57490 Federal Register / Vol. 73, No. 193 / Friday, October 3, 2008 / Rules and Regulations 

reported values on its FR 2910a report 

in order to qualify for reduced reporting 

will be shifted to an FR 2900 reporting 

panel. 

Notice and Regulatory Flexibility Act. 

The provisions of 5 U.S.C. 553(b) 

relating to notice of proposed 

rulemaking have not been followed in 

connection with the adoption of these 

amendments. The amendments involve 

expected, ministerial adjustments 

prescribed by statute and by the Board’s 

policy concerning reporting practices. 

The adjustments in the reserve 

requirement exemption amount, the low 

reserve tranche, the nonexempt deposit 

cutoff level, and the reduced reporting 

limit serve to reduce regulatory burdens 

on depository institutions. Accordingly, 

the Board finds good cause for 

determining, and so determines, that 

notice in accordance with 5 U.S.C. 

553(b) is unnecessary. Consequently, 

the provisions of the Regulatory 

Flexibility Act, 5 U.S.C. 601, do not 

apply to these amendments. 

List of Subjects in 12 CFR Part 204 

Banks, banking, Reporting and 

recordkeeping requirements. 

■ For the reasons set forth in the 

preamble, the Board is amending 12 

CFR part 204 as follows: 

PART 204—RESERVE 

REQUIREMENTS OF DEPOSITORY 

INSTITUTIONS (REGULATION D) 

■ 1. The authority citation for part 204 

continues to read as follows: 

Authority: 12 U.S.C. 248(a), 248(c), 371a, 

461, 601, 611, and 3105. 

■ 2. Section 204.9 is revised to read as 

follows: 

§ 204.9 Reserve requirement ratios. 

The following reserve requirement 

ratios are prescribed for all depository 

institutions, banking Edge and 

agreement corporations, and United 

States branches and agencies of foreign 

banks: 

Category Reserve requirement 

Net transaction accounts: 

$0 to $10.3 million ............................................................................. 0 percent of amount. 

Over $10.3 million and up to $44.4 million ....................................... 3 percent of amount. 

Over $44.4 million ............................................................................. $1,023,000 plus 10 percent of amount over $44.4 million. 

Nonpersonal time deposits ....................................................................... 0 percent. 

Eurocurrency liabilities .............................................................................. 0 percent. 

By order of the Board of Governors of the 

Federal Reserve System, acting through the 

Director of the Division of Monetary Affairs 

under delegated authority, September 25, 

2008. 

Jennifer J. Johnson, 

Secretary of the Board. 

[FR Doc. E8–22944 Filed 10–2–08; 8:45 am] 

BILLING CODE 6210–01–P 

SMALL BUSINESS ADMINISTRATION 

13 CFR Part 124 

RIN 3245–AF79 

Small Disadvantaged Business 

Program 

AGENCY: U.S. Small Business 

Administration. 

ACTION: Interim final rule, with request 

for comments. 

SUMMARY: This rule changes the 

requirements relating to which firms 

may certify their status as small 

disadvantaged businesses (SDBs) for 

purposes of federal prime contracts and 

subcontracts. Currently, only those 

firms that have applied to and been 

certified as SDBs by SBA may certify 

themselves to be SDBs for federal prime 

and subcontracts. This rule allows firms 

to self-represent their status for 

subcontracting purposes without first 

receiving any SDB certification. It also 

recognizes that the benefits of being an 

SDB for federal prime contracts has 

been greatly diminished over the past 

years, and shifts the responsibility of 

identifying firms as SDBs for federal 

prime contracts to those limited 

agencies that have authority and chose 

to use price evaluation adjustments to 

SDBs. 

DATES: Effective Date: This rule is 

effective October 3, 2008. 

Comment Date: Comments must be 

received on or before November 3, 2008. 

ADDRESSES: You may submit comments, 

identified by RIN: 3245–AF79, by any of 

the following methods: 

• Federal eRulemaking Portal: http:// 

www.regulations.gov. Follow the 

instructions for submitting comments. 

• Mail, for paper, disk, or CD/ROM 

submissions: Joseph Loddo, Associate 

Administrator, Office of Business 

Development, 409 Third Street, SW., 

Mail Code, Washington, DC 20416. 

• Hand Delivery/Courier: Joseph 

Loddo, Associate Administrator, Office 

of Business Development, 409 Third 

Street, SW., Washington, DC 20416. 

SBA will post all comments on 

www.regulations.gov. If you wish to 

submit confidential business 

information (CBI) as defined in the User 

Notice at www.regulations.gov, please 

submit the information to LeAnn 

Delaney, Deputy Director, Office of 

Business Development, 409 Third 

Street, SW., Washington, DC 20416, or 

send an e-mail to 

LeAnn.Delaney@sba.gov. Highlight the 

information that you consider to be CBI 

and explain why you believe SBA 

should hold this information as 

confidential. SBA will review the 

information and make the final 

determination of whether it will publish 

the information or not. 

FOR FURTHER INFORMATION CONTACT: 

LeAnn Delaney, Deputy Director, Office 

of Business Development, at (202) 205– 

5852, or LeAnn.Delaney@sba.gov. 

SUPPLEMENTARY INFORMATION: 

I. Background 

Section 1207 of the 1987 Defense 

Authorization Act (Pub. L. 99–661, 

codified in 10 U.S.C. 2323) for the first 

time established a 5 percent goal for all 

Department of Defense (DOD) contracts 

to be awarded to SDBs. To achieve the 

5 percent SDB goal, the statute 

authorized the award of contracts to 

SDBs using less than full and open 

competitive procedures. Specifically, 

DOD developed through regulation a 

practice known as the ‘‘rule of two’’ for 

SDBs. Pursuant to the ‘‘rule of two,’’ 

whenever a contracting officer 

identified two or more SDBs that it 

believed could perform a specific 

procurement at a fair and reasonable 

price, the contracting officer was 

required to set the contract aside for 

bidding exclusively among SDBs. In 

addition, SDBs would receive a 10% 

price evaluation adjustment in the 

evaluation of offers in an unrestricted or 

full and open competition. The DOD’s 

SDB program was a self-certification 

program. SBA established eligibility 

criteria, but firms certified their SDB 

status for particular procurements. SBA 


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did, however, process protests and 

appeals relating to SDB status in 

connection with individual 

procurements. 

In 1994, Congress extended the 

authority granted to DOD by 10 U.S.C. 

2323 to all agencies of the Federal 

Government through enactment of the 

Federal Acquisition Streamlining Act 

(FASA), Public Law 103–355. However, 

as a result of the Supreme Court’s 

decision in Adarand Constructors, Inc. 

v. Pen ̃ a, 515 U.S. 200 (1995), President 

Clinton ordered the Department of 

Justice (DOJ) to work with Federal 

agencies to conduct a review of all race 

and gender conscious Federal 

contracting programs and implement 

necessary regulatory reforms to comply 

with the Court’s ruling. Regulations to 

implement FASA were delayed until the 

completion of this review. 

In 1996, DOJ completed its review 

and, on May 23, 1996, published in the 

Federal Register proposed reforms to 

these Federal preferential contracting 

programs. 61 FR 26042–6063. The ‘‘rule 

of two’’ and the corresponding SDB setaside authority were put on hold 

pending further review. This left the 

price evaluation adjustment for SDBs on 

unrestricted or full and open 

competitions as the primary benefit for 

SDB contractors. The Department of 

Commerce was tasked with the 

responsibility to determine those 

industries in which a price evaluation 

adjustment could be used in Federal 

procurements. This included 

developing the methodology for 

determining the benchmark limitation 

and developing the methodology for 

calculating the size of the price 

evaluation adjustments for eligible 

industries. 

DOJ also proposed governmental SDB 

certification for all firms seeking to 

submit offers as SDBs for Federal prime 

contracts and subcontracts. DOJ 

believed that a governmental 

certification would ensure that those 

who were receiving SDB benefits were 

truly SDB qualified in accordance with 

the standards established by SBA, and 

would readily meet the Adarand strict 

scrutiny test. The proposal included 

language that allowed procuring 

agencies to certify concerns as eligible 

for the SDB program, or ‘‘In the 

alternative, an agency may enter into an 

agreement with SBA to have SBA make 

all determinations, including the initial 

determination of eligibility.’’ Id. at 

26044. Because of SBA’s long-term 

experience in determining social and 

economic disadvantage for the 8(a) 

program and in connection with SDB 

protests, agencies were strongly 

encouraged to enter into an agreement 

with SBA. In August 1997 and June 

1998, SBA published regulations, 

including standards and procedures, 

governing the SDB certification process. 

On December 9, 2004, Congress 

allowed the price evaluation adjustment 

authority for SDBs to expire for the 

majority of Federal procuring agencies. 

Nevertheless, it remains in effect 

through 2009 for DOD, the National 

Aeronautics and Space Administration 

(NASA), and the Coast Guard. However, 

Section 801 of the Strom Thurmond 

National Defense Authorization Act for 

Fiscal Year 1999, Public Law, 105–261, 

amended 10 U.S.C. § 2323(e) to prohibit 

DOD from using the SDB price 

evaluation preference if the Secretary 

determines at the beginning of the fiscal 

year that DOD achieved the SDB 5% 

goal in the most recent fiscal year for 

which data are available. DOD has met 

the 5% goal each year since. As such, 

DOD has not used the SDB price 

evaluation preference in DOD prime 

contracts since 1999. Data in the Federal 

Procurement Data System indicates that 

NASA and the Coast Guard rarely use 

the price evaluation adjustment. 

Thus, at this point, only two agencies 

(NASA and the Coast Guard) are 

currently able to use the SDB price 

evaluation preference, and their use is 

minimal. Considering this, having SBA 

certify SDBs Government-wide for 

prime contracts is no longer the most 

efficient or effective way to certify firms. 

This rule removes SBA from the SDB 

certification process. In terms of prime 

contracts, the rule will have those 

procuring agencies that have an SDB 

prime contracts program certify firms as 

SDBs where the need to do so arises. In 

other words, if an agency uses the Price 

Evaluation Adjustment, then they 

should develop procedures for 

certifying SDBs. But in all other cases, 

agencies can rely on self-certification of 

SDBs. The rule recognizes that the 

approximately 9,545 firms currently 

participating in the 8(a) Business 

Development (BD) program are deemed 

certified SDB firms during their tenure 

in the 8(a) BD program. In addition, the 

approximately 2,814 SBA-certified SDB 

firms will remain as SDB certified firms 

for a period of three years from the date 

of their certifications where they 

continue to meet all applicable 

requirements. Finally, the rule gives 

procuring agencies that have an SDB 

prime contracts program the authority to 

accept SDB certifications made by 

private certifying entities and state and 

local governments where the procuring 

agencies believe that it is appropriate to 

do so. For all of these reasons, SBA does 

not believe that there will be a great 

burden on these procuring agencies to 

certify firms as SDBs for their programs. 

The rule’s effect of having procuring 

agencies make SDB certifications is 

consistent with one of the alternatives 

set forth in the 1996 DOJ SDB proposal. 

In order to make the transition 

smoother, SBA will conduct training 

seminars designed to instruct personnel 

from other agencies on the procedures 

for making eligibility determinations. 

This training component is also 

consistent with the DOJ proposal. 

Moreover, as noted above, any firm 

seeking to represent itself as a SDB for 

a subcontract on a federal prime 

contract must currently also be certified 

as an SDB by SBA. Requiring 

certification for subcontracts is not 

required by law, and may contradict the 

express language of the Small Business 

Act. In this regard, § 8(d)(3)(F) of the 

Small Business Act, 15 U.S.C. 

637(d)(3)(F), states: ‘‘Contractors acting 

in good faith may rely on written 

representations by their subcontractors 

regarding their status as * * * a small 

business concern owned and controlled 

by socially and economically 

disadvantaged individuals * * *’’ 

(Emphasis added). This language clearly 

suggests that Congress intended to allow 

large business prime contractors to rely 

on the self representations of 

subcontractors claiming to be SDBs. 

SBA believes that the clear language 

of the Small Business Act should be 

adhered to. As such, SBA’s regulatory 

change permits firms to self-represent 

their status as SDBs for subcontracts. 

Specific Regulatory Changes 

Section 124.1001 is amended to 

eliminate references to SBA performing 

SDB certifications. It also changes the 

provisions regarding which firms can 

certify their status as SDBs for both 

federal prime contracts and subcontracts 

on federal prime contracts. The rule 

eliminates the requirement that a firm 

must have received an SDB certification 

from SBA before it can represent itself 

to be an SDB. In order for a concern to 

represent that it is an SDB in order to 

receive a benefit as a prime contractor 

on a Federal Government procurement, 

the rule states that a firm must: (1) Be 

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

program; (2) have been certified by SBA 

as an SDB within three years of the date 

it seeks to certify as an SDB; (3) have 

received certification from the procuring 

agency that it qualifies as an SDB; or (4) 

have submitted an application for SDB 

certification to the procuring agency and 

must not have received a negative 

determination regarding that 

application. For subcontracts, the rule 

permits a firm to represent that it 


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qualifies as an SDB if it believes in good 

faith that it is owned and controlled by 

one or more socially and economically 

disadvantaged individuals. 

The rule eliminates current 

§§ 124.1003 through 124.1007 relating 

to Private Certifiers. When SBA first 

promulgated regulations implementing 

the Government-wide SDB program, 

SBA anticipated having entities called 

‘‘Private Certifiers’’ to assist in 

processing SDB applications. The 

Private Certifier aspect of the SDB 

program never materialized. As such, 

there do not need to be regulations 

pertaining to them. 

The rule moves the content of current 

§ 124.1008, regarding how a firm 

becomes certified as an SDB, to 

§ 124.1003. It also removes the elaborate 

procedures for applying to SBA (or a 

Private Certifier) to become certified as 

an SDB. While the procedures are 

eliminated from SBA’s regulations, SBA 

expects that some of the substance 

would be preserved in any procedures 

developed by procuring agencies. For 

example, the provision requiring 

individuals who are not members of 

groups presumed to be socially 

disadvantaged to submit statements 

identifying personally how their entry 

into or advancement in the business 

world has been impaired due to their 

having one or more distinguishing 

features would be required by 

individual procuring agencies that 

process applications for SDB 

certification. 

Section 124.1004 pertains to 

misrepresentations of SDB status, and 

evolves from current § 124.1011. On a 

prime contract, a firm that represents 

that it is an SDB will be deemed to have 

misrepresented its status as an SDB if it 

(1) is not currently a Participant in the 

8(a) BD program; (2) did not receive an 

SBA SDB certification within three 

years of its representation; (3) has not 

received an SDB certification from the 

procuring agency, or has not applied to 

the procuring agency for SDB 

certification; or (4) has received a 

negative determination. For a 

subcontract, a misrepresentation will 

occur where there is not a good faith 

belief that the firm is owned and 

controlled by one or more socially and 

economically disadvantaged 

individuals. Any certification by a firm 

that SBA found not to qualify as an SDB 

in connection with an SDB protest or 

otherwise will be deemed a 

misrepresentation of SDB status if the 

firm has not overcome the reason(s) for 

the negative determination. 

The rule also removes current 

sections 124.1012 and 124.1013. 

Because SBA will no longer certify firms 

as SDBs, provisions relating to firms 

reapplying to SBA after receiving a 

negative determination similarly will no 

longer be needed. In addition, other 

than its list of certified 8(a) firms, SBA 

will no longer maintain a list of certified 

SDB firms. As such, any references to 

such a list will be eliminated. 

The substance of current §§ 124.1014 

and 124.1016 is moved to §§ 124.1005 

and 124.1006, respectively. Current 

§ 124.1015 is removed as unnecessary. 

Finally, under this rule, SBA 

continues to handle protests and 

appeals of SDB status in the same 

manner as it does currently. The protest 

procedures are similar to applying to 

SBA for SDB certification. SBA requires 

the same information and whatever 

forms or supporting materials deemed 

relevant. Current §§ 124.1017 through 

124.1024 are redesignated as 

§§ 124.1007 through 124.1014, 

respectively. SBA’s final decision in an 

SDB protest or appeal is binding on all 

interested parties. If for example a 

procuring agency had found a firm to 

qualify as an SDB and SBA, through an 

SDB protest or appeal, ruled that the 

firm did not qualify as an SDB, SBA’s 

decision would overrule the procuring 

agency determination. In addition, if in 

connection with a protest SBA finds 

that a firm does not qualify as a SDB for 

a contract that has been awarded, the 

procuring agency cannot take SDB 

goaling credit for that contract. 

II. Justification for Publication as 

Interim Final Status Rule 

In general, SBA publishes a 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, however, 

where 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 final rule without soliciting 

public comment. 

In enacting the good cause exception 

to standard rulemaking procedures, 

Congress recognized that emergency 

situations arise where an agency must 

issue a rule without public 

participation. SBA must cease 

performing SDB certifications as of 

September 30, 2008. If this rule is not 

effective before that date, SBA might 

risk a violation of the Anti-Deficiency 

Act. SBA does not receive any 

Congressional funding for processing 

applications for SDB certification, but 

instead seeks re-imbursement from 

those Federal Agencies that utilize 

SBA’s certification in making SDB 

awards under the Economy Act, (31 

U.S.C. 1535). Some of these top 20 

procuring agencies have notified SBA 

that they will cease reimbursement for 

the SDB certification services as of 

September 30, 2008. The SDB Program 

is a statutory requirement for only two 

agencies, the Coast Guard and the 

NASA. Other Agencies have benefited 

from the SDB price evaluation 

preference in the past, but that law 

expired for most agencies in 2004. In 

order for an Agency to order and 

reimburse for services under the 

Economy Act, it must receive a benefit 

from those services. The benefit most 

procuring Agencies receive from the 

SDB certification services is minimal in 

their view, and some have notified SBA 

that they will not continue 

reimbursements in Fiscal Year 2009. 

Basically, the main residual benefit is 

for the procuring agencies to track their 

SDB goaling requirement in 15 U.S.C. 

644(g)(1) (the SDB goal is 5 percent of 

all prime contract and subcontract 

awards for each fiscal year). The loss of 

so many paying agencies and the 

inability of SBA to use its own 

appropriations to make up for shortfalls, 

results in a lack of funding for a viable 

SDB certification program. SBA is 

unable to use its own funds to make up 

any shortfall because the SDB Program 

is not an SBA program; the SDB 

program is a government wide service 

that SBA agreed to provide under 

Economy Act through interagency 

shared funding in 1996. Therefore, SBA 

cannot provide these SDB certification 

services beyond the end of Fiscal Year 

2008 using SBA appropriations. 

SBA has 2,814 SDB firms other than 

8(a) participants as eligible solely for 

SDB status. Without this Interim Final 

Rule, which will allow them to selfrepresent their SDB status in good faith 

to Agencies, there will be no way, after 

SBA ceases certification services, for 

Agencies to continue to meet their 

annual SDB goaling requirements or for 

any SDBs that are not certified to be 

considered for SDB procurements. It is 

critical that this rule be issued so these 

affected businesses can prepare for the 

self-representation process. 

Accordingly, SBA finds that good 

cause exists to publish this rule as an 

interim final rule in light of the urgent 

need. Advance solicitation of comments 

for this rulemaking would be 

impracticable and contrary to the public 

interest, as it would harm those small 

businesses seeking SDB procurements. 


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Any such delay would be extremely 

prejudicial to the affected businesses. 

Although this rule is being published 

as an interim final rule, comments are 

hereby solicited from interested 

members of the public. These comments 

must be received on or before November 

3, 2008. SBA may then consider these 

comments in making any necessary 

revisions to these regulations. 

III. Justification for Immediate Effective 

Date of Interim Final Rule 

The APA 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 finds 

that good cause exists to make this final 

rule effective the same day it is 

published in the Federal Register. 

The purpose of the APA provision is 

to provide interested and affected 

members of the public sufficient time to 

adjust their behavior before the rule 

takes effect. For the reasons set forth 

above in II, Justification of Publication 

of Interim Final Status Rule, SBA finds 

that good cause exists for making this 

interim final rule effective immediately, 

instead of observing the 30-day period 

between publication and effective date. 

SBA is aware of many entities that 

will be assisted by the immediate 

adoption of this rule. 

Compliance with Executive Orders 

12866, 12988, 13175, and 13132, the 

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

612), and the Paperwork Reduction Act 

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

Executive Order 12866 

OMB has determined that this rule is 

significant regulatory action for 

purposes of Executive Order 12866. 

OMB has also determined that this rule 

is not major under the Congressional 

Review Act. 

Because this rule is a significant 

regulatory action, a Regulatory Impact 

Analysis, discussing the need, cost, 

benefits and alternatives to the rule is 

required. 

1. Is there a need for this regulatory 

action? 

Yes, there is a need for this regulatory 

action. Under the existing regulation, 

SBA is required to perform SDB 

certification services for other Agencies. 

13 CFR s. 124.1001(c). In addition, the 

FAR defines an SDB as a small business 

that has received certification from SBA 

as a SDB consistent with 13 CFR 124, 

Subpart B. This Interim Final Rule is 

necessary since SBA must cease 

performing SDB certifications as of the 

end of Fiscal Year 2008 due to a lack of 

funding. By the time this Interim Final 

Rule has been published, SBA will have 

initiated a FAR case to make the 

conforming changes to the FAR. These 

changes will ensure that eligible SDBs 

will be able to continue to compete for 

SDB procurements that Agencies use to 

meet their SDB statutory goals, as well 

as use the SDB price evaluation 

preference for NASA and Coast Guard, 

by self-representing their SDB status. It 

may also open up other Agencies using 

either private SDB certifiers or 

establishing Agency-specific SDB 

programs. In addition, it will allow 

these SDBs to continue to participate in 

the Department of Transportation’s 

(DOTs) Disadvantaged Business 

Enterprise Program, 49 CFR 26.5, which 

has relied upon the SBA and FAR SDBs 

status. Moreover, the SBA Office of 

Inspector General early on recognized 

that the current funding structure for the 

SDB Program is unreliable and 

unpredictable and that there was no 

legal basis that assured the other 

Agencies would continue funding the 

SDB Program. SBA OIG Audit Report 

No. 00–19, SDB Certification Program 

Obligations and Expenditures. Without 

continued interagency funding, SBA is 

unable to continue to support the 

existing rule process by certifying SDBs 

for the entire Federal Government. 

2. What are the potential benefits and 

costs of this regulatory action? 

Currently, SBA has certified only 

2,814 firms other than 8(a) participants 

as eligible solely for SDB status. From 

FY 98 through FY 07 SBA has been 

reimbursed by procuring agencies over 

$27.5 million for these SDB 

certifications. The procuring agencies 

are obligated to reimburse SBA another 

$1.2 million in FY 2008, so total 

reimbursements from procuring 

agencies will exceed $28.7 million since 

FY 1998. 

The SDB procurement goal 

achievement calculation includes 8(a) 

certified firms (9,994) and SDB certified 

firms (2,814). Firms certified as 8(a) are 

also considered to be SDB for statistical 

purposes. In FY 2005 Federal agencies 

reported SDB contracts awarded to 

SDBs totaling $21.7 billion. When 8(a) 

contract award dollars are subtracted, 

the contracts awarded to SDBs in dollars 

totaled $11.2 billion, of which DoD 

awarded $7.4 billion or 66%. DoD was 

successful in awarding this amount 

without the use of the SDB price 

evaluation adjustment. Based on 

conversations with the other Federal 

agencies, virtually all of the remaining 

SDB dollars, $3.8 billion, were awarded 

under full and open competition 

without the use of the SDB price 

evaluation adjustment. During this same 

period, the Federal Government 

exceeded the SDB 5% goal, reaching 

6.92%. 

The SDB certification process is time 

consuming and costly for many small 

businesses. During the past five years, 

the Federal Government has exceeded 

the statutory 5% SDB goal without the 

use of the SDB price evaluation 

adjustment. Eliminating SDB 

certification would have little negative 

impact on the SDB community as long 

as self-representation is allowed. 

Presently, there is minimal use of the 

SDB price evaluation adjustment at the 

Federal prime contract level. 

Specifically, Congress allowed the SDB 

price evaluation adjustment authority to 

expire on December 9, 2004 for all but 

two agencies. Authority for the two 

remaining agencies was reauthorized for 

another three years to 2009. However, 

for the most part these agencies are not 

using the price evaluation preference to 

meet the 5% SDB goal. Therefore, at the 

prime contract level, there is little or no 

benefit for a firm to expend substantial 

time and expense to obtain SDB 

certification. 

Therefore, continuation of the existing 

SDB certification process is costly, time 

consuming and burdensome. As 

opposed to this, self-representation by 

firms of their status in good faith is 

cheaper, quicker and less burdensome. 

SBA will continue to provide an appeal 

process for contract protests and SDB 

status. Allowing firms to self represent 

at the subcontracting level appears to be 

consistent with Congressional intent. 

3. What are the alternatives to this rule? 

SBA has identified three separate 

alternatives to this rule: (1) Selfrepresentation; (2) private certification, 

and (3) agency specific SDB certification 

programs. 

We believe self-representation is 

supported by the relevant statute. In 

terms of subcontracting, § 8(d)(3)(F) of 

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

637(d)(3)(F), states: ‘‘Contractors acting 

in good faith may rely on written 

representations by their subcontractors 

regarding their status as * * * a small 

business concern owned and controlled 

by socially and economically 

disadvantaged individuals, * * * ’’ 

(Emphasis added). This language 

suggests that Congress intended to allow 

large business prime contractors to rely 

on self certifications by companies 

claiming to be SDBs. Small business 

concerns would make the selfrepresentation as an SDB in good faith 

and the determination would be subject 


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to SBA SDB protest and appeal 

procedures. 

Private certifiers were contemplated 

under the existing SBA SDB regulations, 

but none were ever approved. 13 CFR 

124.1003–.1009. However, the Private 

Certifier structure is available if an 

Agency wanted to go replicate or 

approximate those regulations and 

proceed with that option. Since a 

Private Certifier must be compensated 

by the Agency hiring them under 

contract, this option does require a 

procurement action and Agency funding 

and oversight. 

Agency-specific SDB certification 

programs could also be established by 

interested Agencies. We believe this 

would require rulemaking and the 

commitment of Agency resources to 

creation and maintenance of each 

Agency’s SDB program. SBA will also 

provide training and educational 

assistance on how to implement and 

administer a SDB certification program 

to any interested Agency. 

Executive Order 12988 

This action meets applicable 

standards set forth in Sections 3(a) and 

3(b)(2) of Executive Order 12988, Civil 

Justice Reform, to minimize litigation, 

eliminate ambiguity, and reduce 

burden. The action does not have 

retroactive or preemptive effect. 

Executive Order 13132 

For purposes of E.O. 13132, the SBA 

has determined that the rule will not 

have substantial, direct effects on the 

States, on the relationship between the 

national government and the States, or 

on the distribution of power and 

responsibilities among the various 

levels of government. Therefore, for the 

purpose of Executive Order 13132, 

Federalism, SBA determines that this 

Interim Final Rule has no federalism 

implications warranting preparation of a 

federalism assessment. 

Executive Order 13175, Tribal Summary 

Impact Statement 

For the purposes of Executive Order 

13175, Consultation and Coordination 

with Indian Tribal Governments, SBA 

has determined that this Interim Final 

Rule will not have a substantial direct 

effect on one or more Indian tribes, on 

the relationship between the Federal 

Government and Indian Tribes, or on 

the distribution of power and 

responsibilities between the Federal 

Government and Indian tribes. 

Paperwork Reduction Act, 44 U.S.C. Ch. 

35 

SBA has determined that this 

proposed rule does not impose 

additional reporting or recordkeeping 

requirements under the Paperwork 

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

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

612 

Because the rule is an interim final 

rule, there is no requirement for SBA to 

prepare an Initial Regulatory Flexibility 

Act (IRFA) analysis. The Regulatory 

Flexibility Act (RFA), 5 U.S.C. 601, 

requires administrative agencies to 

consider the effect of their actions on 

small entities, small non-profit 

businesses, and small local 

governments. Pursuant to the RFA, 

when an agency issues a rule, the 

agency must prepare an IRFA which 

describes whether the impact of the rule 

will have a significant economic impact 

on a substantial number of small 

entities. However, the RFA requires 

analysis of a rule only where notice and 

comment rulemaking are required. 

Rules are exempt from Administrative 

Procedure Act (APA) notice and 

comment requirements and therefore 

from the RFA requirements when the 

agency for good cause finds (and 

incorporates the finding and a brief 

statement of reasons in the rules issued) 

that notice and public procedure 

thereon is impracticable, unnecessary, 

or contrary to the public interest. In this 

case it would be contrary to the public 

interest to delay the promulgation of the 

rule. 

List of Subjects in 13 CFR Part 124 

Administrative practice and 

procedure, Government procurement, 

Hawaiian Natives, Indians—business 

and finance, Minority businesses, 

Reporting and recordkeeping 

requirements, Technical assistance. 

■ For the reasons stated in the preamble, 

the Small Business Administration 

amends title 13 CFR part 124 as follows: 

PART 124—8(A) BUSINESS 

DEVELOPMENT/SMALL 

DISADVANTAGED BUSINESS STATUS 

DETERMINATIONS 

Subpart B—Eligibility and Protests 

Relating to Federal Small 

Disadvantaged Business Programs 

■ 1. 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 Public Law 99–661, Public 

Law 100–656, sec. 1207, Public Law 101–37, 

Public Law 101–574, section 8021, Public 

Law 108–87, and 42 U.S.C. 9815. 

■ 2. Revise § 124.1001 to read as 

follows: 

§ 124.1001 General applicability. 

(a) This subpart defines a Small 

Disadvantaged Business (SDB). It also 

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, 

Indian tribes, ANCs, CDCs, and NHOs. 

(b) In order for a concern to represent 

that it is an SDB in order to receive a 

benefit as a prime contractor on a 

Federal Government procurement, it 

must: 

(1) Be a current Participant, as defined 

in § 124.3 of this part, in SBA’s 8(a) BD 

as described in § 124.1 of this part, 

program; 

(2) Have been certified by SBA as an 

SDB within three years of the date it 

seeks to certify as an SDB; 

(3) Have received certification from 

the procuring agency that it qualifies as 

an SDB; or 

(4) Have submitted an application for 

SDB certification to the procuring 

agency and must not have received a 

negative determination regarding that 

application. 

(c) A firm may represent that it 

qualifies as an SDB for any Federal 

subcontracting program if it believes in 

good faith that it is owned and 

controlled by one or more socially and 

economically disadvantaged 

individuals. 

■ 3. Revise §§ 124.1003 through 

124.1006 to read as follows: 

§ 124.1003 How does a firm become 

certified as an SDB? 

(a) All firms that are current 

Participants in SBA’s 8(a) BD program 

are automatically deemed to be certified 

SDBs. 

(b) Any firm seeking to be certified as 

an SDB in order to represent that it 

qualifies and is eligible to obtain a 

benefit on a federal prime contract as an 

SDB may apply to the procuring agency 

for such certification. 

(c) A procuring agency may accept a 

certification from another entity (e.g., a 

private certifying entity, or a state or 

local government) that a firm qualifies 

as an SDB if the agency deems it 

appropriate. 

§ 124.1004 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 


jlentini on PROD1PC65 with RULES
Federal Register / Vol. 73, No. 193 / Friday, October 3, 2008 / Rules and Regulations 57495 

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. 

(b)(1) A representation of SDB status 

on a federal prime contract will be 

deemed a misrepresentation of SDB 

status if the firm does not meet the 

requirements of § 124.1001(b). 

(2) A representation of SDB status on 

a subcontract to a federal prime contract 

will be deemed a misrepresentation of 

SDB status if the firm does not have a 

good faith belief that it is owned and 

controlled by one or more socially and 

economically disadvantaged 

individuals. Any certification by a firm 

that SBA found not to qualify as an SDB 

in connection with an SDB protest or 

otherwise will be deemed a 

misrepresentation of SDB status if the 

firm has not overcome the reason(s) for 

the negative determination. 

(3) Any representation of SDB status 

by a firm that SBA has found not to 

qualify as an SDB in connection with a 

protest or SBA-initiated SDB 

determination will be deemed a 

misrepresentation of SDB status if the 

firm has not overcome the reason(s) set 

forth in SBA’s written decision. 

§ 124.1005 How long does an SDB 

certification last? 

(a) A firm that is certified to be an 

SDB will generally be certified for a 

period of three years from the date of 

the certification. 

(b) A firm’s SDB certification will 

extend beyond three years where SBA 

finds the firm to be an SDB: 

(1) In connection with a protest 

challenging the firm’s SDB status (see 

§ 124.1013(h)(2)); 

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

§ 124.1006); or 

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

review. 

(c) A firm that completes its nine-year 

program term in the 8(a) BD program 

will continue to be deemed a certified 

SDB firm for a period of three years 

from the date of its last 8(a) annual 

review. 

§ 124.1006 Can SBA initiate a review of the 

SDB status of a firm claiming to be an SDB? 

SBA may initiate an SDB 

determination on any firm that has been 

certified to be an SDB by a procuring 

agency or that has represented itself to 

be an SDB on a subcontract to a federal 

prime contract whenever it receives 

credible information calling into 

question the SDB status of the firm. 

Upon its completion of an SDB 

determination, SBA will issue a written 

decision regarding the SDB status of the 

questioned firm. 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. 

■ 3. Remove §§ 124.1007 through 

124.1016 and redesignate §§ 124.1017 

through 124.1024 as §§ 124.1007 

through 124.1014, respectively. 

Sandy K. Baruah, 

Acting Administrator. 

[FR Doc. E8–23472 Filed 10–2–08; 8:45 am] 

BILLING CODE 8025–01–P 

DEPARTMENT OF COMMERCE 

Bureau of Industry and Security 

15 CFR Parts 732, 734, 738, 740, 742, 

744, 746, 748, 750, 762, 770, 772, and 

774 

[Docket No. 080211163–81224–01] 

RIN 0694–AE18 

Encryption Simplification 

AGENCY: Bureau of Industry and 

Security, Commerce. 

ACTION: Interim final rule. 

SUMMARY: This interim final rule 

amends the Export Administration 

Regulations (EAR) to make the treatment 

of encryption items more consistent 

with the treatment of other items subject 

to the EAR, as well as to simplify and 

clarify regulations pertaining to 

encryption items. The restrictions 

pertaining to technical assistance by 

U.S. persons with respect to encryption 

items are removed, because the current 

export and reexport restrictions set forth 

in the EAR for technology already 

include technical assistance. This rule 

also removes License Exception KMI as 

it has become obsolete because of 

developments in uses of encryption. In 

addition, this rule removes notification 

requirements for items classified as 

5A992, 5D992, and 5E992. This rule 

also increases certain parameters under 

License Exception ENC, which is 

intended to reflect advances in 

technology. This rule adds two new 

review and reporting requirement 

exclusion paragraphs under License 

Exception ENC for wireless ‘‘personal 

area network’’ items and for ‘‘ancillary 

cryptography’’ items. This rule also 

adds Bulgaria, Canada, Iceland, 

Romania, and Turkey to the list of 

countries that receive favorable 

treatment under License Exception ENC. 

Commodities and software pending 

mass market review may no longer be 

exported under ECCNs 5A992 and 

5D992 using No License Required 

(NLR). However, once the mass market 

review has been received by BIS, then 

such commodities and software may be 

exported using License Exception ENC 

under ECCNs 5A002 and 5D002. This 

rule will reduce the paperwork burden 

on the public by 9% (annual dollar 

amount savings of approximately 

$14,000 to the public and $5,000 to the 

U.S. Government), because of the 

removal of certain notification 

requirements, addition of countries to 

the list of those receiving favorable 

treatment under License Exception ENC, 

and the increase of reporting and review 

requirement exclusions. The 

Departments of Commerce, State and 

Defense will continue to review export 

control, license review policies, and 

license exceptions for encryption items 

in the EAR. 

DATES: Effective Date: This rule is 

effective October 3, 2008. 

ADDRESSES: Written comments on this 

interim final rule may be sent by e-mail 

to publiccomments@bis.doc.gov. 

Include ‘‘Encryption rule’’ in the subject 

line of the message. Comments may also 

be submitted by mail or hand delivery 

to Sharron Cook, Office of Exporter 

Services, Regulatory Policy Division, 

Bureau of Industry and Security, 

Department of Commerce, 14th St. & 

Pennsylvania Avenue, NW., Room 2705, 

Washington, DC 20230, ATTN: 

Encryption rule; or by fax to (202) 482– 

3355. 

FOR FURTHER INFORMATION CONTACT: For 

questions of a general nature contact 

Sharron Cook, Office of Exporter 

Services, Regulatory Policy Division at 

(202) 482–2440 or E-Mail: 

scook@bis.doc.gov. 

For questions of a technical nature 

contact: The Information Technology 

Division, Office of National Security 

and Technology Transfer Controls at 

202–482–0707 or E-Mail: C. Randall 

Pratt at cpratt@bis.doc.gov. 

SUPPLEMENTARY INFORMATION: 

Background 

Steps Regarding Scope of the EAR 

This rule revises paragraph 732.2(b) of 

the EAR, which sets forth instructions 

on how to determine if your technology 

or software is publicly available, by 

adding mass market encryption software 

with symmetric key length exceeding 

64-bits classified under ECCN 5D992. 

The addition of this phrase harmonizes 

with the scope of publicly available 

encryption software that is considered 

to be subject to the EAR because of the 

criteria set forth in § 734.3(b)(3) of the 

EAR. 


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