13 CFR Regulation

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ELECTRONIC CODE OF FEDERAL REGULATIONS
e-CFR data is current as of January 27, 2021
Title 13 → Chapter I → Part 125
Title 13: Business Credit and Assistance
PART 125—GOVERNMENT CONTRACTING PROGRAMS
Contents
§125.1 What definitions are important to SBA's Government Contracting Programs?
§125.2 What are SBA's and the procuring agency's responsibilities when providing
contracting assistance to small businesses?
§125.3 What types of subcontracting assistance are available to small businesses?
§125.4 What is the Government property sales assistance program?
§125.5 What is the Certificate of Competency Program?
§125.6 What are the prime contractor's limitations on subcontracting?
§125.7 Acquisition-related dollar thresholds.
§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?
§125.9 What are the rules governing SBA's small business mentor-protégé program?
§125.10 Mentor-Protégé programs of other agencies.
Subpart A—Definitions for the Service-Disabled Veteran-Owned Small Business
Concern Program
§125.11 What definitions are important in the Service-Disabled Veteran-Owned (SDVO)
Small Business Concern (SBC) Program?
Subpart B—Eligibility Requirements for the SDVO SBC Program
§125.12
§125.13
§125.14
§125.15
§125.16

Who does SBA consider to own an SDVO SBC?
Who does SBA consider to control an SDVO SBC?
What size standards apply to SDVO SBCs?
[Reserved]
[Reserved]

Subpart C—Contracting with SDVO SBCs
§125.17
§125.18
§125.19
§125.20
§125.21

What are SDVO contracts?
What requirements must an SDVO SBC meet to submit an offer on a contract?
[Reserved]
[Reserved]
What requirements are not available for SDVO contracts?

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§125.22 When may a contracting officer set-aside a procurement for SDVO SBCs?
§125.23 When may a contracting officer award sole source contracts to SDVO SBCs?
§125.24 Are there SDVO contracting opportunities at or below the simplified acquisition
threshold?
§125.25 May SBA appeal a contracting officer's decision not to make a procurement
available for award as an SDVO contract?
§125.26 What is the process for such an appeal?
Subpart D—Protests Concerning SDVO SBCs
§125.27
§125.28
protest?
§125.29
§125.30
§125.31

Who may protest the status of an SDVO SBC?
What are the requirements for filing a service-disabled veteran-owned status
What are the grounds for filing an SDVO SBC protest?
How will SBA process an SDVO protest?
What are the procedures for appealing an SDVO status protest?

Subpart E—Penalties and Retention of Records
§125.32 What are the requirements for representing SDVO SBC status, and what are the
penalties for misrepresentation?
§125.33 What must a concern do in order to be identified as a SDVO SBC in any Federal
procurement databases?
Subpart F—Surplus Personal Property for Veteran-Owned Small Business Programs
§125.100 How does a small business concern owned and controlled by veterans obtain
Federal surplus personal property?
A
8127.

S

: 15 U.S.C. 632(p), (q), 634(b)(6), 637, 644, 657f, 657q, 657r, and 657s; 38 U.S.C. 501 and

: 61 FR 3312, Jan. 31, 1996, unless otherwise noted.

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§125.1 What definitions are important to SBA's Government Contracting Programs?
Chief Acquisition Officer means the employee of a Federal agency designated as such
pursuant to section 16(a) of the Office of Federal Procurement Policy Act (41 U.S.C. 414(a)).
Commercial off-the-shelf item has the same definition as set forth in 41 U.S.C. 101 (as
renumbered) and Federal Acquisition Regulation (FAR) 2.101 (48 U.S.C. 2.101).
Consolidation of contract requirements, consolidated contract, or consolidated
requirement means a solicitation for a single contract or a Multiple Award Contract to: (1)
Satisfy two or more requirements of the Federal agency for goods or services that have been
provided to or performed for the Federal agency under two or more separate contracts each
of which was lower in cost than the total cost of the contract for which the offers are solicited,
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the total cost of which exceeds $2 million (including options); or (2) Satisfy requirements of
the Federal agency for construction projects to be performed at two or more discrete sites.
Contract, unless otherwise noted, has the same definition as set forth in FAR 2.101 (48
U.S.C. 2.101) and includes orders issued against Multiple Award Contracts and orders
competed under agreements where the execution of the order is the contract (e.g., a Blanket
Purchase Agreement (BPA), a Basic Agreement (BA), or a Basic Ordering Agreement
(BOA)).
Contract bundling, bundled requirement, bundled contract, or bundling means the
consolidation of two or more procurement requirements for goods or services previously
provided or performed under separate smaller contracts into a solicitation of offers for a
single contract or a Multiple Award Contract that is likely to be unsuitable for award to a small
business concern (but may be suitable for award to a small business with a Small Business
Teaming Arrangement) due to:
(1) The diversity, size, or specialized nature of the elements of the performance
specified;
(2) The aggregate dollar value of the anticipated award;
(3) The geographical dispersion of the contract performance sites; or
(4) Any combination of the factors described in paragraphs (e)(1), (2), and (3) of this
section.
Cost of materials means costs of the items purchased, handling and associated shipping
costs for the purchased items (which includes raw materials), commercial off-the-shelf items
(and similar common supply items or commercial items that require additional manufacturing,
modification or integration to become end items), special tooling, special testing equipment,
and construction equipment purchased for and required to perform on the contract. In the
case of a supply contract, cost of materials includes the acquisition of services or products
from outside sources following normal commercial practices within the industry.
General Services Administration (GSA) Schedule Contract means a Multiple Award
Contract issued by GSA and includes the Federal Supply Schedules and other Multiple
Award Schedules.
Multiple Award Contract means a contract that is:
(1) A Multiple Award Schedule contract issued by GSA (e.g., GSA Schedule Contract) or
agencies granted Multiple Award Schedule contract authority by GSA (e.g., Department of
Veterans Affairs) as described in FAR part 38 and subpart 8.4;
(2) A multiple award task-order or delivery-order contract issued in accordance with FAR
subpart 16.5, including Governmentwide acquisition contracts; or

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(3) Any other indefinite-delivery, indefinite-quantity contract entered into with two or more
sources pursuant to the same solicitation.
Office of Small and Disadvantaged Business Utilization (OSDBU) or the Office of Small
Business Programs (OSBP) means the office in each Federal agency having procurement
powers that is responsible for ensuring that small businesses receive a fair proportion of
Federal contracts in that agency. The office is managed by a Director, who is responsible and
reports directly to the head of the agency or deputy to the agency (except that for DoD, the
Director reports to the Secretary or the Secretary's designee).
Partial set-aside (or partially set-aside) means, for a Multiple Award Contract, a
contracting vehicle that can be used when: market research indicates that a total set-aside is
not appropriate; the procurement can be broken up into smaller discrete portions or discrete
categories such as by Contract Line Items, Special Item Numbers, Sectors or Functional
Areas or other equivalent; and two or more small business concerns, 8(a) BD Participants,
HUBZone SBCs, SDVO SBCs, WOSBs or EDWOSBs are expected to submit an offer on the
set-aside part or parts of the requirement at a fair market price.
Reserve means, for a Multiple Award Contract,
(1) An acquisition conducted using full and open competition where the contracting
officer makes—
(i) Two or more contract awards to any one type of small business concern (e.g., small
business, 8(a), HUBZone, SDVO SBC, WOSB or EDWOSB) and competes any orders solely
amongst the specified types of small business concerns if the “rule of two” or any alternative
set-aside requirements provided in the small business program have been met;
(ii) Several awards to several different types of small businesses (e.g., one to 8(a), one
to HUBZone, one to SDVO SBC, one to WOSB or EDWOSB) and competes any orders
solely amongst all of the small business concerns if the “rule of two” has been met; or
(iii) One contract award to any one type of small business concern (e.g., small business,
8(a), HUBZone, SDVO SBC, WOSB or EDWOSB) and subsequently issues orders directly to
that concern.
(2) An award on a bundled contract to one or more small businesses with a Small
Business Teaming Arrangement.
“Rule of Two” refers to the requirements set forth in §§124.506, 125.2(f), 125.19(c),
126.607(c) and 127.503 of this chapter that there is a reasonable expectation that the
contracting officer will obtain offers from at least two small businesses and award will be
made at fair market price.
Senior Procurement Executive (SPE) means the employee of a Federal agency
designated as such pursuant to section 16(c) of the Office of Federal Procurement Policy Act
(41 U.S.C. 414(c)).
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Separate contract means a contract or order (including those placed against a GSA
Schedule Contract or an indefinite delivery, indefinite quantity contract) that has previously
been performed by any business, including an other-than-small business or small business
concern.
Separate smaller contract means a contract that has previously been performed by one
or more small business concerns or was suitable for award to one or more small business
concerns.
Similarly situated entity is a subcontractor that has the same small business program
status as the prime contractor. This means that: For a HUBZone requirement, a
subcontractor that is a certified HUBZone small business concern; for a small business setaside, partial set-aside, or reserve a subcontractor that is a small business concern; for a
SDVO small business requirement, a subcontractor that is a self-certified SDVO SBC; for an
8(a) requirement, a subcontractor that is an 8(a) certified Program Participant; for a WOSB or
EDWOSB contract, a subcontractor that has complied with the requirements of part 127. In
addition to sharing the same small business program status as the prime contractor, a
similarly situated entity must also be small for the NAICS code that the prime contractor
assigned to the subcontract the subcontractor will perform.
Single contract means any contract or order (including those placed against a GSA
Schedule Contract or an indefinite delivery, indefinite quantity contract) resulting in one or
more awardee(s).
Subcontract or subcontracting means, except for purposes of §125.3, that portion of the
contract performed by a business concern, other than the business concern awarded the
contract, under a second contract, purchase order, or agreement for any parts, supplies,
components, or subassemblies which are not available commercial off-the-shelf items, and
which are manufactured in accordance with drawings, specifications, or designs furnished by
the contractor, or by the government as a portion of the solicitation. Raw castings, forgings,
and moldings are considered as materials, not as subcontracting costs. Where the prime
contractor has been directed by the Government as part of the contract to use any specific
source for parts, supplies, or components subassemblies, the costs associated with those
purchases will be considered as part of the cost of materials, not subcontracting costs.
Substantial bundling means any bundling that meets or exceeds the following dollar
amounts (if the acquisition strategy contemplates Multiple Award Contracts or multiple award
orders issued against a GSA Schedule Contract or a task or delivery order contract awarded
by another agency, these thresholds apply to the cumulative estimated value of the Multiple
Award Contracts or orders, including options):
(1) $8.0 million or more for the Department of Defense;
(2) $6.0 million or more for the National Aeronautics and Space Administration, the
General Services Administration, and the Department of Energy; and
(3) $2.5 million or more for all other agencies.
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[78 FR 61134, Oct. 2, 2013, as amended at 81 FR 34261, May 31, 2016; 84 FR 65239, Nov. 26,
2019]

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§125.2 What are SBA's and the procuring agency's responsibilities when providing
contracting assistance to small businesses?
(a)(1) General. The objective of the SBA's contracting programs is to assist small
business concerns, including 8(a) BD Participants, HUBZone small business concerns,
Service-Disabled Veteran-Owned Small Business Concerns, Women-Owned Small
Businesses and Economically Disadvantaged Women-Owned Small Businesses, in obtaining
a fair share of Federal Government prime contracts, subcontracts, orders, and property
sales. Therefore, these regulations apply to all types of Federal Government contracts,
including Multiple Award Contracts, and contracts for architectural and engineering services,
research, development, test and evaluation. 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 disposal agency determine to be in the interest of:
(i) Maintaining or mobilizing the Nation's full productive capacity;
(ii) War or national defense programs;
(iii) Assuring that a fair proportion of the total purchases and contracts for property,
services and construction for the Government in each industry category are placed with small
business concerns; or
(iv) Assuring that a fair proportion of the total sales of Government property is made to
small business concerns.
(2) One acceptable offer. If the contracting officer receives only one acceptable offer
from a responsible small business concern in response to any small or socioeconomic setaside, the contracting officer should make an award to that firm.
(b) SBA's responsibilities in the acquisition planning process—(1) SBA Procurement
Center Representative (PCR) Responsibilities—
(i) PCR Review—(A) SBA has PCRs who are generally located at Federal agencies and
buying activities which have major contracting programs. At the SBA's discretion, PCRs may
review any acquisition to determine whether a set-aside or sole-source award to a small
business under one of SBA's programs is appropriate and to identify alternative strategies to
maximize the participation of small businesses in the procurement. PCRs also advocate for
the maximum practicable utilization of small business concerns in Federal contracting,
including by advocating against the consolidation or bundling of contract requirements, as
defined in §125.1, and reviewing any justification provided by the agency for consolidation or
bundling. This review includes acquisitions that are Multiple Award Contracts where the
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agency has not set-aside all or part of the acquisition or reserved the acquisition for small
businesses. It also includes acquisitions where the agency has not set-aside orders placed
against Multiple Award Contracts for small business concerns.Unless the contracting agency
requests a review, PCRs will not review an acquisition by or on behalf of the Department of
Defense if the acquisition is conducted for a foreign government pursuant to section 22 of the
Arms Control Export Act (22 U.S.C. 2762), is humanitarian or civic assistance provided in
conjunction with military operations as defined in 10 U.S.C. 401(e), is for a contingency
operation as defined in 10 U.S.C. 101(a)(13), is to be awarded pursuant to an agreement
with the government of a foreign country in which Armed Forces of the United States are
deployed, or where both the place of award and place of performance are entirely outside of
the United States and its territories.
(B) PCRs will work with the cognizant Small Business Specialist (SBS) and agency
OSDBU or OSBP as early in the acquisition process as practicable to identify proposed
solicitations that involve bundling, and with the agency acquisition officials to revise the
acquisition strategies for such proposed solicitations, where appropriate, to increase the
probability of participation by small businesses, including small business contract teams and
Small Business Teaming Arrangements, as prime contractors.
(C) In conjunction with their duties to promote the set-aside of procurements for small
business, PCRs may identify small businesses that are capable of performing particular
requirements.
(D) PCRs will also ensure that any Federal agency decision made concerning the
consolidation of contract requirements considers the use of small businesses and ways to
provide small businesses with maximum opportunities to participate as prime contractors and
subcontractors in the acquisition or sale of real property.
(E) PCRs will review whether, for bundled and consolidated contracts that are
recompeted, the amount of savings and benefits was achieved under the prior bundling or
consolidation of contract requirements, that such savings and benefits will continue to be
realized if the contract remains bundled or consolidated, or such savings and benefits would
be greater if the procurement requirements were divided into separate solicitations suitable
for award to small business concerns.
(F) PCRs also advocate competitive procedures and recommend the breakout for
competition of items and requirements which previously have not been competed when
appropriate. They may appeal the failure by the buying activity to act favorably on a
recommendation in accord with the appeal procedures in paragraph (b)(2) of this section.
PCRs also review restrictions and obstacles to competition and make recommendations for
improvement.
(ii) PCR recommendations. The PCR must recommend to the procuring activity
alternative procurement methods that would increase small business prime contract
participation if a PCR believes that a proposed procurement includes in its statement of work
goods or services currently being performed by a small business and is in a quantity or
estimated dollar value the magnitude of which renders small business prime contract
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participation unlikely; will render small business prime contract participation unlikely (e.g.,
ensure geographical preferences are justified); or is for construction and seeks to package or
consolidate discrete construction projects. If a PCR does not believe a bundled or
consolidated requirement is necessary or justified the PCR shall advocate against the
consolidation or bundling of such requirement and recommend to the procuring activity
alternative procurement methods which would increase small business prime contract
participation. Such alternatives may include:
(A) Breaking up the procurement into smaller discrete procurements, especially
construction acquisitions that can be procured as separate projects;
(B) Breaking out one or more discrete components, for which a small business set-aside
may be appropriate;
(C) Reserving one or more awards for small businesses when issuing Multiple Award
Contracts;
(D) Using a partial set-aside;
(E) Stating in the solicitation for a Multiple Award Contract that the orders will be setaside for small businesses; and
(F) Where the bundled or consolidated requirement is necessary and justified, the PCR
will work with the procuring activity to tailor a strategy that preserves small business contract
participation to the maximum extent practicable.
(iii) PCR Recommendations for Small Business Teaming Arrangements and
Subcontracting. The PCR will work to ensure that small business participation is maximized
both at the prime contract level such as through Small Business Teaming Arrangements and
through subcontracting opportunities. This may include the subcontracting considerations in
source selections set forth in §125.3(g), as well as the following:
(A) Reviewing an agency's oversight of its subcontracting program, including its overall
and individual assessment of a contractor's compliance with its small business
subcontracting plans. The PCR will furnish a copy of the information to the SBA Commercial
Market Representative (CMR) servicing the contractor;
(B) Recommending that the solicitation and resultant contract specifically state the small
business subcontracting goals that are expected of the contractor awardee;
(C) Recommending that the small business subcontracting goals be based on total
contract dollars in addition to goals based on a percentage of total subcontracted dollars;
(D) Recommending that separate evaluation factors be established for evaluating the
offerors' proposed approach to small business subcontracting participation in the subject
procurement, the extent to which the offeror has met its small business subcontracting goals
on previous contracts; and/or the extent to which the offeror actually paid small business
subcontractors within the specified number of days;
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(E) Recommending that a contracting officer include an evaluation factor in a solicitation
which evaluates an offeror's commitment to pay small business subcontractors within a
specified number of days after receipt of payment from the Government for goods and
services previously rendered by the small business subcontractor. The contracting officer will
comparatively evaluate the proposed timelines. Such a commitment shall become a material
part of the contract. The contracting officer must consider the contractor's compliance with
the commitment in evaluating performance, including for purposes of contract continuation
(such as exercising options);
(F) For bundled and consolidated requirements, recommending that a separate
evaluation factor with significant weight be established for evaluating the offeror's proposed
approach to small business utilization, the extent to which the offeror has met its small
business subcontracting goals on previous contracts; and the extent to which the other than
small business offeror actually paid small business subcontractors within the specified
number of days;
(G) For bundled or consolidated requirements, recommending the solicitation state that
the agency must evaluate offers from teams of small businesses the same as other offers,
with due consideration to the capabilities and past performance of all proposed
subcontractors. It may also include recommending that the agency reserve at least one
award to a small business prime contractor with a Small Business Teaming Arrangement;
(H) For Multiple Award Contracts and multiple award requirements above the substantial
bundling threshold, recommending or requiring that the solicitation state that the agency will
solicit offers from small business concerns and small business concerns with Small Business
Teaming Arrangements;
(I) For consolidated contracts, ensuring that agencies have provided small business
concerns with appropriate opportunities to participate as prime contractors and
subcontractors and making recommendations on such opportunities as appropriate; and
(J) Recommending paragraphs (B) through (I) above apply to an ordering agency
placing an order against a Multiple Award Contract or Agreement.
(iv) PCRs will consult with the agency OSDBU regarding agency decisions to convert an
activity performed by a small business concern to an activity performed by a Federal
employee.
(v) PCRs may receive unsolicited proposals from small business concerns and will
transmit those proposals to the agency personnel responsible for reviewing such proposals.
The agency personnel shall provide the PCR with information regarding the disposition of
such proposal.
(2) Appeals of PCR recommendations. In cases where there is disagreement between a
PCR and the contracting officer over the suitability of a particular acquisition for a small
business set-aside, partial set-aside or reserve, whether or not the acquisition is a bundled,
substantially bundled or consolidated requirement, the PCR may initiate an appeal to the
head of the contracting activity If the head of the contracting activity agrees with the

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head of the contracting activity. If the head of the contracting activity agrees with the
contracting officer, SBA may appeal the matter to the Secretary of the Department or head of
the agency. The time limits for such appeals are set forth in FAR subpart 19.5 (48 CFR 19.5).
(c) Procuring Agency Responsibilities—(1) Requirement to Foster Small Business
Participation. The Small Business Act requires each Federal agency to foster the
participation of small business concerns as prime contractors and subcontractors in the
contracting opportunities of the Government regardless of the place of performance of the
contract. In addition, Federal agencies must ensure that all bundled and consolidated
contracts contain the required analysis and justification and provide small business concerns
with appropriate opportunities to participate as prime contractors and subcontractors. Agency
acquisition planners must:
(i) Structure procurement requirements to facilitate competition by and among small
business concerns, including small business concerns owned and controlled by servicedisabled veterans, certified HUBZone small business concerns , 8(a) BD small business
concerns (including those owned by ANCs, Indian Tribes and NHOs), and small business
concerns owned and controlled by women;
(ii) Avoid unnecessary and unjustified bundling of contracts or consolidation of contract
requirements that inhibits or precludes small business participation in procurements as prime
contractors;
(iii) Follow the limitations on use of consolidated contracts;
(iv) With respect to any work to be performed the amount of which would exceed the
maximum amount of any contract for which a surety may be guaranteed against loss under
15 U.S.C. 694b, to the extent practicable, place contracts so as to allow more than one small
business concern to perform such work;
(v) Provide SBA the necessary information relating to the acquisition under review at
least 30 days prior to issuance of a solicitation. This includes providing PCRs (to the extent
allowable pursuant to their security clearance) copies of all documents relating to the
acquisition under review, including, but not limited to, the performance of work
statement/statement of work, technical data, market research, hard copies or their electronic
equivalents of Department of Defense (DoD) Form 2579 or equivalent, and other relevant
information. The DoD Form 2579 or equivalent must be sent electronically to the PCR (or if a
PCR is not assigned to the procuring activity, to the SBA Office of Government Contracting
Area Office serving the area in which the buying activity is located);
(vi) Provide opportunities for the participation of small business concerns during
acquisition planning processes and in acquisition plans; and
(vii) Invite the participation of the appropriate Director of Small and Disadvantaged
Business Utilization in acquisition planning processes and provide that Director with access
to acquisition plans.
(2) Requirement for market research. Each agency, as part of its acquisition planning,
must conduct market research to determine the type and extent of foreseeable small

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a et esea c to dete

e t e type a d e te t o o eseeab e s a

business participation in the acquisition. In addition, each agency must conduct market
research and any required analysis and justifications before proceeding with an acquisition
strategy that could lead to a bundled, substantially bundled, or consolidated contract. The
purpose of the market research and analysis is to determine whether the bundling or
consolidation of the requirements is necessary and justified and all statutory requirements for
such a strategy have been met. Agencies should be as broad as possible in their search for
qualified small businesses, using key words as well as NAICS codes in their examination of
the System for Award Management (SAM) and the Dynamic Small Business Search (DSBS),
and must not place unnecessary and unjustified restrictions when conducting market
research (e.g., requiring that small businesses prove they can provide the best scientific and
technological sources) when determining whether to set-aside, partially set-aside, reserve or
sole source a requirement to small businesses. During the market research phase, the
acquisition team must consult with the applicable PCR (or if a PCR is not assigned to the
procuring activity, the SBA Office of Government Contracting Area Office serving the area in
which the buying activity is located) and the activity's Small Business Specialist.
(3) Proposed Acquisition Strategy. A procuring activity must provide to the applicable
PCR (or to the SBA Office of Government Contracting Area Office serving the area in which
the buying activity is located if a PCR is not assigned to the procuring activity) at least 30
days prior to a solicitation's issuance:
(i) A copy of a proposed acquisition strategy (e.g., DoD Form 2579, or equivalent)
whenever a proposed acquisition strategy:
(A) Includes in its description goods or services the magnitude of the quantity or
estimated dollar value of which would render small business prime contract participation
unlikely;
(B) Seeks to package or consolidate discrete construction projects;
(C) Is a bundled or substantially bundled requirement; or
(D) Is a consolidation of contract requirements;
(ii) A written statement explaining why, if the proposed acquisition strategy involves a
bundled or consolidated requirement, the procuring activity believes that the bundled or
consolidated requirement is necessary and justified; the analysis required by paragraph (d)
(2)(i) of this section; the acquisition plan; any bundling information required under paragraph
(d)(3) of this section; and any other relevant information. The PCR and agency OSDBU or
OSBP, as applicable, must then work together to develop alternative acquisition strategies
identified in paragraph (b)(1) of this section to enhance small business participation;
(iii) All required clearances for the bundled, substantially bundled, or consolidated
requirement; and
(iv) A written statement explaining why—if the description of the requirement includes
goods or services currently being performed by a small business and the magnitude of the
quantity or estimated dollar value of the proposed procurement would render small business
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prime contract participation unlikely, or if a proposed procurement for construction seeks to
package or consolidate discrete construction projects—
(A) The proposed acquisition cannot be divided into reasonably small lots to permit
offers on quantities less than the total requirement;
(B) Delivery schedules cannot be established on a basis that will encourage small
business participation;
(C) The proposed acquisition cannot be offered so as to make small business
participation likely; or
(D) Construction cannot be procured through separate discrete projects.
(4) Procuring Agency Small Business Specialist (SBS) Responsibilities.
(i) As early in the acquisition planning process as practicable—but no later than 30 days
before the issuance of a solicitation, or prior to placing an order without a solicitation—the
procuring activity must coordinate with the procuring activity's SBS when the acquisition
strategy contemplates an acquisition meeting the dollar amounts set forth for substantial
bundling. If the acquisition strategy contemplates Multiple Award Contracts or orders under
the GSA Multiple Award Schedule Program or a task or delivery order contract awarded by
another agency, these thresholds apply to the cumulative estimated value of the Multiple
Award Contracts or orders, including options. The procuring activity is not required to
coordinate with its SBS if the contract or order is entirely set-aside for small business
concerns, or small businesses under one of SBA's small business programs, as authorized
under the Small Business Act.
(ii) The SBS must notify the agency OSDBU or OSBP if the agency's acquisition strategy
or plan includes bundled or consolidated requirements that the agency has not identified as
bundled, or includes unnecessary or unjustified bundling of requirements. If the strategy
involves substantial bundling, the SBS must assist in identifying alternative strategies that
would reduce or minimize the scope of the bundling.
(iii) The SBS must coordinate with the procuring activity and PCR on all required
determinations and findings for bundling and/or consolidation, and acquisition planning and
strategy documentation.
(5) OSDBU and OSBP Oversight Functions. The Agency OSDBU or OSBP must:
(i) Conduct annual reviews to assess the:
(A) Extent to which small businesses are receiving their fair share of Federal
procurements, including contract opportunities under programs administered under the Small
Business Act;
(B) Adequacy of the bundling or consolidation documentation and justification; and
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(C) Adequacy of actions taken to mitigate the effects of necessary and justified contract
bundling or consolidation on small businesses (e.g., review agency oversight of prime
contractor subcontracting plan compliance under the subcontracting program);
(ii) Provide a copy of the assessment under paragraph (c)(5)(i) of this section to the
agency head and SBA's Administrator;
(iii) Identify proposed solicitations that involve significant bundling of contract
requirements, and work with the agency acquisition officials and the SBA to revise the
procurement strategies for such proposed solicitations to increase the probability of
participation by small businesses as prime contractors through Small Business Teaming
Arrangements;
(iv) Facilitate small business participation as subcontractors and suppliers, if a
solicitation for a substantially bundled contract is to be issued;
(v) Assist small business concerns to obtain payments, required late payment interest
penalties, or information regarding payments due to such concerns from an executive agency
or a contractor, in conformity with chapter 39 of Title 31 or any other protection for
contractors or subcontractors (including suppliers) that is included in the FAR or any
individual agency supplement to such Government-wide regulation;
(vi) Cooperate, and consult on a regular basis with the SBA with respect to carrying out
these functions and duties;
(vii) Make recommendations to contracting officers as to whether a particular contract
requirement should be awarded to any type of small business. The Contracting Officer must
document any reason not to accept such recommendations and include the documentation in
the appropriate contract file; and
(viii) Coordinate on any acquisition planning and strategy documentation, including
bundling and consolidation determinations at the agency level.
(6) Communication on Achieving Goals. All Senior Procurement Executives, senior
program managers, Directors of OSDBU or Directors of OSBP must communicate to their
subordinates the importance of achieving small business goals and ensuring that a fair
proportion of awards are made to small businesses.
(d) Contract Consolidation and Bundling—(1) Limitation on the Use of Consolidated
Contracts. (i) An agency may not conduct an acquisition that is a consolidation of contract
requirements unless the Senior Procurement Executive or Chief Acquisition Officer for the
Federal agency, before carrying out the acquisition strategy:
(A) Conducts adequate market research;
(B) Identifies any alternative contracting approaches that would involve a lesser degree
of consolidation of contract requirements;
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(C) Makes a written determination, which is coordinated with the agency's
OSDBU/OSBP, that the consolidation of contract requirements is necessary and justified;
(D) Identifies any negative impact by the acquisition strategy on contracting with small
business concerns; and
(E) Ensures that steps will be taken to include small business concerns in the acquisition
strategy.
(ii) A Senior Procurement Executive or Chief Acquisition Officer may determine that an
acquisition strategy involving a consolidation of contract requirements is necessary and
justified.
(A) A consolidation of contract requirements may be necessary and justified if the
benefits of the acquisition strategy substantially exceed the benefits of each of the possible
alternative contracting approaches identified under paragraph (d)(1)(i)(B).
(B) The benefits may include cost savings and/or price reduction, quality improvements
that will save time or improve or enhance performance or efficiency, reduction in acquisition
cycle times, better terms and conditions, and any other benefits that individually, in
combination, or in the aggregate would lead to: benefits equivalent to 10 percent of the
contract or order value (including options) where the contract or order value is $94 million or
less; or benefits equivalent to 5 percent of the contract or order value (including options) or
$9.4 million, whichever is greater, where the contract or order value exceeds $94 million.
(C) Savings in administrative or personnel costs alone do not constitute a sufficient
justification for a consolidation of contract requirements in a procurement unless the
expected total amount of the cost savings, as determined by the Senior Procurement
Executive or Chief Acquisition Officer, is expected to be substantial in relation to the total cost
of the procurement. To be substantial, such administrative or personnel cost savings must be
at least 10 percent of the contract value (including options).
(iii) Each agency must ensure that any decision made concerning the consolidation of
contract requirements considers the use of small businesses and ways to provide small
businesses with opportunities to participate as prime contractors and subcontractors in the
acquisition.
(iv) If the consolidated requirement is also considered a bundled requirement, then the
contracting officer must instead follow the provisions regarding bundling set forth in
paragraphs (d)(2) through (7) of this section.
(v) Not later than 7 days after making a determination that an acquisition strategy
involving a consolidation of contract requirements is necessary and justified under
subparagraph (d)(1)(i) of this section, the Senior Procurement Executive (SPE) or Chief
Acquisition Officer (CAO), or designee, shall publish a notice on the Government Point of
Entry (GPE) that such determination has been made. Any solicitation for a procurement
related to the acquisition strategy shall not be issued earlier than 7 days after such notice is
published. Along with the publication of the solicitation, the SPE or CAO (or designee) must
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publish in the GPE the justification for the determination, which shall include the information
in paragraphs (d)(1)(i)(A) through (E) of this section.
(2) Limitation on the Use of Contract Bundling.
(i) When the procuring activity intends to proceed with an acquisition involving bundled
or substantially bundled procurement requirements, it must document the acquisition strategy
to include a determination that the bundling is necessary and justified, when compared to the
benefits that could be derived from meeting the agency's requirements through separate
smaller contracts.
(ii) A bundled requirement is necessary and justified if, as compared to the benefits that
the procuring activity would derive from contracting to meet those requirements if not
bundled, it would derive measurably substantial benefits. The procuring activity must quantify
the identified benefits and explain how their impact would be measurably substantial. The
benefits may include cost savings and/or price reduction, quality improvements that will save
time or improve or enhance performance or efficiency, reduction in acquisition cycle times,
better terms and conditions, and any other benefits that individually, in combination, or in the
aggregate would lead to:
(A) Benefits equivalent to 10 percent of the contract or order value (including options),
where the contract or order value is $94 million or less; or
(B) Benefits equivalent to 5 percent of the contract or order value (including options) or
$9.4 million, whichever is greater, where the contract or order value exceeds $94 million.
(iii) Notwithstanding paragraph (d)(2)(ii) of this section, the Senior Procurement
Executives or the Under Secretary of Defense for Acquisition and Technology (for other
Defense Agencies) in the Department of Defense and the Deputy Secretary or equivalent in
civilian agencies may, on a non-delegable basis, determine that a bundled requirement is
necessary and justified when:
(A) There are benefits that do not meet the thresholds set forth in paragraph (d)(2)(ii) of
this section but, in the aggregate, are critical to the agency's mission success; and
(B) The procurement strategy provides for maximum practicable participation by small
business.
(iv) The reduction of administrative or personnel costs alone must not be a justification
for bundling of contract requirements unless the administrative or personnel cost savings are
expected to be substantial, in relation to the dollar value of the procurement to be bundled
(including options). To be substantial, such administrative or personnel cost savings must be
at least 10 percent of the contract value (including options).
(v) In assessing whether cost savings and/or a price reduction would be achieved
through bundling, the procuring activity and SBA must compare the price that has been
charged by small businesses for the work that they have performed and, where available, the
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price that could have been or could be charged by small businesses for the work not
previously performed by small business.
(vi) The substantial benefit analysis set forth in paragraph (d)(2)(ii) of this section is still
required where a requirement is subject to a Cost Comparison Analysis under OMB Circular
A-76.
(3) Limitations on the Use of Substantial Bundling. Where a proposed procurement
strategy involves a Substantial Bundling of contract requirements, the procuring agency
must, in the documentation of that strategy, include a determination that the anticipated
benefits of the proposed bundled contract justify its use, and must include, at a minimum:
(i) The analysis for bundled requirements set forth in paragraph (d)(2)(i) of this section;
(ii) An assessment of the specific impediments to participation by small business
concerns as prime contractors that will result from the substantial bundling;
(iii) Actions designed to maximize small business participation as prime contractors,
including provisions that encourage small business teaming for the substantially bundled
requirement;
(iv) Actions designed to maximize small business participation as subcontractors
(including suppliers) at any tier under the contract or contracts that may be awarded to meet
the requirements; and
(v) The identification of the alternative strategies that would reduce or minimize the
scope of the bundling, and the rationale for not choosing those alternatives (i.e., consider the
strategies under paragraph (b)(1)(ii) of this section).
(4) Significant Subcontracting Opportunities in Justified Consolidated, Bundled and
Substantially Bundled Requirements.
(i) Where a justified consolidated, bundled, or substantially bundled requirement offers a
significant opportunity for subcontracting, the procuring agency must designate the following
factors as significant factors in evaluating offers:
(A) A factor that is based on the rate of participation provided under the subcontracting
plan for small business in the performance of the contract; and
(B) For the evaluation of past performance of an offeror, a factor that is based on the
extent to which the offeror attained applicable goals for small business participation in the
performance of contracts.
(ii) Where the offeror for such a contract qualifies as a small business concern, the
procuring agency must give to the offeror the highest score possible for the evaluation factors
identified above.

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(5) Notification to Current Small Business Contractors of Intent to Bundle. The procuring
activity must notify each small business which is performing a contract that it intends to
bundle that requirement with one or more other requirements at least 30 days prior to the
issuance of the solicitation for the bundled or substantially bundled requirement. The
procuring activity, at that time, should also provide to the small business the name, phone
number and address of the applicable SBA PCR (or if a PCR is not assigned to the procuring
activity, the SBA Office of Government Contracting Area Office serving the area in which the
buying activity is located). This notification must be documented in the contract file.
(6) Notification to Public of Rationale for Bundled Requirement. The head of a Federal
agency must publish on the agency's Web site a list and rationale for any bundled
requirement for which the agency solicited offers or issued an award. The notification must
be made within 30 days of the agency's data certification regarding the validity and
verification of data entered in that Federal Procurement Data Base to the Office of Federal
Procurement Policy. However, to foster transparency in Federal procurement, the agency is
encouraged to provide such notification before issuance of the solicitation.
(7) Notification to public of rationale for substantial bundling. If the head of a contracting
agency determines that an acquisition plan for a procurement involves a substantial bundling
of contract requirements, the head of a contracting agency shall publish a notice on the GPE
that such determination has been made not later than 7 days after making such
determination. Any solicitation for a procurement related to the acquisition plan may not be
published earlier than 7 days after such notice is published. Along with the publication of the
solicitation, the head of a contracting agency shall publish in the GPE a justification for the
determination, which shall include the following information:
(i) The specific benefits anticipated to be derived from the bundling of contract
requirements and a determination that such benefits justify the bundling;
(ii) An identification of any alternative contracting approaches that would involve a lesser
degree of bundling of contract requirements;
(iii) An assessment of the specific impediments to participation by small business
concerns as prime contractors that result from the bundling of contract requirements; and
(iv) The specific actions designed to maximize participation of small business concerns
as subcontractors (including suppliers) at various tiers under the contract or contracts that
are awarded to meet the requirements.
(8) Notification to SBA of Recompeted Bundled or Consolidated Requirement. For each
bundled or consolidated contract that is to be recompeted (even if additional requirements
have been added or deleted) the procuring agency must notify SBA's PCR as soon as
possible but no later than 30 days prior to issuance of the solicitation of:
(i) The amount of savings and benefits achieved under the prior bundling or
consolidation of contract requirements;
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(ii) Whether such savings and benefits will continue to be realized if the contract remains
bundled or consolidated; and
(iii) Whether such savings and benefits would be greater if the procurement
requirements were divided into separate solicitations suitable for award to small business
concerns.
(e) Multiple Award Contract—(1) General.
(i) The contracting officer must set-aside a Multiple Award Contract if the requirements
for a set-aside are met. This includes set-asides for small businesses, 8(a) Participants,
HUBZone SBCs, SDVO SBCs, WOSBs or EDWOSBs.
(ii) The contracting officer in his or her discretion may partially set-aside or reserve a
Multiple Award Contract, or set aside, or preserve the right to set aside, orders against a
Multiple Award Contract that was not itself set aside for small business. The ultimate decision
of whether to use any of the above-mentioned tools in any given procurement action is a
decision of the contracting agency.
(iii) The procuring agency contracting officer must document the contract file and explain
why the procuring agency did not partially set-aside or reserve a Multiple Award Contract, or
set-aside orders issued against a Multiple Award Contract, when these authorities could have
been used.
(2) Total Set-aside of Multiple Award Contracts.
(i) The contracting officer must conduct market research to determine whether the “rule
of two” can be met. If the “rule of two” can be met, the contracting officer must follow the
procedures for a set-aside set forth in paragraph (f) of this section.
(ii) The contracting officer must assign a NAICS code to the solicitation for the Multiple
Award Contract and each order pursuant to §121.402(c) of this chapter. See §121.404 for
further determination on size status for the Multiple Award Contract and each order issued
against that contract.
(iii) When drafting the solicitation for the contract, agencies should consider an “onramp” provision that permits the agency to refresh the awards by adding more small business
contractors throughout the life of the contract. Agencies should also consider the need to “offramp” existing contractors that no longer qualify as small for the size standard corresponding
to the NAICS code assigned to the contract (e.g., termination for convenience).
(iv) A business must comply with the applicable limitations on subcontracting provisions
(see §125.6) and the nonmanufacturer rule (see §121.406(b)), if applicable, during each
performance period of the contract (e.g., the base term and each subsequent option period).
However, the contracting officer, in his or her discretion, may require the contractor perform
the applicable amount of work or comply with the nonmanufacturer rule for each order
awarded under the contract.
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(3) Partial Set-asides of Multiple Award Contracts.
(i) A contracting officer may partially set-aside a multiple award contract when: market
research indicates that a total set-aside is not appropriate; the procurement can be broken up
into smaller discrete portions or discrete categories such as by Contract Line Items, Special
Item Numbers, Sectors or Functional Areas or other equivalent; and two or more small
business concerns, 8(a) BD Participants, HUBZone SBCs, SDVO SBCs, WOSBs or
EDWOSBs are expected to submit an offer on the set-aside part or parts of the requirement
at a fair market price. A contracting officer has the discretion, but is not required, to set-aside
the discrete portions or categories for different small businesses participating in SBA's small
business programs (e.g., CLIN 0001, 8(a) set-aside; CLIN 0002, HUBZone set-aside; CLIN
0003, SDVO SBC set-aside; CLIN 0004, WOSB set-aside; CLIN 0005 EDWOSB set-aside;
CLIN 0006, small business set-aside). If the contracting officer decides to partially set-aside a
Multiple Award Contract, the contracting officer must follow the procedures for a set-aside set
forth in paragraph (f) of this section for the part or parts of the contract that have been setaside.
(ii) The contracting officer must assign a NAICS code and corresponding size standard
to the solicitation for the Multiple Award Contract and each order issued against the Multiple
Award Contract pursuant to §121.402(c) of this chapter. See §121.404 for further
determination on size status for the Multiple Award Contract and each order issued against
that contract.
(iii) A contracting officer must state in the solicitation that the small business will not
compete against other-than-small businesses for any order issued against that part or parts
of the Multiple Award Contract that are set-aside.
(iv) A contracting officer must state in the solicitation that the small business will be
permitted to compete against other-than-small businesses for an order issued against the
portion of the Multiple Award Contract that has not been partially set-aside if the small
business submits an offer for the non-set-aside portion. The business concern will not have
to comply with the limitations on subcontracting (see §125.6) and the nonmanufacturer rule
for any order issued against the Multiple Award Contract if the order is competed and
awarded under the portion of the contract that is not set-aside.
(v) When drafting the solicitation for the contract, agencies should consider an “on ramp”
provision that permits the agency to refresh these awards by adding more small business
contractors to that portion of the contract that was set-aside throughout the life of the
contract. Agencies should also consider the need to ”off ramp” existing contractors that no
longer qualify as small for the size standard corresponding to the NAICS code assigned to
the contract (e.g., termination for convenience).
(vi) The small business must submit one offer that addresses each part of the solicitation
for which it wants to compete. A small business (or 8(a) Participant, HUBZone SBC, SDVO
SBC or ED/WOSB) is not required to submit an offer on the part of the solicitation that is not
set-aside. However, a small business may choose to submit an offer on the part or parts of
the solicitation that have been set-aside and/or on the parts that have not been set-aside.
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(vii) A small business must comply with the applicable limitations on subcontracting
provisions (see §125.6) and the nonmanufacturer rule (see §121.406(b)), if applicable, during
each performance period of the contract (e.g., during the base term and then during option
period thereafter). However, the contracting officer, in his or her discretion, may require the
contractor perform the applicable amount of work or comply with the nonmanufacturer rule
for each order awarded under the contract.
(4) Reserves of Multiple Award Contracts Awarded in Full and Open Competition. (i) A
contracting officer may reserve one or more awards for small business where:
(A) The market research and recent past experience evidence that—
(1) At least two small businesses, 8(a) BD Participants, HUBZone SBCs, SDVO SBCs,
WOSBs or EDWOSBs could perform one part of the requirement, but the contracting officer
was unable to divide the requirement into smaller discrete portions or discrete categories by
utilizing individual Contract Line Items (CLINs), Special Item Numbers (SINs), Functional
Areas (FAs), or other equivalent; or
(2) At least one small business, 8(a) BD Participant, HUBZone SBC, SDVO SBC, WOSB
or EDWOSB can perform the entire requirement, but there is not a reasonable expectation of
receiving at least two offers from small business concerns, 8(a) BD Participants, HUBZone
SBCs, SDVO SBCs, WOSBs or EDWOSBs at a fair market price for all the work
contemplated throughout the term of the contract; or
(B) The contracting officer makes:
(1) Two or more contract awards to any one type of small business concern (e.g., small
business, 8(a), HUBZone, SDVO SBC, WOSB or EDWOSB) and competes any orders solely
amongst the specified types of small business concerns if the “rule of two” or any alternative
set-aside requirements provided in the small business program have been met;
(2) Several awards to several different types of small businesses (e.g., one to 8(a), one
to HUBZone, one to SDVO SBC, one to WOSB or EDWOSB) and competes any orders
solely amongst all of the small business concerns if the “rule of two” has been met; or
(3) One contract award to any one type of small business concern (e.g., small business,
8(a), HUBZone, SDVO SBC, WOSB or EDWOSB) and subsequently issues orders directly to
that concern.
(ii) If the contracting officer decides to reserve a multiple award contract established
through full and open competition, the contracting officer must assign a NAICS code to the
solicitation for the Multiple Award Contract and each order issued against the Multiple Award
Contract pursuant to §121.402(c) of this chapter. See §121.404 for further determination on
size status for the Multiple Award Contract and each order issued against that contract.
(iii) A contracting officer must state in the solicitation that if there are two or more
contract awards to any one type of small business concern (e.g., small business, 8(a),
HUBZone, SDVO SBC, WOSB or EDWOSB), the agency may compete any orders solely
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amongst the specified types of small business concerns if the “rule of two” or an alternative
set-aside requirement provided in the small business program have been met.
(iv) A contracting officer must state in the solicitation that if there are several awards to
several different types of small businesses (e.g., one to 8(a), one to HUBZone, one to SDVO
SBC, one to WOSB or EDWOSB), the agency may compete any orders solely amongst all of
the small business concerns if the “rule of two” has been met.
(v) A contracting officer must state in the solicitation that if there is only one contract
award to any one type of small business concern (e.g., small business, 8(a), HUBZone,
SDVO SBC, WOSB or EDWOSB), the agency may issue orders directly to that concern for
work that it can perform.
(vi) A contracting officers may, but is not required to, set forth targets in the contract
showing the estimated dollar value or percentage of the total contract to be awarded to small
businesses.
(vii) A small business offeror must submit one offer that addresses each part of the
solicitation for which it wants to compete.
(viii) Small businesses are permitted to compete against other-than-small businesses for
an order issued against the Multiple Award Contract if agency issued the small business a
contract for those supplies or services.
(ix) A business must comply with the applicable limitations on subcontracting provisions
(see §125.6) and the nonmanufacturer rule (see §121.406(b)), if applicable, for any order
issued against the Multiple Award Contract if the order is set aside or awarded on a sole
source basis. However, a business need not comply with the limitations on subcontracting
provisions (see §125.6) and the nonmanufacturer rule for any order issued against the
Multiple Award Contract if the order is competed amongst small and other-than-small
business concerns.
(5) Reserve of Multiple Award Contracts that are Bundled.
(i) If the contracting officer decides to reserve a multiple award contract established
through full and open competition that is a bundled contract, the contracting officer must
assign a NAICS code to the solicitation for the Multiple Award Contract and each order
issued against the Multiple Award Contract pursuant to §121.402(c) of this chapter. See
§121.404 for further determination on size status for the Multiple Award Contract and each
order issued against that contract.
(ii) The Small Business Teaming Arrangement must comply with the applicable
limitations on subcontracting provisions (see §125.6) and the nonmanufacturer rule (see
§121.406(b)), if applicable, on all orders issued against the Multiple Award Contract, although
the cooperative efforts of the team members will be considered in determining whether the
subcontracting limitations requirement is met (see §125.6(j)).

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(iii) Team members of the Small Business Teaming Arrangement will not be affiliated for
the specific solicitation or contract (see §121.103(b)(8)).
(6) Set-aside of orders against Multiple Award Contracts.
(i) Notwithstanding the fair opportunity requirements set forth in 10 U.S.C. 2304c and 41
U.S.C. 4106(c), a contracting officer may set aside orders for small businesses, eligible 8(a)
Participants, certified HUBZone small business concerns, SDVO small business concerns,
WOSBs, and EDWOSBs against full and open Multiple Award Contracts. In addition, a
contracting officer may set aside orders for eligible 8(a) Participants, certified HUBZone small
business concerns, SDVO small business concerns, WOSBs, and EDWOSBs against total
small business set-aside Multiple Award Contracts, partial small business set-aside Multiple
Award Contracts, and small business reserves of Multiple Award Contracts awarded in full
and open competition. Although a contracting officer can set aside orders issued under a
small business set-aside Multiple Award Contract or reserve to any subcategory of small
businesses, contracting officers are encouraged to review the award dollars under the
Multiple Award Contract and aim to make available for award at least 50% of the award
dollars under the Multiple Award Contract to all contract holders of the underlying small
business set-aside Multiple Award Contract or reserve. However, a contracting officer may
not further set aside orders for specific types of small business concerns against Multiple
Award Contracts that are set-aside or reserved for eligible 8(a) Participants, certified
HUBZone small business concerns, SDVO small business concerns, WOSBs, and
EDWOSBs (e.g., a contracting officer cannot set-aside an order for 8(a) Participants that are
also certified HUBZone small business concerns against an 8(a) Multiple Award Contract).
(ii) The contracting officer may state in the solicitation and resulting contract for the
Multiple Award Contract that:
(A) Based on the results of market research, orders issued against the Multiple Award
Contract will be set-aside for small businesses or any subcategory of small businesses
whenever the “rule of two” or any alternative set-aside requirements provided in the small
business program have been met; or
(B) The agency is preserving the right to consider set-asides using the “rule of two” or
any alternative set-aside requirements provided in the small business program, on an orderby-order basis.
(iii) For the acquisition of orders valued at or below the simplified acquisition threshold
(SAT), the contracting officer may set-aside the order for small businesses, 8(a) BD
Participants, HUBZone SBCs, SDVO SBCs, WOSBs or EDWOSBs in accordance with the
relevant program's regulations. For the acquisition of orders valued above the SAT, the
contracting officer shall first consider whether there is a reasonable expectation that offers
will be obtained from at least two 8(a) BD Participants, HUBZone SBCs, SDVO SBCs,
WOSBs or EDWOSBs in accordance with the program's regulations, before setting aside the
requirement as a small business set-aside. There is no order of precedence among the 8(a)
BD, HUBZone, SDVO SBC or WOSB programs.
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(iv) The contracting officer must assign a NAICS code to the solicitation for each order
issued against the Multiple Award Contract pursuant to §121.402(c) of this chapter. See
§121.404 for further determination on size status for each order issued against that contract.
(v) A business must comply with applicable limitations on subcontracting provisions (see
§125.6) and the nonmanufacturer rule (see §121.406(b)), if applicable in the performance of
each order that is set-aside against the contract.
(7) Tiered evaluation of offers, or cascading. An agency cannot create a tiered
evaluation of offers or “cascade” unless it has specific statutory authority to do so. This is a
procedure used in negotiated acquisitions when the contracting officer establishes a tiered or
cascading order of precedence for evaluating offers that is specified in the solicitation, which
states that if no award can be made at the first tier, it will evaluate offers at the next lower tier,
until award can be made. For example, unless the agency has specific statutory authority to
do so, an agency is not permitted to state an intention to award one contract to an 8(a) BD
Participant and one to a HUBZone SBC, but only if no awards are made to 8(a) BD
Participants.
(f) Contracting Among Small Business Programs—(1) Acquisitions Valued At or Below
the Simplified Acquisition Threshold. The contracting officer shall set aside any acquisition
with an anticipated dollar value exceeding the Micro-purchase Threshold but not exceeding
the Simplified Acquisition Threshold (defined in the FAR at 48 CFR 2.101) for small business
concerns when there is a reasonable expectation that offers will be obtained from at least two
small business concerns that are competitive in terms of quality and delivery and award will
be made at fair market prices. This requirement does not preclude a contracting officer from
making an award to a small business under the 8(a) BD, HUBZone, SDVO SBC or WOSB
Programs.
(2) Acquisitions Valued Above the Simplified Acquisition Threshold. (i) The contracting
officer shall set aside any acquisition with an anticipated dollar value exceeding the
Simplified Acquisition Threshold (defined in the FAR at 48 CFR 2.101) for small business
concerns when there is a reasonable expectation that offers will be obtained from at least two
small business concerns that are competitive in terms of quality and delivery and award will
be made at fair market prices. However, after conducting market research, the contracting
officer shall first consider a set-aside or sole source award (if the sole source award is
permitted by statute or regulation) under the 8(a) BD, HUBZone, SDVO SBC or WOSB
programs before setting aside the requirement as a small business set-aside. There is no
order of precedence among the 8(a) BD, HUBZone, SDVO SBC or WOSB programs. The
contracting officer must document the contract file with the rationale used to support the
specific set-aside, including the type and extent of market research conducted. In addition,
the contracting officer must document the contract file showing that the apparent successful
offeror's certifications in the System for Award Management (SAM) (or successor system)
and associated representations were reviewed.
(ii) SBA believes that Progress in fulfilling the various small business goals, as well as
other factors such as the results of market research, programmatic needs specific to the
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procuring agency, anticipated award price, and the acquisition history, will be considered in
making a decision as to which program to use for the acquisition.
(g) Capabilities, past performance, and experience. When an offer of a small business
prime contractor includes a proposed team of small business subcontractors and specifically
identifies the first-tier subcontractor(s) in the proposal, the head of the agency must consider
the capabilities, past performance, and experience of each first tier subcontractor that is part
of the team as the capabilities, past performance, and experience of the small business
prime contractor if the capabilities, past performance, and experience of the small business
prime does not independently demonstrate capabilities and past performance necessary for
award.
[61 FR 3312, Jan. 31, 1996, as amended at 63 FR 31908, June 11, 1998; 64 FR 57370, Oct. 25,
1999; 65 FR 45833, July 26, 2000; 68 FR 60012, Oct. 20, 2003; 74 FR 46887, Sept. 14, 2009; 75 FR
62281, Oct. 7, 2010; 76 FR 63547, Oct. 12, 2011; 77 FR 1860, Jan. 12, 2012; 78 FR 61135, Oct. 2,
2013; 81 FR 34261, May 31, 2016; 81 FR 48585, July 25, 2016; 84 FR 65239, Nov. 26, 2019; 84 FR
65662, Nov. 29, 2019; 85 FR 66191, Oct. 16, 2020]

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§125.3 What types of subcontracting assistance are available to small businesses?
(a) General. The purpose of the subcontracting assistance program is to provide the
maximum practicable subcontracting opportunities for small business concerns, including
small business concerns owned and controlled by veterans, small business concerns owned
and controlled by service-disabled veterans, certified HUBZone small business concerns,
certified small business concerns owned and controlled by socially and economically
disadvantaged individuals, and small business concerns owned and controlled by women.
The subcontracting assistance program implements section 8(d) of the Small Business Act,
which includes the requirement that, unless otherwise exempt, other than small business
concerns awarded contracts that offer subcontracting possibilities by the Federal
Government in excess of $650,000, or in excess of $1,500,000 for construction of a public
facility, must submit a subcontracting plan to the appropriate contracting agency. The Federal
Acquisition Regulation sets forth the requirements for subcontracting plans in 48 CFR 19.7,
and the clause at 48 CFR 52.219-9.
(1) Subcontract under this section means a legally binding agreement between a
contractor that is already under contract to another party to perform work and a third party
(other than one involving an employer-employee relationship), hereinafter referred to as the
subcontractor, for the subcontractor to perform a part or all of the work that the contractor has
undertaken.
(i) Subcontract award data reported by prime contractors and subcontractors shall be
limited to awards made to their immediate next-tier subcontractors. Credit cannot be taken
for awards made beyond the immediate next-tier, except as follows:
(A) The contractor or subcontractor has been designated to receive a small business or
small disadvantaged business credit from an ANC or Indian Tribe; or
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(B) Purchases from a corporation, company, or subdivision that is an affiliate of the prime
contractor or subcontractor are not included in the subcontracting base. Subcontracts by firsttier affiliates shall be treated as subcontracts of the prime.
(C) Where the prime contractor has an individual subcontracting plan, the prime
contractor shall establish two sets of small business subcontracting goals, one goal for the
first tier and one goal for lower tier subcontracts awarded by other than small subcontractors
with individual subcontracting plans. Under individual subcontracting plans the prime
contractor shall receive credit for small business concerns performing as first tier
subcontractors (first tier goal) and subcontractors at any tier pursuant to the subcontracting
plans required under paragraph (c) of this section in an amount equal to the dollar value of
work awarded to such small business concerns (lower tier goal). Other-than-small, lower tier
subcontractors must have their own individual subcontracting plans if the subcontract is at or
above the subcontracting plan threshold, and are required to make a good faith effort to meet
their subcontracting plan goals. The prime contractor and any subcontractor with a
subcontracting plan are responsible for reporting on subcontracting performance under their
contracts or subcontracts at their first tier. The prime contractor's performance under its
individual subcontracting plan will be calculated using its own reporting at the first tier for its
first tier goal and its subcontractors' first tier reports under their plans for the lower tier
subcontracting goals. The prime contractor's performance under the individual
subcontracting plan must be evaluated based on its combined performance under the first
tier and lower tier goal.
(D) Other-than-small prime contractors and subcontractors with subcontracting plans
shall report on their subcontracting performance on the Summary Subcontracting report
(SSR) at their first tier only.
(ii) Only subcontracts involving performance in the United States or its outlying areas
should be included, with the exception of subcontracts under a contract awarded by the U.S.
Department of State or any other agency that has statutory or regulatory authority to require
subcontracting plans for subcontracts performed outside the United States and its outlying
areas and subcontracts for foreign military sales unless waived in accordance with agency
regulations.
(iii) The following should not be included in the subcontracting base: internally generated
costs such as salaries and wages; employee insurance; other employee benefits; payments
for petty cash; depreciation; interest; income taxes; property taxes; lease payments; bank
fees; fines, claims, and dues; Original Equipment Manufacturer relationships during warranty
periods (negotiated up front with product); utilities such as electricity, water, sewer, and other
services purchased from a municipality or solely authorized by the municipality to provide
those services in a particular geographical region; and philanthropic contributions. Utility
companies may be eligible for additional exclusions unique to their industry, which may be
approved by the contracting officer on a case-by-case basis. Exclusions from the
subcontracting base include but are not limited to those listed above.
(2) Subcontracting goals required under paragraph (c) of this section must be
established in terms of the total dollars subcontracted and as a percentage of total
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subcontract dollars. However, a contracting officer may establish additional goals as a
percentage of total contract dollars.
(3) A prime contractor has a history of unjustified untimely or reduced payments to
subcontractors if the prime contractor has reported itself to a contracting officer in
accordance with paragraph (c)(5) of this section on three occasions within a 12 month period.
(b) Responsibilities of prime contractors. (1) Prime contractors (including small business
prime contractors) selected to receive a Federal contract that exceeds the simplified
acquisition threshold, that will not be performed entirely outside of any state, territory, or
possession of the United States, the District of Columbia, or the Commonwealth of Puerto
Rico, and that is not for services which are personal in nature, are responsible for ensuring
that small business concerns have the maximum practicable opportunity to participate in the
performance of the contract, including subcontracts for subsystems, assemblies,
components, and related services for major systems, consistent with the efficient
performance of the contract.
(2) A small business cannot be required to submit a formal subcontracting plan or be
asked to submit a formal subcontracting plan, a small-business prime contractor is
encouraged to provide maximum practicable opportunity to other small businesses to
participate in the performance of the contract, consistent with the efficient performance of the
contract. This applies whether the firm qualifies as a small business concern for the size
standard corresponding to the NAICS code assigned to the contract, or is deemed to be
treated as a small business concern by statute (see e.g., 43 U.S.C. 1626(e)(4)(B)).
(3) Efforts to provide the maximum practicable subcontracting opportunities for small
business concern may include, as appropriate for the procurement, one or more of the
following actions:
(i) Breaking out contract work items into economically feasible units, as appropriate, to
facilitate small business participation;
(ii) Conducting market research to identify small business subcontractors and suppliers
through all reasonable means, such as performing online searches via the System for Award
Management (SAM) (or any successor system), posting Notices of Sources Sought and/or
Requests for Proposal on SBA's SUB-Net, participating in Business Matchmaking events,
and attending pre-bid conferences;
(iii) Soliciting small business concerns as early in the acquisition process as practicable
to allow them sufficient time to submit a timely offer for the subcontract;
(iv) Providing interested small businesses with adequate and timely information about
the plans, specifications, and requirements for performance of the prime contract to assist
them in submitting a timely offer for the subcontract;
(v) Negotiating in good faith with interested small businesses;
(vi) Directing small businesses that need additional assistance to SBA;
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(vii) Assisting interested small businesses in obtaining bonding, lines of credit, required
insurance, necessary equipment, supplies, materials, or services;
(viii) Utilizing the available services of small business associations; local, state, and
Federal small business assistance offices; and other organizations; and
(ix) Participating in a formal mentor-protégé program with one or more small-business
protégés that results in developmental assistance to the protégés.
(c) Additional responsibilities of other than small contractors. (1) In addition to the
responsibilities provided in paragraph (b) of this section, a prime contractor selected for
award of a contract or contract modification that exceeds $700,000, or $1,500,000 in the
case of construction of a public facility, is responsible for the following:
(i) Submitting and negotiating before award an acceptable subcontracting plan that
reflects maximum practicable opportunities for small businesses in the performance of the
contract as subcontractors or suppliers at all tiers of performance. A prime contractor may
submit a commercial plan, described in paragraph (c)(2) of this section, instead of an
individual subcontracting plan, when the product or service being furnished to the
Government meets the definition of a commercial item under 48 CFR 2.101;
(ii) Making a good-faith effort to achieve the dollar and percentage goals and other
elements in its subcontracting plan;
(iii) The contractor may not prohibit a subcontractor from discussing any material matter
pertaining to payment or utilization with the contracting officer;
(iv) When developing an individual subcontracting plan (also called individual contract
plan), the contractor must decide whether to include indirect costs in its subcontracting goals.
If indirect costs are included in the goals, these costs must be included in the Individual
Subcontract Report (ISR) in www.esrs.gov (eSRS) or Subcontract Reports for Individual
Contracts (the paper SF-294, if authorized). If indirect costs are excluded from the goals,
these costs must be excluded from the ISRs (or SF-294 if authorized); however, these costs
must be included on a prorated basis in the Summary Subcontracting Report (SSR) in the
eSRS system. A contractor authorized to use a commercial subcontracting plan must include
all indirect costs in its subcontracting goals and in its SSR;
(v) The contractor must assign to each subcontract, and to each solicitation, if a
solicitation is utilized, the NAICS code and corresponding size standard that best describes
the principal purpose of the subcontract (see §121.410 of this chapter). A formal solicitation
is not required for each subcontract, but the contractor must provide some form of written
notice of the NAICS code and size standard assigned to potential offerors prior to
acceptance and award of the subcontract. The prime contractor (or subcontractor) may rely
on a subcontractor's electronic representations and certifications, if the solicitation for the
subcontract contains a clause which provides that the subcontractor verifies by submission of
the offer that the size or socioeconomic representations and certifications are current,
accurate and complete as of the date of the offer for the subcontract. Electronic submission
may include any method acceptable to the prime contractor (or subcontractor) including but

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may include any method acceptable to the prime contractor (or subcontractor) including, but
not limited to, size or socioeconomic representations and certifications made in SAM (or any
successor system). A prime contractor (or subcontractor) may not require the use of SAM (or
any successor system) for purposes of representing size or socioeconomic status in
connection with a subcontract;
(vi) The contractor must submit timely and accurate ISRs and SSRs in eSRS (or any
successor system), or if information for a particular procurement cannot be entered into
eSRS (or any successor system), submit a timely SF-294, Subcontracting Report for
Individual Contract. When a report is rejected by the contracting officer, the contractor must
make the necessary corrections and resubmit the report within 30 days of receiving the
notice of rejection;
(vii) The contractor must cooperate in the reviews of subcontracting plan compliance,
including providing requested information and supporting documentation reflecting actual
achievements and good-faith efforts to meet the goals and other elements in the
subcontracting plan;
(viii) The contractor must provide pre-award written notification to unsuccessful small
business offerors on all subcontracts over the simplified acquisition threshold (as defined in
the FAR at 48 CFR 2.101) for which a small business concern received a preference. The
written notification must include the name and location of the apparent successful offeror and
if the successful offeror is a small business, veteran-owned small business, service-disabled
veteran-owned small business, HUBZone small business, small disadvantaged business, or
women-owned small business;
(ix) As a best practice, the contractor may provide the pre-award written notification cited
in paragraph (c)(1)(viii) of this section to unsuccessful and small business offerors on
subcontracts at or below the simplified acquisition threshold (as defined in the FAR at 48
CFR 2.101) and should do so whenever practical; and
(x) Except when subcontracting for commercial items, the prime contractor must require
all subcontractors (except small business concerns) who receive subcontracts in excess of
$1,500,000 in the case of a subcontract for the construction of any public facility, or in excess
of $700,000 in the case of all other subcontracts, and which offer further subcontracting
possibilities, to adopt a subcontracting plan of their own consistent with this section, and
must ensure at a minimum that all subcontractors required to maintain subcontracting plans
pursuant to this paragraph will review and approve subcontracting plans submitted by their
subcontractors; monitor their subcontractors' compliance with their approved subcontracting
plans; ensure that subcontracting reports are submitted by their subcontractors when
required; acknowledge receipt of their subcontractors' reports; compare the performance of
their subcontractors to their subcontracting plans and goals; and discuss performance with
their subcontractors when necessary to ensure their subcontractors make a good-faith effort
to comply with their subcontracting plans; and
(xi) The prime contractor must provide a written statement of the types of records it will
maintain to demonstrate procedures which have been adopted to ensure subcontractors at
all tiers comply with the requirements and goals set forth in the subcontracting plan

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established in accordance with paragraph (c)(1)(x) of this section, including the
establishment of source lists of small business concerns, small business concerns owned
and controlled by veterans, small business concerns owned and controlled by servicedisabled veterans, certified HUBZone small business concerns, small business concerns
owned and controlled by socially and economically disadvantaged individuals, and small
business concerns owned and controlled by women; the efforts to identify and award
subcontracts to such small business concerns; and size or socioeconomic certifications or
representations received in connection with each subcontract.
(2) A commercial plan, also referred to as an annual plan or company-wide plan, is the
preferred type of subcontracting plan for contractors furnishing commercial items. A
commercial plan covers the offeror's fiscal year and applies to the entire production of
commercial items sold by either the entire company or a portion thereof (e.g., division, plant,
or product line). Once approved, the plan remains in effect during the contractor's fiscal year
for all Federal government contracts in effect during that period. The contracting officer of the
agency that originally approved the commercial plan will exercise the functions of the
contracting officer on behalf of all agencies that award contracts covered by the plan.
(3) An offeror must represent to the contracting officer that it will make a good faith effort
to acquire articles, equipment, supplies, services, or materials, or obtain the performance of
construction work from the small business concerns that it used in preparing the bid or
proposal, in the same scope, amount, and quality used in preparing and submitting the bid or
proposal. Merely responding to a request for a quote does not constitute use in preparing a
bid or offer. An offeror used a small business concern in preparing the bid or proposal if:
(i) The offeror references the small business concern as a subcontractor in the bid or
proposal or associated small business subcontracting plan;
(ii) The offeror has a subcontract or agreement in principle to subcontract with the small
business concern to perform a portion of the specific contract; or
(iii) The small business concern drafted any portion of the bid or proposal or the offeror
used the small business concern's pricing or cost information or technical expertise in
preparing the bid or proposal, where there is written evidence (including email) of an intent or
understanding that the small business concern will be awarded a subcontract for the related
work if the offeror is awarded the contract.
(4) If a prime contractor fails to acquire articles, equipment, supplies, services or
materials or obtain the performance of construction work as described in (c)(3), the prime
contractor must provide the contracting officer with a written explanation. This written
explanation must be submitted to the contracting officer prior to the submission of the invoice
for final payment and contract close-out.
(5) A prime contractor shall notify the contracting officer in writing if upon completion of
the responsibilities of the small business subcontractor (i.e., the subcontractor is entitled to
payment under the terms of the subcontract), the prime contractor pays a reduced price to a
small business subcontractor for goods and services provided for the contract or the payment
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to a small business subcontractor is more than 90 days past due under the terms of the
subcontract for goods and services provided for the contract and for which the Federal
agency has paid the prime contractor. “Reduced price” means a price that is less than the
price agreed upon in a written, binding contractual document. The prime contractor shall
include the reason for the reduction in payment to or failure to pay a small business
subcontractor in any written notice.
(6) If at the conclusion of a contract the prime contractor did not meet all of the small
business subcontracting goals in the subcontracting plan, the prime contractor shall provide
the contracting officer with a written explanation as to why it did not meet the goals of the
plan so that the contracting officer can evaluate whether the prime contractor acted in good
faith as set forth in paragraph (d)(3) of this section.
(7) The additional prime contractor responsibilities described in paragraph (c)(1) of this
section do not apply if:
(i) The prime contractor is a small business concern;
(ii) The prime contract or contract modification is a personal services contract; or
(iii) The prime contract or contract modification will be performed entirely outside of any
state, territory, or possession of the United States, the District of Columbia, or the
Commonwealth of Puerto Rico.
(8) A prime contractor that identifies a small business by name as a subcontractor in a
proposal, offer, bid or subcontracting plan must notify those subcontractors in writing prior to
identifying the concern in the proposal, bid, offer or subcontracting plan.
(9) Anyone who has a reasonable basis to believe that a prime contractor or a
subcontractor may have made a false statement to an employee or representative of the
Federal Government, or to an employee or representative of the prime contractor, with
respect to subcontracting plans must report the matter to the SBA Office of Inspector
General. All other concerns as to whether a prime contractor or subcontractor has complied
with SBA regulations or otherwise acted in bad faith may be reported to the Government
Contracting Area Office where the firm is headquartered.
(d) Contracting officer responsibilities. The contracting officer (or administrative
contracting officer if specifically delegated in writing to accomplish this task) is responsible for
evaluating the prime contractor's compliance with its subcontracting plan, including:
(1) Ensuring that all contractors submit their subcontracting reports into the eSRS (or
any successor system) or, if applicable, the SF-294, Subcontracting Report for Individual
Contracts, within 30 days after the report ending date (e.g., by October 30th for the fiscal
year ended September 30th).
(2) Reviewing all ISRs, and where applicable, SSRs, in eSRS (or any successor system)
within 60 days of the report ending date (e.g., by November 30th for a report submitted for
the fiscal year ended September 30th) and either accepting or rejecting the reports in
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accordance with the Federal Acquisition Regulation (FAR) provisions set forth in 48 CFR
subpart 19.7, 52.219-9, and the eSRS instructions (www.esrs.gov). The authority to
acknowledge or reject SSRs for commercial plans resides with the contracting officer who
approved the commercial plan. If a report is rejected, the contracting officer must provide an
explanation for the rejection to allow prime contractors the opportunity to respond specifically
to perceived deficiencies.
(3) Evaluating whether the prime contractor made a good faith effort to comply with its
small business subcontracting plan.
(i) Evidence that a large business prime contractor has made a good faith effort to
comply with its subcontracting plan or other subcontracting responsibilities includes
supporting documentation that:
(A) The contractor performed one or more of the actions described in paragraph (b) of
this section, as appropriate for the procurement;
(B) Although the contractor may have failed to achieve its goal in one socioeconomic
category, it over-achieved its goal by an equal or greater amount in one or more of the other
categories; or
(C) The contractor fulfilled all of the requirements of its subcontracting plan.
(ii) Examples of activities reflective of a failure to make a good faith effort to comply with
a subcontracting plan include, but are not limited, to:
(A) Failure to submit the acceptable individual or summary subcontracting reports in
eSRS by the report due dates or as provided by other agency regulations within prescribed
time frames;
(B) Failure to pay small business concern subcontractors in accordance with the terms
of the contract with the prime;
(C) Failure to designate and maintain a company official to administer the subcontracting
program and monitor and enforce compliance with the plan;
(D) Failure to maintain records or otherwise demonstrate procedures adopted to comply
with the plan including subcontracting flow-down requirements;
(E) Adoption of company policies or documented procedures that have as their
objectives the frustration of the objectives of the plan;
(F) Failure to correct substantiated findings from federal subcontracting compliance
reviews or participate in subcontracting plan management training offered by the
government;
(G) Failure to conduct market research identifying potential small business concern
subcontractors through all reasonable means including outreach, industry days, or the use of
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federal database marketing systems such as SBA's Dynamic Small Business Search (DSBS)
or SUBNet Systems or any successor federal systems;
(H) Failure to comply with regulations requiring submission of a written explanation to
the contracting officer to change small business concern subcontractors that were used in
preparing offers; or
(I) Falsifying records of subcontracting awards to SBCs.
(4) Evaluating the prime contractor's written explanation concerning the prime
contractor's failure to use a small business concern in performance in the same scope,
amount, and quality used in preparing and submitting the bid or proposal, and considering
that information when rating the contractor for past performance purposes.
(5) Evaluating the prime contractor's written explanation concerning its payment of a
reduced price to a small business subcontractor for goods and services upon completion of
the responsibilities of the subcontractor or its payment to a subcontractor more than 90 days
past due under the terms of the subcontract for goods and services provided for the contract
and for which the Federal agency has paid the prime contractor, and considering that
information when rating the contractor for past performance purposes.
(6) Evaluating whether the prime contractor has a history of unjustified untimely or
reduced payments to subcontractors, and if so, recording the identity of the prime contractor
in the Federal Awardee Performance and Integrity Information System (FAPIIS), or any
successor database.
(7) In his or her discretion, requiring the prime contractor (other than a prime contractor
with a commercial plan) to update its subcontracting plan when an option is exercised.
(8) Requiring the prime contractor (other than a contractor with a commercial plan) to
submit a subcontracting plan if the value of a modification causes the value of the contract to
exceed the subcontracting plan threshold and to the extent that subcontracting opportunities
exist.
(9) In his or her discretion, requiring a subcontracting plan if a prime contractor's size
status changes from small to other than small as a result of a size recertification.
(10) Where a subcontracting plan is amended in connection with an option, or added as
a result of a recertification or modification, the changes to any existing plan are for
prospective subcontracting opportunities and do not apply retroactively. However, since
achievements must be reported on the ISR (or the SF-294, if applicable) on a cumulative
basis from the inception of the contract, the contractor's achievements prior to the
modification or option will be factored into its overall achievement on the contract from
inception.
(11) Evaluating whether the contractor or subcontractor complied in good faith with the
requirement to provide periodic reports and cooperate in any studies or surveys as may be
required by the Federal agency or the Administration in order to determine the extent of
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compliance by the contractor or subcontractor with the subcontracting plan. The contractor or
subcontractor's failure to comply with this requirement in good faith shall be a material
breach of such contract or subcontract and may be considered in any past performance
evaluation of the contractor.
(e) CMR Responsibilities. Commercial Market Representatives (CMRs) are SBA's
subcontracting specialists. CMRs are responsible for:
(1) Facilitating the matching of large prime contractors with small business concerns;
(2) Counseling large prime contractors on their responsibilities to maximize
subcontracting opportunities for small business concerns;
(3) Instructing large prime contractors on identifying small business concerns by means
of SAM (or any successor system), SUB-Net, Business Matchmaking events, and other
resources and tools;
(4) Counseling small business concerns on how to market themselves to large prime
contractors;
(5) Maintaining a portfolio of large prime contractors and conducting Subcontracting
Orientation and Assistance Reviews (SOARs). SOARs are conducted for the purpose of
assisting prime contractors in understanding and complying with their small business
subcontracting responsibilities, including developing subcontracting goals that reflect
maximum practicable opportunity for small business; maintaining acceptable books and
records; and periodically submitting reports to the Federal government; and
(6) Conducting periodic reviews, including compliance reviews in accordance with
paragraph (f) of this section.
(f) Compliance reviews. (1) A prime contractor's performance under its subcontracting
plan is evaluated by means of on-site compliance reviews and follow-up reviews, as a
supplement to evaluations performed by the contracting agency, either on a contract-bycontract basis or, in the case of contractors having multiple contracts, on an aggregate basis.
A compliance review is a surveillance review that determines a contractor's achievements in
meeting the goals and other elements in its subcontracting plan for both open contracts and
contracts completed during the previous twelve months. A follow-up review is done after a
compliance review, generally within six to eight months, to determine if the contractor has
implemented SBA's recommendations.
(2) All compliance reviews begin with a validation of the prime contractor's most recent
ISR (or SF-294, if applicable) or SSR. A compliance review includes:
(i) An evaluation of whether the prime contractor assigned the proper NAICS code and
corresponding size standard to a subcontract, and a review of whether small business
subcontractors qualify for the size or socioeconomic status claimed;

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(ii) Validation of the prime contractor's methodology for completing its subcontracting
reports; and
(iii) Consideration of whether the prime contractor is monitoring its other than small
subcontractors with regard to their subcontracting plans, determining achievement of their
proposed subcontracting goals, and reviewing their subcontractors' ISRs (or SF-294s, if
applicable).
(3) Upon completion of the review and evaluation of a contractor's performance and
efforts to achieve the requirements in its subcontracting plans, the contractor's performance
will be assigned one of the following ratings: Exceptional, Very Good, Satisfactory, Marginal
or Unsatisfactory. The factors listed in paragraph (c) of this section will be taken into
consideration, where applicable, in determining the contractor's rating. However, a contractor
may be found Unsatisfactory, regardless of other factors, if it cannot substantiate the claimed
achievements under its subcontracting plan.
(4) Any contractor that receives a marginal or unsatisfactory rating must provide a
written corrective action plan to SBA, or to both SBA and the agency that conducted the
compliance review if the agency conducting the review has an agreement with SBA, within
30 days of its receipt of the official compliance report.
(5) Any contractor that fails to comply with paragraph (f)(4) of this section, or any
contractor that fails to demonstrate a good-faith effort, as set forth in paragraph (d) of this
section:
(i) May be considered for liquidated damages under the procedures in 48 CFR 19.705-7
and the clause at 52.219-16; and
(ii) Shall be in material breach of such contract or subcontract, and such failure to
demonstrate good faith must be considered in any past performance evaluation of the
contractor. This action shall be considered by the contracting officer upon receipt of a written
recommendation to that effect from the CMR. The CMR's recommendation must include a
copy of the compliance report and any other relevant correspondence or supporting
documentation. Furthermore, if the CMR has a reasonable basis to believe that a contractor
has made a false statement to an employee or representative of the Federal Government, or
to an employee or representative of the prime contractor, the CMR must report the matter to
the SBA Office of Inspector General. All other concerns as to whether a prime contractor or
subcontractor has complied with SBA regulations or otherwise acted in bad faith may be
reported to the Area Government Contracting Office where the firm is headquartered.
(6) Reviews and evaluations of contractors with commercial plans are identical to
reviews and evaluations of other contractors, except that contractors with commercial
subcontracting plans do not submit the SF-294, Subcontracting Report for Individual
Contracts. Instead, goal achievement is determined by comparing the goals in the approved
commercial subcontracting plan against the cumulative achievements on the SF-295,
Summary Subcontract Report, for the same period. The same ratings criteria set forth in
paragraph (f)(3) of this section apply to contractors with commercial plans.
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(7) SBA is authorized to enter into agreements with other Federal agencies or entities to
conduct compliance reviews and otherwise further the objectives of the subcontracting
program. Copies of these agreements will be published on http://www.sba.gov/GC. SBA is
the lead agency on all joint compliance reviews with other agencies.
(8) The head of the contracting agency shall ensure that:
(i) The agency collects and reports data on the extent to which contractors of the agency
meet the goals and objectives set forth in subcontracting plans; and
(ii) The agency periodically reviews data collected and reported pursuant to paragraph
(f)(8)(i) of this section for the purpose of ensuring that such contractors comply in good faith
with the requirements of this section.
(g) Subcontracting consideration in source selection. (1) A contracting officer may
include an evaluation factor in a solicitation which evaluates:
(i) An offeror's proposed approach to small business subcontracting participation in the
subject procurement;
(ii) The extent to which the offeror has met its small business subcontracting plan goals
on previous covered contracts; and/or
(iii) The extent to which the offeror timely paid its small business subcontractors under
covered contracts.
(2) A contracting officer may include an evaluation factor in a solicitation which evaluates
an offeror's commitment to pay small business subcontractors within a specific number of
days after receipt of payment from the Government for goods and services previously
rendered by the small business subcontractor.
(i) The contracting officer will comparatively evaluate the proposed timelines.
(ii) Such a commitment shall become a material part of the contract.
(iii) The contracting officer must consider the contractor's compliance with the
commitment in evaluating performance, including for purposes of contract continuation (such
as exercising options).
(3) A small business concern submitting an offer shall receive the maximum score, credit
or rating under an evaluation factor described in paragraph (g) of this section without having
to submit any information in connection with this factor.
(4) A contracting officer shall include a significant evaluation factor for the criteria
described in paragraphs (g)(1)(i) and (g)(1)(ii) of this section in a bundled contract or order as
defined in §125.2.
(5) Paragraph (g) of this section may apply to solicitations for orders against multiple
award contracts (including a Federal Supply Schedule or Multiple Award Schedule contract

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award contracts, (including a Federal Supply Schedule or Multiple Award Schedule contract,
a Government-wide acquisition contract (GWAC), or a multi-agency contract (MAC)), blanket
purchase agreements or basic ordering agreements.
(h) Multiple award contracts. (1) Except where a prime contractor has a commercial
plan, the contracting officer shall require a subcontracting plan for each multiple award
indefinite delivery, indefinite quantity contract (including Multiple Award Schedule), where the
estimated value of the contract exceeds the subcontracting plan thresholds in paragraph (a)
of this section and the contract has subcontracting opportunities.
(2) Contractors shall submit small business subcontracting reports for individual orders
to the contracting agency on an annual basis.
(3) The agency funding the order shall receive credit towards its small business
subcontracting goals. More than one agency may not receive credit towards its
subcontracting goals for a particular subcontract.
(4) The agency funding the order may in its discretion establish small business
subcontracting goals for individual orders, blanket purchase agreements or basic ordering
agreements.
(i) Subcontracting consideration in bundled and consolidated contracts. (1) For bundled
requirements, the agency must evaluate offers from teams of small businesses the same as
other offers, with due consideration to the capabilities of all proposed subcontractors.
(2) For substantial bundling, the agency must design actions to maximize small business
participation as subcontractors (including suppliers) at any tier under the contract or contracts
that may be awarded to meet the requirements.
(3) For significant subcontracting opportunities in consolidated contracts, bundled
requirements, and substantially bundled requirements, see §125.2(d)(4).
[69 FR 75824, Dec. 20, 2004, as amended at 74 FR 46887, Sept. 14, 2009; 78 FR 42403, July 16,
2013; 78 FR 59798, Sept. 30, 2013; 78 FR 61142, Oct. 2, 2013; 81 FR 34262, May 31, 2016; 81 FR
94250, Dec. 23, 2016; 83 FR 12852, Mar. 26, 2018; 84 FR 65239, Nov. 26, 2019; 84 FR 65663, Nov.
29, 2019; 85 FR 66192, Oct. 16, 2020]

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§125.4 What is the Government property sales assistance program?
(a) The purpose of SBA's Government property sales assistance program is to:
(1) Insure that small businesses obtain their fair share of all Federal real and personal
property qualifying for sale or other competitive disposal action; and
(2) Assist small businesses in obtaining Federal property being processed for disposal,
sale, or lease.
(b) SBA property sales assistance primarily consists of two activities:
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(1) Obtaining small business set-asides when necessary to insure that a fair share of
Government property sales are made to small businesses; and
(2) Providing advice and assistance to small businesses on all matters pertaining to sale
or lease of Government property.
(c) The program is intended to cover the following categories of Government property:
(1) Sales of timber and related forest products;
(2) Sales of strategic material from national stockpiles;
(3) Sales of royalty oil by the Department of Interior's Minerals Management Service;
(4) Leases involving rights to minerals, petroleum, coal, and vegetation; and
(5) Sales of surplus real and personal property.
(d) SBA has established specific small business size standards and rules for the sale or
lease of the different kinds of Government property. These provisions are contained in
§§121.501 through 121.514 of this chapter.
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§125.5 What is the Certificate of Competency Program?
(a) General. (1) The Certificate of Competency (COC) Program is authorized under
section 8(b)(7) of the Small Business Act (15 U.S.C. 637(b)(7)). The COC Program is
applicable to all Government procurement actions, with the exception of 8(a) sole source
awards but 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. 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. With respect to
Multiple Award Contracts, contracting officers generally determine responsibility at the time of
award of the contract. However, if a contracting officer makes a responsibility determination
as set forth in paragraph (a)(2) of this section for an order issued against a Multiple Award
Contract, the contracting officer must refer the matter to SBA for a COC. The COC
procedures apply to all Federal procurements, regardless of the location of performance or
the location of the procuring activity.
(2) A contracting officer must refer a small business concern to SBA for a possible COC,
even if the next apparent successful offeror is also a small business, when the contracting
officer:
(i) Denies an apparent successful small business offeror award of a contract or order on
the basis of responsibility (including those bases set forth in paragraphs (a)(1)(ii) and (iii) of
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this section);
(ii) Refuses to consider a small business concern for award of a contract or order after
evaluating the concern's offer on a non-comparative basis (e.g., a pass/fail, go/no go, or
acceptable/unacceptable) under one or more responsibility type evaluation factors (such as
experience of the company or key personnel or past performance); or
(iii) Refuses to consider a small business concern for award of a contract or order
because it failed to meet a definitive responsibility criterion contained in the solicitation.
(3) A small business offeror referred to SBA as nonresponsible may apply to SBA for a
COC. Where the applicant is a non-manufacturing offeror on a supply contract, the COC
applies to the responsibility of the non-manufacturer, not to that of the manufacturer.
(b) COC Eligibility. (1) The offeror seeking a COC has the burden of proof to
demonstrate its eligibility for COC review. (i) To be eligible for a COC, an offeror must qualify
as a small business under the applicable size standard in accordance with part 121 of this
chapter.
(ii) To be eligible for a COC, an offeror must qualify as a small business under the
applicable size standard in accordance with part 121 of this chapter, and must have agreed
to comply with the applicable limitations on subcontracting and the nonmanufacturer rule,
where applicable.
(2) SBA will determine a concern ineligible for a COC if the concern, or any of its
principals, appears in the “Parties Excluded From Federal Procurement Programs” section
found in the U.S. General Services Administration Office of Acquisition Policy Publication:
List of Parties Excluded From Federal Procurement or Nonprocurement Programs. If a
principal is unable to presently control the applicant concern, and appears in the
Procurement section of the list due to matters not directly related to the concern itself,
responsibility will be determined in accordance with paragraph (f)(2) of this section.
(3) An eligibility determination will be made on a case-by-case basis, where a concern or
any of its principals appears in the Nonprocurement Section of the publication referred to in
paragraph (b)(2) of this section.
(c) Referral of nonresponsibility determination to SBA. (1) The contracting officer must
refer the matter in writing to the SBA Government Contracting Area Office (Area Office)
serving the area in which the headquarters of the offeror is located. The referral must include
a copy of the following:
(i) Solicitation;
(ii) Offer submitted by the concern whose responsibility is at issue for the procurement
(its Best and Final Offer for a negotiated procurement);
(iii) Abstract of Bids, where applicable, or the Contracting Officer's Price Negotiation
Memorandum;
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(iv) Preaward survey, where applicable;
(v) Contracting officer's written determination of nonresponsibility;
(vi) Technical data package (including drawings, specifications, and Statement of Work);
and
(vii) Any other justification and documentation used to arrive at the nonresponsibility
determination.
(2) Contract award must be withheld by the contracting officer for a period of 15 working
days (or longer if agreed to by SBA and the contracting officer) following receipt by the
appropriate Area Office of a referral which includes all required documentation.
(3) The COC referral must indicate that the offeror has been found responsive to the
solicitation, and also identify the reasons for the nonresponsibility determination.
(d) Application for COC. (1) Upon receipt of the contracting officer's referral, the Area
Office will inform the concern of the contracting officer's negative responsibility determination,
and offer it the opportunity to apply to SBA for a COC by a specified date.
(2) The COC application must include all information and documentation requested by
SBA and any additional information which the firm believes will demonstrate its ability to
perform on the proposed contract. The application should be returned as soon as possible,
but no later than the date specified by SBA.
(3) Upon receipt of a complete and acceptable application, SBA may elect to visit the
applicant's facility to review its responsibility. SBA personnel may obtain clarification or
confirmation of information provided by the applicant by directly contacting suppliers,
financial institutions, and other third parties upon whom the applicant's responsibility
depends.
(e) Incomplete applications. If an application for a COC is materially incomplete or is not
submitted by the date specified by SBA, SBA will close the case without issuing a COC and
will notify the contracting officer and the concern with a declination letter.
(f) Reviewing an application. (1) The COC review process is not limited to the areas of
nonresponsibility cited by the contracting officer. SBA may, at its discretion, independently
evaluate the COC applicant for all elements of responsibility, but it may presume
responsibility exists as to elements other than those cited as deficient. SBA may deny a COC
for reasons of nonresponsibility not originally cited by the contracting officer.
(2) An offeror seeking a COC has the burden of proof to demonstrate that it possesses
all relevant elements of responsibility and that it has overcome the contracting officer's
objection(s).
(3) A small business will be rebuttably presumed nonresponsible if any of the following
circumstances are shown to exist:
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(i) Within three years before the application for a COC, the concern, or any of its
principals, has been convicted of an offense or offenses that would constitute grounds for
debarment or suspension under FAR subpart 9.4 (48 CFR part 9, subpart 9.4), and the
matter is still under the jurisdiction of a court (e.g., the principals of a concern are
incarcerated, on probation or parole, or under a suspended sentence); or
(ii) Within three years before the application for a COC, the concern or any of its
principals has had a civil judgment entered against it or them for any reason that would
constitute grounds for debarment or suspension under FAR subpart 9.4 (48 CFR part,
subpart 9.4).
(4) Where a contracting officer finds a concern to be non-responsible for reasons of
financial capacity on an indefinite delivery or indefinite quantity task or delivery order
contract, the Area Director will consider the firm's maximum financial capacity. If the Area
Director issues a COC, it will be for a specific amount that is the limit of the firm's financial
capacity for that contract. The contracting officer may subsequently determine to exceed the
amount, but cannot deny the firm award of an order or contract on financial grounds if the
firm has not reached the financial maximum the Area Director identified in the COC letter.
(g) Decision by Area Director (“Director”). After reviewing the information submitted by
the applicant and the information gathered by SBA, the Area Director will make a
determination, either final or recommended as set forth in the following chart:
Contracting actions
Less than or equal to the Simplified
Acquisition Threshold
Above the Simplified Acquisition
Threshold and less than or equal to
$25 million

Exceeding $25 million

SBA official or office with
authority to make decision
Director may approve or deny
(1) Director may deny

Finality of decision; options for
contracting agencies
Final. The Director will notify both applicant
and contracting agency in writing of the
decision.
(1) Final.

(2) Director may approve, subject (2) Contracting agency may proceed under
to right of appeal and other options paragraph (h) or paragraph (i) of this
section.
(1) Director may deny
(1) Final.
(2) Director must refer to SBA
(2) Contracting agency may proceed under
Headquarters recommendation for paragraph (j) of this section.
approval

(h) Notification of intent to issue on a contract or order with a value between the
simplified acquisition threshold and $25 million. Where the Director determines that a COC is
warranted, he or she will notify the contracting officer (or the procurement official with the
authority to accept SBA's decision) of the intent to issue a COC, and of the reasons for that
decision, prior to issuing the COC. At the time of notification, the contracting officer or the
procurement official with the authority to accept SBA's decision has the following options:
(1) Accept the Director's decision to issue the COC and award the contract to the
concern. The COC issuance letter will then be sent, including as an attachment a detailed
rationale of the decision; or
(2) Ask the Director to suspend the case for one of the following purposes:
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(2) Ask the Director to suspend the case for one of the following purposes:
(i) To forward a detailed rationale for the decision to the contracting officer for review
within a specified period of time;
(ii) To afford the contracting officer the opportunity to meet with the Area Office to review
all documentation contained in the case file;
(iii) To submit any information which the contracting officer believes SBA has not
considered (at which time, SBA will establish a new suspense date mutually agreeable to the
contracting officer and SBA); or
(iv) To permit resolution of an appeal by the contracting agency to SBA Headquarters
under paragraph (i) of this section.
(i) Appeals of Area Director determinations. For COC actions with a value exceeding the
simplified acquisition threshold , contracting agencies may appeal a Director's decision to
issue a COC to SBA Headquarters by filing an appeal with the Area Office processing the
COC application. The Area Office must honor the request to appeal if the contracting officer
agrees to withhold award until the appeal process is concluded. Without such an agreement
from the contracting officer, the Director must issue the COC. When such an agreement has
been obtained, the Area Office will immediately forward the case file to SBA Headquarters.
(1) The intent of the appeal procedure is to allow the contracting agency the opportunity
to submit to SBA Headquarters any documentation which the Area Office may not have
considered.
(2) SBA Headquarters will furnish written notice to the Director, OSDBU or OSBP of the
procuring agency, with a copy to the contracting officer, that the case file has been received
and that an appeal decision may be requested by an authorized official. If the contracting
agency decides to file an appeal, it must notify SBA Headquarters through its Director,
OSDBU, within 10 working days (or a time period agreed upon by both agencies) of its
receipt of the notice under paragraph (h) of this section. The appeal and any supporting
documentation must be filed within 10 working days (or a different time period agreed to by
both agencies) after SBA receives the request for a formal appeal.
(3) The SBA Director, Office of Government Contracting (D/GC) will make a final
determination, in writing, to issue or to deny the COC.
(j) Decision by SBA Headquarters where contract value exceeds $25 million. (1) Prior to
taking final action, SBA Headquarters will contact the contracting agency at the secretariat
level or agency equivalent and afford it the following options:
(i) Ask SBA Headquarters to suspend the case so that the agency can meet with
Headquarters personnel and review all documentation contained in the case file; or
(ii) Submit to SBA Headquarters for evaluation any information which the contracting
agency believes has not been considered.

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(2) After reviewing all available information, the AA/GC will make a final decision to
either issue or deny the COC. If the AA/GC's decision is to deny the COC, the applicant and
contracting agency will be informed in writing by the Area Office. If the decision is to issue the
COC, a letter certifying the responsibility of the firm will be sent to the contracting agency by
Headquarters and the applicant will be informed of such issuance by the Area Office. Except
as set forth in paragraph (l) of this section, there can be no further appeal or reconsideration
of the decision of the AA/GC.
(k) Notification of denial of COC. The notification to an unsuccessful applicant following
either an Area Director or a Headquarters denial of a COC will briefly state all reasons for
denial and inform the applicant that a meeting may be requested with appropriate SBA
personnel to discuss the denial. Upon receipt of a request for such a meeting, the
appropriate SBA personnel will confer with the applicant and explain the reasons for SBA's
action. The meeting does not constitute an opportunity to rebut the merits of the SBA's
decision to deny the COC, and is for the sole purpose of giving the applicant the opportunity
to correct deficiencies so as to improve its ability to obtain future contracts either directly or, if
necessary, through the issuance of a COC.
(l) Reconsideration of COC after issuance. (1) An approved COC may be reconsidered
and possibly rescinded, at the sole discretion of SBA, where an award of the contract has not
occurred, and one of the following circumstances exists:
(i) The COC applicant submitted false or omitted materially adverse information;
(ii) New materially adverse information has been received relating to the current
responsibility of the applicant concern; or
(iii) The COC has been issued for more than 60 days (in which case SBA may
investigate the business concern's current circumstances and the reason why the contract
has not been issued).
(2) Where SBA reconsiders and reaffirms the COC the procedures under paragraph (h)
of this section do not apply.
(m) Effect of a COC. By the terms of the Act, a COC is conclusive as to responsibility.
Where SBA issues a COC on behalf of a small business with respect to a particular contract,
contracting officers are required to award the contract without requiring the firm to meet any
other requirement with respect to responsibility. Where SBA issues a COC with respect to a
referral in paragraph (a)(2)(ii) or (a)(2)(iii) of this section, the contracting officer is not required
to issue an award to that offeror if the contracting officer denies the contract for reasons
unrelated to responsibility.
(n) Effect of Denial of COC. Denial of a COC by SBA does not preclude a contracting
officer from awarding a contract to the referred firm, nor does it prevent the concern from
making an offer on any other procurement.
(o) Monitoring performance. Once a COC has been issued and a contract awarded on
that basis, SBA will monitor contractor performance.
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o to co t acto pe o

a ce

[61 FR 3312, Jan. 31, 1996; 61 FR 7987, Mar. 1, 1996, as amended at 72 FR 50041, Aug. 30, 2007;
78 FR 61142, Oct. 2, 2013; 81 FR 34262, May 31, 2016; 81 FR 48585, July 25, 2016; 85 FR 66192,
Oct. 16, 2020]

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§125.6 What are the prime contractor's limitations on subcontracting?
(a) General. In order to be awarded a full or partial small business set-aside contract
with a value greater than the simplified acquisition threshold (as defined in the FAR at 48
CFR 2.101), an 8(a) contract, an SDVO SBC contract, a HUBZone contract, or a WOSB or
EDWOSB contract pursuant to part 127 of this chapter, a small business concern must agree
that:
(1) In the case of a contract for services (except construction), it will not pay more than
50% of the amount paid by the government to it to firms that are not similarly situated. Any
work that a similarly situated subcontractor further subcontracts will count towards the 50%
subcontract amount that cannot be exceeded. Other direct costs may be excluded to the
extent they are not the principal purpose of the acquisition and small business concerns do
not provide the service, such as airline travel, work performed by a transportation or disposal
entity under a contract assigned the environmental remediation NAICS code (562910), cloud
computing services, or mass media purchases. In addition, work performed overseas on
awards made pursuant to the Foreign Assistance Act of 1961 or work required to be
performed by a local contractor, is excluded.
(2)(i) In the case of a contract for supplies or products (other than from a
nonmanufacturer of such supplies), it will not pay more than 50% of the amount paid by the
government to it to firms that are not similarly situated. Any work that a similarly situated
subcontractor further subcontracts will count towards the 50% subcontract amount that
cannot be exceeded. Cost of materials are excluded and not considered to be subcontracted.
(ii) In the case of a contract for supplies from a nonmanufacturer, it will supply the
product of a domestic small business manufacturer or processor, unless a waiver as
described in §121.406(b)(5) of this chapter is granted.
(A) For a multiple item procurement where a waiver as described in §121.406(b)(5) of
this chapter has not been granted for one or more items, more than 50% of the value of the
products to be supplied by the nonmanufacturer must be the products of one or more
domestic small business manufacturers or processors.
(B) For a multiple item procurement where a waiver as described in §121.406(b)(5) of
this chapter is granted for one or more items, compliance with the limitation on
subcontracting requirement will be determined by combining the value of the items supplied
by domestic small business manufacturers or processors with the value of the items subject
to a waiver. As such, as long as the value of the items to be supplied by domestic small
business manufacturers or processors plus the value of the items to be supplied that are
subject to a waiver account for at least 50% of the value of the contract, the limitations on
subcontracting requirement is met.
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(C) For a multiple item procurement, the same small business concern may act as both
a manufacturer and a nonmanufacturer.
Example 1 to paragraph (a)(2). A contract calls for the supply of one item valued at $1,000,000. The
market research shows that there are no small business manufacturers that produce this item, and the
contracting officer seeks and is granted a contract specific waiver for this item. In this case, a small business
nonmanufacturer may supply an item manufactured by a large business.
Example 2 to paragraph (a)(2). A procurement is for $1,000,000 and calls for the acquisition of 10 items.
Market research shows that nine of the items can be sourced from small business manufacturers and one
item is subject to an SBA class waiver. Since 100% of the value of the contract can be procured through
domestic small business manufacturers or processors plus manufacturers or processors of the item for which
a waiver has been granted, the procurement should be set aside for small business. At least 50% of the value
of the contract, or 50% of $1,000,000, must be supplied by one or more domestic small business
manufacturers or manufacturers or processors of the one item for which class waiver has been granted. In
addition, the prime small business nonmanufacturer may act as a manufacturer for one or more items.
Example 3 to paragraph (a)(2). A contract is for $1,000,000 and calls for the acquisition of 10 items.
Market research shows that only four of these items are manufactured by small businesses. The value of the
items manufactured by small business is estimated to be $400,000. The contracting officer seeks and is
granted contract specific waivers on the other six items. Since 100% of the value of the contract can be
procured through domestic small business manufacturers or processors plus manufacturers or processors of
the items for which a waiver has been granted, the procurement should be set aside for small business. At
least 50% of the value of the contract, or 50% of $1,000,000, must be supplied by one or more domestic small
business manufacturers or manufacturers or processors of the six items for which a contract specific waiver
has been granted. In addition, the prime small business nonmanufacturer may act as a manufacturer for one
or more items.
Example 4 to paragraph (a)(2). A contract is for $1,000,000 and calls for the acquisition of 10 items.
Market research shows that three of the items can be sourced from small business manufacturers at this
particular time, and the estimated value of these items is $300,000. There are no class waivers subject to the
remaining seven items. In order for this procurement to be set aside for small business, a contracting officer
must seek and be granted a contract specific waiver for one or more items totaling $200,000 (so that
$300,000 plus $200,000 equals 50% of the value of the entire procurement). Once a contract specific waiver
is received for one or more items, at least 50% of the value of the contract, or 50% of $1,000,000, must be
supplied by one or more domestic small business manufacturers or processors or by manufacturers or
processors of the items for which a contract specific waiver has been granted. In addition, the prime small
business nonmanufacturer may act as a manufacturer for one or more items.

(3) In the case of a contract for general construction, it will not pay more than 85% of the
amount paid by the government to it to firms that are not similarly situated. Any work that a
similarly situated subcontractor further subcontracts will count towards the 85% subcontract
amount that cannot be exceeded. Cost of materials are excluded and not considered to be
subcontracted.
(4) In the case of a contract for special trade contractors, no more than 75% of the
amount paid by the government to the prime may be paid to firms that are not similarly
situated. Any work that a similarly situated subcontractor further subcontracts will count
towards the 75% subcontract amount that cannot be exceeded. Cost of materials are
excluded and not considered to be subcontracted.
(b) Mixed contracts. Where a contract integrates any combination of services, supplies,
or construction, the contracting officer shall select the appropriate NAICS code as prescribed
in §121.402(b) of this chapter. The contracting officer's selection of the applicable NAICS
code is determinative as to which limitation on subcontracting and performance requirement
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applies. Based on the NAICS code selected, the relevant limitation on subcontracting
requirement identified in paragraphs (a)(1) through (4) of this section will apply only to that
portion of the contract award amount. In no case shall more than one limitation on
subcontracting requirement apply to the same contract.
Example 1 to paragraph (b). A procuring agency is acquiring both services and supplies through a small
business set-aside. The total value of the requirement is $3,000,000, with the supply portion comprising
$2,500,000, and the services portion comprising $500,000. The contracting officer appropriately assigns a
manufacturing NAICS code to the requirement. The cost of material is $500,000. Thus, because the services
portion of the contract and the cost of materials are excluded from consideration, the relevant amount for
purposes of calculating the performance of work requirement is $2,000,000 and the prime and/or similarly
situated entities must perform at least $1,000,000 and the prime contractor may not subcontract more than
$1,000,000 to non-similarly situated entities.
Example 2 to paragraph (b). A procuring agency is acquiring both services and supplies through a small
business set-aside. The total value of the requirement is $3,000,000, with the services portion comprising
$2,500,000, and the supply portion comprising $500,000. The contracting officer appropriately assigns a
services NAICS code to the requirement. Thus, because the supply portion of the contract is excluded from
consideration, the relevant amount for purposes of calculating the performance of work requirement is
$2,500,000 and the prime and/or similarly situated entities must perform at least $1,250,000 and the prime
contractor may not subcontract more than $1,250,000 to non-similarly situated entities.
Example 3 to paragraph (b). A procuring activity is acquiring both services and general construction
through a small business set-aside. The total value of the requirement is $10,000,000, with the construction
portion comprising $8,000,000, and the services portion comprising $2,000,000. The contracting officer
appropriately assigns a construction NAICS code to the requirement. The 85% limitation on subcontracting
identified in paragraph (a)(3) would apply to this procurement. Because the services portion of the contract is
excluded from consideration, the relevant amount for purposes of calculating the limitation on subcontracting
requirement is $8,000,000. As such, the prime contractor cannot subcontract more than $6,800,000 to nonsimilarly situated entities, and the prime and/or similarly situated entities must perform at least $1,200,000.

(c) Subcontracts to similarly situated entities. A small business concern prime contractor
that receives a contract listed in paragraph (a) of this section and spends contract amounts
on a subcontractor that is a similarly situated entity shall not consider those subcontracted
amounts as subcontracted for purposes of determining whether the small business concern
prime contractor has violated paragraph (a) of this section, to the extent the subcontractor
performs the work with its own employees. Any work that the similarly situated subcontractor
does not perform with its own employees shall be considered subcontracted SBA will also
exclude a subcontract to a similarly situated entity from consideration under the ostensible
subcontractor rule (§121.103(h)(4)). A prime contractor may no longer count a similarly
situated entity towards compliance with the limitations on subcontracting where the
subcontractor ceases to qualify as small or under the relevant socioeconomic status.
Example 1 to paragraph (c): An SDVO SBC sole source contract is awarded in the total amount of
$500,000 for hammers. The prime contractor is a manufacturer and subcontracts 51% of the total amount
received, less the cost of materials ($100,000) or $204,000, to an SDVO SBC subcontractor that
manufactures the hammers in the U.S. The prime contractor does not violate the limitation on subcontracting
requirement because the amount subcontracted to a similarly situated entity (less the cost of materials) is
excluded from the limitation on subcontracting calculation.
Example 2 to paragraph (c): A competitive 8(a) BD contract is awarded in the total amount of
$10,000,000 for janitorial services. The prime contractor subcontracts $8,000,000 of the janitorial services to
another 8(a) BD certified firm. The prime contractor does not violate the limitation on subcontracting for
services because the amount subcontracted to a similarly situated entity is excluded from the limitation on
subcontracting.
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Example 3 to paragraph (c): A WOSB set-aside contract is awarded in the total amount of $1,000,000 for
landscaping services. The prime contractor subcontracts $500,001 to an SDVO SBC subcontractor that is not
also a WOSB under the WOSB program. The prime contractor is in violation of the limitation on
subcontracting requirement because it has subcontracted more than 50% of the contract amount to an SDVO
SBC subcontractor, which is not considered similarly situated to a WOSB prime contractor.

(d) Determining compliance with applicable limitation on subcontracting. The period of
time used to determine compliance for a total or partial set-aside contract will be the base
term and then each subsequent option period. For an order set aside under a full and open
contract or a full and open contract with reserve, the agency will use the period of
performance for each order to determine compliance unless the order is competed among
small and other-than-small businesses (in which case the subcontracting limitations will not
apply).
(1) The contracting officer, in his or her discretion, may require the concern to comply
with the applicable limitations on subcontracting and the nonmanufacturer rule for each order
awarded under a total or partial set-aside contract.
(2) Compliance will be considered an element of responsibility and not a component of
size eligibility.
(3) Work performed by an independent contractor shall be considered a subcontract,
and may count toward meeting the applicable limitation on subcontracting where the
independent contractor qualifies as a similarly situated entity.
(e) Inapplicability of limitations on subcontracting. The limitations on subcontracting do
not apply to:
(1) Small business set-aside contracts with a value that is greater than the micropurchase threshold but less than or equal to the simplified acquisition threshold (as both
terms are defined in the FAR at 48 CFR 2.101); or
(2) Subcontracts (except where a prime is relying on a similarly situated entity to meet
the applicable limitations on subcontracting).
(3) For contracts where an independent contractor is not otherwise treated as an
employee of the concern for which he/she is performing work for size purposes under
§121.106(a) of this chapter, work performed by the independent contractor shall be
considered a subcontract. Such work will count toward meeting the applicable limitation on
subcontracting where the independent contractor qualifies as a similarly situated entity.
(4) Contracting officers may, at their discretion, require the contractor to demonstrate its
compliance with the limitations on subcontracting at any time during performance and upon
completion of a contract if the information regarding such compliance is not already available
to the contracting officer. Evidence of compliance includes, but is not limited to, invoices,
copies of subcontracts, or a list of the value of tasks performed.
(f) Request to change applicable limitation on subcontracting. SBA may use different
percentages if the Administrator determines that such action is necessary to reflect
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conventional industry practices among small business concerns that are below the numerical
size standard for businesses in that industry group. Representatives of a national trade or
industry group or any interested SBC may request a change in subcontracting percentage
requirements for the categories defined by six digit industry codes in the North American
Industry Classification System (NAICS) pursuant to the following procedures:
(1) Format of request. Requests from representatives of a trade or industry group and
interested SBCs should be in writing and sent or delivered to the Director, Office of
Government Contracting, U.S. Small Business Administration, 409 3rd Street SW.,
Washington, DC 20416. The requester must demonstrate to SBA that a change in
percentage is necessary to reflect conventional industry practices among small business
concerns that are below the numerical size standard for businesses in that industry category,
and must support its request with information including, but not limited to:
(i) Information relative to the economic conditions and structure of the entire national
industry;
(ii) Market data, technical changes in the industry and industry trends;
(iii) Specific reasons and justifications for the change in the subcontracting percentage;
(iv) The effect such a change would have on the Federal procurement process; and
(v) Information demonstrating how the proposed change would promote the purposes of
the small business, 8(a), SDVO, HUBZone, WOSB, or EDWOSB programs.
(2) Notice to public. Upon an adequate preliminary showing to SBA, SBA will publish in
the F
R
a notice of its receipt of a request that it considers a change in the
subcontracting percentage requirements for a particular industry. The notice will identify the
group making the request, and give the public an opportunity to submit information and
arguments in both support and opposition.
(3) Comments. SBA will provide a period of not less than 30 days for public comment in
response to the F
R
notice.
(4) Decision. SBA will render its decision after the close of the comment period. If SBA
decides against a change, SBA will publish notice of its decision in the F
R
.
Concurrent with the notice, SBA will advise the requester of its decision in writing. If SBA
decides in favor of a change, SBA will propose an appropriate change to this part.
(g) Penalties. Whoever violates the requirements set forth in paragraph (a) of this
section shall be subject to the penalties prescribed in 15 U.S.C. 645(d), except that the fine
shall be treated as the greater of $500,000 or the dollar amount spent, in excess of permitted
levels, by the entity on subcontractors. A party's failure to comply with the spirit and intent of
a subcontract with a similarly situated entity may be considered a basis for debarment on the
grounds, including but not limited to, that the parties have violated the terms of a Government
contract or subcontract pursuant to FAR 9.406-2(b)(1)(i) (48 CFR 9.406-2(b)(1)(i)).
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[81 FR 34262, May 31, 2016; 81 FR 67093, Sept. 30, 2016; 83 FR 12852, Mar. 26, 2018; 84 FR
65239, Nov. 26, 2019; 84 FR 65664, Nov. 29, 2019; 85 FR 66192, Oct. 16, 2020]
E
N
: At 81 FR 48585, July 25, 2016, §125.6 was amended; however, the amendment could
not be incorporated due to inaccurate amendatory instruction.

Back to Top
§125.7 Acquisition-related dollar thresholds.
The Federal Acquisition Regulatory Council (FAR Council) has the responsibility of
adjusting each acquisition-related dollar threshold on October 1, of each year that is evenly
divisible by five. Acquisition-related dollar thresholds are defined as dollar thresholds that are
specified in law as a factor in defining the scope of the applicability of a policy, procedure,
requirement, or restriction provided in that law to the procurement of property or services by
an executive agency as determined by the FAR Council. 41 U.S.C. 431a(c). Part 125,
Government Contracting Programs, contains acquisition-related dollar thresholds subject to
inflationary adjustments. The FAR Council shall publish a notice of the adjusted dollar
thresholds in the F
R
. The adjusted dollar thresholds shall take effect on the
date of publication.
[74 FR 46887, Sept. 14, 2009]

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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 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 protégé 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
designating a named employee of the small business managing venturer as the manager
with ultimate responsibility for performance of the contract (the “Responsible Manager”).
(A) The managing venturer is responsible for controlling the day-to-day management
and administration of the contractual performance of the joint venture but other partners to

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and administration of the contractual performance of the joint venture, but other partners to
the joint venture may participate in all corporate governance activities and decisions of the
joint venture as is commercially customary.
(B) The individual identified as the Responsible 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 Responsible Manager cannot be employed by the mentor and become an employee of
the small business for purposes of performance under the joint venture.
(C) Although the joint venture managers responsible for orders issued under an IDIQ
contract need not be employees of the protégé, those managers must report to and be
supervised by the joint venture's Responsible Manager;
(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 participant(s) must receive profits from the joint
venture commensurate with the work performed by them, or a percentage agreed to by the
parties to the joint venture whereby the small business participant(s) receive profits from the
joint venture that exceed the percentage commensurate with the work performed by them,
and that at the conclusion of the joint venture contract(s) and/or the termination of a joint
venture, any funds remaining in the joint venture bank account shall distributed at the
discretion of the joint venture members according to percentage of ownership;
(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 or consent of all parties to
the joint venture for any payments made by the joint venture to its members for services
performed. 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 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

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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 annual performance-of-work statements required by paragraph (h)(1)
must be submitted to SBA and the relevant contracting officer not later than 45 days after
each operating year of the joint venture; and
(xii) Stating that the project-end performance-of-work required by paragraph (h)(2) must
be submitted to SBA and the relevant contracting officer 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 protégé and its SBAapproved 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. Except as set forth in
paragraph (c)(4) of this section, the 40% calculation for protégé workshare follows the same
rules as those set forth in §125.6 concerning supplies, construction, and mixed contracts,
including the exclusion of the same costs from the limitation on subcontracting calculation
(e.g., cost of materials excluded from the calculation in construction contracts).
(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 protégé 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 protégé, all work done by the mentor and any of its affiliates at any subcontracting
tier will be counted

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tier will be counted.
(4) Work performed by a similarly situated entity will not count toward the requirement
that a protégé must perform at least 40% of the work performed by a joint venture.
(d) Certification of compliance. Prior to the performance of any contract set aside or
reserved for small business by a joint venture between a protégé 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) Capabilities, past performance and experience. When evaluating the capabilities,
past performance, experience, business systems and certifications 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 and qualifications held
individually by each partner to the joint venture as well as any work done by the joint venture
itself previously. A procuring activity may not require the protégé firm to individually meet the
same evaluation or responsibility criteria as that required of other offerors generally. The
partners to the joint venture in the aggregate must demonstrate the past performance,
experience, business systems and certifications necessary to perform the contract.
(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 joint
venture or a small business mentor-protégé 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 protégé 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 protégé small business and a mentor authorized by

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awarded to a joint venture between a protégé small business and a mentor authorized by
§125.9, and upon request by SBA or the relevant contracting officer, the small business
partner to the joint venture must submit a report to the relevant contracting officer and to
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 protégé 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
(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.
[81 FR 48585, July 25, 2016, as amended at 81 FR 94941, Dec. 27, 2016; 85 FR 66193, Oct. 16,
2020]

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§125.9 What are the rules governing SBA's small business mentor-protégé program?
(a) General. The small business mentor-protégé program is designed to enhance the
capabilities of protégé firms by requiring approved mentors to provide business development
assistance to protégé firms and to improve the protégé 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 protégé or from the protégé 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 protégé 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:
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(i) Is capable of carrying out its responsibilities to assist the protégé firm under the
proposed mentor-protégé agreement;
(ii) Does not appear on the Federal list of debarred or suspended contractors; and
(iii) Can impart value to a protégé firm due to lessons learned and practical experience
gained or through its knowledge of general business operations and government contracting.
(2) SBA will decline an application if SBA determines that the mentor does not possess
good character or a favorable financial position, employs or otherwise controls the managers
of the protégé, or is otherwise affiliated with the protégé. Once approved, SBA may terminate
the mentor-protégé agreement if the mentor does not possess good character or a favorable
financial position, was affiliated with the protégé at time of application, or is affiliated with the
protégé for reasons other than the mentor-protégé agreement or assistance provided under
the agreement.
(3) In order for SBA to agree to allow a mentor to have more than one protégé at time,
the mentor and proposed additional protégé must demonstrate that the added mentorprotégé relationship will not adversely affect the development of either protégé firm (e.g., the
second firm may not be a competitor of the first firm).
(i) A mentor that has more than one protégé cannot submit competing offers in response
to a solicitation for a specific procurement through separate joint ventures with different
protégés.
(ii) A mentor generally cannot have more than three protégés at one time. However, the
first two mentor-protégé relationships approved by SBA between a specific mentor and a
small business that has its principal office located in the Commonwealth of Puerto Rico do
not count against the limit of three proteges that a mentor can have at one time.
(c) Protégés. (1) In order to initially qualify as a protégé 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 small business concern seeks to qualify as a protégé in a secondary NAICS
code, the concern must demonstrate how the mentor-protégé relationship will help it further
develop or expand its current capabilities in that secondary NAICS code. SBA will not
approve a mentor-protégé relationship in a secondary NAICS code in which the small
business concern has no prior experience. SBA may approve a mentor-protégé relationship
where the small business concern can demonstrate that it has performed work in one or
more similar NAICS codes or where the NAICS code in which the small business concern
seeks a mentor-protégé relationship is a logical business progression to work previously
performed by the concern.
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(2) A protégé firm may generally have only one mentor at a time. SBA may approve a
second mentor for a particular protégé firm where the second relationship will not compete or
otherwise conflict with the first mentor-protégé relationship, and:
(i) The second relationship pertains to an unrelated NAICS code; or
(ii) The protégé 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 protégé 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 mentor-protégé relationship.
(d) Benefits. (1) A protégé and mentor may joint venture as a small business for any
government prime contract, subcontract or sale, provided the protégé qualifies as small for
the procurement or sale. 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 protégé firm
qualifies (e.g., a protégé firm that qualifies as a WOSB could seek a WOSB set-aside as a
joint venture with its SBA-approved mentor). Similarly, a joint venture between a protégé and
mentor may seek a subcontract as a HUBZone small business, small disadvantaged
business, SDVO small business, or WOSB provided the protégé individually qualifies as
such.
(i) SBA must approve the mentor-protégé 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) A joint venture between a protégé and its mentor will qualify as a small business for
any procurement for which the protégé individually qualifies as small. Once a protégé firm no
longer qualifies as a small business for the size standard corresponding to the NAICS code
under which SBA approved its mentor-protégé relationship, any joint venture between the
protégé and its mentor will no longer be able to seek additional contracts or subcontracts as
a small business for any NAICS code having the same or lower size standard. A joint venture
between a protégé and its mentor could seek additional contract opportunities in NAICS
codes having a size standard for which the protégé continues to qualify as small. A change in
the protégé's size status does not generally affect contracts previously awarded to a joint
venture between the protégé 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 protégé 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
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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 protégé no longer qualifies as small for the size standard
corresponding to the NAICS code assigned to the contract, the joint venture will not be able
re-certify itself to be a small business for that contract. The rules set forth in §121.404(g)(3)
of this chapter apply in such circumstances.
(2) In order to raise capital, the protégé firm may agree to sell or otherwise convey to the
mentor an equity interest of up to 40% in the protégé firm.
(3) Notwithstanding the mentor-protégé relationship, a protégé 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 protégé firm and its
mentor based solely on the mentor-protégé 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 protégé firm.
(6) A mentor that provides a subcontract to a protégé that has its principal office located
in the Commonwealth of Puerto Rico may (i) receive positive consideration for the mentor's
past performance evaluation, and (ii) apply costs incurred for providing training to such
protege toward the subcontracting goals contained in the subcontracting plan of the mentor.
(e) Written agreement. (1) The mentor and protégé firms must enter a written agreement
setting forth an assessment of the protégé'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;
bonding; use of equipment; export assistance; assistance as a subcontractor under prime
contracts being performed by the protégé; cooperation on joint venture projects; or
subcontracts under prime contracts being performed by the mentor). The mentor-protégé
agreement must:
(i) Specifically identify the business development assistance to be provided and address
how the assistance will help the protégé enhance its growth and/or foster or acquire needed
capabilities;
(ii) Establish a single point of contact in the mentor concern who is responsible for
managing and implementing the mentor-protégé agreement; and
(iii) Provide that the mentor will provide such assistance to the protégé firm for at least
one year.
(2) A firm seeking SBA's approval to be a protégé must identify any other mentorprotégé relationship it has through another federal agency or SBA and provide a copy of
each such mentor-protégé agreement to SBA.

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(i) The small business mentor-protégé agreement must identify how the assistance to be
provided by the proposed mentor is different from assistance provided to the protégé through
another mentor-protégé relationship, either with the same or a different mentor.
(ii) A firm seeking SBA's approval to be a protégé may terminate a mentor-protégé
relationship it has through another agency and use any not yet provided assistance identified
in the other mentor-protégé agreement as part of the assistance that will be provided through
the small business mentor-protégé relationship. Any assistance that has already been
provided through another mentor-protégé relationship cannot be identified as assistance that
will be provided through the small business mentor-protégé 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 protégé, 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 protégé or the mentor may terminate the
agreement with 30 days advance notice to the other party to the mentor-protégé relationship
and to SBA.
(5) The term of a mentor-protégé agreement may not exceed six years. If an initial
mentor-protégé agreement is for less than six years, it may be extended by mutual
agreement prior to the expiration date for an additional amount of time that would total no
more than six years from its inception (e.g., if the initial mentor-protégé agreement was for
two years, it could be extended for an additional four years by consent of the two parties; if
the initial mentor-protégé agreement was for three years, it could be extended for an
additional three years by consent of the two parties). Unless rescinded in writing as a result
of an SBA review, the mentor-protégé relationship will automatically renew without additional
written notice of continuation or extension to the protégé firm.
(6) A protégé may generally have a total of two mentor-protégé agreements with
different mentors.
(i) Each mentor-protégé agreement may last for no more than six years, as set forth in
paragraph (e)(5) of this section.
(ii) If a mentor-protégé agreement is terminated within 18 months from the date SBA
approved the agreement, that mentor-protégé relationship will generally not count as one of
the two mentor-protégé relationships that a small business may enter as a protégé. However,
where a specific small business protégé appears to enter into many short-term mentorprotégé relationships as a means of extending its program eligibility as a protégé, SBA may
determine that the business concern has exhausted its participation in the mentor-protégé
program and not approve an additional mentor-protégé relationship.
(iii) If during the evaluation of the mentor-protégé relationship pursuant to paragraphs (g)
and (h) of this section SBA determines that a mentor has not provided the business
development assistance set forth in its mentor-protégé agreement or that the quality of the

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development assistance set forth in its mentor protégé agreement or that the quality of the
assistance provided was not satisfactory, SBA may allow the protégé to substitute another
mentor for the time remaining in the mentor-protégé agreement without counting against the
two-mentor limit.
(7) SBA must approve all changes to a mentor-protégé agreement in advance, and any
changes made to the agreement must be provided in writing. If the parties to the mentorprotégé relationship change the mentor-protégé agreement without prior approval by SBA,
SBA shall terminate the mentor-protégé relationship and may also propose suspension or
debarment of one or both of the firms pursuant to paragraph (h) of this section where
appropriate.
(8) If control of the mentor changes (through a stock sale or otherwise), the previously
approved mentor-protégé relationship may continue provided that, after the change in
control, the mentor expresses in writing to SBA that it acknowledges the mentorprotégéagreement and certifies that it will continue to abide by its terms.
(9) SBA may terminate the mentor-protégé agreement at any time if it determines that
the protégé is not benefiting from the relationship or that the parties are not complying with
any term or condition of the mentor protégé agreement. In the event SBA terminates the
relationship, the mentor-protégé joint venture is obligated to complete any previously
awarded contracts unless the procuring agency issues a stop work order.
(f) Decision to decline mentor-protégé relationship. Where SBA declines to approve a
specific mentor-protégé agreement, SBA will issue a written decision setting forth its
reason(s) for the decline. The small business concern seeking to be a protégé cannot
attempt to enter into another mentor-protégé 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-protégé agreement with a different proposed
mentor at any time after the SBA's final decline decision.
(g) Evaluating the mentor-protégé relationship. SBA will review the mentor-protégé
relationship annually. SBA will ask the protégé for its assessment of how the mentor-protégé
relationship is working, whether or not the protégé received the agreed upon business
development assistance, and whether the protégé would recommend the mentor to be a
mentor for another small business in the future. At any point in the mentor-protégé
relationship where a protégé believes that a mentor has not provided the business
development assistance set forth in its mentor-protégé agreement or that the quality of the
assistance provided did not meet its expectations, the protégé can ask SBA to intervene on
its behalf with the mentor.
(i) All technical and/or management assistance provided by the mentor to the protégé;
(ii) All loans to and/or equity investments made by the mentor in the protégé;
(iii) All subcontracts awarded to the protégé by the mentor and all subcontracts awarded
to the mentor by the protégé, and the value of each subcontract;

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(iv) All federal contracts awarded to the mentor-protégé 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 protégé and addressing any problems encountered.
(2) The protégé must report the mentoring services it receives by category and hours.
(3) The protégé must annually certify to SBA whether there has been any change in the
terms of the agreement.
(4) At any point in the mentor-protégé relationship where a protégé believes that a
mentor has not provided the business development assistance set forth in its mentor-protégé
agreement or that the quality of the assistance provided did not meet its expectations, the
protégé can ask SBA to intervene on its behalf with the mentor.
(5) SBA may decide not to approve continuation of a mentor-protégé agreement where:
(i) SBA finds that the mentor has not provided the assistance set forth in the mentorprotégé agreement;
(ii) SBA finds that the assistance provided by the mentor has not resulted in any material
benefits or developmental gains to the protégé; or
(iii) A protégé does not provide information relating to the mentor-protégé relationship,
as set forth in paragraph (g).
(h) Consequences of not providing assistance set forth in the mentor-protégé
agreement. (1) Where SBA determines that a mentor may not have provided to the protégé
firm the business development assistance set forth in its mentor-protégé agreement or that
the quality of the assistance provided may not have been satisfactory, 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, presenting information demonstrating that it
did satisfactorily provide the assistance set forth in the mentor-protégé agreement or
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
adequately provide information demonstrating that it did satisfactorily provide the assistance
set forth in the mentor-protégé agreement, 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 mentor-protégé 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-protégé agreement; and
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(iii) SBA may recommend to the relevant procuring agency to issue a stop work order for
each federal contract for which the mentor and protégé are performing as a small business
joint venture in order to encourage the mentor to comply with its mentor-protégé agreement.
Where a protégé firm is able to independently complete performance of any such contract,
SBA may recommend to the procuring agency to authorize a substitution of the protégé firm
for the joint venture.
(2) SBA may consider a mentor's failure to comply with the terms and conditions of an
SBA-approved mentor-protégé 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-protégé relationship. (1) In order to assess the results of a mentorprotégé relationship upon its completion, the protégé must report to SBA whether it believed
the mentor-protégé relationship was beneficial and describe any lasting benefits to the
protégé.
(2) Where a protégé does not report the results of a mentor-protégé relationship upon its
completion, SBA will not approve a second mentor-protégé relationship either under this
section or under §124.520 of this chapter.
[81 FR 48585, July 25, 2016, as amended at 85 FR 66194, Oct. 16, 2020]

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§125.10 Mentor-Protégé programs of other agencies.
(a) Except as provided in paragraph (c) of this section, a Federal department or agency
may not carry out a mentor-protégé 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 protégé 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-protégé 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 protégés 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-protégé program of the Department of Defense;
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(2) Any mentoring assistance provided under a Small Business Innovation Research
Program or a Small Business Technology Transfer Program; and
(3) A mentor-protégé 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 agency-specific
mentor-protégé program must report annually to SBA:
(1) The participants (both protégé firms and their approved mentors) in its mentorprotégé 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 protégé firms under the program to compete for Federal prime
contracts and subcontracts.
[81 FR 48585, July 25, 2016]

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Subpart A—Definitions for the Service-Disabled Veteran-Owned Small
Business Concern Program
S

: 69 FR 25267, May 5, 2004, unless otherwise noted.

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§125.11 What definitions are important in the Service-Disabled Veteran-Owned
(SDVO) Small Business Concern (SBC) Program?
Contracting officer has the meaning given such term in section 27(f)(5) of the Office of
Federal Procurement Policy Act (41 U.S.C. 423(f)(5)).
Daily business operations include, but are not limited to, the marketing, production,
sales, and administrative functions of the firm, as well as the supervision of the executive
team and the implementation of policies

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team, and the implementation of policies.
ESOP has the meaning given the term “employee stock ownership plan” in section
4975(e)(7) of the Internal Revenue Code of 1986 (26 U.S.C. 4975(e)(7)).
Extraordinary circumstances, for purposes of this part, are only the following:
(1) Adding a new equity stakeholder;
(2) Dissolution of the company;
(3) Sale of the company;
(4) The merger of the company; and
(5) Company declaring bankruptcy.
Negative control has the same meaning as that set forth in §121.103(a)(3) of this
chapter.
Participant means a veteran-owned small business concern that has verified status in
the Vendor Information Pages database, available at https://www.vip.vetbiz.gov/.
Permanent caregiver, for purposes of this part, is the spouse, or an individual, 18 years
of age or older, who is legally designated, in writing, to undertake responsibility for managing
the well-being of the service-disabled veteran with a permanent and severe disability, as
determined by Department of Veterans Affairs' Veterans Benefits Administration, to include
housing, health and safety. A permanent caregiver may, but does not need to, reside in the
same household as the service-disabled veteran with a permanent and severe disability. In
the case of a service-disabled veteran with a permanent and severe disability lacking legal
capacity, the permanent caregiver shall be a parent, guardian, or person having legal
custody. There may be no more than one permanent caregiver per service-disabled veteran
with a permanent and severe disability.
(1) A permanent caregiver may be appointed, in a number of ways, including:
(i) By a court of competent jurisdiction;
(ii) By the Department of Veterans Affairs, National Caregiver Support Program, as the
Primary Family Caregiver of a Veteran participating in the Program of Comprehensive
Assistance for Family Caregivers (this designation is subject to the Veteran and the caregiver
meeting other specific criteria as established by law and the Secretary and may be revoked if
the eligibility criteria do not continue to be met); or
(iii) By a legal designation.
(2) Any appointment of a permanent caregiver must in all cases be accompanied by a
written determination from the Department of Veterans Affairs that the veteran has a
permanent and total service-connected disability as set forth in 38 CFR 3.340 for purposes of
receiving disability compensation or a disability pension. The appointment must also
delineate why the permanent caregiver is given the appointment must include the consent of

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delineate why the permanent caregiver is given the appointment, must include the consent of
the veteran to the appointment and how the appointment would contribute to managing the
veteran's well-being.
Service-connected has the meaning given that term in 38 U.S.C. 101(16).
Service-disabled veteran is a veteran who possesses either a valid disability rating letter
issued by the Department of Veterans Affairs, establishing a service-connected rating
between 0 and 100 percent, or a valid disability determination from the Department of
Defense or is registered in the Beneficiary Identification and Records Locator Subsystem
maintained by Department of Veterans Affairs' Veterans Benefits Administration as a servicedisabled veteran. Reservists or members of the National Guard disabled from a disease or
injury incurred or aggravated in line of duty or while in training status also qualify.
Service-disabled veteran with a permanent and severe disability means a veteran with a
service-connected disability that has been determined by the Department of Veterans Affairs,
in writing, to have a permanent and total service-connected disability as set forth in 38 CFR
3.340 for purposes of receiving disability compensation or a disability pension.
Small business concern means a concern that, with its affiliates, meets the size standard
corresponding to the NAICS code for its primary industry, pursuant to part 121 of this chapter.
Small business concern owned and controlled by service-disabled veterans (also known
as a Service-Disabled Veteran-Owned SBC) means any of the following:
(1) A small business concern—
(i) Not less than 51 percent of which is owned by one or more service-disabled veterans
or, in the case of any publicly owned business, not less than 51 percent of the stock (not
including any stock owned by an ESOP) of which is owned by one or more service-disabled
veterans; and
(ii) The management and daily business operations of which are controlled by one or
more service-disabled veterans or, in the case of a veteran with permanent and severe
disability, the spouse or permanent caregiver of such veteran;
(2) A small business concern—
(i) Not less than 51 percent of which is owned by one or more service-disabled veterans
with a disability that is rated by the Secretary of Veterans Affairs as a permanent and total
disability who are unable to manage the daily business operations of such concern; or
(ii) In the case of a publicly owned business, not less than 51 percent of the stock (not
including any stock owned by an ESOP) of which is owned by one or more such veterans.
Surviving spouse has the meaning given the term in 38 U.S.C. 101(3).
Unconditional ownership means ownership that is not subject to conditions precedent,
conditions subsequent, executory agreements, voting trusts, restrictions on or assignments

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of voting rights, or other arrangements causing or potentially causing ownership benefits to
go to another (other than after death of incapacity). The pledge or encumbrance of stock or
other ownership interest as collateral, including seller-financed transactions, does not affect
the unconditional nature of ownership if the terms follow normal commercial practices and
the owner retains control absent violations of the terms.
Veteran has the meaning given the term in 38 U.S.C. 101(2). A Reservist or member of
the National Guard called to Federal active duty or disabled from a disease or injury incurred
or aggravated in line of duty or while in training status also qualify as a veteran.
Veteran owned small business concern means a small business concern:
(1) Not less than 51 percent of which is owned by one or more veterans or, in the case of
any publicly owned business, not less than 51 percent of the stock of which is owned by one
or more veterans; and
(2) The management and daily business operations of which are controlled by one or
more veterans. All of the provisions of subpart B of this part apply for purposes of
determining ownership and control.
[83 FR 48912, Sept. 28, 2018]

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Subpart B—Eligibility Requirements for the SDVO SBC Program
S

: 69 FR 25267, May 5, 2004, unless otherwise noted.

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§125.12 Who does SBA consider to own an SDVO SBC?
Generally, a concern must be at least 51% unconditionally and directly owned by one or
more service-disabled veterans. More specifically:
(a) Ownership must be direct. Ownership by one or more service disabled veterans must
be direct ownership. A concern owned principally by another business entity that is in turn
owned and controlled by one or more service-disabled veterans does not meet this
requirement. Ownership by a trust, such as a living trust, may be treated as the functional
equivalent of ownership by service-disabled veterans where the trust is revocable, and
service-disabled veterans are the grantors, trustees, and the current beneficiaries of the trust.
(b) Ownership of a partnership. In the case of a concern which is a partnership, at least
51% of aggregate voting interest must be unconditionally owned by one or more servicedisabled veterans. The ownership must be reflected in the concern's partnership agreement.
(c) Ownership of a limited liability company. In the case of a concern which is a limited
liability company, at least 51% of each class of member interest must be unconditionally
owned by one or more service-disabled veterans.
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(d) Ownership of a corporation. In the case of a concern which is a corporation, at least
51% of the aggregate of all stock outstanding and at least 51% of each class of voting stock
outstanding must be unconditionally owned by one or more service-disabled veterans. In the
case of a publicly owned business, not less than 51 percent of the stock (not including any
stock owned by an ESOP) must be unconditionally owned by one or more veterans.
(e) Stock options' effect on ownership. In determining unconditional ownership, SBA will
disregard any unexercised stock options or similar agreements held by service-disabled
veterans. However, any unexercised stock options or similar agreements (including rights to
convert non-voting stock or debentures into voting stock) held by non-service-disabled
veterans sill be treated as exercised, except for any ownership interests which are held by
investment companies licensed under the Small Business Investment Act of 1958.
(f) Change of ownership. A concern may change its ownership or business structure so
long as one or more service-disabled veterans own and control it after the change.
(g) Dividends and distributions. One or more service-disabled veterans must be entitled
to receive:
(1) At least 51 percent of the annual distribution of profits paid to the owners of a
corporation, partnership, or limited liability company concern;
(2) 100 percent of the value of each share of stock owned by them in the event that the
stock or member interest is sold; and
(3) At least 51 percent of the retained earnings of the concern and 100 percent of the
unencumbered value of each share of stock or member interest owned in the event of
dissolution of the corporation, partnership, or limited liability company.
(4) An eligible individual's ability to share in the profits of the concern must be
commensurate with the extent of his/her ownership interest in that concern.
(h) Community property. Ownership will be determined without regard to community
property laws.
(i) Surviving spouse. (1) A small business concern owned and controlled by one or more
service-disabled veterans immediately prior to the death of a service-disabled veteran who
was the owner of the concern, the death of whom causes the concern to be less than 51
percent owned by one or more service-disabled veterans, will continue to qualify as a small
business concern owned and controlled by service-disabled veterans during the time period
if:
(i) The surviving spouse of the deceased veteran acquires such veteran's ownership
interest in such concern;
(ii) Such veteran had a service-connected disability (as defined in 38 U.S.C. 101(16))
rated as 100 percent disabling under the laws administered by the Secretary of Veterans
Affairs or such veteran died as a result of a service-connected disability; and
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(iii) For a participant, immediately prior to the death of such veteran, and during the
period described in paragraph (i)(2) of this section, the small business concern is included in
the database described in 38 U.S.C. 8127(f).
(2) The time period described in paragraph (i)(1)(iii) of this section is the time period
beginning on the date of the veteran's death and ending on the earlier of—
(i) The date on which the surviving spouse remarries;
(ii) The date on which the surviving spouse relinquishes an ownership interest in the
small business concern; or
(iii) The date that is 10 years after the date of the death of the veteran.
[69 FR 25267, May 5, 2004. Redesignated at 81 FR 48585, July 25, 2016. Amended at 83 FR
48913, Sept. 28, 2018]

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§125.13 Who does SBA consider to control an SDVO SBC?
(a) General. To be an eligible SDVO SBC, the management and daily business
operations of the concern must be controlled by one or more service-disabled veterans (or in
the case of a veteran with permanent and severe disability, the spouse or permanent
caregiver of such veteran). Control by one or more service-disabled veterans means that
both the long-term decisions making and the day-to-day management and administration of
the business operations must be conducted by one or more service-disabled veterans (or in
the case of a veteran with permanent and severe disability, the spouse or permanent
caregiver of such veteran).
(b) Managerial position and experience. A service-disabled veteran (or in the case of a
service-disabled veteran with permanent and severe disability, the spouse or permanent
caregiver of such veteran) must hold the highest officer position in the concern (usually
President or Chief Executive Officer) and must have managerial experience of the extent and
complexity needed to run the concern. The service-disabled veteran manager (or in the case
of a veteran with permanent and severe disability, the spouse or permanent caregiver of such
veteran) need not have the technical expertise or possess the required license to be found to
control the concern if the service-disabled veteran can demonstrate that he or she has
ultimate managerial and supervisory control over those who possess the required licenses or
technical expertise.
(c) Control over a partnership. In the case of a partnership, one or more service-disabled
veterans (or in the case of a veteran with permanent and severe disability, the spouse or
permanent caregiver of such veteran) must serve as general partners, with control over all
partnership decisions.
(d) Control over a limited liability company. In the case of a limited liability company, one
or more service-disabled veterans (or in the case of a veteran with permanent or severe
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disability, the spouse or permanent caregiver of such veteran) must serve as managing
members, with control over all decisions of the limited liability company.
(e) Control over a corporation. One or more service-disabled veterans (or in the case of
a veteran with permanent and severe disability, the spouse or permanent caregiver of such
veteran) must control the Board of Directors of the concern.
(1) SBA will deem service-disabled veteran individuals to control the Board of Directors
where:
(i) A single service-disabled veteran individual owns 100% of all voting stock of an
applicant or concern;
(ii) A single service-disabled veteran individual owns at least 51% of all voting stock of
an applicant or concern, the individual is on the Board of Directors and no super majority
voting requirements exist for shareholders to approve corporation actions. Where super
majority voting requirements are provided for in the concern's articles of incorporation, its bylaws, or by state law, the service-disabled veteran individual must own at least the percent of
the voting stock needed to overcome any such super majority voting requirements; or
(iii) More than one service-disabled veteran shareholder seeks to qualify the concern
(i.e., no one individual owns 51%), each such individual is on the Board of Directors, together
they own at least 51% of all voting stock of the concern, no super majority voting
requirements exist, and the service-disabled veteran shareholders can demonstrate that they
have made enforceable arrangements to permit one of them to vote the stock of all as a
block without a shareholder meeting. Where the concern has super majority voting
requirements, the service-disabled veteran shareholders must own at least that percentage
of voting stock needed to overcome any such super majority ownership requirements. In the
case of super majority ownership requirements, the service-disabled veteran shareholders
can demonstrate that they have made enforceable arrangements to permit one of them to
vote the stock of all as a block without a shareholder meeting.
(2) Where an applicant or concern does not meet the requirements set forth in
paragraph (e)(1) of this section, the service-disabled veteran individual(s) upon whom
eligibility is based must control the Board of Directors through actual numbers of voting
directors or, where permitted by state law, through weighted voting (e.g., in a concern having
a two-person Board of Directors where one individual on the Board is service-disabled
veteran and one is not, the service-disabled veteran vote must be weighted—worth more
than one vote—in order for the concern to be eligible). Where a concern seeks to comply
with this paragraph (e)(2):
(i) Provisions for the establishment of a quorum cannot permit non-service-disabled
veteran Directors to control the Board of Directors, directly or indirectly; and
(ii) Any Executive Committee of Directors must be controlled by service-disabled veteran
directors unless the Executive Committee can only make recommendations to and cannot
independently exercise the authority of the Board of Directors.
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(3) Non-voting, advisory, or honorary Directors may be appointed without affecting
service-disabled veteran individuals' control of the Board of Directors.
(4) Arrangements regarding the structure and voting rights of the Board of Directors
must comply with applicable state law.
(f) Super majority requirements. One or more service-disabled veterans must meet all
super majority voting requirements. An applicant must inform the Department of Veterans
Affairs, when applicable, of any super majority voting requirements provided for in its articles
of incorporation, its by-laws, by state law, or otherwise. Similarly, after being verified, a
participant must inform the Department of Veterans Affairs of changes regarding super
majority voting requirements.
(g) Licenses. A firm must obtain and keep current any and all required permits, licenses,
and charters, required to operate the business.
(h) Unexercised rights. A service-disabled veteran owner's unexercised right to cause a
change in the control or management of the applicant concern does not in itself constitute
control and management, regardless of how quickly or easily the right could be exercised.
(i) Control by non-service-disabled veterans. Non-service-disabled veteran individuals or
entities may not control the firm. There is a rebuttable presumption that non-service-disabled
veteran individuals or entities control or have the power to control a firm in any of the
following circumstances, which are illustrative only and not inclusive:
(1) The non-service-disabled veteran individual or entity who is involved in the
management or ownership of the firm is a current or former employer or a principal of a
current or former employer of any service-disabled veteran individual upon whom the firm's
eligibility is based. However, a firm may provide evidence to demonstrate that the relationship
does not give the non-service-disabled veteran actual control over the concern and such
relationship is in the best interests of the concern.
(2) One or more non-service-disabled veterans receive compensation from the firm in
any form as directors, officers or employees, including dividends, that exceeds the
compensation to be received by the highest-ranking officer (usually CEO or President). The
highest ranking officer may elect to take a lower amount than the total compensation and
distribution of profits that are received by a non-veteran only upon demonstrating that it helps
the concern.
(3) In circumstances where the concern is co-located with another firm in the same or
similar line of business, and that firm or an owner, director, officer, or manager, or a direct
relative of an owner, director, officer, or manager of that firm owns an equity interest in the
concern.
(4) In circumstances where the concern shares employees, resources, equipment, or
any type of services, whether by oral or written agreement with another firm in the same or
similar line of business, and that firm or an owner, director, officer, or manager, or a direct
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relative of an owner, director, officer, or manager of that firm owns an equity interest in the
concern.
(5) A non-service-disabled veteran individual or entity, having an equity interest in the
concern, provides critical financial or bonding support.
(6) In circumstances where a critical license is held by a non-service-disabled individual,
or other entity, the non-service-disabled individual or entity may be found to control the firm.
A critical license is considered any license that would normally be required of firms operating
in the same field or industry, regardless of whether a specific license is required on a specific
contract.
(7) Business relationships exist with non-service-disabled veteran individuals or entities
which cause such dependence that the applicant or concern cannot exercise independent
business judgment without great economic risk.
(j) Critical financing. A non-service-disabled veteran individual or entity may be found to
control the concern through loan arrangements with the concern or the service-disabled
veteran(s). Providing a loan or a loan guaranty on commercially reasonable terms does not,
by itself, give a non-service-disabled veteran individual or entity the power to control a firm,
but when taken into consideration with other factors may be used to find that a non-servicedisabled firm or individual controls the concern.
(k) Normal business hours. There is a rebuttable presumption that a service-disabled
veteran does not control the firm when the service-disabled veteran is not able to work for the
firm during the normal working hours that businesses in that industry normally work. This
may include, but is not limited to, other full-time or part-time employment, being a full-time or
part-time student, or any other activity or obligation that prevents the service-disabled
veteran from actively working for the firm during normal business operating hours.
(l) Close proximity. There is rebuttable presumption that a service-disabled veteran does
not control the firm if that individual is not located within a reasonable commute to firm's
headquarters and/or job-sites locations, regardless of the firm's industry. The servicedisabled veteran's ability to answer emails, communicate by telephone, or to communicate at
a distance by other technological means, while delegating the responsibility of managing the
concern to others is not by itself a reasonable rebuttal.
(m) Exception for “extraordinary circumstances.” SBA will not find that a lack of control
exists where a service-disabled veteran does not have the unilateral power and authority to
make decisions in “extraordinary circumstances.” The only circumstances in which this
exception applies are those articulated in the definition.
(n) Exception for active duty. Notwithstanding the provisions of this section requiring a
service-disabled veteran to control the daily business operations and long-term strategic
planning of a concern, where a service-disabled veteran individual upon whom eligibility is
based is a reserve component member in the United States military who has been called to
active duty, the concern may elect to designate in writing one or more individuals to control
the concern on behalf of the service-disabled veteran during the period of active duty The

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the concern on behalf of the service disabled veteran during the period of active duty. The
concern will not be considered ineligible based on the absence of the service-disabled
veteran during the period of active duty. The concern must keep records evidencing the
active duty and the written designation of control, and provide those documents to VA, and if
requested to SBA.
[69 FR 25267, May 5, 2004. Redesignated at 81 FR 48585, July 25, 2016. Amended at 83 FR
48914, Sept. 28, 2018]

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§125.14 What size standards apply to SDVO SBCs?
(a) At time of contract offer, an SDVO SBC must be small within the size standard
corresponding to the NAICS code assigned to the contract.
(b) If the contracting officer is unable to verify that the SDVO SBC is small, the concern
shall be referred to the responsible SBA Government Contracting Area Director for a formal
size determination in accordance with part 121 of this chapter.
[69 FR 25267, May 5, 2004. Redesignated at 81 FR 48585, July 25, 2016]

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§125.15 [Reserved]
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§125.16 [Reserved]
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Subpart C—Contracting with SDVO SBCs
S

: 69 FR 25268, May 5, 2004, unless otherwise noted.

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§125.17 What are SDVO contracts?
SDVO contracts, including Multiple Award Contracts (see §125.1), are those awarded to
an SDVO SBC through any of the following procurement methods:
(a) Sole source awards to an SDVO SBC;
(b) Set-aside awards, including partial set-asides, based on competition restricted to
SDVO SBCs;
(c) Awards based on a reserve for SDVO SBCs in a solicitation for a Multiple Award
Contract (see §125.1); or
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(d) Orders set-aside for SDVO SBCs against a Multiple Award Contract, which had been
awarded in full and open competition.
[78 FR 61143, Oct. 2, 2013. Redesignated at 81 FR 48585, July 25, 2016]

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§125.18 What requirements must an SDVO SBC meet to submit an offer on a
contract?
(a) General. In order for a business concern to submit an offer and be eligible for the
award of a specific SDVO contract, the concern must submit the appropriate representations
and certifications at the time it submits its initial offer which includes price (or other formal
response to a solicitation) to the contracting officer, including, but not limited to, the fact that:
(1) It is small under the size standard corresponding to the NAICS code(s) assigned to
the contract;
(2) It is an SDVO SBC; and
(3) There has been no material change in any of its circumstances affecting its SDVO
SBC eligibility.
(b) Joint ventures. An SDVO SBC may enter into a joint venture agreement with one or
more other SBCs or its SBA-approved 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 protégé firm that qualifies as an SDVO SBC and its SBAapproved mentor (see §125.9) will be deemed small provided the protégé 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 protégé firm that qualifies as an SDVO SBC and
its SBA-approved mentor authorized by §125.9, must contain a provision:
(i) Setting forth the purpose of the joint venture;
(ii) Designating an SDVO SBC as the managing venturer of the joint venture, and
designating a named employee of the SDVO SBC managing venturer as the manager with
ultimate responsibility for performance of the contract (the “Responsible Manager”).
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(A) The managing venturer is responsible for controlling the day-to-day management
and administration of the contractual performance of the joint venture, but other partners to
the joint venture may participate in all corporate governance activities and decisions of the
joint venture as is commercially customary.
(B) The individual identified as the Responsible Manager of the joint venture need not be
an employee of the SDVO 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 SDVO SBC if the joint venture is the successful offeror. The individual identified as the
Responsible Manager cannot be employed by the mentor and become an employee of the
SDVO SBC for purposes of performance under the joint venture.
(C) Although the joint venture managers responsible for orders issued under an IDIQ
contract need not be employees of the protégé, those managers must report to and be
supervised by the joint venture's Responsible Manager.
(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 a percentage agreed to by the
parties to the joint venture whereby the SDVO SBC receives profits from the joint venture
that exceed the percentage commensurate with the work performed by the SDVO SBC;
(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 or consent of all parties to
the joint venture for any payments made by the joint venture to its members for services
performed. 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,
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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 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 protégé
and a mentor authorized by §125.9, 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 nonSDVO 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 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;
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(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) Capabilities, past performance, and experience. When evaluating the capabilities,
past performance, experience, business systems, and certifications 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 and qualifications held individually by each partner to the
joint venture as well as any work done by the joint venture itself previously. A procuring
activity may not require the SDVO SBC to individually meet the same evaluation or
responsibility criteria as that required of other offerors generally. The partners to the joint
venture in the aggregate must demonstrate the past performance, experience, business
systems, and certifications necessary to perform the contract.
(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 mentor-protégé 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 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
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(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.
(c) Non-manufacturers. An SDVO SBC which is a non-manufacturer may submit an offer
on an SDVO contract for supplies if it meets the requirements of the non-manufacturer rule
set forth at §121.406(b)(1) of this chapter.
(d) Multiple Award Contracts. (1) SDVO status. With respect to Multiple Award
Contracts, orders issued against a Multiple Award Contract, and Blanket Purchase
Agreements issued against a Multiple Award Contract:
(i) SBA determines SDVO small business eligibility for the underlying Multiple Award
Contract as of the date a business concern certifies its status as an SDVO small business
concern as part of its initial offer (or other formal response to a solicitation), which includes
price, unless the firm was required to recertify under paragraph (e) of this section.
(A) Unrestricted Multiple Award Contracts or Set-Aside Multiple Award Contracts for
Other than SDVO. For an unrestricted Multiple Award Contract or other Multiple Award
Contract not specifically set aside for SDVO, if a business concern is an SDVO small
business concern at the time of offer and contract-level recertification for the Multiple Award
Contract, it is an SDVO small business concern for goaling purposes for each order issued
against the contract, unless a contracting officer requests recertification as an SDVO small
business for a specific order or Blanket Purchase Agreement. Except for orders and Blanket
Purchase Agreements issued under any Federal Supply Schedule contract, if an order or a
Blanket Purchase Agreement under an unrestricted Multiple Award Contract is set-aside
exclusively for SDVO small business, a concern must recertify that it qualifies as an SDVO
small business at the time it submits its initial offer, which includes price, for the particular
order or Blanket Purchase Agreement. However, where the underlying Multiple Award
Contract has been awarded to a pool of concerns for which SDVO small business status is
required, if an order or a Blanket Purchase Agreement under that Multiple Award Contract is
set-aside exclusively for concerns in the SDVO small business pool, concerns need not
recertify their status as SDVO small business concerns (unless a contracting officer requests
size certifications with respect to a specific order or Blanket Purchase Agreement).
(B) SDVO Set-Aside Multiple Award Contracts. For a Multiple Award Contract that is
specifically set aside for SDVO small business, if a business concern is an SDVO small
business at the time of offer and contract-level recertification for the Multiple Award Contract,
it is an SDVO small business for each order issued against the contract, unless a contracting
officer requests recertification as an SDVO small business for a specific order or Blanket
Purchase Agreement.
(ii) SBA will determine SDVO small business status at the time of initial offer (or other
formal response to a solicitation), which includes price, for an order or an Agreement issued
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against a Multiple Award Contract if the contracting officer requests a new SDVO small
business certification for the order or Agreement.
(2) Total Set-Aside Contracts. The SDVO SBC must comply with the applicable
limitations on subcontracting provisions (see §125.6) and the nonmanufacturer rule (see
§121.406(b)), if applicable, in the performance of a contract totally set-aside for SDVO SBCs.
However, the contracting officer, in his or her discretion, may require the concern to perform
the applicable amount of work or comply with the nonmanufacturer rule for each order
awarded under the contract.
(3) Partial Set-Aside Contracts. For orders awarded under a partial set-aside contract,
the SDVO SBC must comply with the applicable limitations on subcontracting provisions (see
§125.6) and the nonmanufacturer rule (see §121.406(b)), if applicable, during each
performance period of the contract—e.g., during the base term and then during each option
period thereafter. For orders awarded under the non-set-aside portion, the SDVO SBC need
not comply with any limitations on subcontracting or nonmanufacturer rule requirements.
However, the contracting officer, in his or her discretion, may require the concern to perform
the applicable amount of work or comply with the nonmanufacturer rule for each order
awarded under the contract.
(4) Orders. The SDVO SBC must comply with the applicable limitations on
subcontracting provisions (see §125.6) and the nonmanufacturer rule (see §121.406(b)), if
applicable, in the performance of each individual order that has been set-aside for SDVO
SBCs.
(5) Reserves. The SDVO SBC must comply with the applicable limitations on
subcontracting provisions (see §125.6) and the nonmanufacturer rule (see §121.406(b)), if
applicable, in the performance of an order that is set aside for SDVO SBCs. However, the
SDVO SBC will not have to comply with the limitations on subcontracting provisions and the
nonmanufacturer rule for any order issued against the Multiple Award Contract if the order is
competed amongst SDVO SBCs and one or more other-than-small business concerns.
(e) Recertification. (1) A concern that represents itself and qualifies as an SDVO SBC at
the time of initial offer (or other formal response to a solicitation), which includes price,
including a Multiple Award Contract, is considered an SDVO SBC throughout the life of that
contract. This means that if an SDVO SBC is qualified at the time of initial offer for a Multiple
Award Contract, then it will be considered an SDVO SBC for each order issued against the
contract, unless a contracting officer requests a new SDVO SBC certification in connection
with a specific order. Where a concern later fails to qualify as an SDVO SBC, the procuring
agency may exercise options and still count the award as an award to an SDVO SBC.
However, the following exceptions apply to this paragraph (e)(1):
(i) Where a contract is novated to another business concern, the concern that will
continue performance on the contract must certify its status as an SDVO SBC to the
procuring agency, or inform the procuring agency that it does not qualify as an SDVO SBC,
within 30 days of the novation approval. If the concern is not an SDVO SBC, the agency can
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no longer count the options or orders issued pursuant to the contract, from that point forward,
towards its SDVO goals.
(ii) Where a concern that is performing a contract acquires, is acquired by, or merges
with another concern and contract novation is not required, the concern must, within 30 days
of the transaction becoming final, recertify its SDVO SBC status to the procuring agency, or
inform the procuring agency that it no longer qualifies as an SDVO SBC. If the contractor is
not an SDVO SBC, the agency can no longer count the options or orders issued pursuant to
the contract, from that point forward, towards its SDVO goals. The agency and the contractor
must immediately revise all applicable Federal contract databases to reflect the new status.
(iii) Where there has been an SDVO SBC status protest on the solicitation or contract,
see §125.27(e) for the effect of the status determination on the contract award.
(2) For the purposes of contracts (including Multiple Award Contracts) with durations of
more than five years (including options), a contracting officer must request that a business
concern recertify its SDVO SBC status 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.If the business
is unable to recertify its SDVO status, the procuring agency may no longer be able to count
the options or orders issued pursuant to the contract, from that point forward, towards its
SDVO goals.
(3) A business concern that did not certify itself as an SDVO SBC, either initially or prior
to an option being exercised, may recertify itself as an SDVO SBC for a subsequent option
period if it meets the eligibility requirements at that time.
(4) Recertification does not change the terms and conditions of the contract. The
limitations on subcontracting, nonmanufacturer and subcontracting plan requirements in
effect at the time of contract award remain in effect throughout the life of the contract.
(5) Where the contracting officer explicitly requires concerns to recertify their status in
response to a solicitation for an order, SBA will determine eligibility as of the date the concern
submits its self-representation as part of its response to the solicitation for the order.
(6) A concern's status may be determined at the time of a response to a solicitation for
an Agreement and each order issued pursuant to the Agreement.
(f) Ostensible subcontractor. Where a subcontractor that is not similarly situated
performs primary and vital requirements of a set-aside or sole-source service contract or
order, or where a prime contractor is unduly reliant on a small business that is not similarly
situated to perform the set-aside or sole source service contract or order, the prime
contractor is not eligible for award of an SDVO contract.
(1) When the subcontractor is small for the size standard assigned to the procurement,
this issue may be grounds for an SDVO status protest, as described in subpart D of this part.
When the subcontractor is other than small, or alleged to be other than small for the size
standard assigned to the procurement, this issue may be grounds for a size protest subject to
the ostensible subcontractor rule, as described at §121.103(h)(4) of this chapter.
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t e oste s b e subco t acto u e, as desc bed at §

03( )( ) o t s c apte

(2) SBA will find that a prime SDVO contractor is performing the primary and vital
requirements of a contract or order and is not unduly reliant on one or more non-similarly
situated subcontracts where the prime contractor can demonstrate that it, together with any
similarly situated entity, will meet the limitations on subcontracting provisions set forth in
§125.6.
[69 FR 25268, May 5, 2004, as amended at 70 FR 14527, Mar. 23, 2005; 78 FR 61143, Oct. 2, 2013;
81 FR 34264, May 31, 2016. Redesignated at 81 FR 48585, July 25, 2016, as amended at 81 FR
48590, July 25, 2016; 81 FR 94941, Dec. 27, 2016; 83 FR 12852, Mar. 26, 2018; 84 FR 65664, Nov.
29, 2019; 85 FR 27660, May 11, 2020; 85 FR 66196, Oct. 16, 2020; 86 FR 2959, Jan. 14, 2021]

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§125.19 [Reserved]
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§125.20 [Reserved]
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§125.21 What requirements are not available for SDVO contracts?
A contracting activity may not make a requirement available for a SDVO contract if:
(a) The contracting activity otherwise would fulfill that requirement through award to
Federal Prison Industries, Inc. under 18 U.S.C. 4124 or 4125, or to Javits-Wagner-O'Day Act
participating non-profit agencies for the blind and severely disabled, under 41 U.S.C. 46 et
seq., as amended; or
(b) An 8(a) participant currently is performing that requirement or SBA has accepted that
requirement for performance under the authority of the section 8(a) program, unless SBA has
consented to release of the requirement from the section 8(a) program.
[69 FR 25268, May 5, 2004. Redesignated at 81 FR 48585, July 25, 2016]

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§125.22 When may a contracting officer set-aside a procurement for SDVO SBCs?
(a) The contracting officer first must review a requirement to determine whether it is
excluded from SDVO contracting pursuant to §125.21.
(b) Contracting Among Small Business Programs. (1) Acquisitions Valued At or Below
the Simplified Acquisition Threshold. The contracting officer shall set aside any acquisition
with an anticipated dollar value exceeding the Micro-purchase Threshold but not exceeding
the Simplified Acquisition Threshold (defined in the FAR at 48 CFR 2.101) for small business
concerns, regardless of the place of performance, when there is a reasonable expectation
that offers will be obtained from at least two small business concerns that are competitive in
terms of quality and delivery and award will be made at fair market prices. This requirement
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does not preclude a contracting officer from making an award to a small business under the
8(a) BD, HUBZone, SDVO SBC or WOSB Programs.
(2) Acquisitions Valued Above the Simplified Acquisition Threshold. (i) The contracting
officer shall set aside any acquisition with an anticipated dollar value exceeding the
Simplified Acquisition Threshold (defined in the FAR at 48 CFR 2.101) for small business
concerns, regardless of the place of performance, when there is a reasonable expectation
that offers will be obtained from at least two small business concerns that are competitive in
terms of quality and delivery and award will be made at fair market prices. However, after
conducting market research, the contracting officer shall first consider a set-aside or sole
source award (if the sole source award is permitted by statute or regulation) under the 8(a)
BD, HUBZone, SDVO SBC or WOSB programs before setting aside the requirement as a
small business set-aside. There is no order of precedence among the 8(a) BD, HUBZone,
SDVO SBC or WOSB programs. The contracting officer must document the contract file with
the rationale used to support the specific set-aside, including the type and extent of market
research conducted. In addition, the contracting officer must document the contract file
showing that the apparent successful offeror's certifications in System for Award
Management (SAM) (or any successor system) and associated representations were
reviewed.
(ii) SBA believes that Progress in fulfilling the various small business goals, as well as
other factors such as the results of market research, programmatic needs specific to the
procuring agency, anticipated award price, and the acquisition history, will be considered in
making a decision as to which program to use for the acquisition.
(c) If the CO decides to set-aside the requirement for competition restricted to SDVO
SBCs, the CO must:
(1) Have a reasonable expectation that at least two responsible SDVO SBCs will submit
offers; and
(2) Determine that award can be made at fair market price.
[69 FR 25268, May 5, 2004, as amended at 75 FR 62281, Oct. 7, 2010; 77 FR 1860, Jan. 12, 2012;
78 FR 61144, Oct. 2, 2013. Redesignated at 81 FR 48585, July 25, 2016, as amended at 81 FR
48591, July 25, 2016; 83 FR 12852, Mar. 26, 2018]

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§125.23 When may a contracting officer award sole source contracts to SDVO SBCs?
A contracting officer may award a sole source contract to an SDVO SBC only when the
contracting officer determines that:
(a) None of the provisions of §§125.21 or 125.22 apply;
(b) The anticipated award price of the contract, including options, will not exceed:
(1) $6,500,000 for a contract assigned a manufacturing NAICS code, or
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(2) $4,000,000 for all other contracts;
(c) A SDVO SBC is a responsible contractor able to perform the contract; and
(d) Contract award can be made at a fair and reasonable price.
[69 FR 25268, May 5, 2004, as amended at 74 FR 46887, Sept. 14, 2009; 81 FR 34265, May 31,
2016. Redesignated at 81 FR 48585, July 25, 2016; 83 FR 12852, Mar. 26, 2018]

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§125.24 Are there SDVO contracting opportunities at or below the simplified
acquisition threshold?
Yes, if the requirement is at or below the simplified acquisition threshold, the contracting
officer may set-aside the requirement for consideration among SDVO SBCs using simplified
acquisition procedures or may award a sole source contact to an SDVO SBC.
[69 FR 25268, May 5, 2004. Redesignated at 81 FR 48585, July 25, 2016]

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§125.25 May SBA appeal a contracting officer's decision not to make a procurement
available for award as an SDVO contract?
The Administrator may appeal a contracting officer's decision not to make a particular
requirement available for award as an SDVO sole source or a SDVO set-aside contact at or
above the simplified acquisition threshold.
[69 FR 25268, May 5, 2004. Redesignated at 81 FR 48585, July 25, 2016]

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§125.26 What is the process for such an appeal?
(a) Notice of appeal. When the contacting officer rejects a recommendation by SBA's
Procurement Center Representative to make a requirement available for award as an SDVO
contract, he or she must notify the Procurement Center Representative as soon as
practicable. If the Administrator intends to appeal the decision, SBA must notify the
contracting officer no later than five business days after receiving notice of the contracting
officer's decision.
(b) Suspension of action. Upon receipt of notice of SBA's intent to appeal, the
contracting officer must suspend further action regarding the procurement until the Secretary
of the department or head of the agency issues a written decision on the appeal, unless the
Secretary of the department or head of the agency makes a written determination that urgent
and compelling circumstances which significantly affect the interests of the United States
compel award of the contract.
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(c) Deadline for appeal. Within 15 business days of SBA's notification to the CO, SBA
must file its formal appeal with the Secretary of the department or head of the agency, or the
appeal will be deemed withdrawn.
(d) Decision. The Secretary of the department or head of the agency must specify in
writing the reasons for a denial of an appeal brought under this section.
[69 FR 25268, May 5, 2004. Redesignated at 81 FR 48585, July 25, 2016]

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Subpart D—Protests Concerning SDVO SBCs
S

: 69 FR 25269, May 5, 2004, unless otherwise noted.

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§125.27 Who may protest the status of an SDVO SBC?
(a) For Sole Source Procurements. SBA or the contracting officer may protest the
proposed awardee's service-disabled veteran status.
(b) For all other procurements, including Multiple Award Contracts (see §125.1), any
interested party may protest the apparent successful offeror's SDVO SBC status.
[69 FR 25269, May 5, 2004, as amended at 78 FR 61144, Oct. 2, 2013. Redesignated at 81 FR
48585, July 25, 2016]

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§125.28 What are the requirements for filing a service-disabled veteran-owned status
protest?
(a) General. The protest procedures described in this part are separate from those
governing size protests and appeals. All protests relating to whether an eligible SDVO SBC is
a “small” business for purposes of any Federal program are subject to part 121 of this
chapter and must be filed in accordance with that part. If a protester protests both the size of
the SDVO SBC and whether the concern meets the SDVO SBC requirements set forth in
§125.15(a), SBA will process each protest concurrently, under the procedures set forth in
part 121 of this chapter and this part. SBA does not review issues concerning the
administration of an SDVO contract.
(b) Format and specificity. (1) Protests must be in writing and must specify all the
grounds upon which the protest is based. A protest merely asserting that the protested
concern is not an eligible SDVO SBC, without setting forth specific facts or allegations, is
insufficient.
(i) Example to paragraph (b)(1): A protester submits a protest stating that the apparent
successful offeror is not owned by a service-disabled veteran. The protest does not state any
basis for this assertion The protest allegation is insufficient

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basis for this assertion. The protest allegation is insufficient.
(ii) [Reserved]

(2) For a protest filed against a SDVO SBC joint venture, the protest must state all
specific grounds for why—
(i) The SDVO SBC partner to the joint venture did not meet the SDVO SBC eligibility
requirements set forth in subpart B of part 125; and/or
(ii) The protested SDVO SBC joint venture did not meet the requirements set forth in
§125.18.
(c) Filing. An interested party, other than the contracting officer or SBA, must deliver their
protests in person, by facsimile, by express delivery service, or by U.S. mail (postmarked
within the applicable time period) to the contracting officer. The contracting officer or SBA
must submit their written protest directly to the Director, Office of Government Contracting.
(d) Timeliness. (1) For negotiated acquisitions, an interested party must submit its
protest by close of business on the fifth business day after notification by the contracting
officer of the apparent successful offeror. Except for an order or Blanket Purchase
Agreement issued under any Federal Supply Schedule contract, for an order or a Blanket
Purchase Agreement that is set-aside for SDVO small business under a Multiple Award
Contract that is not itself set aside for SDVO small business or have a reserve for SDVO
small business (or any SDVO order where the contracting officer has requested
recertification of SDVO status), an interested party must submit its protest challenging the
SDVO status of a concern for the order or Agreement by close of business on the fifth
business day after notification by the contracting officer of the apparent successful offeror.
(2) For sealed bid acquisitions, an interested party must submit its protest by close of
business on the fifth business day after bid opening.
(3) Any protest submitted after the time limits is untimely, unless it is from SBA or the
CO.
(4) Any protest received prior to bid opening or notification of intended awardee,
whichever applies, is premature.
(e) Referral to SBA. The contracting officer must forward to SBA any non-premature
protest received, notwithstanding whether he or she believes it is sufficiently specific or
timely. The contracting officer must send all protests, along with a referral letter, directly to the
Director, Office of Government Contracting, U.S. Small Business Administration, 409 Third
Street, SW., Washington, DC 20416 or by fax to (202) 205-6390, marked Attn: ServiceDisabled Veteran Status Protest. The CO's referral letter must include information pertaining
to the solicitation that may be necessary for SBA to determine timeliness and standing,
including: the solicitation number; the name, address, telephone number and facsimile
number of the CO; whether the contract was sole source or set-aside; whether the protester
submitted an offer; whether the protested concern was the apparent successful offeror; when
the protested concern submitted its offer (i.e., made the self-representation that it was a
SDVO SBC); whether the procurement was conducted using sealed bid or negotiated
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procedures; the bid opening date, if applicable; when the protest was submitted to the CO;
when the protester received notification about the apparent successful offeror, if applicable;
and whether a contract has been awarded.
[69 FR 25269, May 5, 2004, as amended at 70 FR 14527, Mar. 23, 2005; 72 FR 50041, Aug. 30,
2007. Redesignated at 81 FR 48585, July 25, 2016; 84 FR 65239, Nov. 26, 2019; 85 FR 66196, Oct.
16, 2020]

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§125.29 What are the grounds for filing an SDVO SBC protest?
(a) Status. In cases where the protest is based on service-connected disability,
permanent and severe disability, or veteran status, the Director, Office of Government
Contracting will only consider a protest that presents specific allegations supporting the
contention that the owner(s) cannot provide documentation from the VA, DoD, or the U.S.
National Archives and Records Administration to show that they meet the definition of
service-disabled veteran or service disabled veteran with a permanent and severe disability
as set forth in §125.8.
(b) Ownership and control. In cases where the protest is based on ownership and
control, the Director, Office of Government Contracting will consider a protest only if the
protester presents credible evidence that the concern is not 51% owned and controlled by
one or more service-disabled veterans. In the case of a veteran with a permanent and severe
disability, the protester must present credible evidence that the concern is not controlled by
the veteran, spouse or permanent caregiver of such veteran.
(c) Ostensible subcontractor. In cases where the prime contractor appears unduly reliant
on a small, non-similarly situated entity subcontractor or where the small non-similarly
situated entity is performing the primary and vital requirements of the contract, the Director,
Office of Government Contracting will consider a protest only if the protester presents
credible evidence of the alleged undue reliance or credible evidence that the primary and
vital requirements will be performed by the subcontractor.
[70 FR 14527, Mar. 23, 2005, as amended at 72 FR 50041, Aug. 30, 2007; 81 FR 34265, May 31,
2016. Redesignated at 81 FR 48585, July 25, 2016; 84 FR 65664, Nov. 29, 2019]

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§125.30 How will SBA process an SDVO protest?
(a) Notice of receipt of protest. Upon receipt of the protest, SBA will notify the contracting
officer and the protester of the date SBA received the protest and whether SBA will process
the protest or dismiss it under paragraph (b) of this section.
(b) Dismissal of protest. If SBA determines that the protest is premature, untimely,
nonspecific, or is based on non-protestable allegations, SBA will dismiss the protest and will
send the contracting officer and the protester a notice of dismissal, citing the reason(s) for
the dismissal. The dismissal notice must also advise the protester of his/her right to appeal
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the dismissal to SBA's Office of Hearings and Appeals (OHA) in accordance with part 134 of
this chapter.
(c) Notice to protested concern. If SBA determines that the protest is timely, sufficiently
specific and is based upon protestable allegations, SBA will:
(1) Notify the protested concern of the protest and of its right to submit information
responding to the protest within ten business days from the date of the notice; and
(2) Forward a copy of the protest to the protested concern, with a copy to the contracting
officer if one has not already been made available.
(d) Time period for determination. SBA will determine the SDVO SBC status of the
protested concern within 15 business days after receipt of the protest, or within any extension
of that time which the contracting officer may grant SBA. If SBA does not issue its
determination within the 15-day period, the contracting officer may award the contract, unless
the contracting officer has granted SBA an extension.
(e) Award of contract. (1) The contracting officer may award a contract after receipt of a
protest if the contracting officer determines in writing that an award must be made to protect
the public interest. Notwithstanding such a determination, the provisions of paragraph (g) of
this section apply to the procurement in question.
(2) If SBA does not issue its determination within 15 business days (or request an
extension that is granted), the contracting officer may award the contract if he or she
determines in writing that there is an immediate need to award the contract and that waiting
until SBA makes its determination will be disadvantageous to the Government.
Notwithstanding such a determination, the provisions of paragraph (g) of this section apply to
the procurement in question.
(f) Notification of determination. SBA will notify the contracting officer, the protester, and
the protested concern in writing of its determination.
(g) Effect of determination. (1) A contracting officer may award a contract to a protested
concern after the Director, Office of Government Contracting (D/GC) has determined either
that the protested concern is an eligible SDVO or has dismissed all protests against it. If OHA
subsequently overturns the D/GC's determination or dismissal, the contracting officer may
apply the OHA decision to the procurement in question.
(2) A contracting officer shall not award a contract to a protested concern that the D/GC
has determined is not an eligible SDVO for the procurement in question.
(i) If a contracting officer receives such a determination after contract award, and no
OHA appeal has been filed, the contracting officer shall terminate the award.
(ii) If a timely OHA appeal is filed after award, the contracting officer must consider
whether performance can be suspended until an appellate decision is rendered.
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(iii) If OHA affirms the D/GC's determination finding the protested concern ineligible, the
contracting officer shall either terminate the contract or not exercise the next option.
(3) The contracting officer must update the Federal Procurement Data System and other
procurement reporting databases to reflect the final agency decision (the D/GC's decision if
no appeal is filed or OHA's decision).
(4) A concern found to be ineligible may not submit an offer as an SDVO SBC on a
future procurement unless it demonstrates to SBA's satisfaction that it has overcome the
reasons for the protest (e.g., it changes its ownership to satisfy the definition of an SDVO
SBC set forth in §125.8) and SBA issues a decision to this effect.
[70 FR 14528, Mar. 23, 2005, as amended at 76 FR 5684, Feb. 2, 2011. Redesignated at 81 FR
48585, July 25, 2016]

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§125.31 What are the procedures for appealing an SDVO status protest?
The protested concern, the protester, or the contracting officer may file an appeal of an
SDVO status protest determination with OHA in accordance with part 134 of this chapter.
[76 FR 5685, Feb. 2, 2011. Redesignated at 81 FR 48585, July 25, 2016]

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Subpart E—Penalties and Retention of Records
S

: 69 FR 25270, May 5, 2004, unless otherwise noted.

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§125.32 What are the requirements for representing SDVO SBC status, and what are
the penalties for misrepresentation?
(a) Presumption of Loss Based on the Total Amount Expended. In every contract,
subcontract, cooperative agreement, cooperative research and development agreement, or
grant which is set aside, reserved, or otherwise classified as intended for award to SDVO
SBCs, there shall be a presumption of loss to the United States based on the total amount
expended on the contract, subcontract, cooperative agreement, cooperative research and
development agreement, or grant whenever it is established that a business concern other
than a SDVO SBC willfully sought and received the award by misrepresentation.
(b) Deemed Certifications. The following actions shall be deemed affirmative, willful and
intentional certifications of SDVO SBC status:
(1) Submission of a bid, proposal, application or offer for a Federal grant, contract,
subcontract, cooperative agreement, or cooperative research and development agreement
reserved, set aside, or otherwise classified as intended for award to SDVO SBCs.
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(2) Submission of a bid, proposal, application or offer for a Federal grant, contract,
subcontract, cooperative agreement or cooperative research and development agreement
which in any way encourages a Federal agency to classify the bid or proposal, if awarded, as
an award to a SDVO SBC.
(3) Registration on any Federal electronic database for the purpose of being considered
for award of a Federal grant, contract, subcontract, cooperative agreement, or cooperative
research and development agreement, as a SDVO SBC.
(c) Signature Requirement. Each offer, proposal, bid, or application for a Federal
contract, subcontract, or grant shall contain a certification concerning the SDVO SBC status
of a business concern seeking the Federal contract, subcontract or grant. An authorized
official must sign the certification on the same page containing the SDVO SBC status
claimed by the concern.
(d) Limitation of Liability. Paragraphs (a) through (c) of this section may be determined
not to apply in the case of unintentional errors, technical malfunctions, and other similar
situations that demonstrate that a misrepresentation of SDVO SBC status was not
affirmative, intentional, willful or actionable under the False Claims Act, 31 U.S.C. §§3729, et
seq. A prime contractor acting in good faith should not be held liable for misrepresentations
made by its subcontractors regarding the subcontractors' SDVO SBC status. Relevant
factors to consider in making this determination may include the firm's internal management
procedures governing SDVO SBC status representations or certifications, the clarity or
ambiguity of the representation or certification requirement, and the efforts made to correct
an incorrect or invalid representation or certification in a timely manner. An individual or firm
may not be held liable where government personnel have erroneously identified a concern as
a SDVO SBC without any representation or certification having been made by the concern
and where such identification is made without the knowledge of the individual or firm.
(e) Penalties for Misrepresentation. (1) Suspension or debarment. The SBA suspension
and debarment official or the agency suspension and debarment official may suspend or
debar a person or concern for misrepresenting a firm's status as a SDVO SBC pursuant to
the procedures set forth in 48 CFR subpart 9.4.
(2) Civil Penalties. Persons or concerns are subject to severe penalties under the False
Claims Act, 31 U.S.C. 3729-3733, the Program Fraud Civil Remedies Act, 31 U.S.C. 38013812, and any other applicable laws or regulations, including 13 CFR part 142.
(3) Criminal Penalties. Persons or concerns are subject to severe criminal penalties for
knowingly misrepresenting the SDVO SBC status of a concern in connection with
procurement programs pursuant to section 16(d) of the Small Business Act, 15 U.S.C.
645(d), as amended, 18 U.S.C. 1001, 18 U.S.C. 287, and any other applicable laws. Persons
or concerns are subject to criminal penalties for knowingly making false statements or
misrepresentations to SBA for the purpose of influencing any actions of SBA pursuant to
section 16(a) of the Small Business Act, 15 U.S.C. 645(a), as amended, including failure to
correct “continuing representations” that are no longer true.
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[78 FR 38819, June 28, 2013, as amended at 81 FR 31492, May 19, 2016. Redesignated at 81 FR
48585, July 25, 2016]

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§125.33 What must a concern do in order to be identified as a SDVO SBC in any
Federal procurement databases?
(a) In order to be identified as a SDVO SBC in the System for Award Management
(SAM) database (or any successor thereto), a concern must certify its SDVO SBC status in
connection with specific eligibility requirements at least annually.
(b) If a firm identified as a SDVO SBC in SAM fails to certify its status within one year of
a status certification, the firm will not be listed as a SDVO SBC in SAM, unless and until the
firm recertifies its SDVO SBC status.
[78 FR 38820, June 28, 2013. Redesignated at 81 FR 48585, July 25, 2016]

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Subpart F—Surplus Personal Property for Veteran-Owned Small
Business Programs
S

: 85 FR 69124, Nov. 2, 2020, unless otherwise noted.

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§125.100 How does a small business concern owned and controlled by veterans
obtain Federal surplus personal property?
(a) General. (1) Pursuant to 15 U.S.C. 657b(g), eligible small business concerns owned
and controlled by veterans may receive surplus Federal Government property from State
Agencies for Surplus Property (SASPs). The procedures set forth in 41 CFR part 102-37 and
this section will be used to transfer surplus personal property to such concerns.
(2) The surplus personal property which may be transferred to SASPs for further transfer
to eligible small business concerns owned and controlled by veterans includes all surplus
personal property which has become available for donation pursuant to 41 CFR 102-37.30.
(b) Eligibility to receive Federal surplus personal property. To be eligible to receive
Federal surplus personal property, on the date of transfer a concern must:
(1) Be a small business concern owned and controlled by veterans, that has been
verified by the Secretary of Veterans Affairs under section 8127 of title 38, United States
Code;
(2) Not be debarred, suspended, or declared ineligible under title 2 or title 48 of the Code
of Federal Regulations; and
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(3) Be engaged or expect to be engaged in business activities making the item useful to
it.
(c) Use of acquired surplus personal property. (1) Eligible concerns may acquire Federal
surplus personal property from the SASP in the State(s) where the concern is located and
operates, provided the concern represents and agrees in writing:
(i) As to what the intended use of the surplus personal property is to be;
(ii) That it will use the surplus personal property to be acquired in the normal conduct of
its business activities or be liable for the fair rental value from the date of its receipt;
(iii) That it will not sell or transfer the surplus personal property to be acquired to any
party other than the Federal Government as required by GSA and SASP requirements and
guidelines;
(iv) That, at its own expense, it will return the surplus personal property to a SASP if
directed to do so by SBA, including where the concern has not used the property as intended
within one year of receipt;
(v) That, should it breach its agreement not to sell or transfer the surplus personal
property, it will be liable to the Federal Government for the established fair market value or
the sale price, whichever is greater, of the property sold or transferred; and
(vi) That it will give GSA and the SASP access to inspect the surplus personal property
and all records pertaining to it.
(2) A concern receiving surplus personal property pursuant to this section assumes all
liability associated with or stemming from the use of the property, and all costs associated
with the use and maintenance of the property.
(d) Costs. Concerns acquiring surplus personal property from a SASP may be required
to pay a service fee to the SASP in accordance with 41 CFR 102-37.280. In no instance will
any SASP charge a concern more for any service than their established fees charged to
other transferees.
(e) Title. Upon execution of the SASP distribution document, the firm receiving the
property has only conditional title to the property during the applicable period of restriction.
Full title to the property will vest in the donee only after the donee has met all of the
requirements of this part and the requirements of GSA and the SASP that it received the
property from.
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