[Federal Register Volume 85, Number 90 (Friday, May 8, 2020)]
[Rules and Regulations]
[Pages 27290-27293]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2020-08619]
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SMALL BUSINESS ADMINISTRATION
13 CFR Part 124
RIN 3245-AH13
Regulatory Reform Initiative: Small Disadvantaged Businesses
AGENCY: U.S. Small Business Administration.
ACTION: Direct final rule.
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SUMMARY: The U.S. Small Business Administration (SBA) is removing from
the Code of Federal Regulations (CFR) 16 regulations that are no longer
necessary because they are either redundant or obsolete. This action
will assist the public by simplifying SBA's regulations.
DATES: This rule is effective on August 6, 2020 without further action,
unless significant adverse comment is received by July 7, 2020. If
significant adverse comment is received, SBA will publish a timely
withdrawal of the rule in the Federal Register.
ADDRESSES: You may submit comments, identified by RIN 3245-AH13 by any
of the following methods:
Federal eRulemaking Portal: http://www.regulations.gov.
Follow the instructions for submitting comments.
Mail or Hand Delivery/Courier: Brenda Fernandez, U.S.
Small Business Administration, Office of Policy, Planning and Liaison,
409 Third Street SW, 8th Floor, Washington, DC 20416.
SBA will post all comments on http://www.regulations.gov. If you
wish to submit confidential business information (CBI), as defined in
the User Notice at http://www.regulations.gov, please submit the
information to Brenda Fernandez, U.S. Small Business Administration,
Office of Policy, Planning and Liaison, 409 Third Street SW, 8th Floor,
Washington, DC 20416, or send an email to [email protected].
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 on whether it
will publish the information.
FOR FURTHER INFORMATION CONTACT: Brenda Fernandez, U.S. Small Business
Administration, Office of Policy, Planning and Liaison, 409 Third
Street SW, Washington, DC 20416; (202) 205-7337;
[email protected].
SUPPLEMENTARY INFORMATION:
Small Disadvantaged Business Program
The government promotes contracting and subcontracting with small
disadvantaged businesses (SDBs) by setting government-wide and agency-
specific goals for the percentage of Federal contract and subcontract
dollars awarded to SDBs each fiscal year. The government-wide goal is
that not less than 5 percent of the total value of all prime contract
and subcontract awards be made to SDBs. At one time, SDBs had to be
certified by the SBA, or by a private certifying entity acting in
compliance with SBA regulations, to qualify for certain Federal
programs as prime contractors. However, all Federal programs for SDB
prime contractors have been discontinued, with only the government-wide
and agency-specific goals for the percentage of Federal contract and/or
subcontract dollars awarded to SDBs each year remaining. Pursuant to
the SDB subcontracting program, Federal agencies must negotiate
subcontracting plans with the apparent successful bidder or offeror on
qualifying prime contracts prior to awarding the contract.
Subcontracting plans set goals for the percentage of subcontract
dollars to be awarded to SDBs, among others, and describe efforts that
will be made to ensure that SDBs have an equitable opportunity to
compete for subcontracts. Federal agencies may also consider the extent
of subcontracting with SDBs in determining to whom to award a contract
or whether to give contractors monetary incentives to subcontract with
SDBs.
Firms do not need to be certified SDBs to qualify for Federal
programs for subcontractors. Rather, 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. In addition, 8(a)
Participants are deemed to be SBDs for Federal contracting purposes. As
of August 8, 2019, the SBA's Dynamic Small Business Search database
included 125,616 self-certified SDBs.
Background Information
On February 24, 2017, President Trump issued Executive Order 13777,
Enforcing the Regulatory Reform Agenda, which further emphasized the
goal of the Administration to alleviate the regulatory burdens placed
on the public. Under Executive Order 13777, agencies must evaluate
their existing regulations to determine which ones should be repealed,
replaced, or modified. In doing so, agencies should focus on
identifying regulations that, among other things: Eliminate jobs or
inhibit job creation; are outdated, unnecessary or ineffective; impose
costs that exceed benefits; create a serious inconsistency or otherwise
interfere with regulatory reform initiatives and policies; or are
associated with Executive Orders or other Presidential directives that
have been rescinded or substantially modified.
In response to the President's directive, SBA initiated a review of
its regulations to determine which might be revised or eliminated.
Based on this analysis, SBA has identified unnecessary provisions that
can be removed from the CFR. First, this rule removes 13 CFR 124.516--
which states that the procuring activity decides all contract disputes
arising between an 8(a) Participant and a procuring activity
contracting officer after the award of an 8(a) contract--because this
provision is redundant. 13 CFR 124.512 already delegates 8(a) contract
administration functions to procuring agencies and contract dispute
resolution is an element of contract administration.
Second, this rule removes 13 CFR 124.1002 through 124.1016. As
discussed below, these provisions pertain to the Small Disadvantaged
Business Program, which is no longer a viable program. Section 1207 of
the 1987 Defense Authorization Act (Pub. L. 99-661, codified in 10
U.S.C. 2323) established a statutory 5 percent goal for all Department
of Defense (DOD) contracts to be awarded to small disadvantaged
businesses (SDBs). To this end, the statute authorized the award of
contracts to SDBs using less than full and open competitive procedures.
Specifically, DOD implemented regulations requiring a contracting
officer to set-aside a procurement for exclusive competition among SDBs
whenever market research identified two or more SDBs that could perform
the contract at a fair and reasonable price. In addition, SDBs would
receive a 10 percent price evaluation adjustment for offers submitted
in an unrestricted or full and open competition. DOD's SDB program was
initially a self-certification program. SBA established eligibility
criteria, but firms self-certified their SDB status for particular
procurements. However, SBA was responsible for processing SDB
[[Page 27291]]
status protests and appeals filed in connection with individual
contracts.
In 1994, Congress extended the authority granted to DOD to all
Federal agencies through enactment of the Federal Acquisition
Streamlining Act (FASA) (Pub. L. 103-355). However, as a result of the
U.S. Supreme Court's decision in Adarand Constructors, Inc. v. Pena,
515 U.S. 200 (1995), President Clinton directed 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 completion of this
review.
On May 23, 1996, DOJ proposed reforms to these Federal preferential
contracting programs (61 FR 26042-63). Among other things, DOJ placed
the SDB set-aside authority in abeyance pending further review, which
left the price evaluation adjustment for SBDs on full and open
competitions as the primary benefit for SDBs. DOJ further proposed
governmental SDB certification for all firms seeking to submit offers
as SDBs for Federal prime contracts and subcontracts. Agencies were
given the option to implement a certification program or enter into an
agreement with SBA under which SBA would make all determinations of SDB
eligibility. However, agencies were strongly encouraged to defer to
SBA's experience on matters related to SDB eligibility. SBA published
regulations governing its SDB certification process in August 1997 and
June 1998.
SBA terminated its SDB certification program on October 3, 2008 (73
FR 57490) after determining that it was no longer efficient or
effective to certify SDBs government-wide. At that time, statutory
authority for the SDB price evaluation adjustment had expired for all
but three agencies: DOD, the National Aeronautics and Space
Administration, and the U.S. Coast Guard. Subsequently, on November 3,
2008, the U.S. Court of Appeals for the Federal Circuit struck down
DOD's SDB program in Rothe Development Corporation v. Department of
Defense, 545 F.3d 1023 (Fed. Cir. 2008), holding that Section 1207 of
the 1987 Defense Authorization Act was facially unconstitutional
because Congress did not have sufficient evidence to conclude that
there was racial discrimination in defense contracting when it
reauthorized the program in 2006. Congress declined to reauthorize the
government's remaining SDB programs in 2009, and the SDB price
evaluation adjustment was removed from the Federal Acquisition
Regulation and the Defense Federal Acquisition Regulation Supplement in
2014 and 2015, respectively (79 FR 61746 and 80 FR 15912). Currently,
there is no SDB set-aside program; there is no statutory authority for
the SDB price evaluation adjustment; and SBA does not administer an SDB
certification program. As such, the provisions set forth in 13 CFR
124.1002 through 124.1016 are obsolete and SBA is removing them from
the CFR. However, SBA is retaining and re-designating the SDB
definition currently set forth in 13 CFR 124.1002. Because a firm may
self-certify that it qualifies as an SDB for any Federal subcontracting
program, SBA believes this provision should remain in the CFR in order
to provide guidance to firms seeking to participate in the Federal
subcontracting program.
Executive Order 13771
On January 30, 2017, President Trump signed Executive Order 13771,
Reducing Regulation and Controlling Regulatory Costs, which, among
other objectives, is intended to ensure that an agency's regulatory
costs are prudently managed and controlled so as to minimize the
compliance burden imposed on the public. For every new regulation an
agency proposes to implement, unless prohibited by law, this Executive
Order requires the agency to (i) identify at least two existing
regulations that the agency can cancel; and (ii) use the cost savings
from the cancelled regulations to offset the cost of the new
regulation.
Executive Order 13777
On February 24, 2017, the President issued Executive Order 13777,
Enforcing the Regulatory Reform Agenda, which further emphasized the
goal of the Administration to alleviate the regulatory burdens placed
on the public. Under Executive Order 13777, agencies must evaluate
their existing regulations to determine which ones should be repealed,
replaced, or modified. In doing so, agencies should focus on
identifying regulations that, among other things: Eliminate jobs or
inhibit job creation; are outdated, unnecessary or ineffective; impose
costs that exceed benefits; create a serious inconsistency or otherwise
interfere with regulatory reform initiatives and policies; or are
associated with Executive Orders or other Presidential directives that
have been rescinded or substantially modified. SBA has engaged in this
process and has identified the regulations in this rulemaking as
appropriate for removal in accordance with Executive Order 13777.
Section by Section Analysis
Section 124.516
The rule removes Sec. 124.516, which provides that a contract
dispute arising between an 8(a) contractor and the procuring activity
contracting officer will be decided by the procuring activity, and that
appeals may be taken by the 8(a) contractor without SBA involvement. As
previously noted, Sec. 124.512 already delegates 8(a) contract
administration functions, including contract dispute resolution
responsibilities, to procuring agencies. As such, Sec. 124.516 is
redundant and is no longer needed.
Section 124.1001
The rule amends Sec. 124.1001 to eliminate references to SBA's SDB
protest and appeal procedures as well as the SDB certification program,
as these provisions are now obsolete. SBA is also amending this section
to incorporate the substantive provisions of the SDB definition
currently set forth in Sec. 124.1002. As noted above, SDB status
remains relevant for Federal subcontracting programs.
Sections 124.1002 Through 124.1016
The rule removes Sec. Sec. 124.1002 through 124.1016, which set
forth SBA's SDB certification program, as well as SBA's SDB protest and
appeal procedures. These provisions are unnecessary because SBA no
longer administers an SDB certification program, nor does it process
SDB protests or appeals.
To provide more information to the public, the titles of these
rules to be removed are as follows: (1) Sec. 124.1002 What is a Small
Disadvantaged Business (SDB)?; (2) Sec. 124.1003 How does a firm
become certified as an SDB?; (3) Sec. 124.1004 What is a
misrepresentation of SDB status?; (4) Sec. 124.1005 How long does an
SDB certification last?; (5) Sec. 124.1006 Can SBA initiate a review
of the SDB status of a firm claiming to be an SDB?; (6) Sec. 124.1007
Who may protest the disadvantaged status of a concern?; (7) Sec.
124.1008 When will SBA not decide an SDB protest?; (8) Sec. 124.1009
Who decides disadvantaged status protests?; (9) Sec. 124.1010 What
procedures apply to disadvantaged status protests?; (10) Sec. 124.1011
What format, degree of specificity, and basis does SBA require to
consider an SDB protest?; (11) Sec. 124.1012 What will SBA do when it
receives an SDB protest?; (12) Sec. 124.1013 How does SBA make
disadvantaged status determinations in considering an SDB protest?;
(13) Sec. 124.1014 Appeals of disadvantaged status determinations.;
(14) Sec. 124.1015 What are the requirements for
[[Page 27292]]
representing SDB status, and what are the penalties for
misrepresentation?; and (15) Sec. 124.1016 What must a concern do in
order to be identified as an SDB in any Federal procurement database?.
Administrative Procedure Act--Direct Final Rule
SBA is publishing this rule as a direct final rule because SBA
views this action as an administrative action that relates solely to
expired SBA programs and is non-controversial. This rule will be
effective on the date shown in the DATES section unless SBA receives
any significant adverse comments on or before the deadline for comments
set forth in the DATES section. Significant adverse comments are
comments that provide strong justifications for why the rule should not
be adopted or for changing the rule. If SBA receives any significant
adverse comments, SBA will publish a notice in the Federal Register
withdrawing this rule before the effective date.
Compliance With Executive Orders 12866, 13771, 12988, and 13132, the
Paperwork Reduction Act (44 U.S.C., Ch. 35), and the Regulatory
Flexibility Act (5 U.S.C. 601-612)
Executive Order 12866
The Office of Management and Budget (OMB) has determined that this
rule does not constitute a significant regulatory action for purposes
of Executive Order 12866 and is not a major rule under the
Congressional Review Act, 5 U.S.C. 801, et seq.
Executive Order 13771
This direct final rule is an Executive Order 13771 deregulatory
action with an annualized net savings of $74,606 and a net present
value of $1,065,795, both in 2016 dollars.
This rule removes redundant and obsolete regulations, which will
save SDBs time reading irrelevant information. These calculations
assume 2 percent of the 125,616 self-certified SDBs read these
regulations per year (or approximately 2,500 SDBs) and that they would
save 30 minutes each from not reading them. This time is valued at
$75.57 per hour--the wage of an attorney according to 2018 Bureau of
Labor Statistics data adding 30 percent more for benefits. This
produces savings to the SBA community of $94,928 per year.
The cost savings also includes a savings to the government
workforce assuming that 2 percent of the 38,000 Federal contracting
officers per year (or about 760) will save 30 minutes from not reading
this removed information. This time is valued at a rate of $54.21 per
hour--assuming the average Federal contracting officer is a GS-12 step
1 (DC locality) adding 30 percent more benefits, for savings of
$20,600. This produces total savings per year of $115,528 in current
dollars.
In the first year, it is assumed that 5 percent of SDBs (about
6,280) and 5 percent of Federal contracting officers (1,900) would read
this Direct Final Rule, which is estimated to take 1 hour per SDB at
$75.57 per hour and $54.21 per Federal contracting officer, producing
cost in the first year of $577,639 ($474,640 for SDBs and $102,999 for
the Federal government). This cost is not expected to continue in
subsequent years.
Table 1 lays out the costs and savings of this rule over the first
2 years after publication, with the savings and costs in the second
year expected to continue into perpetuity. Table 2 presents the
annualized net savings in 2016 dollars.
Table 1--Schedule of Costs/(Savings) Over 2 Year Horizon, Current
Dollars
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Savings Costs
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Year 1.......................... 1,636 hours....... 8,181 hours.
($115,528)........ $577,639.
Year 2.......................... 1,636 hours....... 0 hours.
($115,528)........ $0.
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Table 2--Annualized Savings in Perpetuity with 7% Discount Rate, 2016
Dollars
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Estimate
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Annualized Savings...................................... $110,872
Annualized Costs........................................ ($36,267)
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Annualized Net Savings................................ $74,606
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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
This 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 levels of government, as specified in the Executive Order. As
such it does not warrant the preparation of a Federalism Assessment.
Paperwork Reduction Act (44 U.S.C., Ch. 35)
The SBA has determined that this final rule does not affect any
existing collection of information.
Regulatory Flexibility Act, 5 U.S.C. 601-612
When an agency issues a rule, the Regulatory Flexibility Act (RFA)
requires the agency to prepare a final regulatory flexibility analysis
(FRFA), which describes whether the rule will have a significant
economic impact on a substantial number of small entities. However,
Section 605 of the RFA allows an agency to certify a rule, in lieu of
preparing a FRFA, if the rulemaking is not expected to have a
significant economic impact on a substantial number of small entities.
There are approximately 125,000 self-certified SDBs in SBA's
Dynamic Small Business Search and all can be affected by this rule.
However, this rule removes regulations that are no longer necessary
because they are either redundant or obsolete. The annualized net
savings to SDBs is $63,877 in current dollars or less than a dollar per
SDB, as detailed in the Executive Order13771 discussion above.
Accordingly, the Administrator of the SBA hereby certifies that
this rule will not have a significant economic impact on a substantial
number of small entities.
List of Subjects in 13 CFR Part 124
Administrative practice and procedure, Government procurement,
Government property, Small businesses.
Accordingly, for the reasons stated in the preamble, SBA amends 13
CFR part 124 as follows:
PART 124--8(a) BUSINESS DEVELOPMENT/SMALL DISADVANTAGED BUSINESS
STATUS DETERMINATIONS
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1. The authority citation for part 124 is continues to read as follows:
Authority: 15 U.S.C. 634(b)(6), 636(j), 637(a), 637(d), 644 and
Pub. L. 99-661, Pub. L. 100-656, sec. 1207, Pub. L. 101-37, Pub. L.
101-574, section 8021, Pub. L. 108-87, and 42 U.S.C. 9815.
Sec. 124.516 [Removed and Reserved]
0
2. Remove and reserve Sec. 124.516.
0
3. Revise Sec. 124.1001 to read as follows:
[[Page 27293]]
Sec. 124.1001 What is a Small Disadvantaged Business?
(a) General. A Small Disadvantaged Business (SDB) for purposes of
any Federal subcontracting program is a concern that qualifies as small
under part 121 of this title for the size standard corresponding to the
six-digit North American Industry Classification System (NAICS) code
that is assigned by the contracting officer to the procurement at
issue, and that is owned and controlled by one or more socially and
economically disadvantaged individuals. Unless specifically stated
otherwise, the phrase ``socially and economically disadvantaged
individuals'' includes Indian tribes, ANCs, CDCs, and NHOs. 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.
(b) Reliance on 8(a) criteria. In determining whether a firm
qualifies as an SDB, the criteria of social and economic disadvantage
and other eligibility requirements established in subpart A of this
part apply, including the requirements of ownership and control and
disadvantaged status, unless otherwise provided in this subpart. All
current Participants in the 8(a) BD program qualify as SDBs.
Sec. Sec. 124.1002 through 124.1016 [Removed]
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4. Remove Sec. Sec. 124.1002 through 124.1016.
Jovita Carranza,
Administrator.
[FR Doc. 2020-08619 Filed 5-7-20; 8:45 am]
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