If 

a concern disagrees with the failure of 

SBA’s List of Qualified Base Closure 

Areas to include a particular area as a 

qualified base closure area, then the 

concern must submit relevant 

documentation from the Department of 

Defense, Office of Economic 

Adjustment, or the military department 

responsible for closing that installation. 

* * * * * 

■ 12. Revise § 126.306 as follows: 

§ 126.306 How will SBA process this 

certification? 

(a) The AA/HUB or designee is 

authorized to approve or decline 

certifications. * * * The decision of the 

AA/HUB or designee is the final agency 

decision. 

■ 13. Revise § 126.503(c) as follows: 

§ 126.503 What happens if SBA is unable 

to verify a qualified HUBZone SBC’s 

eligibility or determines that the concern is 

no longer eligible for the program? 

* * * * * 

(c) Decertifying Pursuant to a Protest. 

SBA will decertify a qualified HUBZone 

SBC and remove its name from the List 

without first proposing it for 

decertification if the AA/HUB upholds 

a protest pursuant to § 126.803 and the 

AA/HUB’s decision is not overturned 

pursuant to § 126.805. 

■ 14. Revise § 126.607(b) and (c) to read 

as follows: 

§ 126.607 When must a contracting officer 

set aside a requirement for qualified 

HUBZone SBCs? 

* * * * * 

(b) If the contracting officer 

determines that § 126.605 does not 

apply, the contracting officer shall set 

aside the requirement for HUBZone, 8(a) 

or SDVO SBC contracting before setting 

aside the requirement as a small 

business set-aside. 

(c) If the contracting officer decides to 

set aside the requirement for 

competition restricted to qualified 

HUBZone SBCs, the contracting officer 

must: 

(1) Have a reasonable expectation 

after reviewing SBA’s list of qualified 

HUBZone SBCs that at least two 

responsible qualified HUBZone SBCs 

will submit offers; and 

(2) Determine that award can be made 

at fair market price. 

■ 15. Amend § 126.613 to redesignate 

the current paragraph (c) as paragraph 

(d), and to add a new paragraph (c) to 

read as follows: 

§ 126.613 How does a price evaluation 

preference affect the bid of a qualified 

HUBZone SBC in full and open 

competition? 

* * * * * 

(c) For purchases by the Secretary of 

Agriculture of agricultural commodities 

for export operations through 

international food aid programs 

administered by the Farm Service 

Agency, the price evaluation preference 

shall be 5% on the first portion of a 

contract to be awarded that is not 

greater than 20% of the total volume 

being procured for each commodity in 

a single IFB. 

* * * * * 

■ 16. Revise § 126.700 to read as 

follows: 

§ 126.700 What are the performance of 

work requirements for HUBZone contracts? 

(a) A prime contractor receiving an 

award as a qualified HUBZone SBC 

must meet the performance of work 

requirements set forth in § 125.6(c) of 

this chapter. 

(b) In addition to the requirements set 

forth in § 125.6(c), one or more qualified 

HUBZone SBCs must spend at least 

50% of the cost of the contract incurred 

for personnel on its own employees or 

employees of other qualified HUBZone 

SBCs. 

(1) A qualified HUBZone SBC prime 

contractor receiving a HUBZone 

contract for general construction may 

meet this requirement itself by 

expending at least 50% of the cost of the 

contract incurred for personnel on its 

employees or it may subcontract at least 

35% of the cost of the contract 

performance incurred for personnel to 

one or more qualified HUBZone SBCs. 

A qualified HUBZone SBC prime 

contractor may not, however, 

subcontract more than 50% of the cost 

of the contract incurred for personnel to 

non-qualified HUBZone SBCs. 

(2) A qualified HUBZone SBC prime 

contractor receiving a HUBZone 

contract for specialty construction may 

meet this requirement itself by 

expending at least 50% of the cost of the 

contract incurred for personnel on its 

employees or it may subcontract at least 

25% of the cost of the contract 

performance incurred for personnel to 

one or more qualified HUBZone SBCs. 

A qualified HUBZone SBC prime 

contractor may not, however, 

subcontract more than 50% of the cost 

of the contract incurred for personnel to 

non-qualified HUBZone SBCs. 

(c) A contracting officer may waive 

the 50% requirement set forth in 

paragraph (b) of this section for a 

particular procurement after 

determining that at least two qualified 

HUBZone SBCs cannot meet the 

requirement. Where a waiver is granted, 

the qualified HUBZone SBC prime 

contractor must still meet the 

performance of work requirements set 

forth in § 125.6(c) of this chapter. 

Dated: June 17, 2005. 

Hector V. Barreto, 

Administrator. 

[FR Doc. 05–17206 Filed 8–29–05; 8:45 am] 

BILLING CODE 8025–01–P 

DEPARTMENT OF TRANSPORTATION 

Federal Aviation Administration 

14 CFR Part 71 

[Docket No. FAA–2005–21704; Airspace 

Docket No. 05–ACE–20] 

Modification of Class E Airspace; 

Newton, KS 

AGENCY: Federal Aviation 

Administration (FAA), DOT. 

ACTION: Direct final rule; confirmation of 

effective date. 

SUMMARY: This document confirms the 

effective date of the direct final rule 

which revises Class E airspace at 

Newton, KS. 

EFFECTIVE DATE: 0901 UTC, October 27, 

2005. 

FOR FURTHER INFORMATION CONTACT: 

Brenda Mumper, Air Traffic Division, 

Airspace Branch, ACE–520A, DOT 

Regional Headquarters Building, Federal 

Aviation Administration, 901 Locust, 

Kansas City, MO 64106; telephone: 

(816) 329–2524. 

SUPPLEMENTARY INFORMATION: The FAA 

published this direct final rule with a 

request for comments in the Federal 

Register on July 21, 2005 (70 FR 41949). 

The FAA uses the direct final 

rulemaking procedure for a noncontroversial rule where the FAA 

believes that there will be no adverse 

public comment. This direct final rule 

advised the public that no adverse 

comments were anticipated, and that 

unless a written adverse comment, or a 

written notice of intent to submit such 

an adverse comment, were received 

within the comment period, the 

regulation would become effective on 

October 27, 2005. No adverse comments 

were received, and thus this notice 

confirms that this direct final rule will 

become effective on that date.