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Skip Navigation HomeHelpResourcesContact Us Advanced Search Start of Main Content Small Business, Small Disadvantaged Business, HUBZone, and Service-Disabled Veteran-Owned Business Status Protest and Appeal Regulations This Rule document was issued by the Small Business Administration (SBA) For related information, Open Docket Folder Show agency attachment(s) SMALL BUSINESS ADMINISTRATION
13 CFR Parts 121, 124, 125, 126, and 134
RIN 3245-AF65
SummaryThe U.S. Small Business Administration (SBA or Agency) is amending its regulations to clarify the effect, across all small business programs, of initial and appeal eligibility decisions on the procurement in question; increase the amount of time that SBA has to render formal size determinations; require that SBA's Office of Hearings and Appeals (OHA) issue a size appeal decision within 60 calendar days of the close of the record, if possible; increase the amount of time that SBA has to file North American Industry Classification System (NAICS) code appeals; alter the NAICS code appeal procedures to comply with a Federal Court decision; clarify that contracting officers must reflect final agency eligibility decisions in Federal procurement databases and goaling statistics; and make other changes to size status protest and appeal rules.
Dates Effective date: March 4, 2011. Applicability date: The amendments to 13 CFR 121.402(b), 121.404(a), and 121.407 apply to solicitations issued on or after March 4, 2011.
For Further Information ContactJon Haitsuka, Program Analyst, Office of Size Standards, Office of Government Contracting, (202) 401-1420 or jon.haitsuka@sba.gov. Supplementary InformationOn March 1, 2010, SBA published a proposed rule in theFederal Register(75 FR 9129) to clarify the effect, across all small business programs, of initial and appeal eligibility decisions on the procurement in question; increase the amount of time that SBA has to render formal size determinations; require that SBA's OHA issue a size appeal decision within 60 calendar days of the close of the record, if possible; increase the amount of time that SBA has to file NAICS code appeals; alter the NAICS code appeal procedures to comply with a Federal Court decision; clarify that contracting officers must reflect final agency eligibility decisions in Federal procurement databases and goaling statistics; clarify how a contracting officer assigns a NAICS code and size standard to a multiple award procurement; and make other changes to status protest and appeal rules.
SBA received comments from four individuals or entities in response to the proposed rule. The comments, as well as SBA's response to them, are discussed below. For a section-by-section analysis of the revised Parts 121, 124, 125, 126, and 134, see the supplementary information published as part of the proposed rule (75 FR 9129).Analysis of Comments ReceivedSBA received three supportive comments concerning its proposed removal of the second sentence of paragraph 121.404(a), which required recertification if a procuring agency modifies a solicitation to such an extent that original offers are no longer responsive. All three commenters maintained that it is unfair to disqualify a firm from consideration after the firm has spent a great deal of time and resources pursuing a contract opportunity that it was eligible for at the time of its initial offer including price. The commenters also noted that the current rule reduces competition by eliminating offerors, which is not necessarily in the best interests of the procuring agency. As we explained in the proposed rule, if a requirement changes so much that it is essentially new, the agency should cancel the solicitation and issue a new solicitation and open the competition up to all eligible offerors. In that case, size will be determined as of the date of the initial offer including price in response to the new solicitation. Consequently, SBA has adopted its proposed rule.
Several commenters supported SBA's proposed amendment of §§ 121.1009, 124.1013, 125.27, 126.803, and 134.504 to address the effect of status determinations on the procurement in question. However, two commenters did not support the provision which addresses situations where a contracting officer withholds award, SBA finds the protested concern to be eligible, the procuring agency then awards to that concern, and the initial determination is subsequently overturned on appeal. In that circumstance, the contracting officer may take some action based on the appellate decision, but is not required to do so. One commenter also noted the possibility that a firm found to be ineligible as a result of a formal size determination could successfully challenge the decision on appeal, yet not be awarded the contract. Both of these outcomes are consistent with the regulatory framework which has been in place for many years. The existing framework provides contracting officers with an incentive to withhold award until SBA renders a formal size determination. If SBA issues a formal size determination finding an apparent successful offeror to be small, the agency may proceed with award, even if an appeal is filed. Similarly, if SBA finds an apparent successful offeror to be other than small, the agency may proceed with award to another offeror, even if an appeal is filed. Size appeals can take several months or more to resolve, and agencies typically cannot delay their procurements for months and await an appeal decision. Consequently, SBA has never required contracting officers to apply appellate decisions to the procurement in question when the contracting officer waited for SBA's formal size determination and awarded to a concern based on SBA's formal size determination. If in all cases the contracting officer was required to take some action based on an appellate decision, regardless of whether the contracting officer withheld award andwaited for SBA's formal size determination, contracting officers would likely award before SBA issues a formal size determination, which could result in an increase in the number of ineligible firms performing the base terms of set-aside contracts. Similarly, if SBA issues a formal size determination finding the apparent successful offeror to be other than small and the contracting officer awards to another concern, it would be costly for the Government to have to terminate the award to an eligible concern based on an appellate decision finding the initial successful offeror to be eligible. Thus, SBA is adopting the proposed rule without modification.
One commenter suggested that SBA should require firms to recertify their size prior to award and on an annual basis. The commenter suggested that procuring agencies should not exercise any option with a firm that is other than small. This comment is beyond the scope of this rule. SBA considered these issues when it issued its recertification rule (71 FR 66434), and believes requiring such action could seriously disrupt the procurement process and result in unacceptable costs for procuring agencies and contractors. SBA notes that recertification is required in all cases where there is an acquisition, merger or novation and, for long-term contracts, prior to the sixth year and prior to each option thereafter (see § 121.404(g)).Compliance With Executive Orders 12866, 12988, 13132, the Paperwork Reduction Act (44 U.S.C. Ch. 35), and the Regulatory Flexibility Act (5 U.S.C. 601-612), Executive Order 12866The Office of Management and Budget (OMB) has determined that this final rule is a significant regulatory action for purposes of Executive Order 12866. Accordingly, the next section contains SBA's Regulatory Impact Analysis. This is not a major rule, however, under the Congressional Review Act, 5 U.S.C. 800.Regulatory Impact Analysis1. Is there a need for the regulatory action? SBA's mission is to aid and assist small businesses through a variety of financial, procurement, business development, and advocacy programs. To effectively assist the intended beneficiaries of these programs, SBA must establish distinct definitions of which businesses are deemed small businesses. The Small Business Act (15 U.S.C. 632(a)) delegates the responsibility for establishing small business definitions to SBA's Administrator. This act also provides SBA with the authority to determine which businesses are small businesses concerns (15 U.S.C. 637(b)(1)(G)(6)). The supplementary information section of the proposed and final rule explains SBA's reasons for revising the size protest and appeal timeframes and application of final decisions on size and other small business status determinations. SBA believes that these changes are needed to provide clarity to procuring agencies and contractors.
2. What are the potential benefits and costs of this regulatory action? SBA believes that more realistic timeframes for filing and rendering decisions on size protest and NAICS code appeal cases will improve the functioning of the size protest and size determination processes. Small businesses will have a sufficient time in which to raise size and NAICS classification issues and SBA will have more time, if needed, to prepare thorough decisions.
3. What are the alternatives to this final rule? SBA considered as an alternative completing size determinations within 10 business days of receiving all requested information from the protested concern. Although this would also achieve the objective of this final rule, it would create uncertainty as to when a size determination would actually be rendered. If the necessary information requested of a business is received within the three-day period requested by SBA, a size determination will be completed within 13 days. However, if the protested concern submits incomplete information, the size determination period will vary depending on the circumstances. SBA believes a 15-day period is sufficient in most cases and provides a degree of certainty to contracting officers. It also reinforces the importance of promptly providing information to SBA.Executive Order 12988For purposes of Executive Order 12988, SBA has drafted this final rule, to the extent practicable, in accordance with the standards set forth in section 3(a) and 3(b)(2) of that Order, to minimize litigation, eliminate ambiguity, and reduce burden. This rule has no preemptive or retroactive effect.Executive Order 13132This rule does not have federalism implications as defined in Executive Order 13132. It 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 layers of government, as specified in the order. As such, it does not warrant the preparation of a Federalism Assessment.Paperwork Reduction ActFor the purpose of the Paperwork Reduction Act, 44 U.S.C. Ch. 35, SBA has determined that this final rule will not impose new reporting requirements nor will require new recordkeeping requirements.Regulatory Flexibility ActSBA has determined that this final rule could have a significant economic impact on a substantial number of small entities within the meaning of the Regulatory Flexibility Act (RFA), 5 U.S.C. 601-612. Therefore, SBA has prepared a Final Regulatory Flexibility Act (FRFA) analysis addressing this final rule.FRFAWhen preparing a Regulatory Flexibility Analysis, an agency shall address all of the following: the need for, and objectives of, the rule; the estimated number of small entities to which the rule may apply; the projected reporting, recordkeeping and other compliance requirements; steps taken to minimize the significant economic impact on small entities. This FRFA considers these points and the impact this final rule may have on small entities.a. Need for, and Objectives of, the RuleUnder the Small Business Act, SBA is authorized to determine the size of a business entity. 15 U.S.C. 632. SBA's standards and definitions relating to formal size determinations and NAICS code designation for small business concerns are set forth in 13 CFR part 121. The rules for procedures governing cases before OHA are set forth in 13 CFR part 134.
The final rule will require the contracting officer to update Federal procurement databases to reflect final agency status determinations.b. Estimate of the Number of Small Entities to Which the Rule May ApplyThe RFA directs agencies to provide a description of and, where feasible, an estimate of the number of entities that may be affected by the final rule. The RFA defines “small entity” to include “small businesses,” “small organizations,” and “small governmental jurisdictions.” SBA's programs do not apply to “small organizations” or “small governmental jurisdictions” because they are non-profit or governmental entities and do not qualify as “business concerns” within the meaning of SBA's regulations. SBA's programs apply only to for-profit business concerns. Therefore, this final rule (like the regulation currently in effect) will not impact small organizations or small governmental jurisdictions.
Size protestsFY 2005FY 2006FY 2007FY 2008FY 2009
Total Determinations Requested459593451493488
Cases Dismissed122139131104146
Determined Small Business190219193200207
Determined Other Than Small115163119115128
Cases in Process/Other Determinations32728747
There are more than 330,000 concerns listed as small business concerns in the Dynamic Small Business Search of the Central Contractor Registration database. Based on data for fiscal years 2005-2009, SBA processes an average of nearly 500 size protests each fiscal year, resulting in 41 percent being determined to be small and 26 percent determined to be other than small. The rest are dismissed on procedural grounds. Thus, the number of concerns affected by this rule, regardless of size, will be approximately 330 per year, as compared to 330,000 small business concerns that are active in the Federal Government marketplace. The number of protests in other small business programs is significantly less than the numbers of size protests received.c. Projected Reporting, Recordkeeping and Other Compliance RequirementsThis final rule would not impose any new information collection requirement on small businesses. This final rule will require contracting officers to update Federal procurement databases to reflect final agency status decisions. Contracting officers should currently be updating these databases, and this rule will make it clear that this must be done.d. Steps Taken to Minimize the Significant Economic Impact on Small EntitiesThis final rule should not result in a significant economic impact on small entities. This final rule will extend the timeframe SBA has for determining size of an entity resulting from a size protest. The addition of the five business days will allow SBA more time to adequately review the documentation needed to render a decision and will make SBA's regulations consistent across programs. The timeframe imposed on OHA for rendering decision resulting from appeals should minimize the economic impact on small entities by providing a decision in a timely manner.e. ConclusionBased on the foregoing, SBA has determined that this final rule will not have a significant impact on a substantial number of small entities with the meaning of the RFA.
List of Subjects in 13 CFR Parts 121 124 125 126 and 134Administrative practice and procedure, Government procurement, Government property, Grant programs—business, Loan programs—business, Individuals with disabilities, Reporting and recordkeeping requirements, Small businesses.
For the reasons stated in the preamble, SBA amends parts 121, 124, 125, 126, and 134 of title 13 of the Code of Federal Regulations as follows:Regulatory TextPart 121 Small Business Size Regulations
Authority:15 U.S.C. 632, 634(b)(6), 636(b), 637(a), 644, 662(5) and 694a; Public Law 105-135, sec. 401 et seq., 111 Stat. 2592.
Subpart A—Size Eligibility Provisions and Standards§ 121.402
2. Amend § 121.402(b) by removing the third sentence.
§ 121.404 [Amended]
3. Amend § 121.404(a) by removing the second sentence.
4. Amend § 121.1009 by revising paragraphs (a), (g)(1), (g)(2), (g)(3), and (h) to read as follows:
§ 121.1009 What are the procedures for making the size determination?
5. Amend § 121.1101 by revising paragraph (b) to read as follows:
§ 121.1101 Are formal size determinations subject to appeal?
6. Amend § 121.1103 as follows:
(c) Procedure after a NAICS code appeal is filed and served. (1) Upon receipt of the service copy of a NAICS code appeal, the contracting officer shall:
(v) Inform OHA of any amendments, actions or developments concerning the procurement in question.
(2) Upon receipt of a NAICS code appeal, OHA shall:
(3) Any interested party may file and serve its response to the NAICS code appeal.Part 124 8 a Business Development Small Disadvantaged Business Status Determinations
7. 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. 100-656, Pub. L. 101-37, Pub. L. 101-574, and 42 U.S.C. 9815.
8. Amend § 124.1013 as follows:
a. Remove the second sentence in paragraph (a);
9. Amend § 124.1014 by removing paragraph (f) and redesignating paragraphs (g) through (i) as paragraphs (f) through (h), respectively.
Part 125 Government Contracting Programs
Authority:15 U.S.C. 632(p), (q); 634(b)(6); 637; 644 and 657(f).
11. Amend § 125.27 by revising paragraphs (e) and (g) to read as follows:
§ 125.27 How will SBA process an SDVO protest?
(iii) If OHA affirms the D/GC's determination finding the protested concern ineligible, the contractingofficer shall either terminate the contract or not exercise the next option.
12. Revise § 125.28 to read as follows:
§ 125.28 What are the procedures for appealing an SDVO status protest?
The protested concern, the protester, or the contracting officer may file an appeal of an SDVO status protest determination with OHA in accordance with part 134 of this chapter.Part 126 Hubzone Program
13. The authority citation for part 126 continues to read as follows:
Authority:15 U.S.C. 632(a), 632(j), 632(p), and 657a.
14. Amend § 126.803 by revising paragraphs (b)(2) and (b)(3), redesignating paragraph (d) as paragraph (d)(1), and adding new paragraphs (d)(2), (d)(3), (d)(4) and (d)(5) to read as follows:
15. Amend § 126.805 by removing paragraph (g) and redesignating paragraph (h) as paragraph (g).
Part 134 Rules of Procedure Governing Cases Before the Office of Hearings and Appeals
16. The authority citation for part 134 continues to read as follows:
Authority:5 U.S.C. 504; 15 U.S.C. 632, 634(b)(6), 637(a), 637(m), 648(1), 656(i), and 687(c); E.O. 12549, 51 FR 6370, 3 CFR, 1986 Comp., p. 189.
17. Revise § 134.304 to read as follows:
§ 134.304 Commencement of appeals from size determinations and NAICS code designations.
18. Amend § 134.316 by redesignating paragraphs (a), (b), (c), and (d) as paragraphs (c), (d), (e) and (f), respectively, and adding new paragraphs (a) and (b) to read as follows:
§ 134.316 The decision.
* * * * *Subpart E—Rules of Practice for Appeals From Service-Disabled Veteran Owned Small Business Concern Protests§ 134.504
19. Remove and reserve § 134.504.
§ 134.514 [Amended]
20. Amend § 134.514 by removing the second sentence.
§ 134.515 [Amended]
21. Amend § 134.515(b) by removing the word “service” in the second sentence and adding in its place the word “issuance.”
[FR Doc. 2011-2177 Filed 2-1-11; 8:45 am]BILLING CODE 8025-01-P
Attachments View All (0) View document: No documents available. Attachments View All (0) Comment Now! Comment Period Closed ID: SBA-2010-0003-0006 Tracking Number: View original printed format: Document Information Date Posted: Feb 2, 2011RIN: 3245-AF65CFR: 13 CFR Parts 121, 124, 125, 126, and 134Federal Register Number: 2011-02177 Show More Details Submitter Information Comments0 Comments Received* Docket Information This document is contained in SBA-2010-0003 Related Dockets: NoneRelated RINs: NoneRelated Documents: Small Business, Small Disadvantaged Business, HUBZone, and... Related Comments: View all * This count refers to the total comment/submissions received on this document, as of 11:59 PM yesterday. Note: Agencies review all submissions, however some agencies may choose to redact, or withhold, certain submissions (or portions thereof) such as those containing private or proprietary information, inappropriate language, or duplicate/near duplicate examples of a mass-mail campaign. This can result in discrepancies between this count and those displayed when conducting searches on the Public Submission document type. For specific information about an agency’s public submission policy, refer to its website or the Federal Register document. Document text and images courtesy of the Federal Register Home Search Advanced Search Browse By Category Learn About Us eRulemaking Program Media Toolkit Agencies Awards & Recognition Enhancements & Fixes Resources Site Data Regulatory Agenda Agency Reports Required by Statute API Overview Developers Help How to use Regulations.gov FAQs Glossary Connect With Contact Us Privacy and Security Notice User Notice Accessibility Statement Partner Sites We the People Federal Register Reginfo Congress.gov USA.gov E-Gov Opengov Participate Today!