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Part III
Small Business Administration
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13 CFR Parts 121, 124, 125, et al.
Small Business Mentor Prote´ge´ Programs; Final Rule
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Federal Register / Vol. 81, No. 142 / Monday, July 25, 2016 / Rules and Regulations
SMALL BUSINESS ADMINISTRATION
13 CFR Parts 121, 124, 125, 126, 127,
and 134
RIN 3245–AG24
Small Business Mentor Prote´ge´
Programs
U.S. Small Business
Administration.
ACTION: Final rule.
AGENCY:
The U.S. Small Business
Administration (SBA or Agency) is
amending its regulations to implement
provisions of the Small Business Jobs
Act of 2010, and the National Defense
Authorization Act for Fiscal Year 2013.
Based on authorities provided in these
two statutes, the rule establishes a
Government-wide mentor-prote´ge´
program for all small business concerns,
consistent with SBA’s mentor-prote´ge´
program for Participants in SBA’s 8(a)
Business Development (BD) program.
The rule also makes minor changes to
the mentor-prote´ge´ provisions for the
8(a) BD program in order to make the
mentor-prote´ge´ rules for each of the
programs as consistent as possible. The
rule also amends the current joint
venture provisions to clarify the
conditions for creating and operating
joint venture partnerships, including the
effect of such partnerships on any
mentor-prote´ge´ relationships. In
addition, the rule makes several
additional changes to current size, 8(a)
Office of Hearings and Appeals and
HUBZone regulations, concerning
among other things, ownership and
control, changes in primary industry,
standards of review and interested party
status for some appeals. Finally, SBA
notes that the title of this rule has been
changed.
DATES: This rule is effective August 24,
2016.
FOR FURTHER INFORMATION CONTACT:
Brenda Fernandez, U.S. Small Business
Administration, Office of Government
Contracting, 409 3rd Street SW., 8th
Floor, Washington, DC 20416; (202)
205–7337; [email protected].
SUPPLEMENTARY INFORMATION: This rule
initially appeared in the Regulatory
Agenda of Fall 2010 with the title
‘‘Small Business Jobs Act: Small
Business Mentor-Prote´ge´ Programs.’’
SBA carried this rule title until the
Regulatory Agenda of Spring 2013 when
the reference to the Jobs Act was taken
out, and the title changed to ‘‘Small
Business Mentor-Prote´ge´ Programs.’’
This change reflected the statutory
amendments in section 1641 of NDAA
2013. However, when the proposed rule
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SUMMARY:
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annually to SBA the participants in its
mentor-prote´ge´ program, the assistance
provided to small businesses through
the program, and the progress of prote´ge´
firms to compete for Federal prime
contracts and subcontracts.
On February 5, 2015, SBA published
in the Federal Register a comprehensive
proposal to implement a new
Government-wide mentor-prote´ge´
program for all small businesses. 80 FR
6618. SBA decided to implement one
new small business mentor-prote´ge´
program instead of four new mentorprote´ge´ programs (one for small
businesses, one for SDVO small
businesses, one for WOSBs and one for
HUBZone small businesses) since the
other three types of small businesses
I. Background
(SDVO, HUBZone and women-owned)
On September 27, 2010, the President would be necessarily included within
signed into law the Small Business Jobs any mentor-prote´ge´ program targeting
Act of 2010 (Jobs Act), Public Law 111– all small business concerns. SBA did
240, 124 Stat. 2504, which was designed not eliminate the 8(a) BD mentorto protect the interests of small
prote´ge´ program. Thus, the intent was to
businesses and increase opportunities in propose two separate mentor-prote´ge´
the Federal marketplace. With the
programs, one for 8(a) BD Participants
enactment of the Jobs Act, Congress
and one for all small businesses
recognized that mentor-prote´ge´
(including 8(a) Participants if they
programs serve an important business
choose to create a small business
development function for small
mentor-prote´ge´ relationship instead of a
business and authorized SBA to
mentor-prote´ge´ relationship under the
establish separate mentor-prote´ge´
8(a) BD program). The small business
programs for the Service-Disabled
mentor-prote´ge´ program was drafted to
Veteran-Owned Small Business Concern be as similar to the 8(a) mentor-prote´ge´
(SDVO SBC) Program, the HUBZone
program as possible.
Program, and the Women-Owned Small
The proposed rule called for a 60-day
Business (WOSB) Program, each
comment period, with comments
modeled on SBA’s existing mentorrequired to be made to SBA by April 6,
prote´ge´ program available to 8(a)
2015. The overriding comment SBA
Business Development (BD Program
received in the first few weeks after the
Participants. See section 1347(b)(3) of
publication was to extend the comment
the Jobs Act.
period. In response to these comments,
On January 2, 2013, the President
SBA published a notice in the Federal
signed into law the National Defense
Register on April 7, 2015, extending the
Authorization Act for Fiscal Year 2013
comment period an additional 30 days
(NDAA 2013), Public Law 112–239, 126 to May 6, 2015. 80 FR 18556. In
Stat. 1632. Section 1641 of the NDAA
addition to providing a 90-day comment
2013 authorized SBA to establish a
period, SBA also conducted a series of
mentor-prote´ge´ program for all small
tribal consultations pursuant to
business concerns. This section further
Executive Order 13175, Tribal
provides that a small business mentorConsultations. SBA conducted three inprote´ge´ program must be identical to the person tribal consultations (in
8(a) BD mentor-prote´ge´ program, except Washington, DC on February 26, 2015,
that SBA may modify the program to the in Tulsa, Oklahoma on April 21, 2015,
extent necessary, given the types of
and in Anchorage, Alaska on April 23,
small business concerns to be included
2015) and two telephonic tribal
as prote´ge´s. Section 1641 also provides
consultations (one on April 7, 2015, and
that a Federal department or agency
a Hawaii/Native Hawaiian Organization
could not carry out its own agency
specific one on April 8, 2015).
Currently, the mentor-prote´ge´
specific mentor-prote´ge´ program for
program available to firms participating
small businesses unless the head of the
in the 8(a) BD program is used as a
department or agency submitted a plan
for such a program to SBA and received business development tool in which
the SBA Administrator’s approval of the mentors provide diverse types of
business assistance to eligible 8(a) BD
plan. Finally, section 1641 requires the
prote´ge´s. This assistance may include,
head of each Federal department or
among other things, technical and/or
agency carrying out an agency-specific
management assistance; financial
mentor-prote´ge´ program to report
was published, the title had been
changed to: ‘‘Small Business Mentor
Prote´ge´ Program; Small Business Size
Regulations; Government Contracting
Programs; 8(a) Business Development/
Small Disadvantaged Business Status
Determinations; HUBZone Program;
Women-Owned Small Business Federal
Contract Program; Rules of Procedure
Governing Cases Before the Office of
Hearings and Appeals.’’ In drafting this
final rule, SBA concluded that the
simpler current title (‘‘Small Business
Mentor Prote´ge´ Programs’’) is easier for
the public to understand and would be
consistent with the title that has been
publicly reported in the Regulatory
Agenda since 2013.
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assistance in the form of equity
investments and/or loans; subcontracts;
and/or assistance in performing Federal
prime contracts through joint venture
arrangements. The explicit purpose of
the 8(a) BD mentor-prote´ge´ relationship
is to enhance the capabilities of prote´ge´s
and to improve their ability to
successfully compete for both
government and commercial contracts.
Similarly, the mentor-prote´ge´ program
for all small business concerns is
designed to require approved mentors to
provide assistance to prote´ge´ firms in
order to enhance the capabilities of
prote´ge´s, to assist prote´ge´s with meeting
their business goals, and to improve the
ability of prote´ge´s to compete for
contracts.
One commenter opposed expanding
the mentor-prote´ge´ program beyond the
8(a) BD program. The commenter
believed that it has not been established
that the 8(a) mentor-prote´ge´ program is
bestowing a substantial benefit on 8(a)
Participants, and, therefore, SBA should
perform additional research and
analysis before expanding the program.
SBA disagrees. In the current 8(a) BD
mentor-prote´ge´ program, in order for
any mentor-prote´ge´ relationship to
continue, the 8(a) prote´ge´ firm must
demonstrate annually what benefits it
has derived from the mentor-prote´ge´
relationship. Where the benefits
provided to the prote´ge´ firm are
minimal or where it appears that the
relationship has been used primarily to
permit a non–8(a) (oftentimes, large)
mentor to benefit from contracts with its
approved prote´ge´, through one or more
joint ventures, that it would otherwise
not be eligible for, SBA will terminate
the mentor-prote´ge´ relationship. The
proposed rule also provided that SBA
may terminate the mentor-prote´ge´
agreement (MPA) where it determines
that the parties are not complying with
any term or condition of the MPA. This
rule requires similar reporting of
benefits for non–8(a) prote´ge´ firms and
similar consequences where the benefits
provided to the prote´ge´ firm do not
adequately justify the mentor-prote´ge´
relationship. One commenter requested
clarification as to when and how SBA
would cancel a MPA. SBA’s analysis as
to whether a prote´ge´ firm is adequately
benefitting from the relationship or
whether non-compliance with one or
more specific terms or conditions of the
MPA should warrant termination of the
agreement is a fact specific
determination to be made based on the
totality of the circumstances. SBA
would not terminate a particular MPA
where there are de minimus or
inadvertent violations of the agreement.
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In addition, it is not SBA’s intent to
terminate a particular MPA without
considering the views of the prote´ge´
firm. However, the mere fact that a
prote´ge´ wants the mentor-prote´ge´
relationship to continue will not be
dispositive if SBA believes that
termination is justified.
Conversely, SBA received a
significant number of comments
supporting a small business mentorprote´ge´ program. These commenters
believed that a small business mentorprote´ge´ program would enable firms
that are not in the 8(a) BD program to
receive critical business development
assistance that would otherwise not be
available to them. Many of these
commenters expressed support for the
opportunity to gain meaningful
expertise that would help them to
independently perform more complex
and higher value contracts in the future.
This rule implements a mentorprote´ge´ program similar to the 8(a) BD
mentor-prote´ge´ program for all small
business concerns. The rule adds this
program to a new § 125.9 of SBA’s
regulations. SBA proposed one program
for all small businesses because SBA
believed it would be easier for the small
business and acquisition communities
to use and understand. However, SBA
specifically requested comments as to
whether SBA should finalize one small
business mentor-prote´ge´ program, as
proposed, or, rather, five separate
mentor-prote´ge´ programs for the various
small business entities. Most
commenters supported having one new
small business mentor-prote´ge´ program
instead of four new mentor-prote´ge´
programs (one for SDVO small
businesses, one for HUBZone small
businesses, one for WOSBs, and one for
small businesses not falling into one of
the other categories). They agreed that it
would be less confusing to deal with
one new program, rather than four new
programs, and that it was not necessary
to have four separate mentor-prote´ge´
programs since the three subcategories
of small business are necessarily
included within the overall category of
small business. Many of the commenters
were concerned, however, that changes
could be made to the current 8(a) BD
mentor-prote´ge´ program. Specifically,
commenters were concerned that SBA
might want to eliminate the 8(a) BD
mentor-prote´ge´ program as a separate
program and instead roll it into the
small business mentor-prote´ge´ program.
SBA has considered those concerns and
has decided to keep the 8(a) BD mentorprote´ge´ program as a separate program.
That program has independently
operated successfully for a number of
years and SBA believes that it serves
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important business development
purposes that should continue to be
coordinated through SBA’s Office of
Business Development, rather than
through a separate mentor-prote´ge´ office
managed elsewhere within the Agency.
As such, this final rule makes no
changes as to how MPAs are processed
for the 8(a) BD program.
In addition, the final rule revises the
joint venture provisions contained in
§ 125.15(b) (for SDVO SBCs, and which
are now contained in § 125.18(b)),
§ 126.616 (for HUBZone SBCs), and
§ 127.506 (for WOSB and Economically
Disadvantaged Women-Owned Small
Business (EDWOSB) concerns) to more
fully align those requirements to the
requirements of the 8(a) BD program.
The rule also adds a new § 125.8 to
specify requirements for joint ventures
between small business prote´ge´ firms
and their mentors. The rule also makes
several additional changes to current
size, 8(a) BD and HUBZone regulations
that are needed to clarify certain
provisions or correct interpretations of
the regulations that were inconsistent
with SBA’s intent. These changes, the
comments to the proposed rule, and
SBA’s response to the comments are set
forth more fully below.
In response to the 90-day comment
period, SBA received 113 comments,
with most of the commenters
commenting on multiple proposed
provisions. With the exception of
comments that did not set forth any
rationale or make suggestions, SBA
discusses and responds fully to all the
comments below.
Summary of Comments and SBA’s
Response
Definition of Joint Venture (13 CFR
121.103(h))
SBA’s size regulations recognize that
joint ventures may be formal or
informal. The proposed rule amended
§ 121.103(h) to clarify that every joint
venture, whether a separate legal entity
or an ‘‘informal’’ arrangement that exists
between two (or more) parties, must be
in writing. SBA never meant that an
informal joint venture arrangement
could exist without a formal written
document setting forth the
responsibilities of all parties to the joint
venture. SBA merely intended to
recognize that a joint venture need not
be established as a limited liability
company or other formal separate legal
entity.
A few comments opposed that
provision of the proposed rule that
identified informal joint ventures as
partnerships, believing that entering
into a formal or informal partnership
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often comes with certain obligations
that may not be intended under a joint
venture. For example, partners generally
have fiduciary duties to each other, bind
one another with their actions, and are
jointly and severally liable for the debts
of the business. One commenter
recommended that SBA should replace
the phrase ‘‘formal or informal
partnership’’ with the words
‘‘contractual affiliation.’’ SBA does not
agree that this recommended change
would be beneficial. First, SBA believes
that the term ‘‘contractual affiliation’’ is
not precise and would cause confusion.
Moreover, SBA continues to believe that
state law would recognize an ‘‘informal’’
joint venture with a written document
setting forth the responsibilities of the
joint venture partners as some sort of
partnership. As such, this rule merely
identifies the consequences of forming
an informal joint venture and should
assist firms in determining what type of
joint venture meets the parties’ needs in
each case. If the joint venture partners
do not want the associated
consequences of being considered a
partnership, then it might be beneficial
for the joint venture to be formed as a
limited liability company. Therefore,
this final rule adopts the proposed
language and specifies that a joint
venture may be a formal or informal
partnership or exist as a separate limited
liability company or other separate legal
entity. However, regardless of form, the
joint venture must be reduced to a
written agreement.
In addition, the proposed rule
specified that if a joint venture exists as
a formal separate legal entity, it may not
be populated with individuals intended
to perform contracts awarded to the
joint venture. This is a change from the
current regulation that allows a separate
legal entity joint venture to be
unpopulated, to be populated with
administrative personnel only, or to be
populated with its own separate
employees that are intended to perform
contracts awarded to the joint venture.
SBA explained that it is concerned that
allowing populated joint ventures
between a mentor and prote´ge´ would
not ensure that the prote´ge´ firm and its
employees benefit by developing new
expertise, experience, and past
performance. The separate joint venture
entity would gain those things. If the
individuals hired by the joint venture to
perform the work under the contract did
not come from the prote´ge´ firm, there is
no guarantee that they would ultimately
end up working for the prote´ge´ firm
after the contract is completed. In such
a case, the prote´ge´ firm would have
gained nothing out of that contract. The
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company itself did not perform work
under the contract and the individual
employees who performed work did not
at any point work for the prote´ge´ firm.
SBA received comments on both sides
of this issue. Several commenters
supported the proposed change, noting
that forming a separate legal entity is an
undue burden, and questioned whether
the firm admitted to the 8(a) program
(the prote´ge´ small business) would gain
any direct benefits if all the work was
performed by a separate legal entity. In
addition, several of the commenters
appreciated SBA’s attempt to simplify
these regulatory requirements. Several
other commenters opposed the
elimination of populated joint ventures.
Many of these commenters believed that
populated joint venture companies are
an important mechanism for an entityowned firm to remain competitive. They
argued that this method of business
organization facilitates the development
of the disadvantaged small business
because it makes the company more
competitive in the marketplace.
Specifically, these commenters pointed
out that a populated joint venture has its
own lower indirect costs, which, in
turn, lowers the cost to the Government.
Although SBA understands the benefit
of using lower indirect costs from a
populated joint venture, SBA continues
to believe that a small prote´ge´ firm does
not adequately enhance its expertise or
ability to perform larger and more
complex contracts on its own in the
future when all the work through a joint
venture is performed by a populated
separate legal entity. A joint venture
between a prote´ge´ firm and its mentor
is intended to promote the business
development of the prote´ge´ firm. SBA
questions how that can be accomplished
where the prote´ge´ itself performs no
work on a particular joint venture
contract, and the employees who do the
work for the separate legal entity may or
may not have any present or future
connection to the prote´ge´ firm. In the
8(a) BD context, the purpose is to
promote the business development of
the firm that was admitted to the 8(a)
BD program, the prote´ge´ firm, not a
separate legal entity that is not itself a
certified 8(a) Participant. In addition,
populated joint ventures create unique
problems in the HUBZone program.
HUBZone’s unique requirements with
regard to employees, principal office,
and residency make maintaining
HUBZone status while participating in
populated joint ventures difficult. In
determining whether an individual
should be determined an employee, the
HUBZone program utilizes the totality
of the circumstances approach and
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oftentimes a firm will have some
individuals not on its payroll
considered an employee for HUBZone
eligibility purposes. Populated joint
ventures present a problem because it
can be difficult for firms to determine
whom should be counted as an
employee at any given time.
SBA continues to believe that the
benefits received by a prote´ge´ from a
joint venture are more readily
identifiable where the work done on
behalf of the joint venture is performed
by the prote´ge´ and the mentor
separately. In such a case, it is much
easier to determine that the prote´ge´ firm
performed at least 40% of all work done
by the joint venture, performed more
than merely ministerial or
administrative work, and otherwise
gained experience that could be used to
perform a future contract
independently. Thus, this rule adopts
the proposed language to allow a
separate legal entity joint venture to
have its own separate employees to
perform administrative functions, but
not to have its own separate employees
to perform contracts awarded to the
joint venture.
SBA also proposed to require joint
venture partners to allow SBA’s
authorized representatives, including
representatives authorized by the SBA
Inspector General, to access its files and
inspect and copy records and
documents when necessary. Several
commenters requested SBA to clarify
that the access should be limited to
documents and records relating to the
joint venture, not to unrelated
documents of the joint venture partners
themselves. SBA agrees and has
amended §§ 124.513(i), 125.8(h),
125.18(b)(8), 126.616(h), and 127.506(i)
to clarify that SBA’s access would be
related to files, records and documents
of the joint venture. A few commenters
also recommended that SBA should
provide reasonable notice before it
sought access to such records. SBA
disagrees. SBA’s Office of Inspector
General must be able to have unlimited
access when investigating potential
violations of SBA’s regulations. In a
potential fraud case, providing notice
could cause a destruction of records or
provide time for a party to create the
appearance of complying with
applicable requirements. As such, this
final rule does not require SBA to
provide reasonable notice before seeking
access to joint venture files, records and
documents. SBA notes, however, that in
its normal oversight responsibilities not
related to any investigation of alleged
wrongdoing, SBA would generally
provide reasonable notice.
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Place of Performance
In the case of Latvian Connection
General Trading and Construction LLC,
B–408633, Sept. 18, 2013, 2013 CPD ¶
224, GAO ruled that § 19.000(b) of the
Federal Acquisition Regulation (FAR)
limits the application of FAR part 19
(dealing with SBA’s small business
programs) to acquisitions conducted in
the United States (and its outlying
areas). The basis for GAO’s ruling was
that SBA’s regulations were silent on
this issue and therefore, the more
specific FAR regulation controlled.
Heeding this advice, SBA promulgated
regulations to address this issue.
Specifically, SBA made wholesale
changes to 13 CFR 125.2 on October 2,
2013. As a result, SBA issued a final
rule recognizing that small business
contracting could be used ‘‘regardless of
the place of performance.’’ 13 CFR
125.2(a) and (c).
The February 5, 2015 proposed rule
proposed to add similar language to
§§ 124.501, 125.22(b), 126.600, and
127.500, thus specifically authorizing
contracting in the 8(a) BD, SDVO,
HUBZone and WOSB programs
regardless of the place of performance,
where appropriate. Although SBA
believes that the authority to use those
programs in appropriate circumstances
overseas already exists, the proposed
rule merely sought to make that
authority clear. Nothing in the Small
Business Act would prohibit the use of
those programs in appropriate
circumstances overseas. SBA received a
few comments on this issue. The
commenters supported clarification of
the current authority. The regulatory
text merely highlights contracting
officers’ discretionary authority to use
these programs where appropriate
regardless of the place of performance.
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HUBZone Joint Ventures (13 CFR
126.616)
The HUBZone program is a
community growth and development
program in which businesses are
incentivized to establish principal office
locations in, and employ individuals
from, areas of chronically high
unemployment and/or low income in
order to stimulate economic
development. To further this purpose,
the HUBZone program regulations
permitted a joint venture only between
a HUBZone SBC and another HUBZone
SBC. In authorizing a mentor-prote´ge´
relationship for HUBZone qualified
SBCs, the proposed rule provided
language to allow joint ventures for
HUBZone contracts between a
HUBZone prote´ge´ firm and its mentor,
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regardless of whether the mentor was
itself a HUBZone qualified SBC.
SBA received a significant number of
comments on this provision. The
commenters overwhelmingly supported
allowing a HUBZone qualified SBC that
obtained an SBA-approved small
business mentor-prote´ge´ relationship to
be able to joint venture with its mentor
on all contracts for which the prote´ge´
individually qualified, including
HUBZone contracts. The commenters
felt that such a provision would allow
prote´ge´s to perform contracts that they
otherwise could not have obtained and
truly provide them with expertise and
past performance that would help them
to individually perform additional
contracts in the future.
The commenters expressed that they
felt that the purposes of the HUBZone
program would be appropriately served
by allowing non-HUBZone firms to act
as mentors and joint venture with
prote´ge´ HUBZone firms because the
HUBZone firm itself would be
developed and would necessarily be
required to hire additional HUBZone
employees if it sought to remain eligible
for future HUBZone contracts.
Joint Venture Certifications and
Performance of Work Reports (13 CFR
125.8, 125.18, 126.616, 127.506)
The proposed rule required all
partners to a joint venture agreement
that perform a SDVO, HUBZone, WOSB,
or small business set-aside contract to
certify to the contracting officer and
SBA prior to performing any such
contract that they will perform the
contract in compliance with the joint
venture regulations and with the joint
venture agreement. In addition, the
parties to the joint venture are required
to report to the contracting officer and
to SBA how they are meeting or have
met the applicable performance of work
requirements for each SDVO, HUBZone,
WOSB or small business set-aside
contract they perform as a joint venture.
SBA received comments both
supporting and opposing this approach.
One commenter suggested use of an
honor system for the reporting. SBA did
not view this as a viable alternative.
Others believed that certifications in the
System for Award Management (SAM)
should be sufficient. Other commenters
supported the proposed approach as a
reasonable way to ensure compliance.
SBA believes that affirmative reporting
by the joint venture parties to both the
contracting officer and SBA will provide
the necessary information to track the
use and performance of joint ventures.
SBA also believes that the certification
and reporting requirements
implemented in this rule will assist the
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Government in its ability to deter
wrongdoing. Regular reporting and
monitoring of the limitations on
subcontracting requirements will allow
all parties to know where the joint
venture stands with respect to those
requirements and what must be done to
come into compliance in the future if
the joint venture’s performance is below
the required amount at any point in
time. A contracting officer will be able
to more closely oversee the performance
of a contract where the reports show
inadequate performance to date.
As such, the final rule adopts the
proposed language requiring joint
venture partners to annually report
compliance to both the contracting
officer and SBA.
Tracking Joint Venture Awards
The proposed rule announced that
SBA was considering various methods
of tracking awards to the joint ventures
permitted by SBA’s regulations. The
possible approaches included:
Requiring all joint ventures permitted
by the regulations to include in their
names ‘‘small business joint venture,’’
and, if a mentor-prote´ge´ joint venture, to
include in their names ‘‘mentor-prote´ge´
small business joint venture;’’ requiring
contracting officers to identify awards as
going to small business joint ventures or
to mentor-prote´ge´ small business joint
ventures; requiring SBCs to amend their
SAM entries to specify that they have
formed a joint venture; requiring each
joint venture to get a separate DUNS
number; or a combination of all of these
actions. SBA sought to ensure that
governmental agencies and members of
the public could track joint venture
awards, which would promote
transparency and accountability. SBA
specifically asked for comments on how
best to track awards to joint ventures.
SBA believes a tracking approach will
deter fraudulent or improper conduct,
and promote compliance with SBA’s
regulations.
SBA received numerous comments on
these proposals both in support and in
opposition to the alternate approaches
contemplated. Several commenters
opposed the naming requirement,
expressing concern about the
administrative burden on the
participating firms to change names,
establish duns numbers and meet other
compliance requirements in order to
meet this requirement. Other
commenters recommended that the
cleanest way to track awards to joint
ventures would in fact be to require a
joint venture to form a new entity in
SAM and identity itself to be a joint
venture in SAM. Several commenters
suggested the SAM system adopt a
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certification for joint ventures, or
alternatively contracting officers
designate in SAM that an award was
made to a joint venture.
In response to the comments, SBA
first notes that any SAM certification
process is beyond SBA’s authority and
outside the scope of this rule. SBA also
notes that current participants in the
8(a) BD program annually report to SBA
the joint venture awards they have
received and how they are meeting the
limitations on subcontracting
requirements. To track small business
joint venture awards, SBA could require
similar reporting. However, SBA does
not seek to impose any unnecessary
burdens on small business. With that in
mind, SBA believes that additional
reporting is not necessary, but continues
to believe that some sort of joint venture
identification is required. Thus, this
final rule requires joint ventures to be
separately identified in SAM so that
awards to joint ventures can be properly
accounted for. A joint venture must be
identified as a joint venture in SAM,
with a separate DUNS number and
CAGE number than those of the
individual parties to the joint venture.
In addition, the Entity Type in SAM
must be identified as a joint venture,
and the individual joint venture
partners should also be listed.
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Applications for SBA’s Small Business
Mentor-Prote´ge´ Program (13 CFR 125.9)
As noted above, SBA proposed
implementing one universal small
business mentor-prote´ge´ program
instead of a separate mentor-prote´ge´
program for each type of small business
(i.e., HUBZone, SDVO, WOSB program,
and small business). In addition, the
proposed rule indicated that SBA
intended to maintain a separate mentorprote´ge´ program for eligible 8(a) BD
Program Participants. The proposed rule
provided that a small business seeking
a mentor-prote´ge´ relationship would be
required to submit an application to
SBA and that SBA’s Director of
Government Contracting (D/GC) would
review and either approve or decline
small business MPAs. SBA’s Associate
Administrator for BD (AA/BD) would
continue to review and approve or
decline mentor-prote´ge´ relationships in
the 8(a) BD program. Under the
proposed language, an eligible 8(a) BD
Program Participant could choose to
seek SBA’s approval of a mentor-prote´ge´
relationship through the 8(a) BD
program, or could seek a small business
mentor-prote´ge´ relationship through
SBA’s mentor-prote´ge´ program for all
small businesses. SBA announced it was
considering having one office review
and either approve or decline all MPAs
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to ensure consistency in the process,
and specifically sought comments as to
whether that approach should be
implemented. Finally, the
supplementary information to the
proposed rule provided that SBA may
institute certain ‘‘open’’ and ‘‘closed’’
periods for the receipt of mentor-prote´ge´
applications if the number of firms
seeking SBA to approve their mentorprote´ge´ relationships becomes
unwieldy. In such a case, SBA would
then accept mentor-prote´ge´ applications
only in ‘‘open’’ periods.
SBA received a significant number of
comments regarding applications for
mentor-prote´ge´ relationships.
Commenters applauded SBA’s proposal
to keep the 8(a) BD mentor-prote´ge´
program separate from the small
business mentor-prote´ge´ program.
Commenters also supported establishing
a separate office to process applications
for the small business mentor-prote´ge´
program. The commenters were
concerned, however, about the
administrative burden the additional
small business mentor-prote´ge´ program
will have on SBA’s resources. They felt
that the volume of firms seeking mentorprote´ge´ relationships could excessively
delay SBA’s processing of applications.
Commenters also opposed the proposal
to have open enrollment periods to
receive small business mentor-prote´ge´
applications. They thought that such a
process would cause significant delays
in allowing firms to benefit from the
mentor-prote´ge´ program. They also felt
that open enrollment periods could
cause firms to miss out on
developmental procurement
opportunities if they had to wait several
months before they could apply to
participate in the program. If there were
open enrollment periods, then
commenters believed that firms should
be processed on a first come first served
basis, and different types of small
businesses should not be given priority
or processed first over other types of
small businesses.
SBA understands the concerns raised
by the commenters. It is not SBA’s
intent to delay participation in the small
business mentor-prote´ge´ program. In
order to reduce the processing time for
a small business mentor-prote´ge´
application, SBA considered changing
final approval from the D/GC to six
senior SBA district directors. SBA
thought that six decision makers instead
of one might speed up the processing
time for applications and eliminate the
need for open enrollment periods.
However, such a structure could also
cause inconsistent results and could
require more overall resources (by
requiring additional staff in six different
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locations) than simply providing
adequate staff at one location. SBA
recognizes that the D/GC is responsible
for many other functions, and
understands several commenters’
concerns that mentor-prote´ge´
applications might not be the highest
priority of that office. Therefore, SBA
intends to establish a separate unit
within the Office of Business
Development whose sole function
would be to process mentor-prote´ge´
applications and review the MPAs and
the assistance provided under them
once approved. This final rule provides
that this new unit will process and
make determinations with respect to all
small business MPAs, with the ultimate
decision to be made by the AA/BD or
his/her designee. SBA believes that the
efficiencies gained by having a
dedicated staff for the small business
mentor-prote´ge´ program will allow SBA
to timely process applications for
mentor-prote´ge´ status, and that the need
for open and closed enrollment periods
will be reduced. Of course, it is still
possible that the number of applications
could overwhelm the dedicated small
business mentor-prote´ge´ unit. If that is
the case, open enrollment periods could
still be a possibility. Several
commenters suggested that SBA may
have an enormous volume of
applications, and others suggested
otherwise. SBA believes that additional
information is needed before a decision
to control the acceptance of applications
is necessary. If the need arises, SBA will
provide advance notice to allow
potential applicants the opportunity to
properly plan.
Mentors (13 CFR 124.520 and 125.9)
The proposed rule permitted any forprofit business concern that
demonstrates a commitment and the
ability to assist small business concerns
to be approved to act as a mentor and
receive the benefits of the mentorprote´ge´ relationship. SBA also proposed
to limit mentors to for-profit business
entities based on the language contained
in the NDAA 2013. Section 1641 of the
NDAA 2013 added section 45(d)(1) of
the Small Business Act, 15 U.S.C.
657r(d)(1), which defines the term
mentor to be ‘‘a for-profit business
concern of any size.’’ In order to make
the 8(a) BD mentor-prote´ge´ program
consistent with the small business
mentor-prote´ge´ program, SBA proposed
that mentors in the 8(a) BD mentorprote´ge´ program must be for profit
businesses as well. This was a change
for the 8(a) BD program, which
previously allowed non-profit entities to
be mentors. SBA felt that the change to
the 8(a) BD program made sense because
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Congress intended the new mentorprote´ge´ program for small businesses to
be as similar to the 8(a) BD mentorprote´ge´ program as possible.
A small number of commenters
disagreed with having a small business
mentor-prote´ge´ program at all, and
argued that the statutory authorities
were discretionary and did not require
SBA to implement additional small
business mentor-prote´ge´ programs. A
few of these commenters also felt that if
there were such a program, the mentors
should be limited to other small
businesses. They expressed the view
that individual small businesses could
be harmed competing against joint
ventures in which a large business
mentor was a partner. Although SBA
understands that the small business
mentor-prote´ge´ programs authorized by
the Jobs Act and the NDAA 2013 are
discretionary, SBA believes that they
will serve an important developmental
function that will enable many small
businesses to grow to be able to
independently perform procurements
that they otherwise would not have
been able to perform. In addition, the
vast majority of commenters supported
a small business mentor-prote´ge´
program and many of those comments
believed that it would be critical in
helping them to advance and be able to
perform larger and more complex
contracts on their own. SBA agrees with
the majority of commenters on this issue
and this final rule implements a small
business mentor-prote´ge´ program.
Because the language of section 45(d)(1)
of the Small Business Act, 15 U.S.C.
657r(d)(1), specifies a mentor in the
small business mentor-prote´ge´ program
to be ‘‘a for-profit business concern of
any size’’ and section 45(a)(2) of the
Small Business Act, 15 U.S.C.
657r(a)(2), requires the mentor-prote´ge´
program for small businesses to be
‘‘identical to the [8(a) BD] mentorprote´ge´ program . . . as in effect on the
date of enactment of this section . . .,’’
which authorized large business
mentors, this final rule authorizes only
other than small businesses that are
organized for profit to be mentors.
Specifically, the final rule authorizes
any ‘‘concern,’’ regardless of size, to be
a mentor, and the term ‘‘concern’’ has
historically been defined in SBA’s size
regulations to mean a business entity
organized for profit.
The proposed rule also required a
firm seeking to be a mentor to
demonstrate that it ‘‘possesses a good
financial condition.’’ Several
commenters urged SBA to clarify what
it means to possess good financial
condition. In addition, during the tribal
consultations, several individuals spoke
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of situations where SBA denied a large
multi-national firm from being a mentor
because one or more financial
documents indicated a loss. These
individuals believed SBA did not take
the proper approach when considering
whether a business concern should be a
mentor. They stressed that SBA should
look only at whether the proposed
mentor can deliver what it has said it
will bring to the prote´ge´. They believed
that anything beyond that was not
necessary. SBA agrees that the ‘‘good
financial condition’’ requirement has
caused some confusion. SBA believes
that the key issue is whether a proposed
mentor can meet its obligations under
its MPA. If a proposed mentor can fulfill
those obligations and has the financial
wherewithal to provide all of the
business development assistance to the
prote´ge´ firm as described in its MPA,
SBA should not otherwise care about
the proposed mentor’s financial
condition. SBA wants to ensure that the
prote´ge´ firm receives needed business
development assistance through the
mentor-prote´ge´ relationship. If that can
be demonstrated, SBA will be satisfied
with the arrangement. As such, this
final rule changes the requirement that
a mentor have good financial condition
to one requiring that the mentor must
demonstrate that it can fulfill its
obligations under the MPA.
In addition, the proposed rule
provided that a mentor participating in
any SBA-approved mentor-prote´ge´
program would generally have no more
than one prote´ge´ at a time. It also
provided that SBA could authorize a
concern to mentor more than one
prote´ge´ at a time where it can
demonstrate that the additional mentorprote´ge´ relationship would not
adversely affect the development of
either prote´ge´ firm (e.g., the second firm
may not be a competitor of the first
firm). The rule also proposed, however,
that no firm could be a mentor of more
than three prote´ge´s in the aggregate at
one time under either of the mentorprote´ge´ programs authorized by
§ 124.520 or § 125.9. A mentor could
choose to have: Up to three prote´ge´s in
the 8(a) BD program; or up to three
prote´ge´s in the small business program;
or one or more prote´ge´s in one program
and one or more in another program, but
no more than three prote´ge´s in the
aggregate. SBA received comments on
both sides of this issue. A few
commenters believed that all SBA
should care about is whether a mentor
can adequately provide needed business
development assistance to a proposed
prote´ge´. If they could, these commenters
believed that a specific firm could be a
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48563
mentor for more than three prote´ge´
firms. They argued that some of the best
potential mentors could be large firms
that were already mentoring other small
businesses, and by limiting the number
of prote´ge´s that a mentor could have
could deprive a particular firm of a
mentor that could be an ideal partner.
Conversely, several other commenters
agreed with SBA that allowing one firm
to mentor an unlimited number of
prote´ge´ firms could allow a large
business to unduly benefit from
contracts that are intended to primarily
benefit small business. One commenter
believed that allowing three prote´ge´s at
the same time for one mentor was too
much, and recommended restricting it
to two prote´ge´ firms at one time. SBA
continues to believe that there must be
a limit on the number of firms that one
business, particularly one that is other
than small, can mentor. Although SBA
believes that the small business mentorprote´ge´ program will certainly afford
business development opportunities to
many small businesses, SBA remains
concerned about large businesses
benefitting disproportionately. If one
firm could be a mentor for an unlimited
number (or even a larger limited
number) of prote´ge´s, that firm would
receive benefits from the mentor-prote´ge´
program through joint ventures and
possible stock ownership far beyond the
benefits to be derived by any individual
prote´ge´. In addition, the 8(a) BD
program in effect at the time that the
Jobs Act and the NDAA 2013, also
limited mentors to having no more than
three prote´ge´ firms. Since those
authorities permitted SBA to implement
a small business mentor-prote´ge´
program as similar as possible to the
8(a) BD mentor-prote´ge´ program, it
makes sense that SBA should limit any
mentor to a total of three prote´ge´ firms.
Therefore, this final rule adopts the
language of the proposed rule, which
permits any mentor to have up to a total
of three prote´ge´ firms at one time. One
commenter requested that SBA clarify
that a mentor can have no more than
three prote´ge´ firms at one time, not
three firms in the mentor’s entire
existence. SBA believes that is
adequately spelled out in the regulatory
text and does not further clarify that
provision in this final rule.
Finally, the proposed rule provided
that a prote´ge´ in the small business
mentor-prote´ge´ program may not
become a mentor and retain its prote´ge´
status. That proposal was patterned off
the 8(a) BD mentor-prote´ge´ program.
SBA received several comments
opposing this proposal. The
commenters felt that firms that have
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themselves been prote´ge´s may be in the
best position to act as mentors. In
addition, they argued that just because
a firm can act as a mentor to smaller or
less experienced firms does not mean
that they too don’t need help getting to
the next level. They did not believe that
it would make sense to require a current
prote´ge´ to terminate the MPA with its
mentor before it will be approved as a
mentor to another small business
concern. The commenters believed that
in both the 8(a) BD and small business
mentor-prote´ge´ programs a firm should
be permitted to be both a prote´ge´ and
mentor in appropriate circumstances.
SBA agrees with this position; thus, this
final rule provides that SBA may
authorize a small business to be both a
prote´ge´ and a mentor at the same time
where the firm can demonstrate that the
second relationship will not compete or
otherwise conflict with the first mentorprote´ge´ relationship.
Prote´ge´s (13 CFR 124.520 and 125.9)
In order to qualify as a prote´ge´, the
proposed rule required a business
concern to qualify as small for the size
standard corresponding to its primary
NAICS code. This was a departure for
the current 8(a) BD mentor-prote´ge´
program, which required an 8(a)
Program Participant to: Have a size that
is less than half the size standard
corresponding to its primary NAICS
code; or be in the developmental stage
of its 8(a) program participation; or not
have received an 8(a) contract. SBA
received a significant number of
comments supporting the change to
loosen the requirements to qualify as a
prote´ge´ for the 8(a) BD mentor-prote´ge´
program. These commenters supported
consistency between the two programs
and believed that allowing more mature
small businesses to participate as
prote´ge´s in the 8(a) BD mentor-prote´ge´
program would facilitate more dynamic
developmental assistance and
strengthen the contractor base for
government procurements. Several
commenters also felt that the proposed
change made the requirement clearer to
understand and implement. Conversely,
a few commenters did not support
changes to the size of the prote´ge´ for the
8(a) BD mentor-prote´ge´ program. These
commenters believed that the 8(a)
mentor-prote´ge´ program should not be
made available to larger, or successful,
or experienced 8(a) Participants, and
that allowing participation by firms that
are close to exceeding their applicable
size standard would thwart the purpose
of the program. SBA also received
several comments recommending that a
firm should be able to form a mentorprote´ge´ relationship as long as it
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qualified as small for the particular type
of work for which a mentor-prote´ge´
relationship is sought, even if the firm
no longer qualified as small for its
primary business activity. These
commenters believed that there would
be no harm in allowing such a mentorprote´ge´ relationship because the prote´ge´
firm would still have to qualify as a
small business for any contract
opportunity requiring status as a small
business that it sought. In other words,
if SBA approved a mentor-prote´ge´
relationship that focused on assisting a
firm to gain access to or expand its
experience in a particular industry or
NAICS code where the proposed prote´ge´
firm qualified as a small business for the
size standard corresponding to that
NAICS code but not for the size
standard corresponding to its primary
industry, the prote´ge´ firm could form a
joint venture with its mentor and be
considered small for a contract
opportunity only where the prote´ge´ firm
qualified as small. It could not take that
mentor-prote´ge´ relationship, form a
joint venture and be considered small
for contract opportunities in the
prote´ge´’s primary industry if the prote´ge´
did not qualify as small for that NAICS
code.
SBA believes that consistency
between the 8(a) BD mentor-prote´ge´
program and the small business mentorprote´ge´ program is critical, particularly
where this final rule authorizes an 8(a)
mentor-prote´ge´ relationship to
transition to a small business mentorprote´ge´ relationship when the 8(a)
prote´ge´ graduates from or otherwise
leaves the 8(a) BD program. Therefore,
SBA believes that it does not make
sense to have different rules regarding
who can qualify as a prote´ge´ for the two
mentor-prote´ge´ programs. As such, SBA
does not agree with the commenters
who recommended that SBA continue
to limit prote´ge´s in the 8(a) BD mentorprote´ge´ program only to Participants
whose size was less than half the size
standard corresponding to their primary
industry. Moreover, SBA feels that any
small business could gain valuable
business development assistance
through the mentor-prote´ge´ program.
For this reason, SBA agrees with the
commenters who recommended that a
firm that does not qualify as small for
its primary NAICS code should be able
to form a mentor-prote´ge´ relationship in
a secondary NAICS code for which it
does qualify as small. However, SBA
would not authorize mentor-prote´ge´
relationships in secondary NAICS codes
where the firm had never performed any
work in that NAICS code previously or
where the prote´ge´ would bring nothing
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to a potential joint venture with its
mentor other than its status as a small
business. The intent of allowing joint
ventures between a prote´ge´ firm and its
mentor is to provide a prote´ge´ firm the
opportunity to further develop its
expertise and enhance its ability to
independently perform similar contracts
in the future. The mentor-prote´ge´
program is not intended to enable firms
that have outgrown a particular size
standard to find another industry in
which they have no expertise or past
performance merely to be able to
continue to receive additional contracts
as a small business. As long as the firm
can demonstrate how the mentorprote´ge´ relationship is a logical
progression for the firm and will further
develop current capabilities, SBA
believes that a mentor-prote´ge´
relationship may be appropriate. Thus,
the final rule provides that a concern
must qualify as small for the size
standard corresponding to its primary
NAICS code or identify that it is seeking
business development assistance with
respect to a secondary NAICS code and
qualify as small for the size standard
corresponding to that NAICS code.
The proposed rule provided that a
prote´ge´ participating in either of the
mentor-prote´ge´ programs generally
would have no more than one mentor at
a time. However, it authorized a prote´ge´
to have two mentors where the two
relationships would not compete or
otherwise conflict with each other and
the prote´ge´ demonstrates that the
second relationship pertains to an
unrelated, secondary NAICS code, or
the first mentor does not possess the
specific expertise that is the subject of
the MPA with the second mentor. The
comments supported this provision and,
therefore, SBA adopts it in this final
rule.
In addition, § 125.9(c)(1) of the
proposed rule required that SBA verify
that a firm qualifies as a small business
before approving that firm to act as a
prote´ge´ in a small business mentorprote´ge´ relationship. SBA was
attempting to make eligibility for the
small business mentor-prote´ge´ program
similar to that of the 8(a) BD mentorprote´ge´ program. Just as only firms that
have been certified to be eligible to
participate in the 8(a) BD program and
verified to meet at least one of the three
requirements set forth in the prior 8(a)
BD regulations could be a prote´ge´, the
proposed rule would have permitted
only those firms that have been
affirmatively determined to be small to
qualify as prote´ge´s for the small
business mentor-prote´ge´ program.
Several commenters believed that such
a requirement was overly burdensome.
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These commenters did not believe that
size and 8(a) BD status were
comparable. They argued that size has
always been a self-certification process
that is open to review and protest in
connection with any individual
procurement, and that the same should
be true in the mentor-prote´ge´ context.
They felt that SBA should be able to rely
on the size self-certification of a firm
seeking to qualify as small for a small
business mentor-prote´ge´ relationship.
The commenters believed that a firm
approved to be a small business prote´ge´
would not gain any undue benefit from
the program merely by entering a
mentor-prote´ge´ relationship. If a firm
that was approved to be a prote´ge´ was
not in fact small and was awarded a
joint venture contract with its mentor
based solely on its status as a prote´ge´,
of course that would be objectionable.
However, because the size protest
procedures permit any interested party
to protest the size of any apparent
successful offeror, the commenters
believed that a prote´ge´ that was not
small would ultimately be found
ineligible for award of the contract and,
thus, would not unduly benefit from its
mentor-prote´ge´ relationship. SBA
agrees, and as long as it is clear that
SBA’s approval of a mentor-prote´ge´
relationship does not amount to a
formal determination of size eligibility,
SBA believes that the size protest
procedures would in fact be sufficient to
protect the integrity of the program.
The proposed rule provided that a
prote´ge´ firm that graduates or otherwise
leaves the 8(a) BD program but
continues to qualify as a small business
may transfer its 8(a) mentor-prote´ge´
relationship to a small business mentorprote´ge´ relationship. Several
commenters supported this proposal as
a natural extension of SBA’s
implementation of a small business
mentor-prote´ge´ program. A few
commenters sought clarification,
however, as to whether the transfer from
an 8(a) BD mentor-prote´ge´ relationship
to a small business mentor-prote´ge´
relationship would be automatic or
whether the prote´ge´ firm would have to
apply and again receive SBA approval.
It was not SBA’s intent to require a firm
to apply to transfer its 8(a) BD mentorprote´ge´ relationship to a small business
mentor-prote´ge´ relationship. SBA
intended that a firm merely inform SBA
of its intent to transfer its mentorprote´ge´ relationship. There would be no
SBA review or approval required of
such a transfer. As such, this final rule
adopts the language of the proposed rule
and adds clarifying language that a firm
seeking to transfer its mentor-prote´ge´
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relationship could do so by notification,
without applying to and receiving
approval from SBA to do so. In light of
that change, the final rule also deletes
§ 124.520(d)(5) as unnecessary. That
provision provided that SBA would not
approve an 8(a) BD mentor-prote´ge´
relationship where the proposed prote´ge´
firm had less than six months remaining
in its 8(a) program term. Because SBA
will now permit an 8(a) prote´ge´ to
transfer its mentor-prote´ge´ relationship
to a small business mentor-prote´ge´
relationship after it leaves the 8(a) BD
program (provided the firm continues to
qualify as a small business), it does not
make sense that SBA would not approve
a mentor-prote´ge´ relationship for a
proposed 8(a) prote´ge´ that has less than
six months remaining in its program
term. SBA will give such a firm the
option of pursuing an 8(a) mentorprote´ge´ relationship during its last six
months in the 8(a) BD program, and
then transferring that relationship to a
small business mentor-prote´ge´
relationship when the prote´ge´ firm
leaves the 8(a) BD program, or pursuing
a small business mentor-prote´ge´
relationship during that same time
frame.
48565
departments and agencies, conceivably
other agency-specific mentor-prote´ge´
programs for small business would not
be needed. In the proposed rule, SBA
specifically requested comments as to
whether other Federal mentor-prote´ge´
programs should continue after the oneyear grace period expires. SBA
understands that many of the agencyspecific mentor-prote´ge´ programs
incentivize mentors to utilize their
prote´ge´s as subcontractors. For instance,
some agencies provide additional
evaluation points to a large business
submitting an offer on an unrestricted
procurement where the business has an
active MPA, where the business has
used the prote´ge´ firm as a subcontractor
previously, or where the mentor and
prote´ge´ are submitting an offer as a joint
venture. In addition, some mentorprote´ge´ programs give additional credit
to a large business mentor toward its
subcontracting plan goals when the
mentor uses the prote´ge´ as a
subcontractor on the mentor’s prime
contract(s) with the given agency. SBA’s
mentor-prote´ge´ programs assume more
of a prime contractor role for prote´ge´s,
but would also encourage subcontracts
from mentors to prote´ge´s as part of the
developmental
assistance that prote´ge´s
Mentor-Prote´ge´ Programs of Other
receive from their mentors. Because one
Departments and Agencies (13 CFR
or more mentor-prote´ge´ programs of
125.10)
other agencies ultimately may not be
As noted above, section 1641 of the
continued after SBA’s various mentorNDAA 2013 provided that a Federal
prote´ge´ programs are finalized, SBA
department or agency cannot carry out
requested comments as to whether the
its own agency specific mentor-prote´ge´
subcontracting incentives authorized by
program for small businesses unless the mentor-prote´ge´ programs of other
head of the department or agency
agencies should specifically be
submitted a plan for such a program to
incorporated into SBA’s mentor-prote´ge´
SBA and received the SBA
programs.
Administrator’s approval of the plan.
SBA received only a few comments
The NDAA 2013 specifically excluded
regarding this proposed new section.
the Department of Defense’s mentorThese commenters agreed with the
prote´ge´ program, but included all other
statutory provisions in questioning the
current mentor-prote´ge´ programs of
utility of other Federal mentor-prote´ge´
other agencies. Under its provisions, a
programs. Their only concern was
department or agency that is currently
whether SBA would have the necessary
conducting a mentor-prote´ge´ program
resources to handle mentor-prote´ge´
(except the Department of Defense) may applications for the entire government.
continue to operate that program for one SBA is working to assure that it can
year but must then go through the SBA
adequately process mentor-prote´ge´
approval process in order for the
applications, but, as noted above, if the
program to continue after one year.
number of firms seeking SBA to approve
Thus, in order to continue to operate
their mentor-prote´ge´ relationships
any current mentor-prote´ge´ program
becomes unwieldy, SBA may institute
beyond one year after SBA’s mentorcertain ‘‘open’’ and ‘‘closed’’ periods for
prote´ge´ regulations are final, each
the receipt of further mentor-prote´ge´
department or agency would be required applications. In such a case, SBA would
to obtain the SBA Administrator’s
then accept mentor-prote´ge´ applications
approval. These statutory provisions
only in ‘‘open’’ periods.
Assuming that many agencies will
were proposed to be implemented in
decide not to continue their own
new § 125.10 of SBA’s regulations.
Because the SBA’s 8(a) BD and small
mentor-prote´ge´ programs, one
commenter recommended that SBA
business mentor-prote´ge´ programs will
apply to all Government small business should incorporate the subcontracting
incentives found in other mentorcontracts, and thus to all Federal
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prote´ge´ programs to ensure that these
useful benefits are not eliminated.
Although SBA believes that it is up to
individual procuring agencies whether
to provide subcontracting incentives for
any specific procurement, SBA also
believes that these incentives should be
authorized and used, where appropriate.
As such, this final rule identifies
subcontracting incentives as a possible
benefit to be provided by procuring
activities in appropriate circumstances.
The final rule authorizes procuring
activities to provide incentives in the
contract evaluation process to a firm
that will provide significant
subcontracting work to its SBAapproved prote´ge´ firm. SBA does not
intend that a mentor receive an
incentive where it lists the prote´ge´ as a
subcontractor that would perform
merely ministerial functions that would
not enhance the prote´ge´’s business
development. Any such incentive
would be at the discretion of the
procuring activity.
Benefits of Mentor-Prote´ge´
Relationships (13 CFR 124.520 and
125.9)
As with the 8(a) BD program, under
the proposed small business mentorprote´ge´ program, a prote´ge´ may joint
venture with its SBA-approved mentor
and qualify as a small business for any
Federal government contract or
subcontract, provided the prote´ge´
qualifies as small for the size standard
corresponding to the NAICS code
assigned to the procurement.
Commenters supported this provision.
They believed that it provides
incentives to firms to become mentors
and encourages meaningful business
development assistance to prote´ge´s on
any small business contracts for which
they qualify as small. As such, SBA
adopts the proposed language in this
final rule.
This means that a joint venture
between a prote´ge´ and its approved
mentor in the small business mentorprote´ge´ program will be deemed to be a
small business concern for any Federal
contract or subcontract. It does not
mean that such a joint venture
affirmatively qualifies for any other
small business program. For example, a
joint venture between a small business
prote´ge´ firm and its SBA-approved
mentor will be deemed a small business
concern for any Federal contract or
subcontract for which the prote´ge´
qualified as small, but the joint venture
will qualify for a contract reserved or
set-aside for eligible 8(a) BD, HUBZone
SBCs, SDVO SBCs, or WOSBs only if
the prote´ge´ firm meets the particular
program-specific requirements as well.
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Several commenters sought
clarification of the requirement that the
project manager of a joint venture
between a prote´ge´ firm and its SBAapproved mentor must be an employee
of the prote´ge´ firm. These comments
pointed out that many times a firm that
is awarded a contract will hire many, if
not all, of the individuals currently
performing the work under the contract
for a different firm. These commenters
recommended that SBA clarify that an
individual identified as the project
manager need not be an employee of the
prote´ge´ firm at the time the joint venture
makes an offer, as long as there is a
commitment by the individual to work
for the prote´ge´ if the joint venture wins
the award. SBA agrees and has clarified
that the individual identified as the
project manager of the joint venture
need not be an employee of the prote´ge´
firm at the time the joint venture
submits an offer, but, if he or she is not,
there must be a signed letter of intent
that the individual commits to be
employed by the prote´ge´ firm if the joint
venture is the successful offeror. The
final rule also clarifies that the
individual identified as the project
manager cannot be employed by the
mentor and become an employee of the
prote´ge´ firm for purposes of
performance under the joint venture.
SBA is concerned that such an
‘‘employee’’ of the prote´ge´ has no ties to
the prote´ge´, is not bound to stay with
the prote´ge´ after performance of the
contract is complete, and could easily
go back to the mentor at that time. If that
happens, the business development of
the prote´ge´ firm would be diminished.
Consistent with the 8(a) BD program,
the proposed rule permitted a mentor to
a small business to own an equity
interest of up to 40% in the prote´ge´ firm
in order to raise capital for the prote´ge´
firm. SBA requested comments as to
whether this 40% ownership interest
should be a temporary interest, being
authorized only as long as the mentorprote´ge´ relationship exists, or whether it
should be able to survive the
termination of the mentor-prote´ge´
relationship. SBA was concerned that
allowing a mentor to own 40% of a
small business prote´ge´ after the mentorprote´ge´ relationship ends may allow farreaching influence by large businesses
that act as mentors and enable them to
receive long-term benefits from
programs designed to assist only small
businesses. Several commenters
believed that mentors should not be
required to divest themselves of their
ownership interest in a prote´ge´ firm
once the mentor-prote´ge´ relationship
ends. They noted that, outside the 8(a)
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BD program (which has ownership
restrictions on firms in the same or
similar line of business), a large
business may currently own a
substantial ownership interest in a small
business (up to 49% where one
individual owns the remaining 51%)
without a finding of affiliation, and that
the affiliation rules are sufficient to
protect against a large business from
unduly benefitting from small business
contracting programs. After further
consideration, SBA agrees. During the
mentor-prote´ge´ relationship, the prote´ge´
firm is shielded from a finding of
affiliation where a large business mentor
owns 40% of the prote´ge´. Once the
mentor-prote´ge´ relationship ends, any
protection from a finding of affiliation
also ends. As such, if the large business
mentor’s 40% ownership interest is
controlling (or deemed to be controlling
under SBA’s affiliation rules), the two
firms will be affiliated and the former
prote´ge´ would not qualify as a small
business. For this reason, there is no
need to require a former mentor to
divest itself of its 40% ownership
interest in the former prote´ge´ after the
mentor-prote´ge´ relationship ends. If it
does not divest, the former prote´ge´ will
be found to be ineligible for any contract
as a small business where the 40%
ownership interest causes affiliation
under SBA’s size rules. As such, this
final rule does not add any language
requiring a mentor to divest itself of its
ownership interest in a prote´ge´ firm
once the mentor-prote´ge´ relationship
ends.
Written Mentor-Prote´ge´ Agreement (13
CFR 124.520 and 125.9)
The key to any mentor-prote´ge´
relationship is the benefits to be
received by the proposed prote´ge´ firm
from the proposed mentor. It is essential
that such benefits be identified as
clearly and specifically as possible. To
this end, the proposed rule required that
all MPAs be in writing, identifying
specifically the benefits intended to be
derived by the projected prote´ge´ firms.
Commenters universally supported
requiring a written MPA and that the
benefits to be provided through a MPA
must be clearly identified. Specifically,
they felt that the proposed provision
requiring that there be a detailed
timeline for the delivery of the
assistance in the MPA was critical to
ensuring that assistance was timely
provided to prote´ge´ firms. They
understood that without clear and
identifiable deliverables set forth in
MPAs, both prote´ge´ firms and SBA
would lack the ability to require
mentors to provide specific business
development assistance. One
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commenter noted that the proposed
regulatory language identified
subcontracts as a benefit that a prote´ge´
can receive through its MPA. The
commenter agreed that subcontracts are
an important developmental benefit, but
requested clarification that business
development assistance can be gained
by a prote´ge´ both by receiving a
subcontract from its mentor and by
subcontracting specific work to its
mentor. SBA agrees that a subcontract in
either direction can be beneficial to the
prote´ge´ and that a subcontract from a
prote´ge´ to its mentor should not, by
itself, give rise to a finding of affiliation
as something outside the MPA. As such,
this final rule clarifies that a subcontract
from a prote´ge´ to a mentor can be
developmental assistance authorized by
a MPA.
The proposed rule also required a
firm seeking approval to be a prote´ge´ in
either the 8(a) BD or small business
mentor-prote´ge´ programs to identify any
other mentor-prote´ge´ relationship it has
through another Federal agency or SBA
and provide a copy of each such MPA
to SBA. The proposed rule required that
the MPA submitted to SBA for approval
must identify how the assistance to be
provided by the proposed mentor is
different from assistance provided to the
prote´ge´ through another mentor-prote´ge´
relationship, either with the same or a
different mentor. Several commenters
opposed this requirement. They thought
that the requirement might cause
disputes as to whether the proposed
MPA was different enough from a MPA
with another agency. One commenter
questioned whether a MPA of another
agency could be transferred into the
SBA’s 8(a) BD or small business mentorprote´ge´ program. This commenter
reasoned that if one or more mentorprote´ge´ programs of other agencies cease
because of the new Government-wide
SBA small business mentor-prote´ge´
program, a firm should be able to use
that agreement, or at least the assistance
that had been committed but not yet
provided through the agreement, in the
SBA’s program. SBA continues to
believe that assistance that has already
been provided or pledged in a MPA of
another agency should not be used as
the basis for an SBA MPA. The intent
is that a prote´ge´ firm gain business
development assistance that it otherwise
would not be able to obtain. SBA agrees,
however, that if certain specified
assistance was identified in a MPA of
another agency, but that assistance had
not yet been provided, a firm should be
able to choose to terminate the mentorprote´ge´ relationship with the other
agency and use the not yet provided
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assistance as part of the assistance that
will be provided through the 8(a) BD or
small business mentor-prote´ge´
relationship. Therefore, SBA has
clarified the regulatory text to better
implement its intent in this final rule.
The proposed rule also provided that
SBA will review a mentor-prote´ge´
relationship annually to determine
whether to approve its continuation for
another year. SBA intended to evaluate
the relationship and determine whether
the mentor provided the agreed-upon
business development assistance, and
whether the assistance provided appears
to be worthwhile. SBA also proposed to
limit the duration of a MPA to three
years and to permit a prote´ge´ to have
one three-year MPA with one entity and
one three-year MPA with another entity,
or two three-year MPAs (successive or
otherwise) with the same entity. SBA
invited comments regarding whether
three years is an appropriate length of
time and whether SBA should allow a
mentor and prote´ge´ to enter into an
additional MPA upon the expiration of
the original agreement. Several
commenters did not believe that three
years was an appropriate length to
authorize a mentor-prote´ge´ relationship.
A few commenters disagreed with any
specific limit on the number of years
that a MPA may be in place. They
believed that as long as the prote´ge´
continues to qualify as a small business
and to receive developmental
assistance, and the mentor is capable of
and actually providing the assistance,
then the mentor-prote´ge´ relationship
should be allowed to continue. A few
other commenters thought that three
years was too short and recommended
a longer length. They believed that in
many instances it takes several years in
order for both the mentor and prote´ge´ to
understand how best to work with each
other, and three years is not sufficient
to allow that process to develop. They
felt that the proposed rule would, in
effect, limit a prote´ge´ to one mentor
throughout its life as a small business.
Although the rule proposed to authorize
two three-year MPAs with two separate
mentors, the commenters felt that
because it takes a few years to get one
mentor-prote´ge´ relationship to operate
smoothly, most prote´ge´s would elect to
keep the first MPA for a second three
years instead of seeking a new threeyear MPA with a different mentor.
SBA believes that the mentor-prote´ge´
program serves an important business
development function for 8(a)
Participants and other small businesses.
However, SBA does not believe that any
mentor-prote´ge´ relationship should last
indefinitely (i.e., for as long as the
prote´ge´ qualifies as a small business).
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The mentor-prote´ge´ program should be
a boost to a small business’s
development that enables the small
business to independently perform
larger and more complex contracts in
the future. It should not be a crutch that
prevents small businesses from seeking
and performing those larger and more
complex contracts on their own. SBA
understands that it may take longer than
three years to develop a meaningful
mentor-prote´ge´ relationship. Therefore,
the final rule will continue to authorize
two three-year MPAs with different
mentors, but will allow each to be
extended for a second three years
provided the prote´ge´ has received the
agreed-upon business development
assistance and will continue to receive
additional assistance. SBA intends to
limit all small businesses, including 8(a)
Participants, to having two mentors.
Although an 8(a) Participant can
transfer its 8(a) mentor-prote´ge´
relationship to a small business mentorprote´ge´ relationship after it leaves the
8(a) BD program, it can have only two
mentor-prote´ge´ relationships in total. If
it transfers its 8(a) mentor-prote´ge´
relationship to a small business mentorprote´ge´ relationship after it leaves the
program, it may enter into one
additional mentor-prote´ge´ relationship.
It cannot enter into two additional small
business mentor-prote´ge´ relationships.
The proposed rule also solicited
comments on clarifying language not
currently contained in the 8(a) mentorprote´ge´ regulations authorizing the
continuation of a mentor-prote´ge´
relationship where control or ownership
of the mentor changes during the term
of the MPA. Specifically, the proposed
rule provided (for the 8(a) BD and small
business mentor-prote´ge´ programs) that
if control of the mentor changes
(through a stock sale or otherwise), the
previously approved mentor-prote´ge´
relationship may continue provided
that, after the change in control, the
mentor expresses in writing to SBA that
it acknowledges the MPA and that it
continues its commitment to fulfill its
obligations under the agreement.
Commenters supported this provision,
and it is not changed in this final rule.
Size of 8(a) Joint Venture (13 CFR
124.513).
The rule also proposed to amend
§ 124.513 to clarify that interested
parties may protest the size of an SBAapproved 8(a) joint venture that is the
apparent successful offeror for a
competitive 8(a) contract. This change
alters the rule expressed in Size Appeal
of Goel Services, Inc. and Grunley/Goel
Joint Venture D LLC, SBA No. SIZ–5320
(2012), which concluded that the size of
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an SBA-approved 8(a) joint venture
could not be protested because SBA
had, in effect, determined the joint
venture to qualify as small when it
approved the joint venture pursuant to
§ 124.513(e). SBA’s decision to
authorize a joint venture between a
current 8(a) Program Participant and
another party by its Office of Business
Development was never intended to act
as a formal size determination. Only
SBA’s Office of Government Contracting
may issue formal size determinations.
SBA received a few comments
supporting this proposed change,
believing that the size protest
procedures should be available with
respect to any apparent successful
offeror in a competitive 8(a)
procurement, including joint ventures.
Accordingly, this revision makes clear
that unsuccessful offerors on a
competitive 8(a) set-aside contract may
challenge the size of an apparently
successful joint venture offeror.
One commenter encouraged SBA to
add additional language to clarify that
the only issue that may be challenged is
size, and not the underlying terms,
conditions, or structure of the joint
venture agreement itself. SBA believes
such a clarification is not necessary. As
part of a size protest, an SBA Office of
Government Contracting Area Office
will review a joint venture agreement to
make sure that the agreement complies
with § 124.513, but in no way would
that office seek or have the authority to
invalidate certain terms or conditions of
the joint venture.
A few commenters also sought
clarification of SBA’s regulations
regarding when SBA will determine the
eligibility of an 8(a) joint venture. They
questioned whether approval would
occur as part of the offer and acceptance
process or at some later point in time.
SBA’s regulations provide that SBA
approval of an 8(a) joint venture must
occur prior to the award of an 8(a)
contract. § 124.513(e)(1). That being the
case, requiring an eligibility
determination for a joint venture as part
of the offer and acceptance process
would make that requirement
meaningless. SBA believes that a district
office has flexibility to determine the
eligibility of a particular 8(a) joint
venture depending upon its workload.
As long as that determination occurs
any time prior to award, SBA has
complied with the regulatory
requirement. For a competitive 8(a)
procurement, SBA does not receive an
offering letter on behalf of any particular
8(a) Participant or potential offeror. As
such, requiring SBA to determine the
eligibility of a potential joint venture
offeror at the time of acceptance would
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not make any sense. There is no
certainty that the joint venture will
submit an offer, and, if it does, that it
will be the apparent successful offeror.
Section 124.507(e) provides that within
five working days after being notified by
a contracting officer of the apparent
successful offeror, SBA will verify the
8(a) eligibility of that entity. If the
apparent successful offeror is a joint
venture and SBA has not yet approved
the joint venture, the five-day period for
determining general eligibility would
then apply to the joint venture also. If
the SBA district office has asked for
clarifications or changes with respect to
the joint venture and has not received
them by the end of this five-day period
(and the contracting officer has not
granted SBA additional time to conduct
an eligibility determination), SBA will
have to say that it was unable to verify
the eligibility of the apparent successful
offeror joint venture.
Agency Consideration of the Past
Performance and Capabilities of Team
Members (13 CFR 124.513(f), 125.8(e),
125.18(b)(5), 126.616(f), and 127.506(f))
In the proposed rule, SBA proposed
that an Agency must consider the past
performance of the members of a joint
venture when considering the past
performance of an entity submitting an
offer as a joint venture. SBA proposed
this for both 8(a) joint ventures
(proposed § 124.513(f)) and small
business joint ventures (proposed
§ 125.8(e)). This proposal was in
response to agencies that were
considering only the past performance
of a joint venture entity, and not
considering the past performance of the
very entities that created the joint
venture entity. Where an agency
required the specific joint venture entity
itself to have experience and past
performance, it made it extremely hard
for newly established (and impossible
for first-time) joint venture partners to
demonstrate positive past performance.
Each partner to a joint venture may have
individually performed on one or more
similar contracts previously, but the
joint venture would not be credited with
any experience or past performance of
its individual partners. Commenters
generally supported these changes. A
few commenters recommended that
SBA clarify that the same policy should
also apply to joint ventures in the
SDVO, HUBZone and WOSB programs,
arguing that joint ventures in those
programs could also be hurt where a
procuring agency did not consider the
experience and past performance of the
individual partners to a joint venture.
SBA agrees. As such, this final rule adds
similar language to that proposed for
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8(a) and small business joint ventures to
SDVO joint ventures (§ 125.18(b)(5)),
HUBZone joint ventures (§ 126.616(f)),
and WOSB joint ventures (§ 127.506(f)).
Recertification When an Affiliate
Acquires Another Concern (13 CFR
121.404(g)(2)(ii)(A))
In the final rule, SBA is clarifying its
position that recertification is required
when an affiliate of an entity acquires
another concern. Under SBA’s general
principles of affiliation, if a firm is an
affiliate it means that one entity controls
or has the power to control the other or
a third party controls both, and SBA
aggregates the receipts or employees of
the concern in question and its
affiliates. In our view, an acquisition by
an affiliate must be deemed an
acquisition by the concern in question.
Otherwise, firms could easily
circumvent SBA’s recertification rules
by simply creating affiliates to acquire
or merge with other firms. The clear
intent of SBA’s recertification rule was
to require recertification when an entity
exceeds the size standard due to
acquisition, merger or novation, and
there is no public policy rationale for
not requiring recertification based on
the whether it is the entity in question
that acquires another concern, or an
affiliate of the entity in question. The
bottom line is the entity, including its
affiliates, no longer qualifies as small
and agencies should not receive future
small business credit for dollars
awarded to the concern in question, or
its affiliates.
Establishing Social Disadvantage for the
8(a) BD Program (13 CFR 124.103)
SBA also proposed amendments to
§ 124.103(c) in order to clarify that an
individual claiming social disadvantage
must present a combination of facts and
evidence which by itself establishes that
the individual has suffered social
disadvantage that has negatively
impacted his or her entry into or
advancement in the business world.
Under the proposed rule, SBA could
disregard a claim of social disadvantage
where a legitimate alternative ground
for an adverse action exists and the
individual has not presented evidence
that would render his/her claim any
more likely than the alternative ground.
A statement that a male co-worker
received higher compensation or was
promoted over a woman does not
amount to an incident of social
disadvantage by itself. Additional facts
are necessary to establish an instance of
social disadvantage. A statement that a
male co-worker received higher
compensation or was promoted over a
woman and that the woman had the
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same or superior qualifications and
responsibilities would constitute an
incident of social disadvantage.
A few commenters opposed this
proposed change. They did not believe
that it would be appropriate to require
proof of certain events that are not
easily documented. One commenter
noted that SBA currently permits
individuals to prove social disadvantage
with affidavits and sworn statements
attesting to events in their lives that
they believe were motivated by bias or
discrimination, and questioned how an
individual could in fact present
additional evidence to prove his or her
claim of alleged discriminatory conduct.
SBA believes that these commenters
misunderstood SBA’s intent. SBA does
not intend that individuals provide
additional supporting documentation or
evidence. Rather, SBA is merely looking
for the individual’s statement to contain
a more complete picture. As noted in
the proposed rule, the example of a man
being promoted over a woman without
additional facts does not lead to a more
likely than not conclusion of
discriminatory conduct. If the man had
10 years of experience to the woman’s
3 years of experience, there could be a
legitimate reason for his promotion over
the woman. However, if she can say that
the two had similar experience and
qualifications and yet he was promoted
and she was not, her claim of
discriminatory conduct would have
merit. All SBA is looking for is the
complete picture, or additional facts,
that would make an individual’s claim
of bias or discriminatory conduct more
likely than not. Absent any evidence to
the contrary, SBA would continue to
rely on affidavits and sworn statements,
and as long as those statements
presented a clear picture, they would be
sufficient to establish an instance of
social disadvantage.
SBA is not intending to raise the
evidentiary burden placed on an 8(a)
applicant above the preponderance of
the evidence standard. SBA is not
seeking definitive proof, but rather
additional facts to support the claim
that a negative outcome (e.g., failure to
receive a promotion or needed training)
was based on discriminatory conduct
instead of one or more legitimate nondiscriminatory reasons. It is not SBA’s
intent to disbelieve an applicant. In fact,
SBA intends to rely on personal
narratives to support claims of social
disadvantage. As long as those claims
are complete and are not contradictory,
SBA will depend solely on the
narratives, and consider them to be
instances of social disadvantage.
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Control of an 8(a) BD Applicant or
Participant
Section 124.106 of SBA’s regulations
currently provides that one or more
disadvantaged individuals must control
the daily business operations of an 8(a)
BD applicant or Participant. In
determining whether the experience of
one or more disadvantaged individuals
claiming to manage the applicant or
Participant is sufficient for SBA to
determine that control exists, SBA’s
regulations require that the individuals
must have managerial experience ‘‘of
the extent and complexity needed to run
the concern.’’ Although the regulations
also provide that a ‘‘disadvantaged
individual need not have the technical
expertise or possess a required license
to be found to control an applicant or
Participant,’’ several comments
indicated that there is confusion as to
what type of managerial experience is
needed to satisfy SBA’s requirements.
SBA did not intend to require in all
instances that a disadvantaged
individual must have managerial
experience in the same or similar line of
work as the applicant or Participant. A
middle manager in a multi-million
dollar large business or a vice president
in a concern qualifying as small but
nevertheless substantial may have
gained sufficient managerial experience
in a totally unrelated business field. The
words ‘‘of the extent and complexity
needed to run the concern’’ were meant
to look at the degree of management
experience, not the field in which that
experience was gained. For example, an
individual who has been a middle
manager of a large aviation firm for 20
years and can demonstrate overseeing
the work of a substantial number of
employees may be deemed to have
managerial experience of the extent and
complexity needed to run a fiveemployee applicant firm whose primary
industry category was in emergency
management consulting even though
that individual had no technical
knowledge relating to the emergency
management consulting field. SBA
believes, however, that more specific
industry-related experience may be
needed in appropriate circumstances to
ensure that the disadvantaged
individual(s) claiming to control the
day-to-day operations of the firm do so
in fact. This would be particularly true
where a non-disadvantaged owner (or
former owner) who has experience
related to the industry is actively
involved in the day-to-day management
of the firm. In order to clarify SBA’s
intent, this rule adds language to
§ 124.106 to specify that management
experience need not be related to the
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same or similar industry as the primary
industry classification of the applicant
or Participant.
8(a) BD Application Processing (13 CFR
124.202, 124.203, 124.104(b), and
124.108(a))
SBA’s regulations require applicants
to the 8(a) BD program to submit certain
specified supporting documentation,
including financial statements, copies of
signed Federal personal and business
tax returns and individual and business
bank statements. The regulations also
required that an applicant must submit
a signed IRS Form 4506T, Request for
Copy or Transcript of Tax Form, in all
cases. A commenter questioned the
need for every applicant to submit IRS
Form 4506T. SBA agrees that this form
is not needed in every case. SBA always
has the right to request any applicant to
submit specific information that may be
needed in connection with a specific
application. As long as SBA’s
regulations clearly provide that SBA
may request any additional documents
SBA deems necessary to determine
whether a specific applicant is eligible
to participate in the 8(a) BD program,
SBA will be able to request that a
particular firm submit IRS Form 4506T
where SBA believes it to be appropriate.
As such, this final rule eliminates the
requirement from § 124.203 that an
applicant must submit IRS Form 4506T
in very case, and clarifies that SBA may
request additional documentation when
necessary.
In addition, a commenter noted that
SBA’s regulations provide that
applications for the 8(a) BD program
must generally be filed electronically,
and questioned the need to allow hard
copy applications at all. The commenter
was concerned that there is a greater
possibility for one or more attachments
to be misplaced when an applicant files
a hard copy application, that SBA staff
could incorrectly transpose information
when putting it into an electronic
format, and that in today’s business
world there is no excuse for not having
access to the internet and SBA’s
electronic application. SBA agrees. As
such, this final rule amends § 124.202 to
require applications to be filed
electronically, with the understanding
that certain supporting documentation
may also be required under § 124.203.
Section 124.203 also requires that an
applicant must provide a wet signature
from each individual claiming social
disadvantage status. Several
commenters questioned the need for
‘‘wet’’ signatures, arguing that this
requirement placed a significant burden
on applicants. These commenters noted
that an applicant that files an electronic
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8(a) BD application must also sign and
manually send a wet signature to SBA.
They argued that such a requirement
did not make sense, as long as the
individual(s) upon whom eligibility is
based take responsibility for any
information submitted on behalf of the
applicant. SBA agrees and has
eliminated the requirement for a wet
signature. Any electronic signing
protocol must ensure the Agency is able
to specifically identify the individual
making the representation in an
electronic system. As long as applicants
know that the individual(s) upon whom
eligibility is based take responsibility
for the accuracy and truthfulness of any
information submitted on behalf of the
applicant, an electronic, uploaded
signature should be sufficient.
SBA’s regulations also provided that
if during the processing of an
application, SBA receives adverse
information regarding possible criminal
conduct by the applicant or any of its
principals, SBA would automatically
suspend further processing of the
application and refer it to SBA’s Office
of Inspector General (OIG) for review.
Commenters believed that both of these
provisions unnecessarily delayed SBA’s
processing of 8(a) applications. These
commenters believed that referral to
SBA’s OIG should not occur in every
instance, such as where a minor
infraction occurred many years ago, but
that SBA should have the discretion to
refer matters to SBA’s OIG in
appropriate instances. SBA is
committed to reducing the processing
time for 8(a) applications and agrees
that mandatory OIG referral may be
unnecessary. SBA agrees that an
application evidencing a 20 year old
disorderly conduct offense for an
individual claiming disadvantaged
status when that individual was in
college should not be referred to the OIG
where that is the only instance of
anything concerning the individual’s
good character. Such an offense has
nothing to do with the individual’s
business integrity. In addition, even if it
did, an offense that was that old (with
no other instances of such misconduct)
could also be determined not to be
relevant for a present good character
determination, and thus, not be one that
caused SBA to suspend an 8(a)
application and refer the matter to the
OIG for review. This final rule provides
necessary discretion to SBA to allow
SBA to determine when to refer a matter
to the OIG.
In addition, SBA’s regulations provide
that each individual claiming economic
disadvantage must describe such
economic disadvantage in a narrative
statement, and must submit personal
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financial information to SBA. SBA
believes that the written narrative on
economic disadvantage is an
unnecessary burden imposed on
applicants to the 8(a) BD program.
SBA’s determination as to whether an
individual qualifies as economically
disadvantaged is based solely on an
analysis of objective financial data
relating to the individual’s net worth,
income and total assets. As such, this
final rule eliminates the requirement
that each individual claiming economic
disadvantage must submit a narrative
statement in support of his or her claim
of economic disadvantage.
Substantial Unfair Competitive
Advantage Within an Industry Category
(13 CFR 124.109, 124.110, and 124.111)
Pursuant to section 7(j)(10)(J)(ii)(II) of
the Small Business Act, 15 U.S.C.
636(j)(10)(J)(ii)(II), ‘‘[i]n determining the
size of a small business concern owned
by a socially and economically
disadvantaged Indian tribe (or a wholly
owned business entity of such tribe) [for
purposes of 8(a) BD program entry and
8(a) BD contract award], each firm’s size
shall be independently determined
without regard to its affiliation with the
tribe, any entity of the tribal
government, or any other business
enterprise owned by the tribe, unless
the Administrator determines that one
or more such tribally owned business
concerns have obtained, or are likely to
obtain, a substantial unfair competitive
advantage within an industry category.’’
For purposes of the 8(a) BD program, the
term ‘‘Indian tribe’’ includes any Alaska
Native village or regional or village
corporation (within the meaning of the
Alaska Native Claims Settlement Act).
15 U.S.C. 637(a)(13). SBA’s regulations
have extended this broad exclusion
from affiliation to the other entityowned firms authorized to participate in
the 8(a) BD program (i.e., firms owned
by Native Hawaiian Organizations
(NHOs) and Community Development
Corporations (CDCs)). See §§ 124.109(a),
124.109(c)(2)(iii), 124.110(b), and
124.111(c). The proposed rule attempted
to provide guidance as to how SBA will
determine whether a firm has obtained
or is likely to obtain ‘‘a substantial
unfair competitive advantage within an
industry category.’’
SBA received a significant number of
comments supporting the clarifying
language of the proposed rule.
Commenters agreed that the term
‘‘industry category’’ should be defined
by six digit NAICS code, as that
application would be consistent with
other similar terms in SBA’s regulations.
They also agreed that an industry
category should be looked at nationally
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since size standards are established on
a national basis. Thus, the final rule
provides that an entity-owned business
concern is not subject to the broad
exemption to affiliation set forth in 13
CFR part 124 where one or more entityowned firms are found to have obtained,
or are likely to obtain, a substantial
unfair competitive advantage on a
national basis in a particular NAICS
code with a particular size standard.
In making this assessment, SBA will
consider a firm’s percentage share of the
national market and other relevant
factors to determine whether a firm is
dominant in a specific six-digit NAICS
code with a particular size standard.
SBA will review Federal Procurement
Data System (FPDS) data to compare the
firm’s share of the industry as compared
to overall small business participation
in that industry to determine whether
there is an unfair competitive
advantage. The rule does not
contemplate a finding of affiliation
where an entity-owned concern appears
to have obtained an unfair competitive
advantage in a local market, but remains
competitive, but not dominant, on a
national basis.
Management of Tribally-Owned 8(a)
Program Participants (13 CFR 124.109)
The proposed rule sought to add
language to § 124.109(c)(4) specifying
that the individuals responsible for the
management and daily operations of a
tribally-owned concern cannot manage
more than two Program Participants at
the same time. This language is taken
directly from section 7(j)(11)(B)(iii)(II) of
the Small Business Act (15 U.S.C.
636(j)(11)(B)(iii)(II)), but does not
currently appear in SBA’s 8(a) BD
regulations. The proposed rule provided
that SBA believes it is necessary to
incorporate this provision into the
regulations to more fully apprise
tribally-owned 8(a) applicants and
Participants of the control requirements
applicable to them. Those commenting
on this provision understood the change
and supported it. Thus, this final rule
adopts the proposed language.
Native Hawaiian Organizations (NHOs)
(13 CFR 124.110)
The proposed rule also sought to add
language to § 124.110(d) to clarify that
the members or directors of an NHO
need not have the technical expertise or
possess a required license to be found
to control an applicant or Participant
owned by the NHO. Rather, the NHO,
through its members and directors, must
merely have managerial experience of
the extent and complexity needed to run
the concern. As with individually
owned 8(a) applicants and Participants,
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individual NHO members may be
required to demonstrate more specific
industry-related experience in
appropriate circumstances to ensure
that the NHO in fact controls the dayto-day operations of the firm. This is
particularly true where a nondisadvantaged owner (or former owner)
who has experience related to the
industry is actively involved in the dayto-day management of the firm.
Commenters supported this change as a
needed clarification to the control
requirements for NHOs. They believed
that this change will allow NHOs with
significant management experience to
participate in and branch out into
diverse industries, and that such a
change will have a positive effect on the
Native Hawaiian community. The final
rule adopts the language as proposed.
The Small Business Act authorizes
small business concerns owned by
‘‘economically disadvantaged’’ NHOs to
participate in the 8(a) BD program. 15
U.S.C. 637(a)(4)(A)(i)(III). Neither the
statute nor its legislative history
provides any guidance on how to
determine whether an NHO is
economically disadvantaged. Currently,
§ 124.110(c)(1) provides that in
determining whether an NHO is
economically disadvantaged, SBA will
look at the individual economic status
of the NHO’s members. The NHO must
establish that a majority of its members
qualify as economically disadvantaged
under the rules that apply to individuals
as set forth in § 124.104. The proposed
rule solicited comments as to whether
this is the most sensible approach to
establishing economic disadvantage for
NHOs.
SBA received a significant number of
comments from the Native Hawaiian
community on this issue, including
several commenters who appeared at
one or more of the tribal consultations.
These commenters recommended that
NHOs should establish economic
disadvantage in the same way that tribes
currently do for the 8(a) BD program:
that is, by providing information
relating to members, including the tribal
unemployment rate, the per capita
income of tribal members, and the
percentage of tribal members below the
poverty level. For the Native Hawaiian
community, this would mean that an
NHO would have to describe the
individuals to be served by the NHO
and provide the economic data
regarding those individuals. SBA agrees
that basing the economic disadvantage
status of an NHO on individual Native
Hawaiians who control the NHO does
not seem to be the most appropriate way
to do so. The Small Business Act
defines the term ‘‘Native Hawaiian
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Organization’’ to mean ‘‘any community
service organization serving Native
Hawaiians in the State of Hawaii which
(A) is a nonprofit corporation . . ., (B)
is controlled by Native Hawaiians, and
(C) whose business activities will
principally benefit such Native
Hawaiians.’’ 15 U.S.C. 637(a)(15). The
crucial point is that an NHO must be a
community service organization that
benefits Native Hawaiians. It is certainly
understood that an NHO must serve
economically disadvantaged Native
Hawaiians, but nowhere is there any
hint that economically disadvantaged
Native Hawaiians must control the
NHO. The statutory language merely
requires that an NHO must be controlled
by Native Hawaiians. In order to
maximize benefits to the Native
Hawaiian community, SBA believes that
it makes sense that an NHO should be
able to attract the most qualified Native
Hawaiians to run and control the NHO.
If the most qualified Native Hawaiians
cannot be part of the team that controls
an NHO because they may not qualify
individually as economically
disadvantaged, SBA believes that is a
disservice to the Native Hawaiian
community. As such, this final rule
changes the way that SBA will
determine whether an NHO qualifies as
economically disadvantaged. It makes
NHOs similar to Indian tribes by
requiring an NHO to present
information relating to the economic
disadvantaged status of Native
Hawaiians, including the
unemployment rate of Native Hawaiians
and the per capita income of Native
Hawaiians. The difference between
tribes and NHOs, however, is that one
tribe serves and intends to benefit one
distinct group of people (i.e., its specific
tribal members), and multiple NHOs
may be established to serve and benefit
the same group of people (i.e., the entire
Native Hawaiian community). As with
economic disadvantage for tribes, once
an NHO establishes that it is
economically disadvantaged in
connection with the application of one
firm owned and controlled by the NHO
because the intended beneficiaries are
economically disadvantaged, it need not
reestablish its economic disadvantage
for another firm owned by the NHO. In
addition, unless a second NHO intends
to serve and benefit a different
population than that of the first NHO
that established its economic
disadvantage status, the second NHO
also need not submit information to
establish its economic disadvantage. Of
course, in any case, the AA/BD may
request an NHO to reestablish/establish
its economic disadvantage status where
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the AA/BD believes that circumstances
of the Native Hawaiian community may
have changed.
Sole Source 8(a) Awards
Pursuant to § 8(a)(1)(D) of the Small
Business Act, 8(a) procurements that
exceed $7.0 million for those assigned a
manufacturing NAICS code and $4.0
million for all others must generally be
competed among eligible 8(a) Program
Participants. 15 U.S.C. 637(a)(1)(D).
However, pursuant to section 303 of the
Business Opportunity Reform Act of
1988 (Pub. L. 100–656), 102 Stat. 3853,
3887–3888, 8(a) Program Participants
owned by Indian tribes and Alaska
Native Corporations (ANCs) are exempt
from those competitive threshold
limitations. As such, a Participant
owned by an Indian tribe or ANC can
receive an 8(a) sole source award in any
amount under the Small Business Act.
Section 811 of the National Defense
Authorization Act for Fiscal Year 2010
(NDAA 2010) (Section 811), Public Law
111–84, imposed justification and
approval requirements on any 8(a) sole
source contract that exceeds $20
million. 123 Stat. 2190, 2405.
Specifically, section 811 provides that
the head of an agency may not award a
sole source 8(a) contract for an amount
exceeding $20 million ‘‘unless the
contracting officer for the contract
justifies the use of a sole-source contract
in writing’’ and ‘‘the justification is
approved by the appropriate official
designated to approve contract awards
for dollar amounts that are comparable
to the amount of the sole-source
contract. . .’’ Id. This provision has
been implemented in FAR 19.808–1(a)
and 6.303–1(b), which currently provide
that SBA cannot accept for negotiation
a sole-source 8(a) contract that exceeds
$22 million unless the requesting
agency has completed a justification in
accordance with the requirements of
FAR 6.303. The FAR recently increased
the $20 million amount to $22 million
in order to take into account inflation.
Several commenters to the proposed
rule noted that SBA’s regulations do not
take into account section 811 or FAR
19.808–1, and requested that SBA
amend its regulations to be consistent
with the FAR. This final rule merely
incorporates the section 811 and FAR
requirements into SBA’s regulations. In
addition, it requires a procuring agency
that is offering a sole source
requirement that exceeds $22 million
for award through the 8(a) BD to provide
a statement in its offering letter that the
necessary justification and approval
under the FAR has occurred. SBA will
not question and does not need to
obtain a copy of the justification and
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approval, but merely ensure that it has
been done.
SBA believes that there is some
confusion in the 8(a) and procurement
communities regarding the requirements
of section 811. There is a misconception
by some that there can be no 8(a) sole
source awards that exceed $22 million.
That is not true. Nothing in either
section 811 or the FAR prohibits 8(a)
sole source awards to Program
Participants owned by Indian tribes and
ANCs above $22 million. All that is
required is that a contracting officer
justify the award and have that
justification approved at the proper
level. In addition, there is no statutory
or regulatory requirement that would
support prohibiting 8(a) sole source
awards above any specific dollar
amount, higher or lower than $22
million.
As noted above, 8(a) procurements
that exceed $7.0 million for those
assigned a manufacturing NAICS code
and $4.0 million for all others must
generally be competed among eligible
8(a) Program Participants. This final
rule also amends § 124.506(a)(2)(ii)
regarding the competitive threshold
amounts to make it consistent with the
inflationary adjustment made to the
FAR. As such, the final rule replaces the
outdated $6.5 million competitive
threshold for procurements assigned a
manufacturing NAICS, and replaces it
with the $7.0 million competitive
threshold currently contained in
§ 19.805–1(a)(2) of the FAR.
Change in Primary Industry
Classification (13 CFR 124.112)
The proposed rule sought to authorize
SBA to change the primary industry
classification contained in a
Participant’s business plan where the
greatest portion of the Participant’s total
revenues during a three-year period
have evolved from one NAICS code to
another. It also provided discretion to
SBA in deciding whether to change a
Participant’s primary industry
classification because SBA recognized
that whether the greatest portion of a
firm’s revenues is derived from one
NAICS code, as opposed to one or more
other NAICS codes, is a snapshot in
time that is ever changing. The rule also
proposed to require SBA to notify the
Participant of its intent to change the
Participant’s primary industry
classification and afford the Participant
the opportunity to submit information
explaining why such a change would be
inappropriate. Although the language of
the proposed rule specifically
authorized the opportunity for a
Participant to dispute any intent to
change its primary NAICS code, the
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supplementary information to the
proposed rule also requested comments
as to whether an alternative that would
permit SBA to change a Participant’s
primary industry automatically, based
on FPDS data, should be considered
instead.
SBA received a vast number of
comments on this particular provision,
both as formal written comments and as
part of the various tribal consultations.
In fact, this was the most heavily
commented on provision of the
proposed rule. Commenters focused on
the alternative to allow SBA to change
a Participant’s primary industry
unilaterally and strenuously opposed
that alternative. Commenters presented
many reasons why they opposed any
automatic change in Participants’
primary industry category. They felt that
it would inappropriately impose a
significant change on a firm based on
inherently incomplete date in FPDS,
which does not take all revenue streams
into consideration. Commenters also
noted that firms are not limited to
pursuing work only in their primary
NAICS code, and naturally pursue work
in multiple NAICS codes. They believed
that it would be contrary to the business
development purposes of the program to
discourage firms from branching out
into several related industry categories.
In addition, commenters noted that the
work to be performed for a particular
requirement may often be classified
under more than one NAICS code.
Commenters argued that if there are
several reasonable NAICS codes that
could be assigned to a requirement and
a procuring agency selects one code
(that happens to be a Participant’s
secondary NAICS code) instead of
another (which is the Participant’s
primary NAICS code), the Participant
should not be penalized for not
performing work in its identified
primary NAICS code. Commenters also
felt that a unilateral change by SBA
would deny a Participant due process
rights and argued that there definitely
should be dialogue between SBA and
the Participant before any change is
made to the Participant’s primary
NAICS code. Finally, although several
commenters supported SBA’s belief that
it needed the ability to change a
Participant’s primary NAICS code in
appropriate circumstances, a few
different commenters opposed any
change to a Participant’s primary NAICS
code.
SBA continues to believe that it
should have the ability to change a
Participant’s primary NAICS code in
appropriate circumstances. Because an
entity-owned applicant need not have a
track record of past performance to be
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eligible to participate in the 8(a) BD
program (i.e., it can meet the potential
for success requirement simply by
having the entity make a firm written
commitment to support the operations
of the applicant), the applicant has wide
latitude in selecting its primary NAICS
code. If the applicant selects a primary
NAICS code merely to avoid the
primary NAICS code of another
Participant owned by the entity and has
no intention of doing any work in that
NAICS code, SBA believes that it should
be able to change that Participant’s
primary NAICS code. Without such
ability, there would be no requirement
that the newly admitted Participant
actually perform most, or any, work in
the six digit NAICS code selected as its
primary business classification in its
application after being certified to
participate in the 8(a) BD program. A
firm could circumvent the intent of
SBA’s regulations by selecting a primary
business classification that is different
from the primary business classification
of any other Participant owned by that
same entity merely to get admitted to
the 8(a) BD program, and then perform
the majority, or even all, of its work in
the identical primary NAICS code as
another Participant owned by the entity.
That should not be permitted to occur.
However, SBA agrees with the
commenters that SBA should not
change a Participant’s primary NAICS
code without discussion back and forth
between SBA and the Participant. SBA
merely wants to ensure that the
Participant has made and will continue
to make good faith efforts to receive
contracts (either Federal or non-Federal)
in the NAICS code it identified as its
primary NAICS code. For example,
where a Participant details contract
opportunities under its primary NAICS
code that it submitted offers for in the
last year, but was not successful in
winning, and its concrete plans to
continue to seek additional
opportunities in that NAICS code, SBA
would not change the Participant’s
primary industry classification. SBA
understands the cyclical nature of
business and that different factors may
affect what type of contract
opportunities are available. SBA does
not expect a Participant to do no
business when there is a downward turn
in the industry identified as its primary
NAICS code. Where SBA believes that a
Participant’s revenues for a secondary
NAICS code exceed those of its
identified primary NAICS code over the
Participant’s last three completed fiscal
years, SBA would notify the Participant
of its belief and ask the firm for input
as to what its primary NAICS code is.
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At that point, SBA would be looking for
a reasonable explanation as to why the
identified primary NAICS code should
remain as the Participant’s primary
NAICS code. The Participant should
identify: all non-Federal work that it has
performed in its primary NAICS code;
any efforts it has made to obtain
contracts in the primary NAICS code; all
contracts that it was awarded that it
believes could have been classified
under its primary NAICS code, but
which a contracting officer assigned
another reasonable NAICS code; and
any other information that it believes
has a bearing on why its primary NAICS
code should not be changed despite
performing more work in another
NAICS code.
The proposed rule also provided that
if SBA determined that a change in a
Participant’s primary NAICS code was
appropriate and that Participant was an
entity-owned firm that could not have
two Participants in the program with the
same primary NAICS code, the entity
(tribe, ANC, NHO, or CDC) would be
required to choose which Participant
should leave the 8(a) BD program if the
change in NAICS codes caused it to
have two Participants with the same
primary NAICS code. Several
commenters opposed requiring an entity
to terminate the continued participation
of one of its 8(a) BD Participants where
it would have two Participants having
the same primary NAICS code after SBA
changes the primary NAICS of one of
the firms. Instead, these commenters
recommended that the second, newer
firm be permitted to continue to
participate in the 8(a) BD program, but
not be permitted to receive any
additional 8(a) contracts in the six-digit
NAICS code that is the primary NAICS
code of the other 8(a) Participant. SBA
agrees that that would be a more
suitable approach. The second firm is
the one that should not have been able
to have been admitted to the 8(a) BD
program to perform most of its work in
a NAICS code that was the primary
NAICS code of another Participant
owned by the same entity. Allowing the
entity to choose to end the participation
of the first firm, which may already be
near the end of its program term, while
allowing the second firm to continue to
receive 8(a) contracts in a primary
NAICS code that it never should have
had would not appear to be much of a
deterrent to others to continue this
practice, and would not in any way
penalize the second Participant that
made no reasonable attempt to perform
work in the NAICS code that it
identified as its primary NAICS code to
SBA. Thus, SBA adopts the
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recommendation and incorporates it
into this final rule.
8(a) BD Program Suspensions (13 CFR
124.305)
SBA proposed to add two additional
bases for allowing a Participant to elect
to be suspended from 8(a) BD program
participation: Where the Participant’s
principal office is located in an area
declared a major disaster area or where
there is a lapse in Federal
appropriations. The changes were
intended to allow a firm to suspend its
term of participation in the 8(a) BD
program in order to not miss out on
contract opportunities that the firm
might otherwise have lost due to a
disaster or a lapse in Federal funding.
SBA received only comments in
support of these two new bases to allow
a Participant to elect suspension from
8(a) BD program participation. As such,
the final rule adopts the language
contained in the proposed rule. Upon
the request of a certified 8(a) firm in a
major declared disaster area, SBA will
be able to suspend the eligibility of the
firm for up to a one year period while
the firm recovers from the disaster to
ensure that it is able to take full
advantage of the 8(a) BD program, rather
than being impacted by lack of capacity
or contracting opportunities due to
disaster-induced disruptions. During
such a suspension, a Participant would
not be eligible for 8(a) BD program
benefits, including set-asides, however,
but would not ‘‘lose time’’ in its
program term due to the extenuating
circumstances wrought by a disaster.
Similarly, this rule will allow a
Participant to elect to suspend its
participation in the 8(a) BD program
where: Federal appropriations for one or
more Federal departments or agencies
have expired without being extended
via continuing resolution or other
means and no new appropriations have
been enacted (i.e., during a lapse in
appropriations); SBA has previously
accepted an offer for a sole source 8(a)
award on behalf of the Participant; and
award of the 8(a) sole source contract is
pending. A Participant could not elect a
partial suspension of 8(a) BD program
benefits. If it elects to be suspended
during a lapse in Federal
appropriations, the Participant would be
ineligible to receive any new 8(a) BD
program benefits during the suspension.
Benefits Reporting Requirement (13 CFR
124.602)
The proposed rule included an
amendment to the time frame for the
reporting of benefits for entity-owned
Participants in the 8(a) BD program.
Previously, SBA required an entity-
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owned Participant to report benefits as
part of its annual review submission.
SBA believes it is more appropriate that
this information be submitted as part of
a Participant’s submission of its annual
financial statements pursuant to
§ 124.602. SBA wants to make clear that
benefits reporting should not be tied to
continued eligibility, as may be
assumed where such reporting is part of
SBA’s annual review analysis. The
proposed rule changed the timing of
benefits reporting from the time of a
Participant’s annual review submission
to the time of a Participant’s annual
financial statement submission. SBA
believes that the data collected by
certain Participants in preparing their
financial statements submissions may
also help them report some of the
benefits that flow to the native or other
community. The regulatory change will
continue to require the submission of
the data on an annual basis but within
120 days after the close of the concern’s
fiscal year instead of as part of the
annual submission.
Commenters supported this change,
believing that it was important to
remove any doubt that benefits
reporting should not in any way be tied
to continued eligibility. Although a few
commenters opposed the reporting of
benefits flowing back to the native or
other community entirely, most
commenters understood that this
requirement was generated in response
to a GAO audit and was intended to
support the continued need for the
tribal 8(a) program. The final rule
adopts the proposed language.
Reverse Auctions (13 CFR 125.2 and
125.5)
SBA also proposed to amend
§§ 125.2(a) and 125.5(a)(1) to address
reverse auctions. Specifically, SBA
proposed to reinforce the principle that
all of SBA’s regulations, including those
relating to set-asides and referrals for a
Certificate of Competency, apply to
reverse auctions. With a reverse auction,
the Government is buying a product or
service, but the businesses are bidding
against each other, which tends to drive
the price down (hence the name reverse
auction). In a reverse auction, the
bidders actually get to see all of the
other bidders’ prices and can ‘‘outbid’’
them by offering a lower price.
Although SBA believes that the small
business rules currently apply to reverse
auctions, the proposed rule intended to
make it clear to contracting officials that
there are no exceptions to SBA’s small
business regulations for reverse
auctions. SBA received no adverse
comments in response to this provision.
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As such, the final rule makes no
changes from the proposed rule.
Reconsideration of Decisions of SBA’s
OHA (13 CFR 134.227)
The proposed rule added clarifying
language to § 134.227(c) to recognize
SBA as a party that may file a request
for reconsideration in an OHA
proceeding in which it has not
previously participated. The final rule
adopts the language as proposed. This
provision is intended to alter the rule
expressed in Size Appeal of Goel
Services, Inc. and Grunley/Goel JVD
LLC, SBA No. SIZ–5356 (2012), which
held that SBA could not request
reconsideration where SBA did not
appear as a party in the original appeal.
The SBA believes that it is axiomatic
that SBA is always an interested party
regarding an appeal of an SBA decision
to OHA, and that SBA may request
reconsideration of an OHA appeal
decision even where SBA chose not to
or otherwise did not file a response to
the initial appeal petition.
Compliance With Executive Orders
12866, 13563, 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
proposed 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.
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Regulatory Impact Analysis
1. Is there a need for the regulatory
action?
The final rule implements section
1347(b)(3) of the Small Business Jobs
Act of 2010, Public Law 111–240, 124
Stat. 2504, which authorizes the Agency
to establish mentor-prote´ge´ programs for
SDVO SBCs, HUBZone SBCs, and
WOSB concerns, modeled on the
Agency’s mentor-prote´ge´ program for
small business concerns participating in
programs under section 8(a) of the Small
Business Act (15 U.S.C. 637(a)). In
addition, the final rule implements
section 1641 of the NDAA 2013, Public
Law 112–239, which authorized SBA to
establish a mentor-prote´ge´ program for
all small business concerns. SBA is also
updating its rules to clarify areas where
small business concerns may have been
confused or where OHA’s
interpretations of SBA rules do not
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conform to SBA’s interpretation or
intent.
2. What are the alternatives to this
rule?
As noted above in the supplementary
information, this rule seeks to
implement the Jobs Act of 2010 and
NDAA 2013 authorities by creating one
new mentor-prote´ge´ program in which
any small business could participate
instead of implementing four new
separate small business mentor-prote´ge´
programs (i.e., having a separate mentorprote´ge´ program for SDVO SBCs,
HUBZone SBCs, WOSB concerns, and
all other small business concerns, in
addition to the current mentor-prote´ge´
program for 8(a) BD Participants). SBA
decided to implement one program for
all small businesses because SBA
believed it would be easier for the small
business and acquisition communities
to use and understand. The statutory
authority for this rule specifically
mandates that the new mentor-prote´ge´
programs be modeled on the existing
mentor-prote´ge´ program for small
business concerns participating in the
8(a) BD program. Thus, to the extent
practicable, SBA has attempted to adopt
the regulations governing the 8(a)
mentor-prote´ge´ program in establishing
the mentor-prote´ge´ program for SBCs.
3. What are the potential benefits and
costs of this regulatory action?
The final rule enhances the ability of
small business concerns to obtain larger
prime contracts that would be normally
out of the reach of these businesses. The
small business mentor-prote´ge´ program
should allow all small businesses to tap
into the expertise and capital of larger
firms, which in turn should help small
business concerns become more
knowledgeable, stable, and competitive
in the Federal procurement arena.
SBA estimates that under the final
rule, approximately 2,000 SBCs, will
become active in the small business
mentor-prote´ge´ program, and prote´ge´
firms may obtain Federal contracts
totaling possibly $2 billion per year.
SBA notes that these estimates represent
an extrapolation from data on the
percentage of 8(a) BD Program
Participants with signed MPAs and joint
venture agreements, and are based on
the dollars awarded to SBCs in FY 2012
according to data retrieved from the
Federal Procurement Data System—
Next Generation (FPDS–NG). With SBCs
able to compete for larger contracts and
thus a greater number of contracts in
general, Federal agencies may choose to
set aside more contracts for competition
among small businesses, SDVO SBCs,
HUBZone SBCs, and WOSB concerns,
rather than using full and open
competition. The movement from
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unrestricted to set-aside contracting
might result in competition among
fewer total bidders, although there will
be more small businesses eligible to
submit offers. The added competition
for many of these procurements could
result in lower prices to the Government
for procurements reserved for SBCs,
HUBZone SBCs, WOSB concerns, and
SDVO SBCs, although SBA cannot
quantify this benefit. To the extent that
more than two thousand SBCs could
become active in the small business
mentor-prote´ge´ program, this might
entail some additional administrative
costs to the Federal Government
associated with additional bidders for
Federal small business procurement
opportunities.
The small business mentor-prote´ge´
program may have some distributional
effects among large and small
businesses. Although SBA cannot
estimate with certainty the actual
outcome of the gains and losses among
small and large businesses, it can
identify several probable impacts. There
may be a transfer of some Federal
contracts from large businesses to SBC
prote´ge´s. However, large business
mentors will be able to joint venture
with prote´ge´ firms for contracts reserved
for small business and be eligible to
perform contracts that they would
otherwise be ineligible to perform. Large
businesses may have fewer Federal
prime contract opportunities as Federal
agencies decide to set aside more
Federal contracts for SBCs, SDVO SBCs,
HUBZone SBCs, and WOSB concerns.
In addition, some Federal contracts may
be awarded to HUBZone prote´ge´s
instead of large businesses since these
firms may be eligible for an evaluation
adjustment for contracts when they
compete on a full and open basis. This
transfer may be offset by a greater
number of contracts being set aside for
SBCs, SDVO SBCs, HUBZone SBCs, and
WOSB concerns. SBA cannot estimate
the potential distributional impacts of
these transfers with any degree of
precision.
The small business mentor-prote´ge´
program is consistent with SBA’s
statutory mandate to assist small
businesses, and this regulatory action
promotes the Administration’s
objectives. One of SBA’s goals in
support of the Administration’s
objectives is to help individual small
businesses, including SDVO SBCs,
HUBZone SBCs, and WOSB concerns,
succeed through fair and equitable
access to capital and credit, Federal
contracts, and management and
technical assistance.
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Executive Order 13563
Executive Order 13132
A description of the need for this
regulatory action and the benefits and
costs associated with this action,
including possible distributional
impacts that relate to Executive Order
13563, is included above in the
Regulatory Impact Analysis.
For the purpose of Executive Order
13132, SBA has determined that this
final 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, SBA
has determined that this final rule has
no federalism implications warranting
preparation of a federalism assessment.
Executive Order 12866
In an effort to engage interested
parties in this action, SBA met with
representatives from various agencies to
obtain their feedback on SBA’s
proposed mentor-prote´ge´ program. For
example, SBA participated in a
Government-wide meeting involving
Office of Small and Disadvantaged
Business Utilization (OSDBU)
representatives responsible for mentorprote´ge´ programs in their respective
agencies. It was generally agreed upon
that SBA’s proposed mentor-prote´ge´
program would complement the already
existing Federal programs due in part to
the differing incentives offered to the
mentors under the various programs.
SBA also presented proposed small
business mentor-prote´ge´ programs to
businesses in thirteen cities in the U.S.
and sought their input as part of the Jobs
Act tours. In developing the proposed
rule, SBA considered all input,
suggestions, recommendations, and
relevant information obtained from
industry groups, individual businesses,
and Federal agencies.
Finally, SBA also conducted a series
of tribal consultations pursuant to
Executive Order 13175, Tribal
Consultations. SBA conducted three inperson tribal consultations (in
Washington, DC on February 26, 2015,
in Tulsa, Oklahoma on April 21, 2015,
and in Anchorage, Alaska on April 23,
2015) and two telephonic tribal
consultations (one on April 7, 2015, and
a Hawaii/Native Hawaiian Organization
specific one on April 8, 2015). These
consultations highlighted those issues
specifically relevant to the tribal, ANC,
and NHO communities, but also
solicited comments regarding all of the
provisions of the proposed rule. SBA
considered the statements and
recommendations received during the
consultation process in finalizing this
rule.
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Executive Order 12988
For purposes of Executive Order
12988, SBA has drafted this final rule,
to the extent practicable, in accordance
with the standards set forth in sections
3(a) and 3(b)(2) of that Executive Order,
to minimize litigation, eliminate
ambiguity, and reduce burden. This rule
has no preemptive or retroactive effect.
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Paperwork Reduction Act
For purposes of the Paperwork
Reduction Act, 44 U.S.C. Chapter 35,
SBA has determined that this final rule
would impose new reporting
requirements. These collections of
information include the following: (1)
Information necessary for SBA to
evaluate the success of a mentor-prote´ge´
relationship; (2) information necessary
for SBA to determine whether a
prospective mentor is capable of
carrying out its responsibilities to assist
the prote´ge´ firm under the proposed
mentor-prote´ge´ agreement; (3)
information necessary for SBA to
evaluate compliance with performance
of work requirements, including work
performed by the joint venture; and (4)
information detailing the proposed
relationship between the mentor and
prote´ge´. The rule also eliminates the
collection of information currently
contained in SBA’s regulations.
Specifically, the final rule eliminates
the requirement that each individual
claiming economic disadvantage for
purposes of 8(a) eligibility must submit
a narrative statement in support of his
or her claim of economic disadvantage.
SBA eliminated this requirement
because SBA believes it to be
burdensome and unnecessary.
Finally, the final rule also makes a
minor change to the benefits reporting
schedule from the time of an 8(a)
Participant’s annual review submission
to when the Participant submits its
financial statement as required by
§ 124.602; specifically, within 120 days
after the close of the Participant’s fiscal
year. The 8(a) Participants Benefits
Report form has been approved by OMB
(OMB Control No. 3245–0391). This rule
makes no substantive changes to the
benefits information to be reported to
SBA, it merely adjusts the reporting
date. The title, summary of each
information collection, description of
respondents, and an estimate of the
reporting burden are discussed below.
Included in the estimate is the time for
reviewing instructions, searching
existing data needed, and completing
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48575
and reviewing each collection of
information.
SBA solicited public comments on
these collections of information at the
proposed rule stage. Except as discussed
below, there was very little feedback on
these changes. SBA will submit the final
information collections to OMB for
approval.
1. Title and Description: MentorProte´ge´ Agreement [SBA Form 2459].
The agreement between a mentor and
prote´ge´ will include an assessment of
the prote´ge´’s needs and goals; a
description of the how the mentor
intends to assist prote´ge´ in meeting its
goals; and the timeline for delivery of
such assistance.
Need and Purpose: The agreement
must be submitted to SBA for review
and approval, to help the Agency to
determine whether the proposed
assistance will enhance the
development of the prote´ge´ and not
merely further the interest of the
mentor. The information will also be
beneficial to SBA’s efforts to reduce
fraud, waste, and abuse in Federal
contracting programs.
OMB Control Number: New
Collection.
Description and Estimated Number of
Respondents: This information will be
collected from small business prote´ge´s
pursuant to § 125.9(e). SBA estimates
this number to be 2,000.
Estimated Response Time: 1 hour.
Total Estimated Annual Hour Burden:
2,000.
Overall, commenters agreed that the
collection of information identified in
the proposed rule is necessary for the
proper performance of SBA’s functions,
and would not be overly burdensome
for affected business concerns.
2. Title and Description: MentorProte´ge´ Financial and Other
Information. [Form number not
applicable] The final rule requires
concerns seeking to participate in the
small business mentor-prote´ge´ program
to submit certain financial information
to SBA, including copies of Federal tax
returns or audited financial statements,
if applicable, filings required by the
Securities and Exchange Commission,
as well as payroll records.
Need and Purpose: The information
requested is necessary for SBA to
determine whether prospective mentors
are in good financial condition and
capable of meeting their obligations
under the mentor–prote´ge´ agreement to
provide assistance to prote´ge´s and
enhance their ability to successfully
compete for Federal contracts. SBA will
use the information to help determine
whether the mentor can meet its
obligations to provide business
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development assistance under the
mentor-prote´ge´ agreement, and also
whether the prote´ge´ is an appropriate
participant in the program. This
information is to be submitted along
with the mentor-prote´ge´ agreement as
part of the program approval process.
SBA believes that any additional burden
imposed by this requirement would be
minimal since the firms maintain the
information in their general course of
business.
OMB Control Number: New
Collection.
Description of and Estimated Number
of Respondents: Pursuant to
§ 125.9(b)(2), this information will be
collected from concerns seeking to
benefit as mentors from SBA’s mentorprote´ge´ programs under § 125.9. SBA
estimates this number to be between
1500 and 2000, since SBA has estimated
the number of prote´ge´s to be 2,000.
Estimated Response Time: 1 hour.
Total Estimated Annual Hour Burden:
1,500–2,000.
3. Title and Description: MentorProte´ge´ Benefits Report [SBA Form
number 2460]. Prote´ge´s participating in
the small business mentor-prote´ge´
program are required to submit to SBA
annual reports on their mentor-prote´ge´
relationships. The information to be
included in these annual reports is the
same type of information that is
currently required of prote´ge´s
participating in SBA’s 8(a) Business
Development program, and as such will
be modeled on the mentor-prote´ge´
annual reporting requirements in
Attachment B of SBA Form 1450 (OMB
Control Number 3245–0205). Such
information includes identification of
the technical, management and/or
financial assistance provided by
mentors to prote´ge´s; and a description
of how that assistance has impacted the
development of the prote´ge´s. Once a
mentor-prote´ge´ relationship ends, the
prote´ge´ must submit a close out report
to SBA on whether the prote´ge´ believed
the mentor-prote´ge´ relationship was
beneficial and describe any lasting
benefits it received.
Need and Purpose: This information
collection is necessary for SBA to,
among other things, evaluate whether
and to what extent the prote´ge´s are
benefiting or have benefitted from the
relationship and in general, the
effectiveness of the program in meeting
its objectives. The information will also
help SBA to determine whether to
approve the continuation of the mentorprote´ge´ agreement, approve a second
mentor-prote´ge´ agreement with the
same parties, or take other actions as
necessary to protect against fraud,
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waste, or abuse in SBA’s mentor-prote´ge´
programs.
OMB Control Number: New
Collection.
Description of and Estimated Number
of Respondents: This information will
be collected from small business
prote´ge´s pursuant to proposed
§ 125.9(g). SBA estimates this number to
be 2,000.
Estimated Response Time: 2 hours.
Total Estimated Annual Hour Burden:
4,000
4. Title and Description: Joint venture
agreement. [Form number not
applicable] The final rule requires
participants to enter into a joint venture
agreement that contains certain required
provisions, pertaining to ownership,
profits, bank accounts, itemization of
equipment and specification of
responsibilities. Commenters
recommended that no specific format
should be required for this agreement;
therefore no specific format is
mandated. However, the agreement
must include the information outlined
in § 125.8; § 125.18 ; § 126.616; and
§ 127.506.
Need and Purpose: This information
collection is necessary to ensure that
joint venture agreements contain the
provisions and information required by
regulation, including ownership,
distribution of profits, bank accounts,
itemization of equipment, and
specification of responsibilities.
OMB Control Number: New
Collection.
Description and Estimated Number of
Respondents: This information will be
collected from SBC, SDVO SBC,
HUBZone SBC, and WOSB joint venture
partners SBA estimates this number to
be between 1,500 and 2,000.
Estimated Response Time: 1 hour.
Total Estimated Annual Hour Burden:
1,500–2,000
5. Title and Description: Joint venture
performance of work report [Form
number not applicable]. The final rule
imposes a requirement on SBC joint
venture partners to annually submit to
the applicable contracting officers and
SBA performance of work reports
demonstrating their how they are
meeting or have met (for completed
contracts), the applicable performance
of work requirements for each SDVO,
HUBZone, WOSB or small business setaside contract they perform as a joint
venture. Commenters recommended
that no specific format should be
required by which the information
should be transmitted to SBA. Thus,
SBA will permit any format that is
easiest for the joint venture partners.
Need and Purpose: This requirement
will greatly enhance SBA’s ability to
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monitor compliance with the limitations
on subcontracting requirements in its
effort to reduce fraud, waste, and abuse.
SBA believes that any additional burden
imposed by this recordkeeping
requirement would be minimal because
firms are already required to track their
compliance with these requirements.
OMB Control Number: New
Collection.
Description and Estimated Number of
Respondents: This information will be
collected from SBC, SDVO SBC,
HUBZone SBC, and WOSB joint venture
partners under § 125.8(i), § 125.18(b),
§ 126.616(i), and § 127.506(j). SBA
estimates this number to be between
1,500 and 2,000.
Estimated Response Time: 1 hour.
Total Estimated Annual Hour Burden:
1,500–2,000.
Regulatory Flexibility Act 5 U.S.C., 601–
612
Under the Regulatory Flexibility Act
(RFA), this final rule may have a
significant impact on a substantial
number of small businesses.
Immediately below, SBA sets forth a
final regulatory flexibility analysis
(FRFA) addressing the impact of this
final rule in accordance with section
604, Title 5, of the United States Code.
The FRFA examines the need and
objectives for this final rule; the
significant issues raised by public
comment and SBA’s responses thereto;
kind and number of small entities that
may be affected; the projected
recordkeeping, reporting, and other
requirements; and a description of the
steps SBA has taken to minimize the
significant economic impact on small
entities.
1. What are the need for and objective
of the rule?
This final rule implements section
1347(b)(3) of the Small Business Jobs
Act of 2010, Public Law 111–240, and
section 1641 of the NDAA 2013, Public
Law 112–239. As discussed above, the
Small Business Jobs Act tasked the
Agency with establishing mentorprote´ge´ programs for SDVO SBCs,
HUBZone SBCs, and WOSB concerns,
modeled on the Agency’s mentorprote´ge´ program for small business
concerns participating in programs
under section 8(a) of the Small Business
Act (13 U.S.C. 637(a)), commonly
known as the 8(a) Business
Development program. Similarly,
section 1641 of NDAA 2013 authorized
SBA to establish a mentor-prote´ge´
program for all small business concerns
that is identical to the 8(a) BD mentorprote´ge´ program, except that SBA may
modify the program to the extent
necessary given the types of small
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business concerns included as prote´ge´s.
SBA chose to implement one small
business mentor-prote´ge´ program, in
addition to the 8(a) BD mentor-prote´ge´
program.
2. What are the significant issues
raised by the public comments, SBA’s
assessment of such issues, and any
changes made in the proposed rule as
a result of such comments?
As noted above, SBA received 113
comments in response to the proposed
rule, with most of the commenters
commenting on multiple proposed
provisions. A description of the
comments received, SBA’s response to
such comments, and the changes made
to the final rule in response to the
comments is identified in detail in the
supplementary information section of
this final rule. The most heavily
commented on provision of the
proposed rule was the provision
authorizing SBA to change the primary
NAICS code of an 8(a) BD Program
Participant in appropriate
circumstances. SBA believed that many
of the commenters misconstrued SBA’s
intent. SBA alleviated the concern that
SBA would unilaterally change a firm’s
primary NAICS code without input from
the firm by clarifying in the final rule
that there will be a dialogue between
SBA and the affected Participant before
any NAICS code change is made, and
that a change will not occur where the
firm provides a reasonable explanation
as to why the identified primary NAICS
code should remain as the Participant’s
primary NAICS code.
SBA received a significant number of
comments supporting a small business
mentor-prote´ge´ program. These
commenters believed that a small
business mentor-prote´ge´ program would
enable firms that are not in the 8(a) BD
program to receive critical business
development assistance that would
otherwise not be available to them.
Many of these commenters expressed
support for the opportunity to gain
meaningful expertise that would help
them to independently perform more
complex and higher value contracts in
the future.
3. What are SBA’s description and
estimate of the number of small entities
to which the rule will apply?
The final rule will apply to all small
business concerns participating in the
Federal procurement market that seek to
form mentor-prote´ge´ relationships. SBA
estimates this number to be about two
thousand, based upon the number of
8(a) Participants that have established
mentor-prote´ge´ relationships in that
program.
4. What are the projected reporting,
recordkeeping, and other compliance
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requirements of the rule and an estimate
of the classes of small entities which
will be subject to the requirements?
The final rule imposes the following
reporting and recordkeeping
requirements: (1) Information necessary
for SBA to evaluate the success of a
mentor-prote´ge´ relationship; (2)
information necessary for SBA to
determine whether a prospective mentor
is meeting its obligations under its
MPA; and (3) information necessary for
SBA to evaluate compliance with
performance of work requirements.
SDVO SBC, HUBZone SBC, and WOSB
joint venture partners would be required
to submit to SBA performance of work
reports demonstrating their compliance
with the limitations on subcontracting
requirements. SBA estimates this
number to be approximately 2,000.
The Paperwork Reduction Act
requirements are addressed further
above.
5. What steps has SBA taken to
minimize the significant economic
impact on small entities?
Thirteen Federal agencies, including
SBA, currently offer mentor-prote´ge´
programs aimed at assisting small
businesses to gain the technical and
business skills necessary to successfully
compete in the Federal procurement
market. While the mentor-prote´ge´
programs offered by other agencies
share SBA’s goal of increasing the
participation of small businesses in
Government contracts, the other Federal
mentor-prote´ge´ programs are structured
differently than SBA’s proposed mentorprote´ge´ programs, particularly in terms
of the incentives offered to mentors. For
example, some agencies offer additional
points to a bidder who has a signed
mentor-prote´ge´ agreement in place,
while other agencies offer the benefit of
reimbursing mentors for certain costs
associated with prote´ge´s’ business
development. SBA, as the agency
authorized to determine small business
size status, is uniquely qualified to offer
mentor-prote´ge´ program participants the
distinctive benefit of an exclusion from
affiliation. This incentive makes SBA’s
mentor-prote´ge´ programs particularly
attractive to potential mentors. Having a
larger and more robust mentor pool
increases the likelihood that small
business prote´ge´s will indeed obtain
valuable business development
assistance.
SBA decided to implement one new
small business mentor-prote´ge´ program
instead of four new mentor-prote´ge´
programs (one for small businesses, one
for SDVO small businesses, one for
WOSBs and one for HUBZone small
businesses) since the other three types
of small businesses (SDVO, HUBZone
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48577
and women-owned) would be
necessarily included within any mentorprote´ge´ program targeting all small
business concerns. Having one
additional program instead of four
additional programs will be easier for
small business concerns to use and
understand, and cause less of a burden
on them.
In addition, where the benefits
provided to a prote´ge´ firm are minimal
or where it appears that the relationship
has been used primarily to permit a
large mentor to benefit from contracts
with its approved prote´ge´, through one
or more joint ventures, that it would
otherwise not be eligible for, SBA will
terminate the mentor-prote´ge´
relationship. This will allow a small
prote´ge´ firm to get out of a bad mentorprote´ge´ relationship that may have a
negative impact on its economic
development and seek and enter a new
mentor-prote´ge´ relationship that will
prove to be more beneficial to the small
prote´ge´ firm.
Throughout this final rule, SBA has
attempted to minimize any costs to
small business. SBA believes that the
benefits to be gained through a
productive mentor-prote´ge´ relationship
will far outweigh any administrative
costs associated with the mentor-prote´ge´
program. In addition, the provisions of
the final rule attempt to impose
safeguards that ensure that small
businesses receive meaningful business
development assistance, while at the
same time ensuring that large businesses
do not unduly benefit from small
business contracts for which they would
otherwise be ineligible to perform.
List of Subjects
13 CFR Part 121
Administrative practice and
procedure, Government procurement,
Government property, Individuals with
disabilities, Loan programs-business,
Reporting and recordkeeping
requirements, Small businesses.
13 CFR Part 124
Administrative practice and
procedures, Government procurement,
Hawaiian natives, Indians—business
and finance, Minority businesses,
Reporting and recordkeeping
requirements, Tribally-owned concerns,
Technical assistance.
13 CFR Part 125
Government contracts, Government
procurement, Reporting and
recordkeeping requirements, Small
businesses, Technical assistance.
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13 CFR Part 126
Administrative practice and
procedure, Government procurement,
Penalties, Reporting and recordkeeping
requirements, Small businesses.
13 CFR Part 127
Government contracts, Reporting and
recordkeeping requirements, Small
businesses.
13 CFR Part 134
Administrative practice and
procedure, Organization and functions
(Government agencies).
For the reasons set forth in the
preamble, SBA amends 13 CFR parts
121, 124, 125, 126, 127, and 134 as
follows:
PART 121—SMALL BUSINESS SIZE
REGULATIONS
1. The authority citation for part 121
continues to read as follows:
■
Authority: 15 U.S.C. 632, 634(b)(6), 636(b),
662, and 694a(9).
2. Amend § 121.103 by revising
paragraphs (b)(2)(ii), (b)(6), the last two
sentences of paragraph (h) introductory
text, and paragraph (h)(3)(ii) to read as
follows:
■
§ 121.103 How does SBA determine
affiliation?
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*
*
*
*
(b) * * *
(2) * * *
(ii) Business concerns owned and
controlled by Indian Tribes, ANCs,
NHOs, CDCs, or wholly-owned entities
of Indian Tribes, ANCs, NHOs, or CDCs,
are not considered to be affiliated with
other concerns owned by these entities
because of their common ownership or
common management. In addition,
affiliation will not be found based upon
the performance of common
administrative services so long as
adequate payment is provided for those
services. Affiliation may be found for
other reasons.
(A) Common administrative services
which are subject to the exception to
affiliation include, bookkeeping,
payroll, recruiting, other human
resource support, cleaning services, and
other duties which are otherwise
unrelated to contract performance or
management and can be reasonably
pooled or otherwise performed by a
holding company, parent entity, or
sister business concern without
interfering with the control of the
subject firm.
(B) Contract administration services
include both services that could be
considered ‘‘common administrative
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services’’ under the exception to
affiliation and those that could not.
(1) Contract administration services
that encompass actual and direct day-today oversight and control of the
performance of a contract/project are
not shared common administrative
services, and would include tasks or
functions such as negotiating directly
with the government agency regarding
proposal terms, contract terms, scope
and modifications, project scheduling,
hiring and firing of employees, and
overall responsibility for the day-to-day
and overall project and contract
completion.
(2) Contract administration services
that are administrative in nature may
constitute administrative services that
can be shared, and would fall within the
exception to affiliation. These
administrative services include tasks
such as record retention not related to
a specific contract (e.g., employee time
and attendance records), maintenance of
databases for awarded contracts,
monitoring for regulatory compliance,
template development, and assisting
accounting with invoice preparation as
needed.
(C) Business development may
include both services that could be
considered ‘‘common administrative
services’’ under the exception to
affiliation and those that could not.
Efforts at the holding company or parent
level to identify possible procurement
opportunities for specific subsidiary
companies may properly be considered
‘‘common administrative services’’
under the exception to affiliation.
However, at some point the opportunity
identified by the holding company’s or
parent entity’s business development
efforts becomes concrete enough to
assign to a subsidiary and at that point
the subsidiary must be involved in the
business development efforts for such
opportunity. At the proposal or bid
preparation stage of business
development, the appropriate subsidiary
company for the opportunity has been
identified and a representative of that
company must be involved in preparing
an appropriate offer. This does not mean
to imply that one or more
representatives of a holding company or
parent entity cannot also be involved in
preparing an offer. They may be
involved in assisting with preparing the
generic part of an offer, but the specific
subsidiary that intends to ultimately
perform the contract must control the
technical and contract specific portions
of preparing an offer. In addition, once
award is made, employee assignments
and the logistics for contract
performance must be controlled by the
specific subsidiary company and should
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not be performed at a holding company
or parent entity level.
*
*
*
*
*
(6) A firm that has an SBA-approved
mentor-prote´ge´ agreement authorized
under § 124.520 or § 125.9 of this
chapter is not affiliated with its mentor
firm solely because the prote´ge´ firm
receives assistance from the mentor
under the agreement. Similarly, a
prote´ge´ firm is not affiliated with its
mentor solely because the prote´ge´ firm
receives assistance from the mentor
under a federal mentor-prote´ge´ program
where an exception to affiliation is
specifically authorized by statute or by
SBA under the procedures set forth in
§ 121.903. Affiliation may be found in
either case for other reasons as set forth
in this section.
*
*
*
*
*
(h) * * * For purposes of this
provision and in order to facilitate
tracking of the number of contract
awards made to a joint venture, a joint
venture: must be in writing and must do
business under its own name; must be
identified as a joint venture in the
System for Award Management (SAM);
may be in the form of a formal or
informal partnership or exist as a
separate limited liability company or
other separate legal entity; and, if it
exists as a formal separate legal entity,
may not be populated with individuals
intended to perform contracts awarded
to the joint venture (i.e., the joint
venture may have its own separate
employees to perform administrative
functions, but may not have its own
separate employees to perform contracts
awarded to the joint venture). SBA may
also determine that the relationship
between a prime contractor and its
subcontractor is a joint venture, and that
affiliation between the two exists,
pursuant to paragraph (h)(5) of this
section.
*
*
*
*
*
(3) * * *
(ii) Two firms approved by SBA to be
a mentor and prote´ge´ under § 125.9 of
this chapter may joint venture as a small
business for any Federal government
prime contract or subcontract, provided
the prote´ge´ qualifies as small for the size
standard corresponding to the NAICS
code assigned to the procurement, and
the joint venture meets the requirements
of § 125.18(b)(2) and (3), § 126.616(c)
and (d), or § 127.506(c) and (d) of this
chapter, as appropriate.
*
*
*
*
*
3. Amend § 121.404 by revising
paragraph (g)(2)(ii)(A) to read as follows:
■
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§ 121.404 When is the size status of a
business concern determined?
The additions and revisions read as
follows:
*
*
*
*
*
(g) * * *
(2) * * *
(ii) * * *
(A) When a concern, or an affiliate of
the concern, acquires or is acquired by
another concern;
*
*
*
*
*
§ 121.406
[Amended]
4. Amend § 121.406(b)(5) introductory
text by removing the phrase ‘‘paragraph
(b)(1)(iii)’’ and adding in its place the
phrase ‘‘paragraph (b)(1)(iv)’’.
■
§ 121.702
[Amended]
5. Amend § 121.702(a)(1)(i) by adding
the words ‘‘an Indian tribe, ANC or
NHO (or a wholly owned business
entity of such tribe, ANC or NHO),’’
before the words ‘‘or any combination of
these’’.
■ 6. Amend § 121.1001 by redesignating
paragraph (b)(10) through (12) as
paragraphs (b)(11) through (13),
respectively, and by adding a new
paragraph (b)(10) to read as follows:
■
§ 121.1001 Who may initiate a size protest
or request a formal size determination?
*
*
*
*
*
(b) * * *
(10) For purposes of the small
business mentor-prote´ge´ program
authorized pursuant to § 125.9 of this
chapter (based on its status as a small
business for its primary or identified
secondary NAICS code), the business
concern seeking to be a prote´ge´ or SBA
may request a formal size
determination.
*
*
*
*
*
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 644; 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.
8. Amend § 124.103 as follows:
a. Add a sentence at the end of
paragraph (c)(1);
■ b. Revise paragraph (c)(2)(ii);
■ c. Redesignate paragraph (c)(2)(iii) as
(c)(2)(iv);
■ d. Add a new paragraph (c)(2)(iii);
■ e. Revise newly redesignated
paragraph (c)(2)(iv) introductory text;
and
■ f. Add paragraphs (c)(3) through (6).
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■
■
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§ 124.103
Who is socially disadvantaged?
*
*
*
*
*
(c) * * *
(1) * * * Such individual should
present corroborating evidence to
support his or her claim(s) of social
disadvantage where readily available.
(2) * * *
(ii) The individual’s social
disadvantage must be rooted in
treatment which he or she has
experienced in American society, not in
other countries;
(iii) The individual’s social
disadvantage must be chronic and
substantial, not fleeting or insignificant;
and
(iv) The individual’s social
disadvantage must have negatively
impacted on his or her entry into or
advancement in the business world.
SBA will consider any relevant
evidence in assessing this element,
including experiences relating to
education, employment and business
history (including experiences relating
to both the applicant firm and any other
previous firm owned and/or controlled
by the individual), where applicable.
*
*
*
*
*
(3) An individual claiming social
disadvantage must present facts and
evidence that by themselves establish
that the individual has suffered social
disadvantage that has negatively
impacted his or her entry into or
advancement in the business world.
(i) Each instance of alleged
discriminatory conduct must be
accompanied by a negative impact on
the individual’s entry into or
advancement in the business world in
order for it to constitute an instance of
social disadvantage.
(ii) SBA may disregard a claim of
social disadvantage where a legitimate
alternative ground for an adverse
employment action or other perceived
adverse action exists and the individual
has not presented evidence that would
render his/her claim any more likely
than the alternative ground.
Example 1 to paragraph (c)(3)(ii). A
woman who is not a member of a designated
group attempts to establish her individual
social disadvantage based on gender. She
certifies that while working for company X,
she received less compensation than her
male counterpart. Without additional facts,
that claim is insufficient to establish an
incident of gender bias that could lead to a
finding of social disadvantage. Without
additional facts, it is no more likely that the
individual claiming disadvantage was paid
less than her male counterpart because he
had superior qualifications or because he had
greater responsibilities in his employment
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position. She must identify her qualifications
(education, experience, years of employment,
supervisory functions) as being equal or
superior to that of her male counterpart in
order for SBA to consider that particular
incident may be the result of discriminatory
conduct.
Example 2 to paragraph (c)(3)(ii). A
woman who is not a member of a designated
group attempts to establish her individual
social disadvantage based on gender. She
certifies that while working for company Y,
she was not permitted to attend a
professional development conference, even
though male employees were allowed to
attend similar conferences in the past.
Without additional facts, that claim is
insufficient to establish an incident of gender
bias that could lead to a finding of social
disadvantage. It is no more likely that she
was not permitted to attend the conference
based on gender bias than based on nondiscriminatory reasons. She must identify
that she was in the same professional
position and level as the male employees
who were permitted to attend similar
conferences in the past, and she must
identify that funding for training or
professional development was available at
the time she requested to attend the
conference.
(iii) SBA may disregard a claim of
social disadvantage where an individual
presents evidence of discriminatory
conduct, but fails to connect the
discriminatory conduct to consequences
that negatively impact his or her entry
into or advancement in the business
world.
Example to paragraph (c)(3)(iii). A woman
who is not a member of a designated group
attempts to establish her individual social
disadvantage based on gender. She provides
instances where one or more male business
clients utter derogatory statements about her
because she is a woman. After each instance,
however, she acknowledges that the clients
gave her contracts or otherwise continued to
do business with her. Despite suffering
discriminatory conduct, this individual has
not established social disadvantage because
the discriminatory conduct did not have an
adverse effect on her business.
(4) SBA may request an applicant to
provide additional facts to support his
or her claim of social disadvantage to
substantiate that a negative outcome
was based on discriminatory conduct
instead of one or more legitimate nondiscriminatory reasons.
(5) SBA will discount or disbelieve
statements made by an individual
seeking to establish his or her
individual social disadvantage where
such statements are inconsistent with
other evidence contained in the record.
(6) In determining whether an
individual claiming social disadvantage
meets the requirements set forth in this
paragraph (c), SBA will determine
whether:
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(i) Each specific claim establishes an
incident of bias or discriminatory
conduct;
(ii) Each incident of bias or
discriminatory conduct negatively
impacted the individual’s entry into or
advancement in the business world; and
(iii) In the totality, the incidents of
bias or discriminatory conduct that
negatively impacted the individual’s
entry into or advancement in the
business world establish chronic and
substantial social disadvantage.
*
*
*
*
*
■ 9. Amend § 124.104 by revising
paragraph (b)(1) to read as follows:
§ 124.104 Who is economically
disadvantaged?
*
*
*
*
*
(b) Submission of financial
information. (1) Each individual
claiming economic disadvantage must
submit personal financial information.
*
*
*
*
*
■ 10. Amend § 124.105 by revising
paragraph (h)(2) introductory text to
read as follows:
§ 124.105 What does it mean to be
unconditionally owned by one or more
disadvantaged individuals?
*
*
*
*
*
(h) * * *
(2) A non-Participant concern in the
same or similar line of business or a
principal of such concern may not own
more than a 10 percent interest in a
Participant that is in the developmental
stage or more than a 20 percent interest
in a Participant in the transitional stage
of the program, except that a former
Participant in the same or similar line
of business or a principal of such a
former Participant (except those that
have been terminated from 8(a) BD
program participation pursuant to
§§ 124.303 and 124.304) may have an
equity ownership interest of up to 20
percent in a current Participant in the
developmental stage of the program or
up to 30 percent in a transitional stage
Participant.
*
*
*
*
*
■ 11. Amend § 124.106 introductory text
by adding a new fifth sentence to read
as follows:
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§ 124.106 When do disadvantaged
individuals control an applicant or
Participant?
* * * Management experience need
not be related to the same or similar
industry as the primary industry
classification of the applicant or
Participant. * * *
*
*
*
*
*
■ 12. Amend § 124.108 by revising
paragraph (a)(1) and by removing ‘‘10
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percent’’ in paragraph (a)(4) and adding
in its place ‘‘20 percent’’.
The revision reads as follows:
(a) * * *
(1) If during the processing of an
application, SBA receives adverse
information from the applicant or a
credible source regarding possible
criminal conduct by the applicant or
any of its principals, SBA may suspend
further processing of the application
and refer it to SBA’s Office of Inspector
General (OIG) for review. If the SBA
suspends the application, but does not
hear back from OIG within 45 days, SBA
may proceed with application
processing. The AA/BD will consider
any findings of the OIG when evaluating
the application.
*
*
*
*
*
■ 13. Amend § 124.109 by adding
paragraphs (c)(2)(iv) and (c)(4)(iii) to
read as follows:
SBA looks beyond these corporate
formalities and examines the totality of
the information submitted by the
applicant to determine which
individual(s) manage the actual day-today operations of the applicant concern.
(B) Officers, board members, and/or
tribal leaders may control a holding
company overseeing several triballyowned or ANC-owned companies,
provided they do not actually control
the day-to-day management of more
than two current 8(a) BD Program
Participant firms.
*
*
*
*
*
■ 14. Amend § 124.110 as follows:
■ a. Add a sentence to the end of
paragraph (b) introductory text;
■ b. Add paragraphs (b)(1) and (2);
■ c. Revise paragraph (c) introductory
text and paragraph (c)(1);
■ d. Revise paragraph (d);
■ e. Redesignate paragraph (g) as
paragraph (h); and
■ f. Add a new paragraph (g).
The additions and revisions read as
follows:
§ 124.109 Do Indian tribes and Alaska
Native Corporations have any special rules
for applying to the 8(a) BD program?
§ 124.110 Do Native Hawaiian
Organizations have any special rules for
applying to the 8(a) BD program?
*
*
§ 124.108 What other eligibility
requirements apply for individuals or
businesses?
*
*
*
*
(c) * * *
(2) * * *
(iv) In determining whether a triballyowned concern has obtained, or is likely
to obtain, a substantial unfair
competitive advantage within an
industry category, SBA will examine the
firm’s participation in the relevant six
digit NAICS code nationally as
compared to the overall small business
share of that industry.
(A) SBA will consider the firm’s
percentage share of the national market
and other relevant factors to determine
whether the firm is dominant in a
specific six-digit NAICS code with a
particular size standard.
(B) SBA does not contemplate a
finding of affiliation where a triballyowned concern appears to have
obtained an unfair competitive
advantage in a local market, but remains
competitive, but not dominant, on a
national basis.
*
*
*
*
*
(4) * * *
(iii) The individuals responsible for
the management and daily operations of
a tribally-owned concern cannot manage
more than two Program Participants at
the same time.
(A) An individual’s officer position,
membership on the board of directors or
position as a tribal leader does not
necessarily imply that the individual is
responsible for the management and
daily operations of a given concern.
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*
*
(b) * * * In determining whether an
NHO-owned concern has obtained, or is
likely to obtain, a substantial unfair
competitive advantage within an
industry category, SBA will examine the
firm’s participation in the relevant six
digit NAICS code nationally.
(1) SBA will consider the firm’s
percentage share of the national market
and other relevant factors to determine
whether the firm is dominant in a
specific six-digit NAICS code with a
particular size standard.
(2) SBA does not contemplate a
finding of affiliation where an NHOowned concern appears to have
obtained an unfair competitive
advantage in a local market, but remains
competitive, but not dominant, on a
national basis.
(c) An NHO must establish that it is
economically disadvantaged and that its
business activities will principally
benefit Native Hawaiians. Once an NHO
establishes that it is economically
disadvantaged in connection with the
application of one NHO-owned firm, it
need not reestablish such status in order
to have other businesses that it owns
certified for 8(a) BD program
participation, unless specifically
requested to do so by the AA/BD. If a
different NHO identifies that it will
serve and benefit the same Native
Hawaiian community as an NHO that
has already established its economic
disadvantage status, that NHO need not
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establish its economic disadvantage
status in connection with an 8(a) BD
application of a business concern that it
owns, unless specifically requested to
do so by the AA/BD.
(1) In order to establish that an NHO
is economically disadvantaged, it must
demonstrate that it will principally
benefit economically disadvantaged
Native Hawaiians. To do this, the NHO
must provide data showing the
economic condition of the Native
Hawaiian community that it intends to
serve, including:
(i) The number of Native Hawaiians in
the community that the NHO intends to
serve;
(ii) The present Native Hawaiian
unemployment rate of those
individuals;
(iii) The per capita income of those
Native Hawaiians, excluding judgment
awards;
(iv) The percentage of those Native
Hawaiians below the poverty level; and
(v) The access to capital of those
Native Hawaiians.
*
*
*
*
*
(d) An NHO must control the
applicant or Participant firm. To
establish that it is controlled by an
NHO, an applicant or Participant must
demonstrate that the NHO controls its
board of directors, managing members,
managers or managing partners.
(1) The NHO need not possess the
technical expertise necessary to run the
NHO-owned applicant or Participant
firm. The NHO must have managerial
experience of the extent and complexity
needed to run the concern. Management
experience need not be related to the
same or similar industry as the primary
industry classification of the applicant
or Participant.
(2) An individual responsible for the
day-to-day management of an NHOowned firm need not establish personal
social and economic disadvantage.
*
*
*
*
*
(g) An NHO-owned firm’s eligibility
for 8(a) BD participation is separate and
distinct from the individual eligibility of
the NHO’s members, directors, or
managers.
(1) The eligibility of an NHO-owned
concern is not affected by the former
8(a) BD participation of one or more of
the NHO’s individual members.
(2) In determining whether an NHO is
economically disadvantaged, SBA may
consider the individual economic status
of an NHO member or director even if
the member or director previously used
his or her disadvantaged status to
qualify an individually owned 8(a)
applicant or Participant.
*
*
*
*
*
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15. Amend § 124.111 by adding a
sentence to the end of paragraph (c) and
by adding paragraphs (c)(1) and (2) to
read as follows:
■
§ 124.111 Do Community Development
Corporations (CDCs) have any special rules
for applying to the 8(a) BD program?
*
*
*
*
*
(c) * * * In determining whether a
CDC-owned concern has obtained, or is
likely to obtain, a substantial unfair
competitive advantage within an
industry category, SBA will examine the
firm’s participation in the relevant six
digit NAICS code nationally.
(1) SBA will consider the firm’s
percentage share of the national market
and other relevant factors to determine
whether the firm is dominant in a
specific six-digit NAICS code with a
particular size standard.
(2) SBA does not contemplate a
finding of affiliation where a CDCowned concern appears to have
obtained an unfair competitive
advantage in a local market, but remains
competitive, but not dominant, on a
national basis.
*
*
*
*
*
■ 16. Amend § 124.112 by designating
the text of paragraph (e) as paragraph
(e)(1), and adding paragraph (e)(2) to
read as follows:
§ 124.112 What criteria must a business
meet to remain eligible to participate in the
8(a) BD program?
*
*
*
*
*
(e) * * *
(2) SBA may change the primary
industry classification contained in a
Participant’s business plan where the
greatest portion of the Participant’s total
revenues during the Participant’s last
three completed fiscal years has evolved
from one NAICS code to another. As
part of its annual review, SBA will
consider whether the primary NAICS
code contained in a Participant’s
business plan continues to be
appropriate.
(i) Where SBA believes that the
primary industry classification
contained in a Participant’s business
plan does not match the Participant’s
actual revenues over the Participant’s
most recently completed three fiscal
years, SBA may notify the Participant of
its intent to change the Participant’s
primary industry classification and
afford the Participant the opportunity to
respond.
(ii) A Participant may challenge SBA’s
intent to change its primary industry
classification by demonstrating why it
believes the primary industry
classification contained in its business
plan continues to be appropriate,
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despite an increase in revenues in a
secondary NAICS code beyond those
received in its designated primary
industry classification. The Participant
should identify: All non-federal work
that it has performed in its primary
NAICS code; any efforts it has made and
any plans it has to make to receive
contracts to obtain contracts in its
primary NAICS code; all contracts that
it was awarded that it believes could
have been classified under its primary
NAICS code, but which a contracting
officer assigned another reasonable
NAICS code; and any other information
that it believes has a bearing on why its
primary NAICS code should not be
changed despite performing more work
in another NAICS code.
(iii) As long as the Participant
provides a reasonable explanation as to
why the identified primary NAICS code
continues to be its primary NAICS code,
SBA will not change the Participant’s
primary NAICS code.
(iv) Where an SBA change in the
primary NAICS code of an entity-owned
firm results in the entity having two
Participants with the same primary
NAICS code, the second, newer
Participant will not be able to receive
any 8(a) contracts in the six-digit NAICS
code that is the primary NAICS code of
the first, older Participant for a period
of time equal to two years after the first
Participant leaves the 8(a) BD program.
*
*
*
*
*
■ 17. Revise § 124.202 to read as
follows:
§ 124.202
filed?
How must an application be
An application for 8(a) BD program
admission must be filed in an electronic
format. An electronic application can be
found by going to the 8(a) BD page of
SBA’s Web site (http://www.sba.gov).
The SBA district office will provide an
applicant with information regarding
the 8(a) BD program.
■ 18. Revise § 124.203 to read as
follows:
§ 124.203 What must a concern submit to
apply to the 8(a) BD program?
Each 8(a) BD applicant concern must
submit those forms and attachments
required by SBA when applying for
admission to the 8(a) BD program. These
forms and attachments may include, but
not be limited to, financial statements,
copies of signed Federal personal and
business tax returns, individual and
business bank statements, personal
history statements, and any additional
documents SBA deems necessary to
determine eligibility. In all cases, the
applicant must provide a signature from
each individual claiming social and
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economic disadvantage status. The
electronic signing protocol will ensure
the Agency is able to specifically
identify the individual making the
representation. The individual(s) upon
whom eligibility is based take
responsibility for the accuracy of all
information submitted on behalf of the
applicant.
■ 19. Amend § 124.305 by removing the
period at the end of paragraph (h)(1)(ii)
and adding in its place ‘‘; or’’, adding
paragraphs (h)(1)(iii) and (iv),
redesignating paragraph (h)(5) as (h)(6)
and adding a new paragraph (h)(5).
The additions read as follows:
§ 124.305 What is suspension and how is
a Participant suspended from the 8(a) BD
program?
*
*
*
*
*
(h)(1) * * *
(iii) A Participant has a principal
place of business located in a federally
declared disaster area and elects to
suspend its participation in the 8(a) BD
program for a period of up to one year
from the date of the disaster declaration
to allow the firm to recover from the
disaster and take full advantage of the
program. A Participant that elects to be
suspended may request that the
suspension be lifted prior to the end
date of the original request; or
(iv) Federal appropriations for one or
more federal departments or agencies
have lapsed, SBA has previously
accepted an offer for a sole source 8(a)
award on behalf of the Participant,
award is pending, and the Participant
elects to suspend its participation in the
8(a) BD program during the lapse in
federal appropriations.
*
*
*
*
*
(5) Where a Participant is suspended
pursuant to (h)(1)(iv) of this section, the
Participant must notify SBA when the
lapse in appropriation ends so that SBA
can immediately lift the suspension.
When the suspension is lifted, the
length of the suspension will be added
to the concern’s program term.
*
*
*
*
*
■ 20. Amend § 124.501 by revising the
first sentence of paragraph (a) and by
adding two sentences to the end of
paragraph (b) to read as follows:
mstockstill on DSK3G9T082PROD with RULES3
§ 124.501 What general provisions apply
to the award of 8(a) contracts?
(a) Pursuant to section 8(a) of the
Small Business Act, SBA is authorized
to enter into all types of contracts with
other Federal agencies regardless of the
place of performance, including
contracts to furnish equipment,
supplies, services, leased real property,
or materials to them or to perform
construction work for them, and to
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contract the performance of these
contracts to qualified Participants. * * *
(b) * * * In addition, for multiple
award contracts not set aside for the 8(a)
BD program, a procuring agency may set
aside specific orders to be competed
only among eligible 8(a) Participants,
regardless of the place of performance.
Such an order may be awarded as an
8(a) award where the order was offered
to and accepted by SBA as an 8(a) award
and the order specifies that the
performance of work and/or nonmanufacturer rule requirements apply
as appropriate.
*
*
*
*
*
■ 21. Amend § 124.502 by revising
paragraph (c)(9), by removing ‘‘and’’ at
the end of paragraph (c)(16), by
redesignating paragraph (c)(17) as
(c)(18), and by adding a new paragraph
(c)(17).
The revision and addition read as
follows:
§ 124.502 How does an agency offer a
procurement to SBA for award through the
8(a) BD program?
*
*
*
*
*
(c) * * *
(9) The acquisition history, if any, of
the requirement, including specifically
whether the requirement is a follow-on
requirement, and whether any portion
of the contract was previously
performed by a small business outside
of the 8(a) BD program;
*
*
*
*
*
(17) A statement that the necessary
justification and approval under the
Federal Acquisition Regulation has
occurred where a requirement whose
estimated contract value exceeds
$22,000,000 is offered to SBA as a sole
source requirement on behalf of a
specific Participant; and
*
*
*
*
*
■ 22. Amend § 124.503 by adding two
sentences to the end of paragraph (a)(1),
by adding one sentence to the end of
paragraph (a)(2), and by adding
paragraph (g)(4) to read as follows:
§ 124.503 How does SBA accept a
procurement for award through the 8(a) BD
program?
(a) * * *
(1) * * * As part of its acceptance of
a sole source requirement, SBA will
determine the eligibility of the
Participant identified in the offering
letter, using the same analysis set forth
in § 124.507(b)(2). Where a procuring
agency offers a sole source 8(a)
procurement on behalf of a joint
venture, SBA will conduct an eligibility
review of the lead 8(a) party to the joint
venture as part of its acceptance, and
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will approve the joint venture prior to
award pursuant to § 124.513(e).
(2) * * * For a competitive 8(a)
procurement, SBA will determine the
eligibility of the apparent successful
offeror pursuant to § 124.507(b).
*
*
*
*
*
(g) * * *
(4) A procuring agency may offer, and
SBA may accept, an order issued under
a BOA to be awarded through the 8(a)
BD program where the BOA itself was
not accepted for the 8(a) BD program,
but rather was awarded on an
unrestricted basis.
*
*
*
*
*
§ 124.504
[Amended]
23. Amend § 124.504 by removing the
reference to ‘‘§ 124.503(h)’’ in paragraph
(d)(4) and adding in its place
‘‘§ 124.50(3)(h)(2)’’.
■ 24. Amend § 124.506 by removing
‘‘$6,500,000’’ in paragraph (a)(2)(ii) and
adding in its place ‘‘$7,000,000’’, and
adding paragraph (b)(5).
The addition reads as follows:
■
§ 124.506 At what dollar threshold must an
8(a) procurement be competed among
eligible Participants?
*
*
*
*
*
(b) * * *
(5) An agency may not award an 8(a)
sole source contract for an amount
exceeding $22,000,000 unless the
contracting officer justifies the use of a
sole source contract in writing and has
obtained the necessary approval under
the Federal Acquisition Regulation.
*
*
*
*
*
■ 25. Amend § 124.507 by redesignating
paragraphs (b)(3) through (5) as
paragraphs (b)(4) through (6),
respectively, and by adding new
paragraph (b)(3) to read as follows:
§ 124.507 What procedures apply to
competitive 8(a) procurements?
*
*
*
*
*
(b) * * *
(3) Where the apparent successful
offeror is a joint venture and SBA has
not approved the joint venture prior to
receiving notification of the apparent
successful offeror, review of the joint
venture will be part of the eligibility
determination conducted under this
paragraph (b). If SBA cannot approve
the joint venture within 5 days of
receiving a procuring activity’s request
for an eligibility determination, and the
procuring activity does not grant
additional time for review, SBA will be
unable to verify the eligibility of the
joint venture for award.
*
*
*
*
*
■ 26. Amend § 124.513 as follows:
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a. Add paragraph (b)(3);
b. Revise paragraphs (c)(2), (c)(6) and
(7), (d), and (e)(1);
■ c. Add paragraphs (e)(2)(iii) and (e)(3);
■ d. Redesignate paragraphs (f), (g), (h),
and (i) as paragraphs (g), (h), (i) and (k),
respectively;
■ e. Add new paragraph (f);
■ f. Revise newly redesignated
paragraphs (g) and (i); and
■ g. Add paragraph (j) and (l).
The additions and revisions read as
follows:
■
■
§ 124.513 Under what circumstances can a
joint venture be awarded an 8(a) contract?
mstockstill on DSK3G9T082PROD with RULES3
*
*
*
*
*
(b) * * *
(3) SBA approval of a joint venture
agreement pursuant to paragraph (e) of
this section does not equate to a formal
size determination. As such, despite
SBA’s approval of a joint venture, the
size status of a joint venture that is the
apparent successful offeror for a
competitive 8(a) contract may be
protested pursuant to § 121.1001(a)(2) of
this chapter. See § 124.517(b).
(c) * * *
(2) Designating an 8(a) Participant as
the managing venturer of the joint
venture and an employee of an 8(a)
Participant as the project manager
responsible for performance of the
contract. The individual identified as
the project manager of the joint venture
need not be an employee of the 8(a)
Participant at the time the joint venture
submits an offer, but, if he or she is not,
there must be a signed letter of intent
that the individual commits to be
employed by the 8(a) Participant if the
joint venture is the successful offeror.
The individual identified as the project
manager cannot be employed by the
mentor and become an employee of the
8(a) Participant for purposes of
performance under the joint venture;
*
*
*
*
*
(6) Itemizing all major equipment,
facilities, and other resources to be
furnished by each party to the joint
venture, with a detailed schedule of cost
or value of each, where practical. If a
contract is indefinite in nature, such as
an indefinite quantity contract or a
multiple award contract where the level
of effort or scope of work is not known,
the joint venture must provide a general
description of the anticipated major
equipment, facilities, and other
resources to be furnished by each party
to the joint venture, without a detailed
schedule of cost or value of each, or in
the alternative, specify how the parties
to the joint venture will furnish such
resources to the joint venture once a
definite scope of work is made publicly
available;
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(7) Specifying the responsibilities of
the parties with regard to negotiation of
the contract, source of labor, and
contract performance, including ways
that the parties to the joint venture will
ensure that the joint venture and the
8(a) partner(s) to the joint venture will
meet the performance of work
requirements set forth in paragraph (d)
of this section, where practical. If a
contract is indefinite in nature, such as
an indefinite quantity contract or a
multiple award contract where the level
of effort or scope of work is not known,
the joint venture must provide a general
description of the anticipated
responsibilities of the parties with
regard to negotiation of the contract,
source of labor, and contract
performance, not including the ways
that the parties to the joint venture will
ensure that the joint venture and the
8(a) partner(s) to the joint venture will
meet the performance of work
requirements set forth in paragraph (d)
of this section, or in the alternative,
specify how the parties to the joint
venture will define such responsibilities
once a definite scope of work is made
publicly available;
*
*
*
*
*
(d) Performance of work. (1) For any
8(a) contract, including those between a
prote´ge´ and a mentor authorized by
§ 124.520, the joint venture must
perform the applicable percentage of
work required by § 124.510 of this
chapter.
(2) The 8(a) partner(s) to the joint
venture must perform at least 40% of
the work performed by the joint venture.
(i) The work performed by the 8(a)
partner(s) to a joint venture must be
more than administrative or ministerial
functions so that the 8(a) partners gain
substantive experience.
(ii) The amount of work done by the
partners will be aggregated and the work
done by the 8(a) partner(s) must be at
least 40% of the total done by all
partners. In determining the amount of
work done by a non-8(a) partner, all
work done by the non-8(a) partner and
any of its affiliates at any subcontracting
tier will be counted.
(e) * * *
(1) SBA must approve a joint venture
agreement prior to the award of an 8(a)
contract on behalf of the joint venture.
A Participant may submit a joint
venture agreement to SBA for approval
at any time, whether or not in
connection with a specific 8(a)
procurement.
(2) * * *
(iii) If a second or third contract to be
awarded a joint venture is not an 8(a)
contract, the Participant would not have
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48583
to submit an addendum setting forth
contract performance for the non-8(a)
contract(s) to SBA for approval.
(3) Where a joint venture has been
established and approved by SBA
without a corresponding specific 8(a)
contract award (including where a joint
venture is established in connection
with a blanket purchase agreement
(BPA), basic agreement (BA), or basic
ordering agreement (BOA)), the
Participant must submit an addendum
to the joint venture agreement, setting
forth the performance requirements, to
SBA for approval for each of the three
8(a) contracts authorized to be awarded
to the joint venture. In the case of a
BPA, BA or BOA, each order issued
under the agreement would count as a
separate contract award, and SBA
would need to approve the addendum
for each order prior to award of the
order to the joint venture.
(f) Past performance and experience.
When evaluating the past performance
and experience of an entity submitting
an offer for an 8(a) contract as a joint
venture approved by SBA pursuant to
this section, a procuring activity must
consider work done individually by
each partner to the joint venture as well
as any work done by the joint venture
itself previously.
(g) Contract execution. Where SBA
has approved a joint venture, the
procuring activity will execute an 8(a)
contract in the name of the joint venture
entity or the 8(a) Participant, but in
either case will identify the award as
one to an 8(a) joint venture or an 8(a)
mentor-prote´ge´ joint venture, as
appropriate.
*
*
*
*
*
(i) Inspection of records. The joint
venture partners must allow SBA’s
authorized representatives, including
representatives authorized by the SBA
Inspector General, during normal
business hours, access to its files to
inspect and copy all records and
documents relating to the joint venture.
(j) Certification of compliance. Prior
to the performance of any 8(a) contract
by a joint venture, the 8(a) BD
Participant to the joint venture must
submit a written certification to the
contracting officer and SBA, signed by
an authorized official of each partner to
the joint venture, stating as follows:
(i) The parties have entered into a
joint venture agreement that fully
complies with paragraph (c) of this
section;
(ii) The parties will perform the
contract in compliance with the joint
venture agreement and with the
performance of work requirements set
forth in paragraph (d) of this section.
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(iii) The parties have obtained SBA’s
approval of the joint venture agreement
and any addendum to that agreement
and that there have been no
modifications to the agreement that SBA
has not approved.
*
*
*
*
*
(l) Basis for suspension or debarment.
The Government may consider the
following as a ground for suspension or
debarment as a willful violation of a
regulatory provision or requirement
applicable to a public agreement or
transaction:
(1) Failure to enter a joint venture
agreement that complies with paragraph
(c) of this section;
(2) Failure to perform a contract in
accordance with the joint venture
agreement or performance of work
requirements in paragraph (d) of this
section; or
(3) Failure to submit the certification
required by paragraph (e) of this section
or comply with paragraph (i) of this
section.
■ 27. Amend § 124.515 by revising
paragraph (a) introductory text and by
removing the words ‘‘An 8(a) contract’’
in paragraph (a)(1) introductory text and
adding in their place the words ‘‘An 8(a)
contract or order’’.
The revision reads as follows:
mstockstill on DSK3G9T082PROD with RULES3
§ 124.515 Can a Participant change its
ownership or control and continue to
perform an 8(a) contract, and can it transfer
performance to another firm?
(a) An 8(a) contract (or 8(a) order
where the underlying contract is not an
8(a) contract) must be performed by the
Participant that initially received it
unless a waiver is granted under
paragraph (b) of this section.
*
*
*
*
*
■ 28. Amend § 124.520 as follows:
■ a. Revise the second sentence of
paragraph (a);
■ b. Revise paragraph (b)(1)(i);
■ c. Remove the words ‘‘or non-profit
entity’’ from the first sentence of
paragraph (b) introductory text and from
the second sentence of paragraph (b)(2);
■ d. Revise the last sentence of
paragraph (b)(2);
■ e. Revise paragraph (b)(3);
■ f. Revise paragraphs (c)(1) and (4);
■ g. Remove paragraph (c)(5);
■ h. Revise paragraph (d)(1)(iii);
■ i. Add paragraph (d)(5);
■ j. Redesignate paragraphs (e)(2)
through (5) as paragraphs (e)(3) through
(6), respectively;
■ k. Add a new paragraph (e)(2);
■ l. Revise newly designated paragraph
(e)(5);
■ m. Add paragraphs (e)(7) and (8); and
■ n. Add paragraph (i).
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(iii) Once a prote´ge´ firm graduates or
otherwise leaves the 8(a) BD program or
grows to be other than small for its
§ 124.520 What are the rules governing
primary NAICS code, it will not be
SBA’s 8(a) Mentor-Prote´ge´ program?
eligible for any further 8(a) contracting
(a) * * * This assistance may include benefits from its 8(a) BD mentor-prote´ge´
technical and/or management
relationship. Leaving the 8(a) BD
assistance; financial assistance in the
program, growing to be other than small
form of equity investments and/or loans; for its primary NAICS code, or
subcontracts (either from the mentor to
terminating the mentor-prote´ge´
the prote´ge´ or from the prote´ge´ to the
relationship while a prote´ge´ is still in
mentor); trade education; and/or
the program, does not, however,
assistance in performing prime contracts generally affect contracts previously
with the Government through joint
awarded to a joint venture between the
venture arrangements. * * *
prote´ge´ and its mentor. A prote´ge´ firm
(b) * * *
that graduates or otherwise leaves the
(1) * * *
8(a) BD program but continues to
(i) Is capable of carrying out its
qualify as a small business may transfer
responsibilities to assist the prote´ge´ firm its 8(a) mentor-prote´ge´ relationship to a
under the proposed mentor-prote´ge´
small business mentor-prote´ge´
agreement;
relationship. In order to effectuate such
a transfer, a firm must notify SBA of its
*
*
*
*
*
intent to transfer its 8(a) mentor-prote´ge´
(2) * * * Under no circumstances
will a mentor be permitted to have more relationship to a small business mentorprote´ge´ relationship. The transfer will
than three prote´ge´s at one time in the
occur without any application or
aggregate under the mentor-prote´ge´
approval process.
programs authorized by §§ 124.520 and
(A) A joint venture between a prote´ge´
125.9 of this chapter.
firm that continues to qualify as small
(3) In order to demonstrate that it is
and its mentor may certify its status as
capable of carrying out its
responsibilities to assist the prote´ge´ firm small for any Government contract or
subcontract so long as the prote´ge´ (and/
under the proposed mentor-prote´ge´
agreement, a firm seeking to be a mentor or the joint venture) has not been
determined to be other than small for
may submit to the SBA copies of the
the size standard corresponding to the
federal tax returns it submitted to the
procurement at issue (or any higher size
IRS, or audited financial statements,
standard).
including any notes, or in the case of
(B) Where the prote´ge´ firm no longer
publicly traded concerns, the filings
qualifies
as small, the receipts and/or
required by the Securities and Exchange
employees of the prote´ge´ and mentor
Commission (SEC), for the past three
would generally be aggregated in
years.
determining the size of any joint venture
*
*
*
*
*
between the mentor and prote´ge´ after
(c) * * *
that date.
(1) In order to initially qualify as a
(C) Except for contracts with
prote´ge´ firm, a concern must:
durations of more than five years
(i) Qualify as small for the size
(including options), a contract awarded
standard corresponding to its primary
to a joint venture between a prote´ge´ and
NAICS code or identify that it is seeking a mentor as a small business continues
business development assistance with
to qualify as an award to small business
respect to a secondary NAICS code and
for the life of that contract and the joint
qualify as small for the size standard
venture remains obligated to continue
corresponding to that NAICS code; and
performance on that contract.
(ii) Demonstrate how the business
(D) For contracts with durations of
development assistance to be received
more than five years (including
through its proposed mentor-prote´ge´
options), where size re-certification is
relationship would advance the goals
required no more than 120 days prior to
and objectives set forth in its business
the end of the fifth year of the contract
plan.
and no more than 120 days prior to
exercising any option thereafter, once
*
*
*
*
*
the prote´ge´ firm no longer qualifies as
(4) The AA/BD may authorize a
small for its primary NAICS code, the
Participant to be both a prote´ge´ and a
joint venture must aggregate the
mentor at the same time where the
receipts/employees of the partners to
Participant can demonstrate that the
second relationship will not compete or the joint venture in determining
otherwise conflict with the first mentor- whether it continues to qualify as and
can re-certify itself to be a small
prote´ge´ relationship.
business under the size standard
(d) * * *
corresponding to the NAICS code
(1) * * *
The revisions and additions read as
follows:
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assigned to that contract. The rules set
forth in § 121.404(g)(3) of this chapter
apply in such circumstances.
*
*
*
*
*
(5) Where appropriate, procuring
activities may provide incentives in the
contract evaluation process to a firm
that will provide significant
subcontracting work to its SBAapproved prote´ge´ firm.
(e) * * *
(2) A firm seeking SBA’s approval to
be a prote´ge´ must identify any other
mentor-prote´ge´ relationship it has
through another federal agency or SBA
and provide a copy of each such
mentor-prote´ge´ agreement to SBA.
(i) The 8(a) BD mentor-prote´ge´
agreement must identify how the
assistance to be provided by the
proposed mentor is different from
assistance provided to the prote´ge´
through another mentor-prote´ge´
relationship, either with the same or a
different mentor.
(ii) A firm seeking SBA’s approval to
be a prote´ge´ may terminate a mentorprote´ge´ relationship it has through
another agency and use any not yet
provided assistance identified in the
other mentor-prote´ge´ agreement as part
of the assistance that will be provided
through the 8(a) BD mentor-prote´ge´
relationship. Any assistance that has
already been provided through another
mentor-prote´ge´ relationship cannot be
identified as assistance that will be
provided through the 8(a) BD mentorprote´ge´ relationship.
*
*
*
*
*
(5) SBA will review the mentorprote´ge´ relationship annually during the
prote´ge´ firm’s annual review to
determine whether to approve its
continuation for another year. Unless
rescinded in writing at that time, the
mentor-prote´ge´ relationship will
automatically renew without additional
written notice of continuation or
extension to the prote´ge´ firm. The term
of a mentor-prote´ge´ agreement may not
exceed three years, but may be extended
for a second three years. A prote´ge´ may
have two three-year mentor-prote´ge´
agreements with different mentors, and
each may be extended an additional
three years provided the prote´ge´ has
received the agreed-upon business
development assistance and will
continue to receive additional assistance
through the extended mentor-prote´ge´
agreement.
*
*
*
*
*
(7) If control of the mentor changes
(through a stock sale or otherwise), the
previously approved mentor-prote´ge´
relationship may continue provided
that, after the change in control, the
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mentor expresses in writing to SBA that
it acknowledges the mentor-prote´ge´
agreement and certifies that it will
continue to abide by its terms.
(8) SBA may terminate the mentorprote´ge´ agreement at any time if it
determines that the prote´ge´ is not
adequately benefiting from the
relationship or that the parties are not
complying with any term or condition
of the mentor prote´ge´ agreement. In the
event SBA terminates the relationship,
the mentor-prote´ge´ joint venture is
obligated to complete any previously
awarded contracts unless the procuring
agency issues a stop work order.
*
*
*
*
*
(i) Results of mentor-prote´ge´
relationship. (1) In order to assess the
results of a mentor-prote´ge´ relationship
upon its completion, the prote´ge´ must
report to SBA whether it believed the
mentor-prote´ge´ relationship was
beneficial and describe any lasting
benefits to the prote´ge´.
(2) Where a prote´ge´ does not report
the results of a mentor-prote´ge´
relationship upon its completion, SBA
will not approve a second mentorprote´ge´ relationship either under this
section or under § 125.9 of this chapter.
§ 124.604
[Amended]
29. Amend § 124.604 by removing the
phrase ‘‘annual review submission’’ and
adding in its place the phrase ‘‘annual
financial statement submission (see
§ 124.602)’’ in the first sentence.
■
§ 124.1002
30. Amend § 124.1002 by removing
paragraph (b)(4).
PART 125—GOVERNMENT
CONTRACTING PROGRAMS
31. The authority citation for part 125
is revised to read as follows:
■
Authority: 15 U.S.C. 632(p), (q); 634(b)(6);
637; 644; 657f; 657r.
32. Amend § 125.2 by revising the
third sentence of paragraph (a)
introductory text to read as follows:
■
§ 125.2 What are SBA’s and the procuring
agency’s responsibilities when providing
contracting assistance to small
businesses?
(a) General. * * * Small business
concerns must receive any award
(including orders, and orders placed
against Multiple Award Contracts) or
contract, part of any such award or
contract, any contract for the sale of
Government property, or any contract
resulting from a reverse auction,
regardless of the place of performance,
which SBA and the procuring or
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disposal agency determine to be in the
interest of:
*
*
*
*
*
■ 33. Amend § 125.5 by revising the
second and third sentences of paragraph
(a)(1) to read as follows:
§ 125.5 What is the Certificate of
Competency Program?
(a) General. (1) * * * A COC is a
written instrument issued by SBA to a
Government contracting officer,
certifying that one or more named small
business concerns possess the
responsibility to perform a specific
Government procurement (or sale)
contract, including any contract
deriving from a reverse auction. The
COC Program is applicable to all
Government procurement actions,
including Multiple Award Contracts
and orders placed against Multiple
Award Contracts, where the contracting
officer has used any issues of capacity
or credit (responsibility) to determine
suitability for an award. * * *
*
*
*
*
*
§ 125.6
[Amended]
34. Amend § 125.6 by removing
‘‘§ 125.15’’ from paragraph (b)
introductory text and adding in its place
‘‘§ 125.18’’, and by removing
‘‘§ 125.15(b)(3)’’ from paragraph (b)(5)
and adding in its place ‘‘§ 125.18(b)(3)’’.
■
§§ 125.8 through 125.30 [Redesignated as
§§ 125.11 through 125.33]
35. Redesignate §§ 125.8 through
125.30 as §§ 125.11 through 125.33,
respectively, and locate them in the
subparts as indicated in the following
list:
■ i. Section 125.11 in subpart A;
■ ii. Sections 125.12 through 125.16 in
subpart B;
■ iii. Sections 125.17 through 125.26 in
subpart C;
■ iv. Sections 125.27 through 125.31 in
subpart D; and
■ v. Sections 125.32 and 125.33 in
subpart E.
■ 36. Add new §§ 125.8, 125.9 and
125.10 to precede subpart A to read as
follows:
■
[Amended]
■
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§ 125.8 What requirements must a joint
venture satisfy to submit an offer for a
procurement or sale set aside or reserved
for small business?
(a) General. A joint venture of two or
more business concerns may submit an
offer as a small business for a Federal
procurement, subcontract or sale so long
as each concern is small under the size
standard corresponding to the NAICS
code assigned to the contract, or qualify
as small under one of the exceptions to
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affiliation set forth in § 121.103(h)(3) of
this chapter.
(b) Contents of joint venture
agreement. (1) A joint venture
agreement between two or more entities
that individually qualify as small need
not be in any specific form or contain
any specific conditions in order for the
joint venture to qualify as a small
business.
(2) Every joint venture agreement to
perform a contract set aside or reserved
for small business between a prote´ge´
small business and its SBA-approved
mentor authorized by § 125.9 or
§ 124.520 of this chapter must contain a
provision:
(i) Setting forth the purpose of the
joint venture;
(ii) Designating a small business as
the managing venturer of the joint
venture, and an employee of the small
business managing venturer as the
project manager responsible for
performance of the contract. The
individual identified as the project
manager of the joint venture need not be
an employee of the small business at the
time the joint venture submits an offer,
but, if he or she is not, there must be
a signed letter of intent that the
individual commits to be employed by
the small business if the joint venture is
the successful offeror. The individual
identified as the project manager cannot
be employed by the mentor and become
an employee of the small business for
purposes of performance under the joint
venture;
(iii) Stating that with respect to a
separate legal entity joint venture, the
small business must own at least 51%
of the joint venture entity;
(iv) Stating that the small business
must receive profits from the joint
venture commensurate with the work
performed by the small business, or in
the case of a separate legal entity joint
venture, commensurate with their
ownership interests in the joint venture;
(v) Providing for the establishment
and administration of a special bank
account in the name of the joint venture.
This account must require the signature
of all parties to the joint venture or
designees for withdrawal purposes. All
payments due the joint venture for
performance on a contract set aside or
reserved for small business will be
deposited in the special account; all
expenses incurred under the contract
will be paid from the account as well;
(vi) Itemizing all major equipment,
facilities, and other resources to be
furnished by each party to the joint
venture, with a detailed schedule of cost
or value of each, where practical. If a
contract is indefinite in nature, such as
an indefinite quantity contract or a
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multiple award contract where the level
of effort or scope of work is not known,
the joint venture must provide a general
description of the anticipated major
equipment, facilities, and other
resources to be furnished by each party
to the joint venture, without a detailed
schedule of cost or value of each, or in
the alternative, specify how the parties
to the joint venture will furnish such
resources to the joint venture once a
definite scope of work is made publicly
available;
(vii) Specifying the responsibilities of
the parties with regard to negotiation of
the contract, source of labor, and
contract performance, including ways
that the parties to the joint venture will
ensure that the joint venture and the
small business partner(s) to the joint
venture will meet the performance of
work requirements set forth in
paragraph (d) of this section, where
practical. If a contract is indefinite in
nature, such as an indefinite quantity
contract or a multiple award contract
where the level of effort or scope of
work is not known, the joint venture
must provide a general description of
the anticipated responsibilities of the
parties with regard to negotiation of the
contract, source of labor, and contract
performance, not including the ways
that the parties to the joint venture will
ensure that the joint venture and the
small business partner(s) to the joint
venture will meet the performance of
work requirements set forth in
paragraph (d) of this section, or in the
alternative, specify how the parties to
the joint venture will define such
responsibilities once a definite scope of
work is made publicly available;
(viii) Obligating all parties to the joint
venture to ensure performance of a
contract set aside or reserved for small
business and to complete performance
despite the withdrawal of any member;
(ix) Designating that accounting and
other administrative records relating to
the joint venture be kept in the office of
the small business managing venturer,
unless approval to keep them elsewhere
is granted by the District Director or his/
her designee upon written request;
(x) Requiring that the final original
records be retained by the small
business managing venturer upon
completion of any contract set aside or
reserved for small business that was
performed by the joint venture;
(xi) Stating that quarterly financial
statements showing cumulative contract
receipts and expenditures (including
salaries of the joint venture’s principals)
must be submitted to SBA not later than
45 days after each operating quarter of
the joint venture; and
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(xii) Stating that a project-end profit
and loss statement, including a
statement of final profit distribution,
must be submitted to SBA no later than
90 days after completion of the contract.
(c) Performance of work. (1) For any
contract set aside or reserved for small
business that is to be performed by a
joint venture between a small business
prote´ge´ and its SBA-approved mentor
authorized by § 125.9, the joint venture
must perform the applicable percentage
of work required by § 125.6, and the
small business partner to the joint
venture must perform at least 40% of
the work performed by the joint venture.
(2) The work performed by the small
business partner to a joint venture must
be more than administrative or
ministerial functions so that it gains
substantive experience.
(3) The amount of work done by the
partners will be aggregated and the work
done by the small business prote´ge´
partner must be at least 40% of the total
done by the partners. In determining the
amount of work done by a mentor
participating in a joint venture with a
small business prote´ge´, all work done by
the mentor and any of its affiliates at
any subcontracting tier will be counted.
(d) Certification of compliance. Prior
to the performance of any contract set
aside or reserved for small business by
a joint venture between a prote´ge´ small
business and a mentor authorized by
§ 125.9, the small business partner to
the joint venture must submit a written
certification to the contracting officer
and SBA, signed by an authorized
official of each partner to the joint
venture, stating as follows:
(1) The parties have entered into a
joint venture agreement that fully
complies with paragraph (b) of this
section;
(2) The parties will perform the
contract in compliance with the joint
venture agreement and with the
performance of work requirements set
forth in paragraph (c) of this section.
(e) Past performance and experience.
When evaluating the past performance
and experience of an entity submitting
an offer for a contract set aside or
reserved for small business as a joint
venture established pursuant to this
section, a procuring activity must
consider work done individually by
each partner to the joint venture as well
as any work done by the joint venture
itself previously.
(f) Contract execution. The procuring
activity will execute a contract set aside
or reserved for small business in the
name of the joint venture entity or a
small business partner to the joint
venture, but in either case will identify
the award as one to a small business
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joint venture or a small business
mentor-prote´ge´ joint venture, as
appropriate.
(g) Inspection of records. The joint
venture partners must allow SBA’s
authorized representatives, including
representatives authorized by the SBA
Inspector General, during normal
business hours, access to its files to
inspect and copy all records and
documents relating to the joint venture.
(h) Performance of work reports. In
connection with any contract set aside
or reserved for small business that is
awarded to a joint venture between a
prote´ge´ small business and a mentor
authorized by § 125.9, the small
business partner must describe how it is
meeting or has met the applicable
performance of work requirements for
each contract set aside or reserved for
small business that it performs as a joint
venture.
(1) The small business partner to the
joint venture must annually submit a
report to the relevant contracting officer
and to the SBA, signed by an authorized
official of each partner to the joint
venture, explaining how the
performance of work requirements are
being met for each contract set aside or
reserved for small business that is
performed during the year.
(2) At the completion of every
contract set aside or reserved for small
business that is awarded to a joint
venture between a prote´ge´ small
business and a mentor authorized by
§ 125.9, the small business partner to
the joint venture must submit a report
to the relevant contracting officer and to
the SBA, signed by an authorized
official of each partner to the joint
venture, explaining how and certifying
that the performance of work
requirements were met for the contract,
and further certifying that the contract
was performed in accordance with the
provisions of the joint venture
agreement that are required under
paragraph (b) of this section.
(i) Basis for suspension or debarment.
For any joint venture between a prote´ge´
small business and a mentor authorized
by § 125.9, the Government may
consider the following as a ground for
suspension or debarment as a willful
violation of a regulatory provision or
requirement applicable to a public
agreement or transaction:
(1) Failure to enter a joint venture
agreement that complies with paragraph
(b) of this section;
(2) Failure to perform a contract in
accordance with the joint venture
agreement or performance of work
requirements in paragraph (c) of this
section; or
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(3) Failure to submit the certification
required by paragraph (d) of this section
or comply with paragraph (g) of this
section.
(j) Compliance with performance of
work requirements. Any person with
information concerning a joint venture’s
compliance with the performance of
work requirements may report that
information to SBA and/or the SBA
Office of Inspector General.
§ 125.9 What are the rules governing
SBA’s small business mentor-prote´ge´
program?
(a) General. The small business
mentor-prote´ge´ program is designed to
enhance the capabilities of prote´ge´ firms
by requiring approved mentors to
provide business development
assistance to prote´ge´ firms and to
improve the prote´ge´ firms’ ability to
successfully compete for federal
contracts. This assistance may include
technical and/or management
assistance; financial assistance in the
form of equity investments and/or loans;
subcontracts (either from the mentor to
the prote´ge´ or from the prote´ge´ to the
mentor); trade education; and/or
assistance in performing prime contracts
with the Government through joint
venture arrangements. Mentors are
encouraged to provide assistance
relating to the performance of contracts
set aside or reserved for small business
so that prote´ge´ firms may more fully
develop their capabilities.
(b) Mentors. Any concern that
demonstrates a commitment and the
ability to assist small business concerns
may act as a mentor and receive benefits
as set forth in this section. This includes
other than small businesses.
(1) In order to qualify as a mentor, a
concern must demonstrate that it:
(i) Is capable of carrying out its
responsibilities to assist the prote´ge´ firm
under the proposed mentor-prote´ge´
agreement;
(ii) Possesses good character;
(iii) Does not appear on the federal list
of debarred or suspended contractors;
and
(iv) Can impart value to a prote´ge´ firm
due to lessons learned and practical
experience gained or through its
knowledge of general business
operations and government contracting.
(2) In order to demonstrate that it is
capable of carrying out its
responsibilities to assist the prote´ge´ firm
under the proposed mentor-prote´ge´
agreement, a firm seeking to be a mentor
may submit to the SBA copies of the
federal tax returns it submitted to the
IRS, or audited financial statements,
including any notes, or in the case of
publicly traded concerns, the filings
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required by the Securities and Exchange
Commission (SEC), for the past three
years.
(3) Once approved, a mentor must
annually certify that it continues to
possess good character and a favorable
financial position.
(4) Generally, a mentor will have no
more than one prote´ge´ at a time.
However, SBA may authorize a concern
to mentor more than one prote´ge´ at a
time where it can demonstrate that the
additional mentor-prote´ge´ relationship
will not adversely affect the
development of either prote´ge´ firm (e.g.,
the second firm may not be a competitor
of the first firm). Under no
circumstances will a mentor be
permitted to have more than three
prote´ge´s at one time in the aggregate
under the mentor-prote´ge´ programs
authorized by §§ 124.520 and 125.9 of
this chapter.
(c) Prote´ge´s. (1) In order to initially
qualify as a prote´ge´ firm, a concern must
qualify as small for the size standard
corresponding to its primary NAICS
code or identify that it is seeking
business development assistance with
respect to a secondary NAICS code and
qualify as small for the size standard
corresponding to that NAICS code.
(i) A firm may self-certify that it
qualifies as small for its primary or
identified secondary NAICS code.
(ii) Where a firm is other than small
for the size standard corresponding to
its primary NAICS code and seeks to
qualify as a small business prote´ge´ in a
secondary NAICS code, the firm must
demonstrate how the mentor-prote´ge´
relationship is a logical business
progression for the firm and will further
develop or expand current capabilities.
SBA will not approve a mentor-prote´ge´
relationship in a secondary NAICS code
in which the firm has no prior
experience.
(2) A prote´ge´ firm may generally have
only one mentor at a time. SBA may
approve a second mentor for a particular
prote´ge´ firm where the second
relationship will not compete or
otherwise conflict with the assistance
set forth in the first mentor-prote´ge´
relationship and:
(i) The second relationship pertains to
an unrelated NAICS code; or
(ii) The prote´ge´ firm is seeking to
acquire a specific expertise that the first
mentor does not possess.
(3) SBA may authorize a small
business to be both a prote´ge´ and a
mentor at the same time where the small
business can demonstrate that the
second relationship will not compete or
otherwise conflict with the first mentorprote´ge´ relationship.
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(4) Where appropriate, SBA may
examine the Service-Disabled VeteranOwned Small Business status or
Women-Owned Small Business status of
a concern seeking to be a prote´ge´ that
claims such status in any Federal
procurement database.
(d) Benefits. (1) A prote´ge´ and mentor
may joint venture as a small business for
any government prime contract or
subcontract, provided the prote´ge´
qualifies as small for the procurement.
Such a joint venture may seek any type
of small business contract (i.e., small
business set-aside, 8(a), HUBZone,
SDVO, or WOSB) for which the prote´ge´
firm qualifies (e.g., a prote´ge´ firm that
qualifies as a WOSB could seek a WOSB
set-aside as a joint venture with its SBAapproved mentor).
(i) SBA must approve the mentorprote´ge´ agreement before the two firms
may submit an offer as a joint venture
on a particular government prime
contract or subcontract in order for the
joint venture to receive the exclusion
from affiliation.
(ii) In order to receive the exclusion
from affiliation, the joint venture must
meet the requirements set forth in
§ 125.8(b)(2), (c), and (d).
(iii) Once a prote´ge´ firm no longer
qualifies as a small business for the size
standard corresponding to its primary
NAICS code, it will not be eligible for
any further contracting benefits from its
mentor-prote´ge´ relationship. However, a
change in the prote´ge´’s size status does
not generally affect contracts previously
awarded to a joint venture between the
prote´ge´ and its mentor.
(A) Except for contracts with
durations of more than five years
(including options), a contract awarded
to a joint venture between a prote´ge´ and
a mentor as a small business continues
to qualify as an award to small business
for the life of that contract and the joint
venture remains obligated to continue
performance on that contract.
(B) For contracts with durations of
more than five years (including
options), where size re-certification is
required under § 121.404(g)(3) of this
chapter no more than 120 days prior to
the end of the fifth year of the contract
and no more than 120 days prior to
exercising any option thereafter, once
the prote´ge´ no longer qualifies as small
for the size standard corresponding to
its primary NAICS code, the joint
venture must aggregate the receipts/
employees of the partners to the joint
venture in determining whether it
continues to qualify as and can recertify itself to be a small business
under the size standard corresponding
to the NAICS code assigned to that
contract. The rules set forth in
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§ 121.404(g)(3) of this chapter apply in
such circumstances.
(2) In order to raise capital, the
prote´ge´ firm may agree to sell or
otherwise convey to the mentor an
equity interest of up to 40% in the
prote´ge´ firm.
(3) Notwithstanding the mentorprote´ge´ relationship, a prote´ge´ firm may
qualify for other assistance as a small
business, including SBA financial
assistance.
(4) No determination of affiliation or
control may be found between a prote´ge´
firm and its mentor based solely on the
mentor-prote´ge´ agreement or any
assistance provided pursuant to the
agreement. However, affiliation may be
found for other reasons set forth in
§ 121.103 of this chapter.
(5) Where appropriate, procuring
activities may provide incentives in the
contract evaluation process to a firm
that will provide significant
subcontracting work to its SBAapproved prote´ge´ firm.
(e) Written agreement. (1) The mentor
and prote´ge´ firms must enter a written
agreement setting forth an assessment of
the prote´ge´’s needs and providing a
detailed description and timeline for the
delivery of the assistance the mentor
commits to provide to address those
needs (e.g., management and/or
technical assistance, loans and/or equity
investments, cooperation on joint
venture projects, or subcontracts under
prime contracts being performed by the
mentor). The mentor-prote´ge´ agreement
must:
(i) Address how the assistance to be
provided through the agreement will
help the prote´ge´ firm meet its goals as
defined in its business plan;
(ii) Establish a single point of contact
in the mentor concern who is
responsible for managing and
implementing the mentor-prote´ge´
agreement; and
(iii) Provide that the mentor will
provide such assistance to the prote´ge´
firm for at least one year.
(2) A firm seeking SBA’s approval to
be a prote´ge´ must identify any other
mentor-prote´ge´ relationship it has
through another federal agency or SBA
and provide a copy of each such
mentor-prote´ge´ agreement to SBA.
(i) The small business mentor-prote´ge´
agreement must identify how the
assistance to be provided by the
proposed mentor is different from
assistance provided to the prote´ge´
through another mentor-prote´ge´
relationship, either with the same or a
different mentor.
(ii) A firm seeking SBA’s approval to
be a prote´ge´ may terminate a mentorprote´ge´ relationship it has through
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another agency and use any not yet
provided assistance identified in the
other mentor-prote´ge´ agreement as part
of the assistance that will be provided
through the small business mentorprote´ge´ relationship. Any assistance that
has already been provided through
another mentor-prote´ge´ relationship
cannot be identified as assistance that
will be provided through the small
business mentor-prote´ge´ relationship.
(3) The written agreement must be
approved by the Associate
Administrator for Business
Development (AA/BD) or his/her
designee. The agreement will not be
approved if SBA determines that the
assistance to be provided is not
sufficient to promote any real
developmental gains to the prote´ge´, or if
SBA determines that the agreement is
merely a vehicle to enable the mentor to
receive small business contracts.
(4) The agreement must provide that
either the prote´ge´ or the mentor may
terminate the agreement with 30 days
advance notice to the other party to the
mentor-prote´ge´ relationship and to SBA.
(5) SBA will review the mentorprote´ge´ relationship annually to
determine whether to approve its
continuation for another year. Unless
rescinded in writing as a result of the
review, the mentor-prote´ge´ relationship
will automatically renew without
additional written notice of
continuation or extension to the prote´ge´
firm. The term of a mentor-prote´ge´
agreement may not exceed three years,
but may be extended for a second three
years. A prote´ge´ may have two threeyear mentor-prote´ge´ agreements with
different mentors, and each may be
extended an additional three years
provided the prote´ge´ has received the
agreed-upon business development
assistance and will continue to receive
additional assistance through the
extended mentor-prote´ge´ agreement.
(6) SBA must approve all changes to
a mentor-prote´ge´ agreement in advance,
and any changes made to the agreement
must be provided in writing. If the
parties to the mentor-prote´ge´
relationship change the mentor-prote´ge´
agreement without prior approval by
SBA, SBA shall terminate the mentorprote´ge´ relationship and may also
propose suspension or debarment of one
or both of the firms pursuant to
paragraph (h) of this section where
appropriate.
(7) If control of the mentor changes
(through a stock sale or otherwise), the
previously approved mentor-prote´ge´
relationship may continue provided
that, after the change in control, the
mentor expresses in writing to SBA that
it acknowledges the mentor-prote´ge´
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agreement and certifies that it will
continue to abide by its terms.
(8) SBA may terminate the mentorprote´ge´ agreement at any time if it
determines that the prote´ge´ is not
benefiting from the relationship or that
the parties are not complying with any
term or condition of the mentor prote´ge´
agreement. In the event SBA terminates
the relationship, the mentor-prote´ge´
joint venture is obligated to complete
any previously awarded contracts
unless the procuring agency issues a
stop work order.
(f) Decision to decline mentor-prote´ge´
relationship. (1) Where SBA declines to
approve a specific mentor-prote´ge´
agreement, the prote´ge´ may request the
AA/BD or designee to reconsider the
Agency’s initial decline decision by
filing a request for reconsideration
within 45 calendar days of receiving
notice that its mentor-prote´ge´ agreement
was declined. The prote´ge´ may revise
the proposed mentor-prote´ge´ agreement
and provide any additional information
and documentation pertinent to
overcoming the reason(s) for the initial
decline.
(2) SBA will issue a written decision
within 45 calendar days of receipt of the
prote´ge´’s request. SBA may approve the
mentor-prote´ge´ agreement, deny it on
the same grounds as the original
decision, or deny it on other grounds.
(3) If SBA declines the mentor-prote´ge´
agreement solely on issues not raised in
the initial decline, the prote´ge´ can ask
for reconsideration as if it were an
initial decline.
(4) If SBA’s final decision is to decline
a specific mentor-prote´ge´ agreement, the
small business concern seeking to be a
prote´ge´ cannot attempt to enter into
another mentor-prote´ge´ relationship
with the same mentor for a period of 60
calendar days from the date of the final
decision. The small business concern
may, however, submit another proposed
mentor-prote´ge´ agreement with a
different proposed mentor at any time
after the SBA’s final decline decision.
(g) Evaluating the mentor-prote´ge´
relationship. (1) Within 30 days of the
anniversary of SBA’s approval of the
mentor-prote´ge´ agreement, the prote´ge´
must report to SBA for the preceding
year:
(i) All technical and/or management
assistance provided by the mentor to the
prote´ge´;
(ii) All loans to and/or equity
investments made by the mentor in the
prote´ge´;
(iii) All subcontracts awarded to the
prote´ge´ by the mentor and all
subcontracts awarded to the mentor by
the prote´ge´, and the value of each
subcontract;
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(iv) All federal contracts awarded to
the mentor-prote´ge´ relationship as a
joint venture (designating each as a
small business set-aside, small business
reserve, or unrestricted procurement),
the value of each contract, and the
percentage of the contract performed
and the percentage of revenue accruing
to each party to the joint venture; and
(v) A narrative describing the success
such assistance has had in addressing
the developmental needs of the prote´ge´
and addressing any problems
encountered.
(2) The prote´ge´ must report the
mentoring services it receives by
category and hours.
(3) The prote´ge´ must annually certify
to SBA whether there has been any
change in the terms of the agreement.
(4) SBA will review the prote´ge´’s
report on the mentor-prote´ge´
relationship, and may decide not to
approve continuation of the agreement
if it finds that the mentor has not
provided the assistance set forth in the
mentor-prote´ge´ agreement or that the
assistance has not resulted in any
material benefits or developmental gains
to the prote´ge´.
(h) Consequences of not providing
assistance set forth in the mentorprote´ge´ agreement. (1) Where SBA
determines that a mentor has not
provided to the prote´ge´ firm the
business development assistance set
forth in its mentor-prote´ge´ agreement,
SBA will notify the mentor of such
determination and afford the mentor an
opportunity to respond. The mentor
must respond within 30 days of the
notification, explaining why it has not
provided the agreed upon assistance
and setting forth a definitive plan as to
when it will provide such assistance. If
the mentor fails to respond, does not
supply adequate reasons for its failure to
provide the agreed upon assistance, or
does not set forth a definite plan to
provide the assistance:
(i) SBA will terminate the mentorprote´ge´ agreement;
(ii) The firm will be ineligible to again
act as a mentor for a period of two years
from the date SBA terminates the
mentor-prote´ge´ agreement; and
(iii) SBA may recommend to the
relevant procuring agency to issue a
stop work order for each federal contract
for which the mentor and prote´ge´ are
performing as a small business joint
venture in order to encourage the
mentor to comply with its mentorprote´ge´ agreement. Where a prote´ge´ firm
is able to independently complete
performance of any such contract, SBA
may recommend to the procuring
agency to authorize a substitution of the
prote´ge´ firm for the joint venture.
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(2) SBA may consider a mentor’s
failure to comply with the terms and
conditions of an SBA-approved mentorprote´ge´ agreement as a basis for
debarment on the grounds, including
but not limited to, that the mentor has
not complied with the terms of a public
agreement under 2 CFR 180.800(b).
(i) Results of mentor-prote´ge´
relationship. (1) In order to assess the
results of a mentor-prote´ge´ relationship
upon its completion, the prote´ge´ must
report to SBA whether it believed the
mentor-prote´ge´ relationship was
beneficial and describe any lasting
benefits to the prote´ge´.
(2) Where a prote´ge´ does not report
the results of a mentor-prote´ge´
relationship upon its completion, SBA
will not approve a second mentorprote´ge´ relationship either under this
section or under § 124.520 of this
chapter.
§ 125.10 Mentor-Prote´ge´ programs of
other agencies.
(a) Except as provided in paragraph
(c) of this section, a Federal department
or agency may not carry out a mentorprote´ge´ program for small business
unless the head of the department or
agency submits a plan to the SBA
Administrator for the program and the
SBA Administrator approves the plan.
Before starting a new mentor prote´ge´
program, the head of a department or
agency must submit a plan to the SBA
Administrator. Within one year of the
effective date of this section, the head of
a department or agency must submit a
plan to the SBA for any previously
existing mentor-prote´ge´ program that
the department or agency seeks to
continue.
(b) The SBA Administrator will
approve or disapprove a plan submitted
under paragraph (a) of this section based
on whether the proposed program:
(1) Will assist prote´ge´s to compete for
Federal prime contracts and
subcontracts; and
(2) Complies with the provisions set
forth in §§ 125.9 and 124.520 of this
chapter, as applicable.
(c) Paragraph (a) of this section does
not apply to:
(1) Any mentor-prote´ge´ program of
the Department of Defense;
(2) Any mentoring assistance
provided under a Small Business
Innovation Research Program or a Small
Business Technology Transfer Program;
and
(3) A mentor-prote´ge´ program
operated by a Department or agency on
January 2, 2013, for a period of one year
after the effective date of this section.
(d) The head of each Federal
department or agency carrying out an
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agency-specific mentor-prote´ge´ program
must report annually to SBA:
(1) The participants (both prote´ge´
firms and their approved mentors) in its
mentor-prote´ge´ program. This includes
identifying the number of participants
that are:
(i) Small business concerns;
(ii) Small business concerns owned
and controlled by service-disabled
veterans;
(iii) Small business concerns owned
and controlled by socially and
economically disadvantaged
individuals;
(iv) Small business concerns owned
and controlled by Indian tribes, Alaska
Native Corporations, Native Hawaiian
Organizations, and Community
Development Corporations; and
(v) Small business concerns owned
and controlled by women;
(2) The assistance provided to small
businesses through the program; and
(3) The progress of prote´ge´ firms
under the program to compete for
Federal prime contracts and
subcontracts.
■ 37. Amend newly redesignated
§ 125.18 by revising paragraph (b) to
read as follows:
§ 125.18 What requirements must an
SDVO SBC meet to submit an offer on a
contract?
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*
*
*
*
(b) Joint ventures. An SDVO SBC may
enter into a joint venture agreement
with one or more other SBCs or its SBAapproved mentor for the purpose of
performing an SDVO contract.
(1) Size of concerns to an SDVO SBC
joint venture. (i) A joint venture of at
least one SDVO SBC and one or more
other business concerns may submit an
offer as a small business for a
competitive SDVO SBC procurement or
sale, or be awarded a sole source SDVO
contract, so long as each concern is
small under the size standard
corresponding to the NAICS code
assigned to the procurement or sale.
(ii) A joint venture between a prote´ge´
firm that qualifies as an SDVO SBC and
its SBA-approved mentor (see §§ 125.9
and 124.520 of this chapter) will be
deemed small provided the prote´ge´
qualifies as small for the size standard
corresponding to the NAICS code
assigned to the SDVO procurement or
sale.
(2) Contents of joint venture
agreement. Every joint venture
agreement to perform an SDVO contract,
including those between a prote´ge´ firm
that qualifies as an SDVO SBC and its
SBA-approved mentor authorized by
§ 124.520 or § 125.9 of this chapter,
must contain a provision:
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(i) Setting forth the purpose of the
joint venture;
(ii) Designating an SDVO SBC as the
managing venturer of the joint venture,
and an employee of the SDVO SBC
managing venturer as the project
manager responsible for performance of
the contract;
(iii) Stating that with respect to a
separate legal entity joint venture, the
SDVO SBC must own at least 51% of the
joint venture entity;
(iv) Stating that the SDVO SBC must
receive profits from the joint venture
commensurate with the work performed
by the SDVO SBC, or in the case of a
separate legal entity joint venture,
commensurate with their ownership
interests in the joint venture;
(v) Providing for the establishment
and administration of a special bank
account in the name of the joint venture.
This account must require the signature
of all parties to the joint venture or
designees for withdrawal purposes. All
payments due the joint venture for
performance on an SDVO contract will
be deposited in the special account; all
expenses incurred under the contract
will be paid from the account as well;
(vi) Itemizing all major equipment,
facilities, and other resources to be
furnished by each party to the joint
venture, with a detailed schedule of cost
or value of each, where practical. If a
contract is indefinite in nature, such as
an indefinite quantity contract or a
multiple award contract where the level
of effort or scope of work is not known,
the joint venture must provide a general
description of the anticipated major
equipment, facilities, and other
resources to be furnished by each party
to the joint venture, without a detailed
schedule of cost or value of each, or in
the alternative, specify how the parties
to the joint venture will furnish such
resources to the joint venture once a
definite scope of work is made publicly
available;
(vii) Specifying the responsibilities of
the parties with regard to negotiation of
the contract, source of labor, and
contract performance, including ways
that the parties to the joint venture will
ensure that the joint venture and the
SDVO small business partner(s) to the
joint venture will meet the performance
of work requirements set forth in
paragraph (b)(3) of this section, where
practical. If a contract is indefinite in
nature, such as an indefinite quantity
contract or a multiple award contract
where the level of effort or scope of
work is not known, the joint venture
must provide a general description of
the anticipated responsibilities of the
parties with regard to negotiation of the
contract, source of labor, and contract
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performance, not including the ways
that the parties to the joint venture will
ensure that the joint venture and the
SDVO small business partner(s) to the
joint venture will meet the performance
of work requirements set forth in
paragraph (d) of this section, or in the
alternative, specify how the parties to
the joint venture will define such
responsibilities once a definite scope of
work is made publicly available;
(viii) Obligating all parties to the joint
venture to ensure performance of the
SDVO contract and to complete
performance despite the withdrawal of
any member;
(ix) Designating that accounting and
other administrative records relating to
the joint venture be kept in the office of
the SDVO SBC managing venturer,
unless approval to keep them elsewhere
is granted by the District Director or his/
her designee upon written request;
(x) Requiring that the final original
records be retained by the SDVO SBC
managing venturer upon completion of
the SDVO contract performed by the
joint venture;
(xi) Stating that quarterly financial
statements showing cumulative contract
receipts and expenditures (including
salaries of the joint venture’s principals)
must be submitted to SBA not later than
45 days after each operating quarter of
the joint venture; and
(xii) Stating that a project-end profit
and loss statement, including a
statement of final profit distribution,
must be submitted to SBA no later than
90 days after completion of the contract.
(3) Performance of work. (i) For any
SDVO contract, including those between
a prote´ge´ and a mentor authorized by
§ 125.9 or § 124.520 of this chapter, the
joint venture must perform the
applicable percentage of work required
by § 125.6.
(ii) The SDVO SBC partner(s) to the
joint venture must perform at least 40%
of the work performed by the joint
venture.
(A) The work performed by the SDVO
SBC partner(s) to a joint venture must be
more than administrative or ministerial
functions so that they gain substantive
experience.
(B) The amount of work done by the
partners will be aggregated and the work
done by the SDVO SBC partner(s) must
be at least 40% of the total done by all
partners. In determining the amount of
work done by a non-SDVO SBC partner,
all work done by the non-SDVO SBC
partner and any of its affiliates at any
subcontracting tier will be counted.
(4) Certification of Compliance. Prior
to the performance of any SDVO
contract as a joint venture, the SDVO
SBC partner to the joint venture must
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submit a written certification to the
contracting officer and SBA, signed by
an authorized official of each partner to
the joint venture, stating as follows:
(i) The parties have entered into a
joint venture agreement that fully
complies with paragraph (b)(2) of this
section;
(ii) The parties will perform the
contract in compliance with the joint
venture agreement and with the
performance of work requirements set
forth in paragraph (b)(3) of this section.
(5) Past performance and experience.
When evaluating the past performance
and experience of an entity submitting
an offer for an SDVO contract as a joint
venture established pursuant to this
section, a procuring activity must
consider work done individually by
each partner to the joint venture as well
as any work done by the joint venture
itself previously.
(6) Contract execution. The procuring
activity will execute an SDVO contract
in the name of the joint venture entity
or the SDVO SBC, but in either case will
identify the award as one to an SDVO
joint venture or an SDVO mentorprote´ge´ joint venture, as appropriate.
(7) Inspection of records. The joint
venture partners must allow SBA’s
authorized representatives, including
representatives authorized by the SBA
Inspector General, during normal
business hours, access to its files to
inspect and copy all records and
documents relating to the joint venture.
(8) Performance of work reports. An
SDVO SBC partner to a joint venture
must describe how it is meeting or has
met the applicable performance of work
requirements for each SDVO contract it
performs as a joint venture.
(i) The SDVO SBC partner to the joint
venture must annually submit a report
to the relevant contracting officer and to
the SBA, signed by an authorized
official of each partner to the joint
venture, explaining how and certifying
that the performance of work
requirements are being met.
(ii) At the completion of every SDVO
contract awarded to a joint venture, the
SDVO SBC partner to the joint venture
must submit a report to the relevant
contracting officer and to the SBA,
signed by an authorized official of each
partner to the joint venture, explaining
how and certifying that the performance
of work requirements were met for the
contract, and further certifying that the
contract was performed in accordance
with the provisions of the joint venture
agreement that are required under
paragraph (b)(2) of this section.
(9) Basis for suspension or debarment.
The Government may consider the
following as a ground for suspension or
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debarment as a willful violation of a
regulatory provision or requirement
applicable to a public agreement or
transaction:
(i) Failure to enter a joint venture
agreement that complies with paragraph
(b)(2) of this section;
(ii) Failure to perform a contract in
accordance with the joint venture
agreement or performance of work
requirements in paragraph (b)(3) of this
section; or
(iii) Failure to submit the certification
required by paragraph (b)(4) of this
section or comply with paragraph (b)(7)
of this section.
(10) Any person with information
concerning a joint venture’s compliance
with the performance of work
requirements may report that
information to SBA and/or the SBA
Office of Inspector General.
§ 125.22
[Amended]
38. Amend newly redesignated
§ 125.22 by adding the phrase ‘‘,
regardless of the place of performance,’’
in the first sentence of paragraphs (b)(1)
and (b)(2)(i) after the words ‘‘for small
business concerns’’ and before the
words ‘‘when there is a reasonable
expectation’’.
■
PART 126—HUBZONE PROGRAM
39. The authority citation for part 126
is revised to read as follows:
■
Authority: 15 U.S.C. 632(a), 632(j), 632(p),
644, and 657a; Pub. L. 111–240, 24 Stat.
2504.
40. Amend § 126.306 as follows:
a. Revise paragraphs (a) and (b);
b. Redesignate paragraphs (c) and (d)
as paragraphs (f) and (g), respectively;
and
■ c. Add new paragraphs (c), (d) and (e).
The revisions and additions read as
follows:
■
■
■
§ 126.306 How will SBA process the
certification?
(a) The D/HUB or designee is
authorized to approve or decline
applications for certification. SBA will
receive and review all applications and
request supporting documents. SBA
must receive all required information,
supporting documents, and completed
HUBZone representation before it will
begin processing a concern’s
application. SBA will not process
incomplete packages. SBA will make its
determination within ninety (90)
calendar days after receipt of a complete
package whenever practicable. The
decision of the D/HUB or designee is the
final agency decision.
(b) SBA may request additional
information or clarification of
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information contained in an application
or document submission at any time.
(c) The burden of proof to
demonstrate eligibility is on the
applicant concern. If a concern does not
provide requested information within
the allotted time provided by SBA, or if
it submits incomplete information, SBA
may presume that disclosure of the
missing information would adversely
affect the business concern or
demonstrate a lack of eligibility in the
area or areas to which the information
relates.
(d) The applicant must be eligible as
of the date it submitted its application
and up until and at the time the D/HUB
issues a decision. The decision will be
based on the facts set forth in the
application, any information received in
response to SBA’s request for
clarification, and any changed
circumstances since the date of
application.
(e) Any changed circumstance
occurring after an applicant has
submitted an application will be
considered and may constitute grounds
for decline. After submitting the
application and signed representation,
an applicant must notify SBA of any
changes that could affect its eligibility.
The D/HUB may propose decertification
for any HUBZone SBC that failed to
inform SBA of any changed
circumstances that affected its eligibility
for the program during the processing of
the application.
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*
■ 41. Amend § 126.600 by revising the
introductory text to read as follows:
§ 126.600
What are HUBZone contracts?
HUBZone contracts are contracts
awarded to a qualified HUBZone SBC,
regardless of the place of performance,
through any of the following
procurement methods:
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*
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*
*
■ 42. Revise § 126.615 to read as
follows:
§ 126.615 May a large business participate
on a HUBZone contract?
Except as provided in § 126.618(d), a
large business may not participate as a
prime contractor on a HUBZone award,
but may participate as a subcontractor to
an otherwise qualified HUBZone SBC,
subject to the contract performance
requirements set forth in § 126.700.
■ 43. Revise § 126.616 to read as
follows:
§ 126.616 What requirements must a joint
venture satisfy to submit an offer on a
HUBZone contract?
(a) General. A qualified HUBZone
SBC may enter into a joint venture
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agreement with one or more other SBCs,
or with an approved mentor authorized
by § 125.9 of this chapter (or, if also an
8(a) BD Participant, with an approved
mentor authorized by § 124.520 of this
chapter), for the purpose of submitting
an offer for a HUBZone contract. The
joint venture itself need not be certified
as a qualified HUBZone SBC.
(b) Size. (1) A joint venture of at least
one qualified HUBZone SBC and one or
more other business concerns may
submit an offer as a small business for
a HUBZone procurement or sale so long
as each concern is small under the size
standard corresponding to the NAICS
code assigned to the procurement or
sale.
(2) A joint venture between a prote´ge´
firm and its SBA-approved mentor (see
§ 125.9 of this chapter) will be deemed
small provided the prote´ge´ qualifies as
small for the size standard
corresponding to the NAICS code
assigned to the HUBZone procurement
or sale.
(c) Contents of joint venture
agreement. Every joint venture
agreement to perform a HUBZone
contract, including those between a
prote´ge´ firm that is a certified HUBZone
SBC and its SBA-approved mentor
authorized by § 124.520 or § 125.9 of
this chapter, must contain a provision:
(1) Setting forth the purpose of the
joint venture;
(2) Designating a HUBZone SBC as the
managing venturer of the joint venture,
and an employee of the HUBZone SBC
managing venturer as the project
manager responsible for performance of
the contract. The individual identified
as the project manager of the joint
venture need not be an employee of the
HUBZone SBC at the time the joint
venture submits an offer, but, if he or
she is not, there must be a signed letter
of intent that the individual commits to
be employed by the HUBZone SBC if
the joint venture is the successful
offeror. The individual identified as the
project manager cannot be employed by
the mentor and become an employee of
the HUBZone SBC for purposes of
performance under the joint venture;
(3) Stating that with respect to a
separate legal entity joint venture, the
HUBZone SBC must own at least 51%
of the joint venture entity;
(4) Stating that the HUBZone SBC
must receive profits from the joint
venture commensurate with the work
performed by the HUBZone SBC, or in
the case of a separate legal entity joint
venture, commensurate with their
ownership interests in the joint venture;
(5) Providing for the establishment
and administration of a special bank
account in the name of the joint venture.
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This account must require the signature
of all parties to the joint venture or
designees for withdrawal purposes. All
payments due the joint venture for
performance on a HUBZone contract
will be deposited in the special account;
all expenses incurred under the contract
will be paid from the account as well;
(6) Itemizing all major equipment,
facilities, and other resources to be
furnished by each party to the joint
venture, with a detailed schedule of cost
or value of each, where practical. If a
contract is indefinite in nature, such as
an indefinite quantity contract or a
multiple award contract where the level
of effort or scope of work is not known,
the joint venture must provide a general
description of the anticipated major
equipment, facilities, and other
resources to be furnished by each party
to the joint venture, without a detailed
schedule of cost or value of each, or in
the alternative, specify how the parties
to the joint venture will furnish such
resources to the joint venture once a
definite scope of work is made publicly
available;
(7) Specifying the responsibilities of
the parties with regard to negotiation of
the contract, source of labor, and
contract performance, including ways
that the parties to the joint venture will
ensure that the joint venture and the
HUBZone partner(s) to the joint venture
will meet the performance of work
requirements set forth in paragraph (d)
of this section, where practical. If a
contract is indefinite in nature, such as
an indefinite quantity contract or a
multiple award contract where the level
of effort or scope of work is not known,
the joint venture must provide a general
description of the anticipated
responsibilities of the parties with
regard to negotiation of the contract,
source of labor, and contract
performance, not including the ways
that the parties to the joint venture will
ensure that the joint venture and the
HUBZone partner(s) to the joint venture
will meet the performance of work
requirements set forth in paragraph (d)
of this section, or in the alternative,
specify how the parties to the joint
venture will define such responsibilities
once a definite scope of work is made
publicly available;
(8) Obligating all parties to the joint
venture to ensure performance of the
HUBZone contract and to complete
performance despite the withdrawal of
any member;
(9) Designating that accounting and
other administrative records relating to
the joint venture be kept in the office of
the HUBZone SBC managing venturer,
unless approval to keep them elsewhere
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is granted by the District Director or his/
her designee upon written request;
(10) Requiring that the final original
records be retained by the HUBZone
SBC managing venturer upon
completion of the HUBZone contract
performed by the joint venture;
(11) Stating that quarterly financial
statements showing cumulative contract
receipts and expenditures (including
salaries of the joint venture’s principals)
must be submitted to SBA not later than
45 days after each operating quarter of
the joint venture; and
(12) Stating that a project-end profit
and loss statement, including a
statement of final profit distribution,
must be submitted to SBA no later than
90 days after completion of the contract.
(d) Limitations on subcontracting. (1)
For any HUBZone contract to be
performed by a joint venture between a
qualified HUBZone SBC and another
qualified HUBZone SBC, the aggregate
of the qualified HUBZone SBCs to the
joint venture, not each concern
separately, must perform the applicable
percentage of work required by § 125.6
of this chapter.
(2) For any HUBZone contract to be
performed by a joint venture between a
qualified HUBZone prote´ge´ and a small
business concern or its SBA-approved
mentor authorized by § 125.9 or
§ 124.520 of this chapter, the joint
venture must perform the applicable
percentage of work required by § 125.6
of this chapter, and the HUBZone SBC
partner to the joint venture must
perform at least 40% of the work
performed by the joint venture.
(i) The work performed by the
HUBZone SBC partner to a joint venture
must be more than administrative or
ministerial functions so that it gains
substantive experience.
(ii) The amount of work done by the
partners will be aggregated and the work
done by the HUBZone prote´ge´ partner
must be at least 40% of the total done
by the partners. In determining the
amount of work done by a mentor
participating in a joint venture with a
HUBZone qualified prote´ge´, all work
done by the mentor and any of its
affiliates at any subcontracting tier will
be counted.
(e) Certification of compliance. Prior
to the performance of any HUBZone
contract as a joint venture, the
HUBZone SBC partner to the joint
venture must submit a written
certification to the contracting officer
and SBA, signed by an authorized
official of each partner to the joint
venture, stating as follows:
(i) The parties have entered into a
joint venture agreement that fully
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complies with paragraph (c) of this
section;
(ii) The parties will perform the
contract in compliance with the joint
venture agreement and with the
performance of work requirements set
forth in paragraph (d) of this section.
(f) Past performance and experience.
When evaluating the past performance
and experience of an entity submitting
an offer for a HUBZone contract as a
joint venture established pursuant to
this section, a procuring activity must
consider work done individually by
each partner to the joint venture as well
as any work done by the joint venture
itself previously.
(g) Contract execution. The procuring
activity will execute a HUBZone
contract in the name of the joint venture
entity or the HUBZone SBC, but in
either case will identify the award as
one to a HUBZone joint venture or a
HUBZone mentor-prote´ge´ joint venture,
as appropriate.
(h) Inspection of records. The joint
venture partners must allow SBA’s
authorized representatives, including
representatives authorized by the SBA
Inspector General, during normal
business hours, access to its files to
inspect and copy all records and
documents relating to the joint venture.
(i) Performance of work reports. The
HUBZone SBC partner to a joint venture
must describe how it is meeting or has
met the applicable performance of work
requirements for each HUBZone
contract it performs as a joint venture.
(1) The HUBZone SBC partner to the
joint venture must annually submit a
report to the relevant contracting officer
and to the SBA, signed by an authorized
official of each partner to the joint
venture, explaining how the
performance of work requirements are
being met for each HUBZone contract
performed during the year.
(2) At the completion of every
HUBZone contract awarded to a joint
venture, the HUBZone SBC partner to
the joint venture must submit a report
to the relevant contracting officer and to
the SBA, signed by an authorized
official of each partner to the joint
venture, explaining how and certifying
that the performance of work
requirements were met for the contract,
and further certifying that the contract
was performed in accordance with the
provisions of the joint venture
agreement that are required under
paragraph (c) of this section.
(j) Basis for suspension or debarment.
The Government may consider the
following as a ground for suspension or
debarment as a willful violation of a
regulatory provision or requirement
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applicable to a public agreement or
transaction:
(1) Failure to enter a joint venture
agreement that complies with paragraph
(c) of this section;
(2) Failure to perform a contract in
accordance with the joint venture
agreement or performance of work
requirements in paragraph (d) of this
section; or
(3) Failure to submit the certification
required by paragraph (e) of this section
or comply with paragraph (h) of this
section.
(k) Any person with information
concerning a joint venture’s compliance
with the performance of work
requirements may report that
information to SBA and/or the SBA
Office of Inspector General.
■ 44. Revise § 126.618 to read as
follows:
§ 126.618 How does a HUBZone SBC’s
participation in a Mentor-Prote´ge´
relationship affect its participation in the
HUBZone Program?
(a) A qualified HUBZone SBC may
enter into a mentor-prote´ge´ relationship
under § 125.9 of this chapter (or, if also
an 8(a) BD Participant, under § 124.520
of this chapter) or in connection with a
mentor-prote´ge´ program of another
agency, provided that such relationships
do not conflict with the underlying
HUBZone requirements.
(b) For purposes of determining
whether an applicant to the HUBZone
Program or a HUBZone SBC qualifies as
small under part 121 of this chapter,
SBA will not find affiliation between
the applicant or qualified HUBZone
SBC and the firm that is its mentor in
an SBA-approved mentor-prote´ge´
relationship (including a mentor that is
other than small) on the basis of the
mentor-prote´ge´ agreement or the
assistance provided to the prote´ge´ firm
under the agreement. SBA will not
consider the employees of the mentor in
determining whether the applicant or
qualified HUBZone SBC meets (or
continues to meet) the 35% HUBZone
residency requirement or the principal
office requirement, or in determining
the size of the applicant or qualified
HUBZone SBC for any employee-based
size standard.
(c) A qualified HUBZone SBC that is
a prime contractor on a HUBZone
contract may subcontract work to its
mentor.
(1) The HUBZone SBC must meet the
applicable performance of work
requirements set forth in § 125.6(c) of
this chapter.
(2) SBA may find affiliation between
a prime HUBZone contractor and its
mentor subcontractor where the mentor
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48593
will perform primary and vital
requirements of the contract. See
§ 121.103(h)(4) of this chapter.
PART 127—WOMEN-OWNED SMALL
BUSINESS FEDERAL CONTRACT
PROGRAM
45. The authority citation for part 127
is revised to read as follows:
■
Authority: 15 U.S.C. 632, 634(b)(6),
637(m), 644 and 657r.
§ 127.500
[Amended]
46. Amend § 127.500 by adding the
words ‘‘, regardless of the place of
performance’’ to the end of the sentence.
■ 47. Amend § 127.506 as follows:
■ a. Revise the section introductory text
and paragraph (a), add an italic subject
head to paragraph (c) introductory text,
and revise paragraphs (c)(2) and (3);
■ b. Redesignate paragraph (c)(4) as
(c)(7) and paragraph (c)(5) as (c)(10)
respectively;
■ c. Add new paragraphs (c)(4) through
(6);
■ d. Revise newly redesignated
paragraphs (c)(7) and (c)(10);
■ e. Add paragraphs (c)(8) and (9) and
(c)(11) and (12);
■ f. Revise paragraphs (d), (e), and (f);
and
■ g. Add paragraphs (g) through (l).
The revisions and additions read as
follows:
■
§ 127.506 May a joint venture submit an
offer on an EDWOSB or WOSB
requirement?
A joint venture, including those
between a prote´ge´ and a mentor under
§ 125.9 of this chapter (or, if also an 8(a)
BD Participant, under § 124.520 of this
chapter), may submit an offer on a
WOSB Program contract if the joint
venture meets all of the following
requirements:
(a)(1) A joint venture of at least one
WOSB or EDWOSB and one or more
other business concerns may submit an
offer as a small business for a WOSB
Program procurement or sale so long as
each concern is small under the size
standard corresponding to the NAICS
code assigned to the procurement or
sale.
(2) A joint venture between a prote´ge´
firm and its SBA-approved mentor (see
§ 125.9 and § 124.520 of this chapter)
will be deemed small provided the
prote´ge´ qualifies as small for the size
standard corresponding to the NAICS
code assigned to the WOSB Program
procurement or sale.
*
*
*
*
*
(c) Contents of joint venture
agreement.* * *
*
*
*
*
*
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(2) Designating a WOSB as the
managing venturer of the joint venture,
and an employee of the WOSB
managing venturer as the project
manager responsible for performance of
the contract. The individual identified
as the project manager of the joint
venture need not be an employee of the
WOSB at the time the joint venture
submits an offer, but, if he or she is not,
there must be a signed letter of intent
that the individual commits to be
employed by the WOSB if the joint
venture is the successful offeror. The
individual identified as the project
manager cannot be employed by the
mentor and become an employee of the
WOSB for purposes of performance
under the joint venture;
(3) Stating that with respect to a
separate legal entity joint venture, the
WOSB must own at least 51% of the
joint venture entity;
(4) Stating that the WOSB must
receive profits from the joint venture
commensurate with the work performed
by the WOSB, or in the case of a
separate legal entity joint venture,
commensurate with their ownership
interests in the joint venture;
(5) Providing for the establishment
and administration of a special bank
account in the name of the joint venture.
This account must require the signature
of all parties to the joint venture or
designees for withdrawal purposes. All
payments due the joint venture for
performance on a WOSB Program
contract will be deposited in the special
account; all expenses incurred under
the contract will be paid from the
account as well;
(6) Itemizing all major equipment,
facilities, and other resources to be
furnished by each party to the joint
venture, with a detailed schedule of cost
or value of each, where practical. If a
contract is indefinite in nature, such as
an indefinite quantity contract or a
multiple award contract where the level
of effort or scope of work is not known,
the joint venture must provide a general
description of the anticipated major
equipment, facilities, and other
resources to be furnished by each party
to the joint venture, without a detailed
schedule of cost or value of each, or in
the alternative, specify how the parties
to the joint venture will furnish such
resources to the joint venture once a
definite scope of work is made publicly
available;
(7) Specifying the responsibilities of
the parties with regard to negotiation of
the contract, source of labor, and
contract performance, including ways
that the parties to the joint venture will
ensure that the joint venture and the
WOSB Program participant(s) in the
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joint venture will meet the performance
of work requirements set forth in
paragraph (d) of this section, where
practical. If a contract is indefinite in
nature, such as an indefinite quantity
contract or a multiple award contract
where the level of effort or scope of
work is not known, the joint venture
must provide a general description of
the anticipated responsibilities of the
parties with regard to negotiation of the
contract, source of labor, and contract
performance, not including the ways
that the parties to the joint venture will
ensure that the joint venture and the
WOSB Program participant(s) in the
joint venture will meet the performance
of work requirements set forth in
paragraph (d) of this section, or in the
alternative, specify how the parties to
the joint venture will define such
responsibilities once a definite scope of
work is made publicly available;
(8) Obligating all parties to the joint
venture to ensure performance of the
WOSB contract and to complete
performance despite the withdrawal of
any member;
(9) Designating that accounting and
other administrative records relating to
the joint venture be kept in the office of
the WOSB managing venturer, unless
approval to keep them elsewhere is
granted by the District Director or his/
her designee upon written request;
(10) Requiring that the final original
records be retained by the WOSB
managing venturer upon completion of
the WOSB Program contract performed
by the joint venture;
(11) Stating that quarterly financial
statements showing cumulative contract
receipts and expenditures (including
salaries of the joint venture’s principals)
must be submitted to SBA not later than
45 days after each operating quarter of
the joint venture; and
(12) Stating that a project-end profit
and loss statement, including a
statement of final profit distribution,
must be submitted to SBA no later than
90 days after completion of the contract.
(d) Performance of work. (1) For any
WOSB Program contract, the joint
venture (including one between a
prote´ge´ and a mentor authorized by
§ 125.9 or § 124.520 of this chapter)
must perform the applicable percentage
of work required by § 125.6 of this
chapter.
(2) The WOSB partner(s) to the joint
venture must perform at least 40% of
the work performed by the joint venture.
(i) The work performed by the WOSB
partner(s) to a joint venture must be
more than administrative or ministerial
functions so that they gain substantive
experience.
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(ii) The amount of work done by the
partners will be aggregated and the work
done by the WOSB partner(s) must be at
least 40% of the total done by all
partners. In determining the amount of
work done by the non-WOSB partner,
all work done by the non-WOSB partner
and any of its affiliates at any
subcontracting tier will be counted.
(e) Certification of compliance. Prior
to the performance of any WOSB
Program contract as a joint venture, the
WOSB Program participant in the joint
venture must submit a written
certification to the contracting officer
and SBA, signed by an authorized
official of each partner to the joint
venture, stating as follows:
(i) The parties have entered into a
joint venture agreement that fully
complies with paragraph (c) of this
section;
(ii) The parties will perform the
contract in compliance with the joint
venture agreement and with the
performance of work requirements set
forth in paragraph (d) of this section.
(f) Past performance and experience.
When evaluating the past performance
and experience of an entity submitting
an offer for a WOSB Program contract as
a joint venture established pursuant to
this section, a procuring activity must
consider work done individually by
each partner to the joint venture as well
as any work done by the joint venture
itself previously.
(g) Contract execution. The procuring
activity will execute a WOSB Program
contract in the name of the joint venture
entity or the WOSB, but in either case
will identify the award as one to a
WOSB Program joint venture or a WOSB
Program mentor-prote´ge´ joint venture,
as appropriate.
(h) Submission of joint venture
agreement. The WOSB Program
participant must provide a copy of the
joint venture agreement to the
contracting officer.
(i) Inspection of records. The joint
venture partners must allow SBA’s
authorized representatives, including
representatives authorized by the SBA
Inspector General, during normal
business hours, access to its files to
inspect and copy all records and
documents relating to the joint venture.
(j) Performance of work reports. The
WOSB Program participant in the joint
venture must describe how it is meeting
or has met the applicable performance
of work requirements for each WOSB
Program contract it performs as a joint
venture.
(1) The WOSB partner to the joint
venture must annually submit a report
to the relevant contracting officer and to
the SBA, signed by an authorized
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official of each partner to the joint
venture, explaining how the
performance of work requirements are
being met for each WOSB Program
contract performed during the year.
(2) At the completion of every WOSB
Program contract awarded to a joint
venture, the WOSB partner to the joint
venture must submit a report to the
relevant contracting officer and to the
SBA, signed by an authorized official of
each partner to the joint venture,
explaining how and certifying that the
performance of work requirements were
met for the contract, and further
certifying that the contract was
performed in accordance with the
provisions of the joint venture
agreement that are required under
paragraph (c) of this section.
(k) Basis for suspension or debarment.
The Government may consider the
following as a ground for suspension or
debarment as a willful violation of a
regulatory provision or requirement
applicable to a public agreement or
transaction:
(1) Failure to enter a joint venture
agreement that complies with paragraph
(c) of this section;
(2) Failure to perform a contract in
accordance with the joint venture
agreement or performance of work
requirements in paragraph (d) of this
section; or
(3) Failure to submit the certification
required by paragraph (e) or comply
with paragraph (i) of this section.
(l) Any person with information
concerning a joint venture’s compliance
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with the performance of work
requirements may report that
information to SBA and/or the SBA
Office of Inspector General.
PART 134—RULES OF PROCEDURE
GOVERNING CASES BEFORE THE
OFFICE OF HEARINGS AND APPEALS
48. 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), 648(l), 656(i), and 687(c);
E.O. 12549, 51 FR 6370, 3 CFR, 1986 Comp.,
p. 189.
49. Amend § 134.227 by revising
paragraph (c) to read as follows:
■
§ 134.227
Finality of decisions.
*
*
*
*
*
(c) Reconsideration. Except as
otherwise provided by statute, the
applicable program regulations in this
chapter, or this part 134, an initial or
final decision of the Judge may be
reconsidered. Any party in interest,
including SBA where SBA did not
appear as a party during the proceeding
that led to the issuance of the Judge’s
decision, may request reconsideration
by filing with the Judge and serving a
petition for reconsideration within 20
days after service of the written
decision, upon a clear showing of an
error of fact or law material to the
decision. The Judge also may reconsider
a decision on his or her own initiative.
50. Amend § 134.406 by revising
paragraph (b) to read as follows:
■
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§ 134.406
record.
48595
Review of the administrative
*
*
*
*
*
(b) Except in suspension appeals, the
Administrative Law Judge’s review is
limited to determining whether the
Agency’s determination is arbitrary,
capricious, or contrary to law. As long
as the Agency’s determination is not
arbitrary, capricious or contrary to law,
the Administrative Law Judge must
uphold it on appeal.
(1) The Administrative Law Judge
must consider whether the decision was
based on a consideration of the relevant
factors and whether there has been a
clear error of judgment.
(2) If the SBA’s path of reasoning may
reasonably be discerned, the
Administrative Law Judge will uphold a
decision of less than ideal clarity.
*
*
*
*
*
§ 134.501
[Amended]
51. Amend § 134.501 by removing
‘‘§ 125.26’’ from paragraph (a) and by
adding ‘‘§ 125.29’’ in its place.
■
§ 134.515
[Amended]
52. Amend § 134.515 by removing ‘‘13
CFR 125.28’’ from paragraph (a) and by
adding ‘‘§ 125.31 of this chapter’’ in its
place.
■
Dated: July 1, 2016.
Maria Contreras-Sweet,
Administrator.
[FR Doc. 2016–16399 Filed 7–22–16; 8:45 am]
BILLING CODE 8025–01–P
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| File Modified | 2016-07-23 |
| File Created | 2016-07-23 |