Federal Register Vol. 81, No.104,

I. Discussion

On March 14, 2016 (81 FR 13265), the NRC published a direct final rule amending its regulations in § 72.214 of title 10 of the Code of Federal Regulations by revising the Holtec HI-STORM 100 Cask System listing within the “List of approved spent fuel storage casks” to include Amendment No. 10 to CoC No. 1014. Amendment No. 10 adds new fuel classes to the contents approved for the loading of 16 x 16-pin fuel assemblies into a HI-STORM 100 Cask System; allows a minor increase in manganese in an alloy material for the system's overpack and transfer cask; clarifies the minimum water displacement required of a dummy fuel rod (i.e., a rod not filled with uranium pellets); and clarifies the design pressures needed for normal operation of forced helium drying systems. Additionally, Amendment No. 10 revises Condition No. 9 of CoC No. 1014 to provide clearer direction on the measurement of air velocity and modeling of heat distribution through the storage system.

The March 14, 2016, direct final rule inadvertently omitted Revision 1 to Amendment No. 8 (effective May 2, 2012, as corrected on November 16, 2012) to CoC No. 1014. In a final rule published in the Federal Register on August 18, 2015 (80 FR 49887), the NRC amended its spent fuel storage regulations by revising the Holtec HI-STORM 100 Cask System listing within the “List of approved spent fuel storage casks” to add Revision 1 to Amendment No. 8 (effective May 2, 2012, as corrected on November 16, 2012) to the CoC No. 1014. In addition, the March 14, 2016, direct final rule inadvertently omitted Revision 1 to Amendment No. 9. In a final rule published in the Federal Register on January 6, 2016 (81 FR 371), the NRC amended its spent fuel storage regulations by revising the Holtec HI-STORM 100 Cask System listing within the “List of approved spent fuel storage casks” to add Revision 1 to Amendment No. 9 to the CoC No. 1014. This document restores Revision 1 to Amendment Nos. 8 and 9 to CoC No. 1014.

Under the Administrative Procedure Act (5 U.S.C. 553(b)), an agency may waive the normal notice and comment requirements if it finds, for good cause, that they are impracticable, unnecessary, or contrary to the public interest. As authorized by 5 U.S.C. 553(b)(B), the NRC finds good cause to waive notice and opportunity for comment on the amendments because they will have no substantive impact and the amendments are of a minor and administrative nature. Specifically, these amendments are to restore Revision 1 to Amendment Nos. 8 and 9 to CoC No. 1014. These amendments do not require action by any person or entity regulated by the NRC. Also, the amendments do not change the substantive responsibilities of any person or entity regulated by the NRC. For these reasons, the NRC finds, pursuant to 5 U.S.C. 553(d)(3), that good cause exists to make the amendments effective upon publication of this document.

In the direct final rule, the NRC stated that if no significant adverse comments were received, the direct final rule would become effective on May 31, 2016. The NRC received four comment submissions with 22 individual comments on the companion proposed rule (81 FR 13295). Electronic copies of these comments can be obtained from the Federal Rulemaking Web site, http://www.regulations.gov, by searching for Docket ID NRC-2015-0270. The comments are also available in ADAMS under Accession Nos. ML16105A423, ML16105A424, ML16105A425, and ML16105A426. For the reasons discussed in more detail in Section IV, “Public Comment Analysis,” of this document, none of the comments received are considered significant adverse comments as defined in NUREG/BR-0053, Revision 6, “United States Nuclear Regulatory Commission Regulations Handbook” (ADAMS Accession No. ML052720461).

The NRC received four comment submissions with 22 individual comments on the companion proposed rule. As explained in the March 14, 2016, direct final rule, the NRC would withdraw the direct final rule only if it received a “significant adverse comment.” This is a comment where the commenter explains why the rule would be inappropriate, including challenges to the rule's underlying premise or approach, or would be ineffective or unacceptable without a change. A comment is adverse and significant if:

(1) The comment opposes the rule and provides a reason sufficient to require a substantive response in a notice-and-comment process. For example, a substantive response is required when:

(a) The comment causes the NRC staff to reevaluate (or reconsider) its position or conduct additional analysis;

(b) The comment raises an issue serious enough to warrant a substantive response to clarify or complete the record; or

(c) The comment raises a relevant issue that was not previously addressed or considered by the NRC staff.

(2) The comment proposes a change or an addition to the rule, and it is apparent that the rule would be ineffective or unacceptable without incorporation of the change or addition.

(3) The comment causes the NRC staff to make a change (other than editorial) to the rule, CoC, or Technical Specifications.

The NRC determined that none of the comments submitted on this direct final rule met any of these criteria. The comments either were already addressed by the NRC staff's safety evaluation report (SER) (ADAMS Accession No. ML15331A309), or were beyond the scope of this rulemaking. The NRC has not made any changes to the direct final rule as a result of the public comments. However, the NRC will take the opportunity to respond to the comments in a separate Federal Register notice that will be published in June 2016. You will be able to access the separate Federal Register notice on the Federal rulemaking Web site at http://www.regulations.gov under Docket ID NRC-2015-0270. The Federal rulemaking Web site allows you to receive alerts when changes or additions occur in a docket folder. To subscribe: (1) Navigate to the docket folder (NRC-2015-0270); (2) click the “Sign up for Email Alerts” link; and (3) enter your email address and select how frequently you would like to receive emails (daily, weekly, or monthly).

The NRC staff has concluded that the comments received on the companion proposed rule for the Holtec HI-STORM 100 Cask System, CoC No. 1014, Amendment No. 10, are not significant adverse comments as defined in NUREG/BR-0053, Revision 6. Therefore, the direct final rule will become effective as scheduled.

For the reasons set out in the preamble and under the authority of the Atomic Energy Act of 1954, as amended; the Energy Reorganization Act of 1974, as amended; and 5 U.S.C. 552 and 553, the NRC is adopting the following amendments to 10 CFR part 72:

Introduction

SBA published a proposed rule regarding these changes in the Federal Register on December 29, 2014 (79 FR 77955), inviting the public to submit comments on or before February 27, 2015. This comment period was extended through April 6, 2015, by notice in the Federal Register published on March 9, 2015 (80 FR 12353). SBA also conducted tribal consultations in Washington, DC (February 26, 2015), Catoosa, OK (April 20, 2015), and Anchorage, AK (April 22, 2015), in which SBA accepted comments on the proposed rule. Transcripts of these consultations are in the rule docket (SBA-2014-0006, viewable on Regulations.gov using the docket number). SBA received a total of 216 comments on the proposed rule. Twenty-eight comments were supportive of the rule generally without referencing specific sections of the rule. Seventeen of those generally supportive comments advocated for fast implementation of the rule. Several of these commenters suggested that SBA issue this rule as an interim final rule. Once SBA has published a proposed rule, the next step in the process is to analyze public comments and publish a final rule. Publishing an “interim final rule” after publishing a proposed rule would not expedite the process to finalize the provisions contained in the proposed rule. As such, SBA has not followed that recommendation and is publishing this rule as a final rule. Sixteen comments requested an extension of time for the submission of comments. An extension of the comment period was provided through April 6, 2015, and SBA believed that a further extension was not needed. Seven comments did not support the rulemaking generally and did not reference specific sections that were opposed. Some of these comments were related to regulations not subject to changes in the proposed rule and were considered outside the scope of this rulemaking. SBA's discussion below summarizes the proposed rule, the comments related to each section of the proposed rule and SBA's responses.

Section 1621 of the National Defense Authorization Act of 2013 (NDAA), Public Law 112-239, 126 Stat. 1632 (Jan. 2013), revised the Small Business Act regarding the responsibilities of Procurement Center Representatives (PCRs). Section 1621 clarifies that PCRs have the ability to review barriers to small business participation in Federal contracting and to review any bundled or consolidated solicitation or contract in accordance with the Small Business Act. SBA proposed to amend 13 CFR 125.2(b)(1)(i)(A), based on the changes in Section 1621(c)(6)(H) of the NDAA. SBA also proposed to add language to § 125.2(b)(1)(i)(A) and to § 125.2(b)(1)(ii), which clarifies that PCRs advocate for the maximum practicable utilization of small business concerns in Federal contracting, including advocating against the unjustified consolidation or bundling of contract requirements.

Pursuant to Section 1621(c)(6)(G) of the NDAA, SBA proposed new § 125.2(b)(1)(iv), which states that PCRs will consult with the agency's Office of Small and Disadvantaged Business Utilization (OSDBU) and Office of Small Business Program (OSBP) Director regarding an agency's decision to convert an activity performed by a small business concern to an activity performed by a Federal employee. SBA also proposed new § 125.2(b)(1)(v) pursuant to the language enacted by Section 1621(c)(6)(F) of the NDAA, which allows PCRs to receive unsolicited proposals from small business concerns and to provide those proposals to the appropriate agency's personnel for review and disposition.

SBA proposed to amend § 125.2(b)(1) and (2), which pertain to Breakout PCRs (BPCRs). Sections 1621(e) and (f) of the NDAA effectively eliminate the statutory authority for the separate BPCR role. As a result, SBA proposed to reassign the responsibilities currently held by BPCRs to PCRs. SBA proposed to add § 125.2(b)(1)(i)(F), which states that PCRs also advocate full and open competition in Federal contracting and recommend the breakout for competition of items and requirements which previously have not been competed. SBA also proposed to eliminate § 125.2(b)(2) that provided guidance on the role and responsibilities of BPCRs, and redesignate current § 125.2(b)(3) as the new § 125.2(b)(2) and remove any reference to BPCRs from that paragraph.

SBA received 13 comments regarding its proposed changes to § 125.2. Ten of these comments were supportive of the changes to this section. One commenter suggested that SBA clarify the proposed language in § 125.2(b)(1)(i)(A), which states “This review includes acquisitions that are Multiple Award Contracts where the agency has not set-aside all or part of the acquisition or reserved the acquisition for small businesses.” This commenter suggested that SBA delete the words “or part” to make it clear that PCRs can review any Multiple Award Contract that is not 100% set-aside for small business competition. SBA is not adopting this recommendation because the proposed language states that PCRs can review Multiple Award Contracts that are not entirely set aside for small businesses, meaning partially set-aside. Furthermore, if SBA eliminated “or part” it would indicate that PCRs cannot review Multiple Award Contracts that are entirely set aside for small businesses, which is within the PCRs responsibilities.

Another commenter suggested that SBA should meet with contracting officers to assist with setting aside contracts for small businesses. It is the role of the PCR to review procurements that are not set aside for small businesses. PCRs are often located at the procuring activity and routinely interface with contracting officers regarding whether to set aside acquisitions for small business competition. It is already part of their responsibilities to meet with contracting officers and discuss acquisition planning. As such, it is not necessary to adopt this suggested change.

Another commenter suggested that the term “acquisition” as used in § 125.2 should be changed to “acquisition, including bridge, interim, and follow-on contracts.” The term “acquisition” is defined broadly in section 2.101 of the Federal Acquisition Regulation (FAR) to include “award of contracts.” The commenter is referencing specific types of contracts that are included in the FAR definition of “acquisition.” SBA believes that this clarification is not necessary and does not adopt it in this final rule.

Another commenter suggested that PCRs should unbundle sole source contracts that are made to incumbent vendors in order to allow the agency time to competitively re-procure the goods or services. The proposed rule directly addresses this concern by providing PCRs with the ability to advocate against consolidation or bundling of contract requirements and reviewing any justification provided for such bundling or consolidation. The same commenter also suggested that a prime contract not be awarded on a sole source basis unless the prime contractor agrees to retain its subcontractors under the previous award and incorporates the small business plan associated with the previous award. SBA does not have the authority to mandate which subcontractors a prime contractor chooses to include in a subcontracting plan or to mandate that a prime contractor incorporate a particular subcontracting plan into its offer, and therefore SBA is not adopting this suggestion.

One commenter requested clarification of the language proposed in § 125.2(b)(1)(i)(F) stating, “PCRs also advocate competitive procedures and recommend the breakout for competition when appropriate.” The commenter raised concerns that this language will discourage contracting officers from utilizing the sole source authority provided for the 8(a) Business Development (BD) program, the Women-Owned Small Business (WOSB) program and the HUBZone program. The commenter suggests that SBA clarify what a PCR would consider as “appropriate” in the decision to recommend competition, and if such a decision is made, that contracting officers and PCRs document this decision in the contract file along with an explanation for why competition is considered more appropriate than a small business program sole source award. The language referenced by the commenter is a BPCR responsibility that SBA is transferring to PCRs due to the statute's elimination of the BPCR role. In addition, PCRs provide contracting officers with guidance on the availability of sole source and competitive options, but the contracting officer has the discretion to choose an acquisition program or method, in accordance with SBA's guidance on parity.

Another commenter noted that PCRs will have to coordinate with agency officials to implement the NDAA's requirement, set forth at § 125.2(b)(1)(iv), that PCRs consult with agency OSDBUs regarding an agency's decision to convert an activity performed by a small business concern to an activity performed by a Federal employee. The statute provides that the PCR will consult with the OSDBU. SBA understands that the PCR and OSDBU will consult with other agency officials, as necessary. However, SBA does not believe that additional clarification is necessary and therefore SBA adopts the proposed language in this final rule.

Section 1623 of the NDAA requires that each Federal department or agency provide opportunities for the participation of small business concerns during acquisition planning processes and in acquisition plans. This section also requires that each Federal department or agency invite the participation of the appropriate OSDBU Director in acquisition planning processes and provides that Director with access to acquisition plans. SBA incorporates the exact statutory text from Section 1623 of the NDAA into 13 CFR 125.2(c)(1) by adding new paragraphs (vi) and (vii).

Section 1651 of the NDAA, as codified at 15 U.S.C. 657s, requires that the limitations on subcontracting for full or partial small business set-aside contracts, HUBZone contracts, 8(a) BD contracts, Service-Disabled Veteran-Owned (SDVO) Small Business Concern (SBC) contracts, and WOSB and Economically Disadvantaged Women Owned Small Business (EDWOSB) contracts, be evaluated based on the percentage of the overall award amount that a prime contractor spends on its subcontractors. Significantly, the NDAA excludes from the limitations on subcontracting calculation the percentage of the award amount that the prime contractor spends on similarly situated entity subcontractors. Specifically, the NDAA deems work done by similarly situated entities not to be subcontracted work for purposes of complying with the limitations on subcontracting requirement. Thus, work done by a similarly situated entity is counted in determining whether the applicable limitation on subcontracting is met. When a contract is awarded pursuant to a small business set-aside or socioeconomic program set-aside or sole source authority, a similarly situated entity subcontractor is a small business concern subcontractor that is a participant of the same SBA program that qualified the prime contractor as an eligible offeror and awardee of the contract.

Currently, SBA's regulations contain different terms for compliance with the performance of work requirements based on the type of small business program set-aside at issue. The method for calculating compliance not only varies by program set-aside type, but also based on whether the acquisition is for services, supplies, general construction, or specialty trade construction. Section 1651 of the NDAA creates a shift from the concept of a required percentage of work to be performed by a prime contractor to the concept of limiting a percentage of the award amount to be spent on subcontractors. The goal is the same: To ensure that a certain amount of work is performed by a small business concern (SBC) that qualified for a small business program set-aside or sole source procurement due to its socioeconomic program status. The Government's policy of promoting contracting opportunities for small businesses, HUBZone SBCs, SDVO SBCs, WOSBs/EDWOSBs, and 8(a) SBCs is seriously undermined when firms pass on work in excess of applicable limitations to firms that are other than small or that are not otherwise eligible for specific types of small business contracts. SBA has revised all references to “performance of work” requirements found in parts 121, 124, 125, 126, and 127 to “limitations on subcontracting.”

SBA proposed to totally revise § 125.6 to take into account the new definition and calculation for the limitations on subcontracting as described in Section 1651 of the NDAA. Additionally, SBA reorganized and simplified this section for easier use. Proposed § 125.6(a) explains how to apply the limitations on subcontracting requirements to small business set-aside contracts. Instead of providing different methods of determining compliance based on the type of small business set-aside program at issue and the type of good or service sought, Section 1651(a) of the NDAA provides one method for determining compliance that is shared by almost all applicable small business set-aside programs, but varies based on whether the contract is for services, supplies or products, general construction, specialty trade construction, or a combination of both services and supplies.

The approach described in Sections 1651(a) and (d) of the NDAA is to create a limit on the percentage of the award amount received by the prime contractor that may be spent on other-than-small subcontractors. Specifically, the NDAA provides that a small business awarded a small business set-aside, 8(a), SDVO small business, HUBZone, or WOSB/EDWOSB award “may not expend on subcontractors” more than a specified amount. However, as noted below, work done by “similarly situated entities” does not count as subcontracted work for purposes of determining compliance with the limitation on subcontracting requirements. Proposed § 125.6(a)(1) and (a)(2) addressed the limitations on subcontracting applicable to small business set-aside contracts requiring services or supplies. The limitation on subcontracting for both services and supplies is statutorily set at 50% of the award amount received by the prime contractor. See 15 U.S.C. 657s(a).

Proposed § 125.6(a)(3) addressed how the limitation on subcontracting requirement would be applied to a procurement that combines both services and supplies. This provision intended to clarify that the contracting officer's (CO) selection of the applicable NAICS code will determine which limitation of subcontracting requirement applies. Proposed § 125.6(a)(4) and (5) addressed the limitations on subcontracting for general and specialty trade construction contracts. SBA proposed to keep the same percentages that currently apply: 15% for general construction and 25% for specialty trade construction.

SBA received 115 comments regarding proposed § 125.6(a). The overwhelming majority of these comments requested that SBA allow contractors to exclude the “cost of materials”, as that term is currently defined in § 125.1(i), from the limitations on subcontracting calculation for all contracts. SBA notes that the cost of materials has never been, and was not proposed to be, a term that applies to service contracts. Historically and as proposed, the term cost of materials is applicable to supply, construction, or specialty trade construction set-aside contracts. “Cost of materials” is currently excluded from the performance of work requirements and SBA did not intend to remove this exclusion in proposed paragraph 125.6(a). The exclusion of “cost of materials” from the limitations on subcontracting for supply, construction, and specialty trade construction procurements is included in this final rule. Several commenters suggested that SBA extend this exclusion to procurements assigned a service NAICS code, but, SBA does not believe that this change is needed. As discussed below, because the limitations on subcontracting for a services contract apply only to the services portion of the contract, any “cost of materials” would not be part of the services to be provided through the contract and, thus, would be excluded from the limitations on subcontracting analysis on that basis.

For a mixed contract (i.e., one in which both supplies and services are being procured), commenters believed that the limitation on subcontracting should apply only to that portion of the requirement identified as the primary purpose of the contract. In other words, where, for example, a contracting officer has assigned a services NAICS code to a requirement that has both a services and supply component, the commenters believed that the limitation on subcontracting should apply only to the services portion of the work to be performed. In our view, Section 46(a)(3) of the Small Business Act, 15 U.S.C. 657s(a)(3), which was established by Section 1651 of the NDAA, provides the necessary guidance for mixed contracts. The CO must first determine which category, services or supplies, has the greatest percentage of the contract value, and then assign the appropriate NAICS code. The corresponding limitations on subcontracting will apply to the contract, depending on whether the CO has selected a supply NAICS code or a services NAICS code. Thus, the statutory authority authorizes that the limitations on subcontracting apply only to that portion of the requirement identified as the primary purpose of the contract. SBA has clarified that intent in this final rule, and has moved the requirements pertaining to mixed contracts to § 125.6(b). Therefore, where a procurement combines supplies and services, the limitations on subcontracting apply only to subcontracts that correspond to the principal purpose of the prime contract. For a contract principally for services, but which also requires supplies, this means that the prime contractor or its similarly situated subcontractors cannot subcontract more than 50 percent of the services to other than small concerns. However, the prime contractor can subcontract all of the supply components to any size business.

Several commenters also recommended that SBA change the current definition of “cost of materials” to include any service or product that cannot be procured from a small business. Other commenters recommended that very specific types of services be included in the definition of “cost of materials” such as transportation when procured in the performance of an environmental remediation procurement. SBA did not propose to change the definition of “cost of materials” and does not believe that a change is necessary or required to implement NDAA 2013.

One commenter requested clarity on whether contractors can exclude from the limitations on subcontracting the non-service costs associated with a procurement for services. As noted above, SBA believes that only the services portion of a requirement identified as a services requirement are considered in determining compliance with the limitation on subcontracting requirements. This means that any costs associated with supply items are excluded from that analysis. However, all costs associated with providing the services, including any overhead or indirect costs associated with those services, must be included in determining compliance. This final rule clarifies this application. SBA has also added another example to § 125.6(a)(3) that involves both supplies and services to clarify how the limitations on subcontracting apply in these circumstances.

As noted above, the NDAA prohibits subcontracting beyond a certain specified amount for any small business set-aside, 8(a), SDVO small business, HUBZone, or WOSB/EDWOSB contract. Section 1651(b) of the NDAA creates an exclusion from the limitations on subcontracting for “similarly situated entities.” In effect, the NDAA deems any work done by a similarly situated entity not to constitute “subcontracting” for purposes of determining compliance with the applicable limitation on subcontracting. A similarly situated entity is a small business subcontractor that is a participant of the same small business program that the prime contractor is a certified participant and which qualifies the prime contractor to receive the award. Subcontracts between a small business prime contractor and a similarly situated entity subcontractor are excluded from the limitations on subcontracting calculation because it does not further the goals of SBA's government contracting and business development programs to penalize small business prime contract recipients that benefit the same small business program participants through subcontract awards.

The proposed rule identified SBA's concern with determining compliance with the limitations on subcontracting by looking solely to the first tier of the contracting process (agreements between the prime contractor and its direct subcontractors). If all that was looked at was the first tier subcontract, that first tier subcontractor could in turn pass all of its performance on to a large or otherwise not similarly situated entity through a second subcontract. SBA believes that the intent of the changes in the NDAA were to ensure that the benefits of set-aside contracts flow to the intended beneficiaries. SBA does not believe that an intended consequence of the change was to make it easier to divert these benefits to ineligible entities by merely moving contracts down one or two tiers in the contracting process. As such, the proposed rule retained a requirement that firms benefiting from contracts, and their similarly situated subcontractors perform a required amount of work on the contract themselves. SBA believes that requiring firms to perform significant portions of the work, as well as to retain a significant portion of the contract award, will continue to help ensure that the benefits from these contracts flow to the intended parties.

SBA requested comments on this issue, including whether there may be unintended consequences, as well as comments about SBA's proposed solution. SBA also requested comments on whether prime contractors should be required to report to the contracting officer concerning meeting the performance of work requirements, and comments concerning the frequency and method of reporting.

SBA received three comments regarding SBA's proposal to apply the limitations on subcontracting collectively to all similarly situated entities that are performing work on the contract and that are counted toward the prime contractor's percentage of performance. Two commenters supported SBA's proposed approach and one commenter opposed this approach, and suggested that SBA apply the limitations on subcontracting only to the prime contractor and the first tier subcontractor. Applying the limitations on subcontracting to only the prime contractor and first tier subcontractor creates the possibility that the first tier subcontractor may subcontract 100% of the work it received from the prime to an entity that is not similarly situated as the prime contractor. SBA remains concerned that this would create a loophole for entities that are not small business concerns and would not have qualified to receive the prime contract to benefit, as subcontractors, from government contracts that are set aside for performance by small business concerns. To address these concerns, SBA will apply the limitations on subcontracting collectively to the prime and any similarly situated first tier subcontractor, and any work performed by a similarly situated first tier subcontractor will count toward compliance with the applicable limitation on subcontracting. Any work that a similarly situated first tier subcontractor subcontracts, to any entity, will count as subcontracted to a non-similarly situated entity for purposes of determining whether the prime/sub team performed the required amount of work. In other words, work that is not performed by the employees of the prime contractor or employees of first tier similarly situated subcontractors will count as subcontracts performed by non-similarly situated concerns.

Proposed § 125.6(b)(1) required prime contractors to enter a written agreement with each similarly situated entity that identifies the similarly situated entity and the percentage of work to be performed by that entity. The proposed rule provided that the written agreement must be signed by the similarly situated entity and provided to the contracting officer with the prime contractor's offer. Proposed § 125.6(b)(2) stated that it is immaterial whether the specific subcontractors identified in the written agreement satisfy the percentage of work identified, as long as all similarly situated entities collectively, along with the prime contractor, satisfy the performance of work requirements. Proposed § 125.6(b)(3) stated that a prime contractor may be debarred for a violation of the spirit and intent of this paragraph.

SBA received forty-seven comments related to its proposed § 125.6(b), which described how subcontracts to similarly situated entities will be excluded from the prime contractor's limitations on subcontracting. Eight of these comments generally supported § 125.6(b) as proposed. Four of these comments were considered outside the scope of this rulemaking as they advocated for an interim final rule to apply the exclusion of subcontracts to similarly situated entities from the limitations on subcontracting. One comment generally opposed proposed § 125.6(b), but did not have any suggested alternatives.

Twenty-three of the forty-seven comments received were related to proposed § 125.6(b)(1), which discussed the details that must be included in the required written agreements between the prime contractor and its similarly situated entity subcontractors. Six of these commenters supported the concept of a required written agreement but disagreed with specific aspects of the agreement such as identifying the proposed similarly situated entity subcontractors and identifying the percentage of work to be performed by those subcontractors. Seventeen of the commenters opposed the requirement for any written agreement between a prime contractor and a similarly situated entity subcontractor because it would be impossible to know their identity and possible percentage of performance in advance of the award and because it would be unnecessarily burdensome on small business prime contractors to draft and enter these agreements. SBA also received comments concerning how to address the substitution of one subcontractor for another, or a decision by the prime contractor after award to either perform the work itself or subcontract work to a similarly situated entity.

In response to these comments, SBA has decided not to require a written agreement in order for a prime contractor to rely on the work to be performed by similarly situated entities. For many years SBA's rules have allowed similarly situated entities to be counted towards the limitations on subcontracting requirements under SDVO or HUBZone set-asides or sole source awards, without also requiring a separate written agreement. There is no evidence that this long-standing policy has been difficult to understand or administer, and the rule change that limits subcontracting without regard to cost incurred for personnel should make it easier to track and identify subcontracts, especially in light of other existing requirements to report on subcontracts, such as FAR 52.204-10 (48 CFR 52.204-10). (Reporting Executive Compensation and First-Tier Subcontract Awards). In addition, SBA is concerned that requiring a written agreement would cause an administrative burden on small business concerns, which would in turn cause them to utilize this tool less often, for fear of violating the written agreement or because they would need to constantly amend the agreement based on modifications with respect to team members or to percentages of work performed by individual team members. Further, requiring a written agreement prior to offer would limit a firm's ability to decide to utilize a similarly situated entity after award and during contract performance. Many of the commenters pointed out that it may be difficult to determine whether a subcontractor will or will not be used on certain contracts, especially indefinite delivery indefinite quantity task or delivery order contracts. Small business concerns should have the discretion to run their business and perform contracts as they see fit, and the discretion to subcontract or not subcontract at any point during contract performance, provided they comply with the overall performance requirements. Further, SBA and agencies do not have the resources to review agreements or amendments to those agreements.

SBA received several comments in response to its request for comments on whether prime contractors should be required to report to the contracting officer on their compliance with the limitations on subcontracting. Eight commenters supported mandatory compliance reporting, and five of those commenters recommended that the reporting be made at the end of the contract term. Three of the supportive commenters recommended compliance reporting on a quarterly or annual basis. Three commenters opposed mandatory compliance reporting because it would be too burdensome on small business concerns. One commenter suggested that SBA use its auditing and investigating authority to determine compliance rather than requiring contractors to report their compliance. Another commenter suggested that the only necessary compliance reporting should be made in the offer.

In addition to the requirement for a written agreement, SBA also proposed to require compliance reporting from small business concerns that rely on similarly situated entities to meet their performance obligations under a set aside contract. Notably, SBA did not propose to require compliance reporting from all small business concerns (i.e., firms that do not rely on similarly situated small business concerns to meet their performance obligations). Upon further review, SBA believes that this proposal would create a disincentive to utilize this new statutory authority. Compliance reporting was not required by the statute, and in fact, reliance on similarly situated entities to help meet their performance requirements actually makes it easier these firms to comply with their obligations. Moreover, requiring a prime contractor to report on compliance with the limitations on subcontracting when it uses one or more similarly situated entities could hamper flexibility for firms during contract performance. For example, a firm may initially intend to comply on its own, but may find during contract performance that it must rely on one or more similarly situated subcontractors to meet its performance obligations. In addition, a firm may intend to use one or more similarly situated entities to help it meet its performance obligations, but then may decide during contract performance that it will perform all of the required work with its own employees. These practical realities have led us to remove the compliance reporting requirement with respect to similarly situated entities. SBA may, in the future, propose a rule that requires compliance reporting from all small business concerns, not just those that rely on similarly situated entities. However, such a change would require notice and a request for public comment that is not part of this rulemaking.

For many years, SBA's regulations have allowed similarly situated entities to count towards fulfilling the limitations on subcontracting requirements under a HUBZone or SDVO set-aside or sole source contract, without a requirement to report to the CO. As discussed above, prime contractors are already required to report on subcontracting pursuant to FAR clause 52.204-10 (48 CFR 52.204-10). Thus, because SBA is not requiring written agreements in this final rule, at this time SBA has decided not to require compliance reports from firms that are utilizing similarly situated subcontractors. SBA believes that to the extent compliance reporting should be required, it should be required from all small businesses, not just those that team with similarly situated subcontractors. Thus, SBA intends to issue a proposed rule to request public comment on the issue of whether all small businesses (and not only those that are using similarly situated entities to perform a contract) should be required to report on compliance with the limitations on subcontracting on set-aside contracts. SBA understands the recommendations made by the Government Accountability Office to strengthen the monitoring and oversight of the required performance percentages for all small businesses that receive set-aside awards, including 8(a) contractors, and believes that a separate rulemaking should address that issue more appropriately.

SBA's proposed § 125.6(b) explained that work subcontracted to similarly situated entities may be excluded from a prime contractor's calculation of its limitation on subcontracting. SBA proposed to include three examples to § 125.6(b) to demonstrate how a small business concern or Federal agency should apply the exclusion for similarly situated entities and determine compliance with the limitations on subcontracting. The final rule has redesignated proposed § 125.6(b) as § 125.6(c). As mentioned above, in response to comments, SBA is adding three more examples to redesignated § 125.6(c) to clarify how the limitations on subcontracting apply when the procurement involves a mix of services and supplies.

SBA received six comments in response to proposed § 125.6(b)(3). All six commenters opposed SBA's ability to consider a party's failure to comply with the spirit and intent of the subcontract with a similarly situated entity as a basis for debarment. These commenters argued that the proposed regulation is too vague because it is unclear how SBA would demonstrate a violation of the spirit and intent, and that the penalty of debarment is too severe. SBA clarifies that a contractor's violation of the spirit and intent of a subcontract with a similarly situated entity is something SBA may consider as a basis for debarment, but is not required to consider for debarment. SBA does not take debarment and suspension lightly and understands fully the implications of such an action. As such, SBA would not initiate any debarment or suspension action unless SBA believed that the government's interests needed to be protected. This would happen where, for example, a small business prime contractor had no intent to actually use similarly situated entities. In such a case, the firm's certification would be a misrepresentation to the government, and the government could no longer rely on any representations made by the firm. SBA would not consider a debarment or suspension action where a firm made a good faith representation that it, along with one or more similarly situated entities, would meet the performance of work requirements and through unforeseen circumstances it failed to do so. Additionally, should SBA choose to consider this as a basis for debarment, the entity at issue would have an opportunity to respond to any allegation with its own arguments and evidence. SBA believes this provision is necessary to deter potential fraud, waste, and abuse of the prime contractor's ability to exclude similarly situated entity work from its limitations on subcontracting. SBA has moved the discussion of debarment to redesignated § 125.6(h).

SBA proposed to relocate the definitions that are relevant to the limitations on subcontracting that are currently found in § 125.6(e) to § 125.1 with the other definitions that are applicable to part 125. Section 1651(e) of the NDAA provides the definitions of “similarly situated entity” and “covered small business concern.” Proposed § 125.1(x) interprets the statutorily prescribed definition for similarly situated entity.

SBA received 34 comments about its proposed definition of similarly situated entity. Fifteen of these comments opposed SBA's proposition that a small business concern qualifies as a similarly situated entity if it qualifies as small for the NAICS code assigned to the prime contractor's procurement, in addition to the other requirements included in the definition of “similarly situated entity.” Three commenters requested further clarification of the definition. Two commenters supported the definition as proposed. The remaining comments were questions regarding the application of the proposed definition to procurements for specific types of services or were comments that were considered outside the scope of this rulemaking, as they suggested changes that were not proposed and are not authorized by the statute. For example, one commenter recommended that when a solicitation requires the use of a specific subcontractor, that entity should qualify as a similarly situated entity, regardless of the subcontractor's size or small business program participation. SBA believes that this would conflict with the statutory intent that only entities that would be eligible as prime contractors may qualify as similarly situated entity subcontractors. Another commenter recommended that all individuals classified by the Internal Revenue Service as independent contractors should be included in the definition of similarly situated entity. Again, this would conflict with the statutory intent that only contractors who would qualify for the prime contract are eligible to count toward the prime contractor's performance of work as similarly situated entity provisions. However, SBA has clarified in § 125.6(e)(3) that performance by an independent contractor is considered a subcontract, and may qualify as a similarly situated entity if the contractor meets the relevant criteria.

The majority of the questions related to the application of the definition to procurements for architecture and engineering services. Often the prime contract is assigned the NAICS code representing architecture services and has a size standard that is less than the size standard for engineering services. In these cases, the engineering services are often subcontracted and commenters were concerned about how the engineering firm could qualify as a similarly situated entity if it were required to comply with the size standard assigned to the prime contract. SBA received other comments which described complex procurements involving multiple services. Firms that are small for certain types of services would not qualify as small for the NAICS assigned to the contract. In response to the comments received, SBA is not adopting its proposed definition of “similarly situated entity” and instead will allow an entity to qualify as a similarly situated entity if it is small for the NAICS code that the prime contractor assigns to the subcontract. SBA believes that this alteration to the definition will address the concerns raised about specific types of service procurements. Requiring the subcontractors to be small for the size standard assigned to the prime contract would unduly restrict the ability of prime contractors to find and use similarly situated entities to satisfy the limitations on subcontracting. SBA believes the approach adopted in this final rule will increase the ability of small business prime contractors to utilize similarly situated entity subcontractors. In addition, this approach is consistent with SBA's rules which require a prime contractor to assign the NAICS code to a subcontract which describes the principal purpose of the subcontract. 13 CFR 125.3(c)(1)(v).

In § 125.6(c), SBA proposed to require a certification requirement in connection with the limitations on subcontracting requirement. However, existing regulations require firms to agree to comply with the limitations on subcontracting in connection with a set-aside contract, including firms that are utilizing similarly situated entities, and it is SBA's intent to continue that practice. Consequently, SBA's rules do not specifically require certification from the prime contractor when utilizing similarly situated entities. In order to be awarded a set-aside contract as a small business, the prime contractor must agree to comply with the limitations on subcontracting in connection with the offer, whether that entails using similarly situated entities or not.

Proposed § 125.6(f) and (h) contained language that is included in the current rule and did not contain any proposed changes to that language aside from adding new headings to these paragraphs and reorganizing this language. These provisions have been redesignated as § 125.6(d) and (e) in this final rule. Proposed § 125.6(f) discussed HUBZone procurements of commodities. SBA did not receive any comments within the scope of this rulemaking that relate to proposed § 125.6(f) and SBA is adopting the language of proposed § 125.6(f) in § 125.6(d). Proposed § 125.6(g) discussed how to request a change in the applicable limitation on subcontracting for a particular industry. SBA received two comments related to proposed § 125.6(g). One comment supported the language and the other comment was a question regarding the transition period for industries where the limitations on subcontracting percentages do not align with industry practices. It is unclear what the commenter is requesting as this paragraph does not reference a transition period. This final rule adopts the language of proposed § 125.6(g).

Proposed § 125.6(h) discussed the period of time used to determine compliance with the limitations on subcontracting. While SBA did not propose a change to the time period used to determine compliance, SBA received 15 comments related to this paragraph. Twelve of the comments contained suggestions for how to modify the proposed language to be less burdensome on small business prime contractors and allow prime contractors to have the maximum flexibility to choose and manage subcontractors. The majority of these commenters suggested that SBA use the entire contract term, the base and all option periods, to determine whether the prime contractor has complied with the limitations on subcontracting. Other commenters suggested that periodic checks of compliance would suffice in addition to checking compliance during contract close-out. The remaining commenters believed that the current requirement was too onerous on prime contractors to check compliance for each task order issued under an IDIQ contract.

In response to these comments, SBA again emphasizes that redesignated paragraph (e) is not a change in policy. It recites the policy set forth in a prior SBA rulemaking on multiple award contracting, as set forth at § 125.2(e)(2)(iv), but clarifies that this policy applies to single award task and delivery order contracts, not just multiple award contracts. SBA believes that this provides contracting officers with the maximum flexibility to determine the time period that will be used for determining compliance with the limitations on subcontracting for performance of a task or delivery order contract. SBA does not believe it is appropriate for compliance to be determined at the end of the contract term, including all option periods, because it would eliminate the ability to monitor compliance during performance and request a proposed corrective action from the contractor in order to satisfy the limitations on subcontracting during the performance period. When compliance is monitored per base period and each option period, or per order in some cases, it helps ensure that the intended benefits are flowing to the intended recipients. If the policy were to wait until performance was concluded, the remedies would be much more limited.

Proposed § 125.6(i) addressed how the limitations on subcontracting apply to members of a Small Business Teaming Arrangement (SBTA) that are exempt from affiliation according to § 121.103(b)(9). Proposed § 125.6(i) stated that the limitations on subcontracting apply to the combined effort of the SBTA members, not to the individual members of the SBTA separately. However, SBTAs only apply to bundled contracts, and a bundled contract is a contract that is not suitable for award to a small business concern. The Small Business Act allows small businesses to team together on a bundled contract and requires the agency to consider the capabilities of subcontractors on the team, and exempt those team members from affiliation. 15 U.S.C. 644(e)(4). If a contract contains a reserve, it is suitable for award to a small business, and thus the contract is not bundled and the SBTA would not apply. Thus, SBA is removing language concerning reserves from § 121.109(b)(9) and language concerning SBTAs from § 125.6, because the limitations on subcontracting do not apply. SBTAs with respect to bundled and consolidation contracts are discussed in depth at § 125.2(b)(iii)(G).

SBA proposed to add new § 125.6(j), which exempted small business set-aside contracts valued between $3,500 and $150,000 from the limitations on subcontracting requirements. Section 46 of the Small Business Act mandates that the statutory performance of work requirements (limitations on subcontracting) apply to small business set-aside contracts with values above $150,000, and contracts of any amount awarded to socioeconomically disadvantaged contracting programs, such as 8(a), WOSB/EDWOSB, HUBZone, and SDVO set-aside contracts. 15 U.S.C. 657s. Although the limitations on subcontracting apply to all of these contracts, Section 46 does not specifically cite Section 15(j) of the Small Business Act, which is the statutory authority for non-socioeconomically disadvantaged small business set-asides between $3,500 and $150,000. Further, Section 15(j) of the Small Business Act does not mention any limitation on subcontracting requirements in connection with the performance of set-aside contracts under Section 15(j). Thus, the FAR provides that “[t]he contracting officer shall insert the clause at 52.219-14, Limitations on Subcontracting, in solicitations and contracts for supplies, services, and construction, if any portion of the requirement is to be set aside or reserved for small business and the contract amount is expected to exceed $150,000.” FAR 19.508(e) (48 CFR 19.508(e)). SBA proposed not to expand the application of the limitations on subcontracting to apply to small business set-asides below $150,000, but rather to adopt what the FAR has done. The limitation on subcontracting requirements would continue to apply to all 8(a), HUBZone, SDVO, and WOSB/EDWOSB set-aside contract awards regardless of value, including but not limited to contracts with values between $3,500 and $150,000. SBA requested comments regarding whether the limitations on subcontracting should apply to small business set-aside contracts valued between $3,500 and $150,000. In addition, SBA requested comments on whether, for policy reasons and for purposes of consistency, the performance of work/subcontracting limitation requirements should apply to a small business set-aside contract with a value between $3,500 and $150,000.

SBA received thirteen comments regarding proposed § 125.6(j). Ten of these comments supported SBA's proposed approach to exclude procurements with a value between $3,500 and $150,000 from the limitations on subcontracting. One commenter opposed this approach and stated that eliminating the application of the nonmanufacturer rule (NMR) to procurements of this value would open itself up to direct competition with non-U.S., other than small manufacturers. Another commenter suggested that SBA should exclude all small business program set-aside procurements valued between $3,500 and $150,000 from the limitations on subcontracting rather than just small business set-aside procurements. The remaining comment received was outside the scope of this rule-making.

In response to these comments, SBA notes that the limitations on subcontracting rule and the NMR as set forth in the Small Business Act do not exclude set-asides under other authorities from those requirements based on the value of the contract. 15 U.S.C. 657s. The only set-aside authority that is not cited in the limitations on subcontracting provision is Section 15(j) of the Small Business Act, which is the statutory authority for small business set-asides valued between $3,500 and $150,000. SBA is adopting the proposed language of § 125.6(j), in redesignated § 125.6(f), as the majority of comments supported this approach and it is supported by the Small Business Act and consistent with the existing FAR.

Section 1652 of the NDAA, codified at 15 U.S.C. 645 (Section 16 of the Small Business Act), prescribes penalties for concerns that violate the limitations on subcontracting requirements. SBA proposed to add new § 125.6(k) to incorporate these penalties into the regulations. Proposed § 125.6(k) stated that concerns that violate the limitations on subcontracting are subject to the penalties listed in 15 U.S.C. 645(d) except that the fine associated with these penalties will be the greater of either $500,000 or the dollar amount spent in excess of the permitted levels for subcontracting.

SBA received twenty-nine comments related to proposed § 125.6(k). Twenty-eight of these comments requested that SBA alter this paragraph to lower the penalties and allow a good faith exception for a violation of the limitations on subcontracting. Most of these commenters were concerned that by violating the limitations on subcontracting by even $1, possibly due to a miscalculation or a change in the Service Contract Act wage rates, a prime contractor could be exposed to a minimum fine of $500,000. Many commenters requested that SBA change the language from imposing a minimum fine of $500,000 to imposing a fine that is the lesser of $500,000 or the amount spent in excess of the permitted levels. Several commenters requested that the fine be imposed on the subcontractor that is not qualified to receive the funds, as it is likely that the prime contractor relied in good faith on a misrepresentation of the subcontractor's small business or small business program participation status. Other commenters requested that SBA allow a contractor that has violated the limitations on subcontracting to submit a mitigation plan and provide the contracting officer with discretion to apply the penalty when appropriate and in an amount proportional to the severity of the violation. One commenter supported the penalty language as proposed.

In response to these comments, SBA notes that the language of proposed § 125.6(k) mirrors the language of Section 1652 of the NDAA. The penalty provision is statutory and the use of the $500,000 fine as the minimum amount to be applied is also statutory. SBA believes that the penalty provision will deter contractors from agreeing to comply with the limitations on subcontracting without a practical plan for compliance because it provides a strong enforcement mechanism. It is critical that firms that obtain set-aside and preferential contracts comply with applicable subcontracting limitations. The government's policy of promoting contracting opportunities for small and socioeconomically disadvantaged businesses is seriously undermined when firms pass on work in excess of applicable limitations to firms that are other than small or that are not disadvantaged. SBA is adopting the proposed language into redesignated § 125.6(h).

This rule also proposed to revise § 121.103(h)(4). Paragraph (h) discusses the circumstances under which SBA will find affiliation among joint venturers for size purposes. Paragraph (h)(4) addresses the ostensible subcontractor rule, which is the concept that a subcontractor who performs the majority of the primary and vital requirements of a contract or whom the prime contractor is unusually reliant upon may be considered a joint venturer with the prime contractor and thus affiliated with the prime contractor for size determination purposes. SBA proposed to revise this paragraph to exclude subcontractors that are similarly situated subcontractors, as that term is defined in 13 CFR 125.1, from affiliation under the ostensible subcontractor rule. Such a position clearly flows from the NDAA's treatment of similarly situated subcontractors.

SBA received eleven comments in response to proposed § 121.103(h)(4). All eleven comments supported the exclusion of similarly situated entity subcontractors from the application of the ostensible subcontractor rule, as discussed in § 121.103(h)(4). As such, SBA is adopting the language in § 121.103(h)(4) as proposed.

SBA proposed to amend § 124.510(a), (b), and (c) to reflect the limitations on subcontracting rules with respect to the 8(a) Business Development (BD) program. Part 124 addresses the 8(a) BD program and the limitations on subcontracting that apply to procurements set aside for competition among 8(a) BD participants. SBA proposed to delete paragraphs (a) and (b) and add new paragraph (a). Currently, paragraphs (a) and (b) discuss how 8(a) BD participants can comply with the performance of work requirements even though these specifications are also discussed in § 125.6. To eliminate confusion and repetition, SBA proposed to remove current paragraph (b) and add a new paragraph (a), which will direct 8(a) BD participants to comply with the limitations on subcontracting set forth in § 125.6. The proposed rule would redesignate current paragraph (c) as paragraph (b) and include references to the limitations on subcontracting as opposed to the performance of work requirements in newly redesignated paragraph (b). The NDAA uses the term “limitations on subcontracting” to describe the concept that is currently referred to as “performance of work requirements.” This change provides consistency throughout the rules.

SBA received seventeen comments in response to the proposed language in § 124.510. Ten of these commenters opposed the proposed language and specifically disagreed with providing contracting officers the discretion to apply the limitations on subcontracting to 8(a) contracts per order. Commenters also opposed SBA's proposed § 124.510(b)(2), which allows the SBA District Director the ability to waive the applicable limitations on subcontracting in certain circumstances. Three of the comments received were suggestions to modify the language of proposed § 124.510(b) to clarify that subcontracts awarded to similarly situated entities for an 8(a) procurement are not counted toward that 8(a) prime contractor's limitations on subcontracting but are counted toward their non-8(a) revenue for purposes of meeting their business activity targets. Two commenters supported the language of § 124.510(b) as proposed.

For purposes of counting 8(a) revenue, the dollar amount of a prime contract award is credited towards the revenue of the prime contractor. Thus, to the extent an 8(a) prime decides to utilize a subcontractor for purposes of meeting the limitations on subcontracting provisions, any amount subcontracted is not deducted from the prime's 8(a) revenue. SBA notes that the language in § 124.510(b) is not new, and as such, no changes to this language were proposed. Nonetheless, several commenters expressed their opposition to a District Director's ability to waive compliance with the limitations on subcontracting in certain circumstances and disagreed with the time period used to determine compliance with the limitations on subcontracting for 8(a) procurements. In response to these comments, SBA is eliminating this provision. SBA has not received any comments or input indicating this provision has benefited specific 8(a) concerns. In addition, this exemption is not based on any statutory authority. Thus, in accordance with the intent of the section to make the performance requirements uniform across all programs, SBA is eliminating paragraphs (c)(4) and (c)(5) of § 124.510.

SBA proposed to revise § 125.15(a)(3) and (b)(3), which address the requirements for an SDVO SBC to submit an offer on a contract. SBA proposed to revise paragraph (a)(3) to state that a concern that represents itself as an SDVO SBC must also represent that it will comply with the limitations on subcontracting, as set forth in § 125.6, as part of its initial offer, including price. SBA proposed to revise paragraph (b)(3) to state that joint ventures that represent themselves as an SDVO SBC joint venture must comply with the applicable limitations on subcontracting, as set forth in § 125.6. SBA received no comments related to these paragraphs and as such is adopting the language as proposed.

SBA also proposed to revise § 126.200(b)(6). This paragraph addresses the requirements that a concern must meet in order to receive SBA's certification as a qualified HUBZone SBC. Paragraphs (b)(6) and (d) are repetitive as both address the requirement that HUBZone SBCs must comply with the relevant performance of work requirements. SBA proposed to delete paragraph (d) and revise paragraph (b)(6). Specifically, proposed paragraph (b)(6) would state that the concern must represent in its application for the HUBZone program that it will comply with the applicable limitations on subcontracting requirements with respect to any procurement that it receives as a qualified HUBZone SBC. SBA received one comment related to proposed § 126.200(b)(6), which was a request to clarify whether a HUBZone similarly situated entity subcontractor must meet the 35% residency requirement for HUBZone program participation. In response, SBA clarifies that a HUBZone similarly situated entity subcontractor must be able to qualify for the prime HUBZone procurement in order to be considered a similarly situated entity. This means that it must also be HUBZone certified and be considered small for the NAICS code assigned to its subcontract. SBA is adopting the language in § 126.200(b)(6) as proposed.

SBA proposed to revise § 126.700 in its entirety, including revision of paragraph (a) and removal of paragraphs (b) and (c). This section currently addresses the performance of work requirements for HUBZone contracts. SBA proposed to retitle the section to include the terminology “limitations on subcontracting”; remove references to the “performance of work” requirements; and replace the deleted text with a reference to 13 CFR 125.6 for guidance on the applicable limitations on subcontracting for HUBZone contracts. SBA believes that it would be confusing to have each section of SBA's set-aside program regulations repeat the relevant limitations on subcontracting, and therefore SBA proposed to list all of the limitations on subcontracting requirements at § 125.6 and provide references to that section in each of the various small business government contracting and business development program sections. SBA did not receive comments related to this paragraph and is adopting the language as proposed.

SBA proposed to revise § 127.504(b), which addresses the requirements a concern must satisfy to submit an offer for an EDWOSB or WOSB requirement. Paragraph (b) states that the concern must meet the performance of work requirements in § 125.6. SBA proposed to revise this paragraph to replace the reference to “performance of work requirement” with “limitations on subcontracting.” SBA did not receive comments related to this paragraph and is adopting the language as proposed.

SBA proposed to revise § 127.506(d), which addresses the requirements that a joint venture must satisfy in order to submit an offer for an EDWOSB or WOSB requirement. SBA proposed to revise this paragraph by replacing the reference to “performance of work requirement” with “limitations on subcontracting.” SBA did not receive comments related to this paragraph and is adopting the language as proposed.

Section 1653 of the NDAA, as codified at 15 U.S.C. 637(d) (Section 8(d) of the Small Business Act), addresses amendments to the requirements for subcontracting plans. Section 1653(a)(2) of the NDAA states that the head of the contracting agency shall ensure that the agency collects, reports, and reviews data on the extent to which the agency's contractors meet the goals and objectives set out in their subcontracting plans. SBA proposed to add a new § 125.3(f)(8) to incorporate these provisions. SBA received three comments on this addition. Two were positive, and the one negative comment felt that the statutory language may be too burdensome for contracting officers and prime contractors. This final rule adopts the proposed language.

Section 1653(a)(3) of the NDAA modifies the Small Business Act to state that a contractor that fails to provide a written corrective action plan after receiving a marginal or unsatisfactory rating for its subcontracting plan performance or that fails to make a good faith effort to comply with its subcontracting plan will not only be in material breach of the contract, but such failure shall also be considered in any past performance evaluation of the contractor. SBA proposed to revise § 125.3(f)(5) to incorporate this language. SBA also proposed adding a new sentence to the end of § 125.3(f)(5), which would prescribe the process for a Commercial Market Representative (CMR) to report firms that are found to have acted fraudulently or in bad faith to the SBA's Area Director for the Office of Government Contracting Area Office where the firm is headquartered. SBA received eight comments on this proposed change. One of the comments wanted SBA to ensure that there was a definitive statement that contracting officers shall take into consideration ratings on performance of past subcontracting plans when evaluating past performance. SBA agrees with this position, but believes that it is already clear in the regulatory text. The provisions of the NDAA make clear that contracting officers shall take into consideration previous performance of its subcontracting plans. The remaining comments were generally supportive of the changes. Two negative comments were related to requirements of the Act itself which can be modified or changed only by another Act passed of Congress. Thus, SBA is not making any changes to the proposed rule.

Section 1653(a)(4) of the NDAA modifies the Small Business Act to state that contracting agencies also perform evaluations of a prime contractor's subcontracting plan performance, and that SBA's evaluations of subcontracting plan performance are completed as a supplement to the contracting agency's review. SBA proposed to revise § 125.3(f)(1) to incorporate this language. SBA did not receive any comments on this change and will be keeping the proposed language.

Section 1653(a)(5) of the NDAA requires that if an SBC is identified as a potential subcontractor in a proposal, offer, bid or subcontracting plan in connection with a covered Federal contract, the prime contractor shall notify the SBC prior to such identification. Section 1653(a)(5) also requires that the Administrator establish a reporting mechanism that allows potential subcontractors to report fraudulent activity or bad faith behavior by a prime contractor with respect to a subcontracting plan. SBA proposed to incorporate these requirements in new § 125.3(c)(8) and (9). SBA received eight comments on these changes. Several comments asked for clarification on how the notification requirements can be met. SBA believes that rule is very clear. There are two requirements: First that the notification is in writing; and second that it be given to the party in question. Ensuring that it is in writing and has been received is the responsibility of the contractor. SBA is not making any changes with regard to this requirement. Several commenters requested that additional requirements be added that would also require notification to SBA or another government party that the contract has provided the written notification that is required. SBA does not believe that this additional step is required by the statute, or that the additional burden on contractors is necessary to ensure compliance with the other provision.

SBA proposed to make changes to its regulations in § 121.103(f), which defines affiliation based on an identity of interest. Paragraph 121.103(f) discusses the circumstances where an identity of interest between two or more persons leads to affiliation among those persons and their interests are aggregated. SBA proposed to add additional guidance on how to analyze affiliation due to an identity of interest. SBA believed that the additional clarifications will better enable concerned parties to understand and determine when they are affiliated.

SBA proposed to divide paragraph (f) into two paragraphs. Paragraph (f)(1) will include further clarification regarding the type of relationships between individuals that will create a presumption of affiliation due to an identity of interest. Specifically, SBA proposed to insert language clarifying that a presumption of affiliation exists for firms that conduct business with each other and are owned and controlled by persons who are married couples, parties to a civil union, parents and children, and siblings. SBA proposed that the presumption would be a rebuttable presumption. The proposed rule is based on size appeal decisions that have been issued interpreting this regulation.

SBA received several comments with respect to identity of interest based on family relationships. Four commenters thought that the list of family relationships was not exhaustive enough and should include all relationships, such as grandparents and cousins. These commenters believed that all familial relationships should create the presumption, and that other information such as estrangement or distance could be used in rebuttal. Two commenters agreed that the clarity SBA was providing was helpful and agreed with the changes. Two commenters did not believe that affiliation should ever be found based on familial relationships.

As noted in SBA's proposed rule, the enumerated family relationships are relationships in which SBA's Office of Hearings and Appeals (OHA) has consistently found affiliation in the past. See Size Appeal of Knight Networking & Web Design, Inc., SBA No. SIZ-5561 (2014); Size Appeal of RGB Group, Inc., SBA No. SIZ-5351 (2012); and Size Appeal of Jenn-Kans, Inc., SBA No. SIZ-5114 (2010). The rule is intended to take this knowledge and precedent and provide it in the rule itself in order to make compliance and understanding easier for small businesses. SBA believes the proposed rule accurately encompassed the precedential history of SBA size decisions and that it will be beneficial in providing some clarity to small businesses. Thus, SBA is adopting the language in (f)(1) in the final rule.

In paragraph (f)(2), SBA proposed adopting a presumption of affiliation based on economic dependence. Specifically, if a firm derives 70% or more of its revenue from another firm over the previous fiscal year, SBA will presume that the one firm is economically dependent on the other and, therefore, that the two firms are affiliated. Currently there is no fixed percentage that SBA applies when evaluating this criteria. However, OHA size appeal decisions have provided the 70% figure as a guide. SBA believes that providing clarity on this issue will be beneficial for firms, and will enable them to more easily identify their affiliates. Further, this presumption is rebuttable, such as when a firm is new or a start-up and has only received a few contracts or subcontracts. Often new firms will not have as many partners and clients, and therefore will normally be generating more of their revenue from a much smaller number of other companies. Over time these firms should diversify and become less dependent on one entity.

SBA received 26 comments on this section. Several commenters pointed out that SBA should use a three-year time frame rather than a one year time frame because SBA already uses a three-year time frame when averaging annual receipts for size purposes. SBA agrees, and has adopted a three-year measuring period in the final rule. Several commenters were also concerned that this new rule and its interpretation could adversely impact “start-ups” that have low revenues to begin with and fewer contracts. SBA does not want this new rule to negatively impact start-ups or any other company that operates in a unique industry. That is precisely why this is not a bright line rule, but a rebuttable presumption. This rebuttable presumption is based on OHA cases, and OHA has in fact rebutted the presumption in appropriate circumstances. For instance, OHA has held that the mechanical application of the economic dependence rule is erroneous when a startup has only been able to secure one or two contracts. Size Appeal of Argus & Black, Inc., SBA No. SIZ-5204 (2011). In addition, OHA has held that where the receipts from an alleged affiliate are not enough to sustain a firm's business operations, and the firm is able to look to other financial support from its Alaska Native Corporation (ANC) affiliates to remain viable, the fact that the firm received more than 70% of its receipts from its alleged affiliate is not sufficient to establish affiliation. Size Appeal of Olgoonik Solutions LLC, SBA No SIZ-5669 (2015). In response to the comments and in an effort to provide greater clarity, this final rule specifies that the presumption of affiliation based on economic dependence may be rebutted by a showing that despite the contractual relations with another concern, the concern at issue is not solely dependent on that other concern. In addition, SBA has provided examples in the regulatory text for clarification. Several comments asked for a specific list of acceptable rebuttals, and one commenter requested that Tribally-owned firms be granted an explicit exception. SBA does not believe that providing a list of acceptable rebuttals may have the unintended consequence of limiting the types of rebuttals that are acceptable. Instead SBA believes that firms should be permitted to make any arguments and provide any evidence that they believe demonstrates that no affiliation should be found. In addition, SBA has clarified that SBA will not find affiliation between two concerns owned by an Indian Tribe, ANC, Native Hawaiian Organization (NHO) or Community Development Corporation (CDC) based solely on the contractual relations of the two concerns. The Small Business Act and SBA's rules clearly recognize that ANC, NHO, CDC, and Tribally-owned concerns will provide assistance to sister entities, and it does not make sense to find affiliation based on economic dependence among such concerns.

SBA proposed to amend § 121.103(h) to broaden the exclusion from affiliation for small business size status to allow two or more small businesses to joint venture for any procurement without being affiliated with regard to the performance of that procurement requirement. Currently, in addition to the exclusion from affiliation given to an 8(a) protégé firm that joint ventures with its SBA-approved mentor for any small business procurement, there is also an exclusion from affiliation between two or more small businesses that seek to perform a small business procurement as a joint venture where the procurement is bundled or large (i.e., greater than half the size standard for a procurement assigned a NAICS code with a receipts-based size standard and greater than $10 million for a procurement assigned a NAICS code with an employee-based size standard). SBA proposed to remove the restriction on the type of contract for which small businesses may joint venture without being affiliated for size determination purposes. SBA proposed this change for several reasons. First, the proposed change would encourage more small business joint venturing, in furtherance of the government-wide goals for small business participation in federal contracting. Second, the proposed change is consistent with the results from the Small Business Teaming Pilot Program indicating there is a need for more small business opportunities and firms have greater success on small contracts than on large contracts. Third, this proposed change would better align with the new provisions of the NDAA governing the limitations on subcontracting, which allow a small business prime contractor to subcontract to as many similarly situated subcontractors as desired. If a small business prime contractor can subcontract significant portions of that contract to one or more other small businesses and, in doing so, meet the performance of work requirements for small business (without being affiliated with the small business subcontractor(s)), it is SBA's view that similar treatment should be afforded joint ventures—so that a joint venture of two or more small businesses could perform a procurement requirement as a small business when each is individually small.

SBA received 43 comments on this section. The comments were overwhelmingly supportive of the change. As such, this final rule adopts the proposed language requiring only that each member of a joint venture individually qualify as small. Several commenters also suggested that SBA provide additional guidance regarding joint ventures that perform contracts as similarly situated entities. This final rule clarifies that 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.

SBA proposed to amend § 121.104, which explains how SBA calculates annual receipts when determining the size of a business concern. SBA proposed to clarify that receipts include all income, and the only exclusions from income are the ones specifically listed in paragraph (a). It was always SBA's intent to include all income, except for the listed exclusions; however, SBA has found that some business concerns misinterpreted the current definition of receipts to exclude passive income. SBA's proposed change clarifies the intent to include all income, including passive income, in the calculation of receipts.

SBA received 15 comments on this section. The majority of the comments were supportive. Several commenters believed that SBA should not count certain expenses to subcontractors as revenue. The comments were asking SBA to consider new exemptions. The proposed change was not intended to fundamentally change the meaning of SBA's regulation, but merely ensure that small businesses are aware that all income is considered including passive income. Thus, SBA is adopting the proposed language in this final rule.

SBA proposed to amend § 121.404(g)(2)(ii) by adding new paragraph (D) to clarify when recertification of size is required following the merger or acquisition of a firm that submitted an offer as a small business concern. Paragraph (D) clarifies that if the merger or acquisition occurs after offer but prior to award, the offeror must recertify its size to the contracting officer prior to award.

SBA received twenty-one comments on this proposed change. Nine commenters supported SBA's proposal. One commenter asked that SBA go further and specifically allow contracting officers to refuse novation of contacts if an acquisition or merger occurs within 90 days of an award. Seven commenters strongly opposed SBA's proposed changes. Two commenters argued that there should be a 30 day period prior to award requirement. SBA does not know how this could be implemented given that offerors do not know when an award announcement will be made. One commenter suggested SBA should only require recertification if the merger or sale involves a large business. One commenter was confused about whether this rule would negate the requirement to certify at the time at offer.

SBA is adopting the proposed language in this final rule. For several years SBA's rules have required recertification in connection with a contract when there is an acquisition or merger involving the prime contractor. SBA never intended for the recertification requirement to not apply based on when the acquisition or merger occurred. If recertification is required for an existing contract, it should be required for a pending contract. An agency's receipt of small business credit should not depend on whether an acquisition or merger occurs the day before award of contract.

SBA proposed to amend § 121.702(a)(2), which addresses an ownership and control element of the eligibility requirements for the Small Business Innovation and Research (SBIR) Program, to clarify that a single venture capital operating company (VCOC), hedge fund, or private equity firm may own more than 50% of an SBIR awardee if that single VCOC, hedge fund, or private equity firm qualifies as a small business concern which is more than 50% directly owned and controlled by individuals who are citizens or permanent resident aliens of the United States.

Section 121.702(a) establishes the SBIR program eligibility requirements related to ownership and control. Awardees that satisfy any of the permissible ownership and control structures discussed in § 121.702(a) must also satisfy all of the size and affiliation requirements stated in § 121.702(c). Section 121.702(a)(1)(ii) allows an SBIR awardee to be majority-owned by multiple VCOCs, hedge funds, or private equity firms. Section 121.702(a)(2) prohibits ownership by a single VCOC, hedge fund, or private equity firm that owns a majority of the concern. This paragraph has been misread because it does not account for the scenario where an awardee is majority-owned by a single VCOC, hedge fund, or private equity firm that is itself another small business concern and therefore qualifies as an allowable ownership structure under § 121.702(a)(1)(i). To clarify this point, SBA is amending § 121.702(a)(2) to explain that it is permissible for an SBIR awardee to be majority owned by a single VCOC, hedge fund, or private equity firm if that firm meets the definition of a small business concern under this section and is more than 50% directly owned and controlled by individuals who are citizens or permanent resident aliens of the United States. SBA did not receive any comments related to this proposed change and is adopting the change as proposed.

SBA proposed to amend § 121.1001(a), which specifies who may initiate a size status protest. Small businesses and contracting officers have found the current language to be unclear because it contains a double negative, stating that any offeror that has not been eliminated for reasons not related to size may file a size protest. The intent is to provide standing to any offeror that is in line or consideration for award, but to not provide standing for an offeror that has been found to be non-responsive, technically unacceptable or outside of the competitive range.

In addition, the proposed rule added a new § 121.1001(b)(11) that would authorize the SBA's Director, Office of Government Contracting, to initiate a formal size determination in connection with eligibility for the SDVO SBC and the WOSB/EDWOSB programs. This change is needed to correct an oversight that did not authorize such requests for size determinations when those programs were added to SBA's regulations.

SBA received 16 comments on this change. All commenters were supportive; however one commenter believed that the protests should be allowed for firms outside the competitive range. SBA disagrees. A firm outside of the competitive range is not eligible for award and does not have standing. However, SBA and the contracting officer may file a size protest at any time, so any firm, including those that do not have standing, may bring information pertaining to the size of the apparent successful offeror to the attention of SBA and/or the contracting officer for their consideration.

SBA sought comments on the appropriate timeline for filing a NAICS code appeal. SBA's regulations currently state that, “[a]n appeal from a contracting officer's NAICS code or size standard designation must be served and filed within 10 calendar days after the issuance of the solicitation or amendment affecting the NAICS code or size standard.” 13 CFR 121.1103(b)(1). SBA received 23 comments on this issue. Most of the comments were supportive of SBA's current timing. Several commenters recommended other changes that SBA could make. Based on the comments, SBA is not altering the timeliness rules for NAICS code appeals.

SBA proposed to clarify that the limitations on subcontracting and the nonmanufacturer rule (NMR) do not apply to small business set-aside contracts valued between $3,000 and $150,000. The statutory nonmanufacturer rule, which is contained in Section 8(a)(17) of the Small Business Act, 15 U.S.C. 637(a)(17), is an exception to the limitations on subcontracting (LOS). It provides that a concern may not be denied the opportunity to compete for a supply contract under Sections 8(a) and 15(a) of the Small Business Act simply because it is not the actual manufacturer or processor of the product. Section 8(a)(17) of the Small Business Act does not, however, also reference Section 15(j) of the Small Business Act, the authority requiring small business set-aside contracts valued between $3,500 and $150,000. Thus, there is no specific statutory requirement that the nonmanufacturer rule apply to the mandated small business set-asides between $3,500 and $150,000. SBA believes that not applying the nonmanufacturer rule to small business set-asides valued between $3,500 and $150,000 will spur small business competition by making it more likely that a contracting officer will set aside an acquisition for small business concerns because the agency will not have to request a waiver from SBA where there are no small business manufacturers available. In order to request a waiver, an agency must provide SBA with the solicitation and market research on whether manufacturers exist and wait several weeks for SBA to verify the data and grant the waiver. Without a waiver, an offeror on a small business set-aside supply contract must either manufacture at least 50% of the product on its own or supply the product of a small business made in the United States. Many waiver requests below $150,000 are for name brand items (e.g., computers) that are clearly not made by small businesses in the United States. Whether an agency can procure name brand items is not within the jurisdiction of SBA. The contracting officer must make that determination, which can be protested by interested parties.

SBA received 28 comments on this issue, of which 19 were supportive. The non-supportive comments believed that this change would drastically hurt small business manufacturers because most of their contracts fell within the exemption range. One commenter maintained that the proposed rule would hurt resellers by increasing competition among resellers. Given the support for the change and the consistency between the FAR and SBA's regulations that this creates, SBA is adopting the proposed language in the final rule.

Several commenters asked for additional clarity on several discrete issues. Specifically, commenters sought guidance on how the NMR applies to multiple item procurements generally, and especially to procurements with multiple NAICS codes, and how the NMR and LOS apply when a multiple-item procurement contains items manufactured by multiple large and small businesses.

Further, commenters requested guidance on the treatment of rentals with regard to the NMR and LOS. In order to provide more clarity SBA is proposing new language in § 121.406(b)(4) and (e). SBA has also provided several additional examples to demonstrate how the rules should be applied. The final rule clarifies that rental services are not supplies. SBA bases this clarification on the NAICS code and NAICS manual, as well as the FAR and other government contracting statutes which indicate that renting an item is not the same thing as buying an item. SBA is also adding additional language to clarify how to apply the NMR, LOS, and size standards, to address comments concerning how to apply the various rules when the government acquires more than one item in a single procurement. SBA believes this language will more clearly state how the various regulations interact in that situation.

The intent is for the NMR, LOS, and size standards to operate in conjunction with each other in a manner consistent with all of SBA's regulations. Therefore SBA believes that the proper way to calculate LOS requirements with regard to a contract that contains waived item(s)/small business item(s) is that the value of the waived item(s) are subtracted from the total and the prime contractor is responsible for meeting the requirements on the remainder. SBA has added several examples to § 125.6(a) to help explain how this should be calculated in practice.

SBA proposed to amend § 121.1203 to require that contracting officers notify potential offerors of any waivers, whether class waivers or contract specific waivers, that will be applied to the procurement. SBA proposed that this notification of the application of a waiver be contained in the solicitation itself. Without notification that a waiver is being applied by the contracting officer, potential offerors cannot reasonably anticipate what if any requirements they must meet in order to perform the procurement in accordance with SBA's regulations. SBA believed that providing notice of waivers in the solicitation will provide all potential offerors with the information needed to decide if they should submit an offer.

SBA also proposed to amend § 121.1203, regarding waivers to the nonmanufacturer rule. SBA proposed to amend § 121.1203(a) to specifically authorize SBA to grant a waiver to the nonmanufacturer rule for an individual contract award after a solicitation has been issued, provided the contracting officer agrees to provide all potential offerors additional time to respond. SBA believes that a waiver may be appropriate even after a solicitation has been issued, but wants to ensure that all potential offerors would be fully apprised of any waiver granted after the solicitation is issued and have a reasonable amount of time (depending upon the complexities of the procurement) to adjust their offers accordingly.

SBA proposed in § 121.1203(b) to allow some waivers to be granted after the contract has been awarded. SBA believed that granting post-award waivers, when additional items that are eligible for a waiver are sought through in-scope modifications, is reasonable and will increase the use of the waiver process and allow firms to compete for contracts in a manner consistent with SBA regulations. SBA envisioned these types of post-award waivers to be given in situations similar to the example contained in the proposed regulation—where a need for an item occurs after contract award, where requiring the item would be an in-scope modification, and where the item is one for which a waiver would have been granted if sought prior to contract award.

SBA received 32 comments on the changes being made to NMR waivers. Many commenters supported the proposed language regarding notification by the contracting officer. Commenters universally agreed that being informed of the application of a waiver as early as possible would be beneficial to small business contractors. Several comments requested additional guidance or a firmer statement about the application of waivers granted on base contract to orders issued against that contract. Contract specific waivers are granted for individual items and the waiver is good for the entirety of that contract with regard to the item that was waived. Therefore, the waiver would by necessity also include all orders for supplies under that contract that would require the item(s) that had been waived.,

SBA proposed to add a new § 121.1203(d), dealing with waivers to the nonmanufacturer rule for the purchase of software. SBA proposed to address whether the nonmanufacturer rule should apply to certain software that can readily be treated as an item and not a service. SBA proposed to treat this type of software as a product or item of supply rather than a service. SBA believed that this change will bring SBA's regulations in line with how most buyers already perceive these types of software. Readily available software that is generally available to both the public and private sector unmodified is almost universally perceived to be a supply item, even though SBA's regulations currently would treat the production of any type of software as a service. SBA proposed to allow for certain types of software to be eligible for waivers of the nonmanufacturer rule. SBA proposed to grant waivers on software that meet criteria that establishes that the Government is buying something that is more like a product or supply item than a service. Clearly, when the Government seeks to award a contract to a business concern to create, design, customize or modify custom software, that should be classified as a service requirement and the activity will remain classified in a service NAICS code to which the nonmanufacturer rule does not apply. For a service procurement set aside for small business, the prime (together with one or more similarly situated subcontractors) would have to perform the required percentage of work. On the other hand, when the government buys certain types of unmodified software that is generally available to both the public and the government from a business concern, SBA believes that the contracting officer should classify the requirement as a commodity or supply. If the procurement is a supply contract set aside for small business, the prime contractor, together with any similarly situated subcontractors, would have to perform at least 50% of the cost of manufacturing the software, unless SBA granted a waiver of the nonmanufacturer rule.

Commenters generally supported SBA's proposed language. One commenter stated that given this new approach by SBA, that some software products should be granted class waivers. Once this rule is effective, the public will be able to request a class waiver for a software item under SBA's existing regulations for class waivers. 13 CFR 121.1204. Many commenters requested drastic changes to SBA's current waiver procedures. Specifically, the commenters requested that a waiver requested by CO be assumed granted if SBA does not respond in specified period of time. Two commenters requested language that would allow bidders to assume pending waiver requests are granted when they submit offers. SBA cannot adopt these recommendations. The Small Business Act is clear that only SBA may grant a waiver of the NMR. These comments reinforce SBA's belief that the current situation has caused too much confusion for small contractors, and SBA is adopting the proposed language in this final rule, which requires the contracting officer to request a contract specific waiver prior to issuing the solicitation, and provide notification of the application of the waiver in the solicitation itself.

One commenter complained that the application of the software waiver is not also being applied to cloud based solutions. It is SBA's current position that cloud based solutions are services that are being provided to the government and not supplies that the government is purchasing, and therefore the NMR is not applicable. In our view, cloud based solutions are similar to rentals, which, as discussed above, SBA treats as services. Several commenters asked SBA to address the issue of NMR waiver requests when the issue is contractor requesting a brand name item. The decision to request a brand name item is in the discretion of the contracting officer. However, the Small Business Act does not exclude brand name item acquisitions from the statutory NMR waiver requirements.

In the proposed rule, SBA proposed to amend § 121.201 by adding a footnote to NAICS code 511210, Software Publishers, explaining that this is the proper NAICS code to use when the government is purchasing software that is eligible for a waiver of the NMR. The 2012 NAICs manual provides the following definition of this industry:

SBA believes that this accurately reflects the type of companies that would be producing and supplying the government with the type of software eligible for a waiver. Further, SBA proposed that the procurement of this type of software would be treated by SBA as a supply requirement, and therefore the NMR would apply, as long as the acquisition meets all of the requirements of the rule. SBA reiterates that the custom design or modification of software for the government will generally continue to be treated as a service. Therefore, if the software being acquired requires any custom modifications in order to meet the needs of the government, it is not eligible for a waiver of the NMR because the contractor is performing a service, not providing a supply.

SBA proposed to amend § 121.406(b)(5) to make a technical correction. Section 121.406(b) addresses how a nonmanufacturer may qualify as a small business concern for a requirement to provide a manufactured product or other supply item. Currently, paragraph (b)(5) states that the SBA's Administrator or designee may waive the requirement set forth in paragraph (b)(1)(iii) of this section, that requires nonmanufacturers to supply the end item of a small business manufacturer, processor or producer made in the United States. The citation to paragraph (b)(1)(iii) is incorrect and as such, SBA proposed to amend this paragraph to include the correct citation, paragraph (b)(1)(iv). SBA also proposed to make this correction in the size standard proposed rule for industries with employee based size standards that are not part of manufacturing, wholesale trade or retail trade. 79 FR 53646 (Sept. 10, 2014). The size standard rule was finalized on January 26, 2016 (81 FR 4436), and SBA has removed the proposed amendment from this final rule.

In addition, in the proposed rule SBA proposed to amend § 121.406(b)(7) to clarify that SBA's waiver of the NMR has no effect on requirements external to the Small Business Act which involve domestic sources of supply, such as the Buy American Act and the Trade Agreements Act.

In order to clarify whether the NMR applies, or whether a general or specific waiver is attached to a procurement, SBA proposed to add a new § 121.1206 to require contracting officers to receive specific waivers prior to posting a solicitation, and also to provide notification to all potential offerors of any waivers that will be applied (whether class or specific) to a given solicitation. As noted above, commenters were generally in favor of this provision, and SBA is adopting the proposed language in the final rule.

SBA proposed to amend § 124.504 to clarify when a procurement for construction services is considered a new requirement. This section generally addresses when SBA must conduct an adverse impact analysis for the award of an 8(a) contract. SBA is not required to perform an adverse impact analysis for new requirements. Currently, paragraph (c)(1)(ii)(B) states that “Construction contracts, by their very nature (e.g., the building of a specific structure), are deemed new requirements.” SBA proposed to clarify the definition of “new requirement” for construction contracts by specifying that generally, the building of a specific structure is considered a new requirement. However, recurring indefinite delivery or indefinite quantity (IDIQ) procurements for construction services are not considered new. SBA has found that agencies have misinterpreted the current language of § 124.504(c)(1)(ii)(B) to consider recurring IDIQ construction services procurements as new. SBA intended to clarify that such recurring requirements are not considered new. A determination of whether a construction contract is recurring or new will have to be made on a case by case basis, and there is a process in place that allows SBA to file an appeal with the procuring agency when there is a disagreement.

SBA received 11 comments on this proposed change, and most were supportive. The non-supportive comments seemed to have misunderstood how the rule will be implemented. There is no presumption that IDIQ task or delivery order contracts are not new. The rule is neutral and the determination will be made on a case-by-case basis, subject to SBA's statutory authority to appeal. Thus, SBA is adopting the proposed language in the final rule.

SBA proposed to amend § 125.5(f), which addresses SBA's review of an application for the Certificate of Competency (COC) program. SBA proposed to insert new § 125.5(f)(3) to address how SBA should review an application for a COC based on a finding of non-responsibility due to financial capacity where the applicant is the apparent successful offeror for an IDIQ task order or contract. SBA frequently receives inquiries regarding the application of the COC process for financial capacity to the potential award of an IDIQ contract. SBA intended to clarify this process by proposing changes to § 125.5(f). The proposed changes provided that the SBA's Area Director will consider the firm's maximum financial capacity and if such COC is issued, it will be for a specific amount that serves as the limit of the firm's financial capacity for that contract. The contracting officer cannot deny the firm the award of an order or contract on the basis of financial incapacity if the firm has not reached the financial maximum identified by the Area Director.

SBA received two comments on this issue. One was supportive, and one thought it added too much of a burden to small businesses. SBA believes this rule will address certain issues that arise for IDIQ contracts. This rule provides clarity to the process and ensures that small business participation is maximized. Further, the COC process is statutory and provides SBA with the ability to review non-responsibility determinations concerning small businesses. Thus, SBA is adopting the proposed language in the final rule.

SBA is also revising 13 CFR 121.408(a), which provides the size procedures for the COC program. The revision is a technical correction. This paragraph currently references 13 CFR 121.1009 to explain how SBA would initiate a formal size determination; however, § 121.1009 relates to the process SBA uses to make a formal size determination. The correct regulatory reference is to 13 CFR 121.1001(b)(3)(ii), which explains how SBA initiates a formal size determination for the COC program.

SBA is also revising 13 CFR 121.409, to remove the second sentence. This section addresses the size standard that applies in an unrestricted or full and open procurement. The second sentence states that in an unrestricted procurement, the small business concern must supply a domestically furnished product. That may or may not be true, depending on whether or how the Buy American Act or the Trade Agreements Act apply to the procurement. The Small Business Act does not impose such a requirement on full and open or unrestricted procurements.

The Office of Management and Budget (OMB) has determined that this final rule is a “significant” regulatory action for purposes of Executive Order 12866. Accordingly, the next section contains SBA's Regulatory Impact Analysis. However, this is not a major rule under the Congressional Review Act, 5 U.S.C. 801, et seq.

The final rule implements Sections 1621, 1623, 1651, 1652, 1653 and 1654 of the National Defense Authorization Act of 2013, Public Law 112-239, 126 Stat. 1632, January 2, 2013; 15 U.S.C. 637(d), 644(l), 645, 657s. In addition, it makes several other changes needed to clarify ambiguities in or remedy perceived problems with the current regulations. These changes should make SBA's regulations easier to use and understand.

These final regulations should benefit small business concerns by allowing small business concerns to use similarly situated subcontractors in the performance of a set-aside contract, thereby expanding the capacity of the small business prime contractor and potentially enabling the firm to compete for and obtain larger contracts. It also strengthens the small business subcontracting provisions, which may result in more subcontract awards to small business concerns. The final rule also seeks to address or clarify issues that are ambiguous or subject to dispute, thereby providing clarity to contracting officers as well as small business concerns. SBA does not believe that this rule will impose new costs on small business concerns.

Many provisions in this final rule are required to implement statutory provisions, thus there are no alternatives for these regulations. SBA did consider various options in the proposed rule, including a requirement that small business concerns that want to team with similarly situated entities enter into a written agreement, certify that they will comply and report on compliance. However, in response to the public comments discussed in the Supplementary Information, SBA is not requiring a written agreement or compliance reporting in this rule. Contracting officers in their discretion may require compliance reporting. Further, firms agree to comply with the limitations on subcontracting when they submit an offer. Thus, an additional certification is unnecessary. SBA also considered whether it should not waive the NMR for the purchase of software. However, this would inhibit the ability of agencies to set aside contracts for commodity software for small business concerns.

This executive order directs agencies to, among other things: (a) afford the public a meaningful opportunity to comment through the Internet on proposed regulations, with a comment period that should generally consist of not less than 60 days; (b) provide for an “open exchange” of information among government officials, experts, stakeholders, and the public; and (c) seek the views of those who are likely to be affected by the rulemaking, even before issuing a notice of proposed rulemaking. As far as practicable or relevant, SBA considered these requirements in developing this rule, as discussed below.

1. Did the agency use the best available techniques to quantify anticipated present and future costs when responding to Executive Order 12866 (e.g., identifying changing future compliance costs that might result from technological innovation or anticipated behavioral changes)?

To the extent possible, the agency utilized the most recent data available in the Federal Procurement Data System—Next Generation, System for Award Management and Electronic Subcontracting Reporting System.

2. Public participation: Did the agency: (a) Afford the public a meaningful opportunity to comment through the Internet on any proposed regulation, with a comment period that should generally consist of not less than 60 days; (b) provide for an “open exchange” of information among government officials, experts, stakeholders, and the public; (c) provide timely online access to the rulemaking docket on Regulations.gov; and (d) seek the views of those who are likely to be affected by rulemaking, even before issuing a notice of proposed rulemaking?

The proposed rule had a 60-day comment period and was posted on www.regulations.gov to allow the public to comment meaningfully on its provisions. In addition, the agency extended the comment period in response to public requests to do so. SBA then submitted the final rule to the Office of Management and Budget for interagency review. Further, as discussed in the Supplementary Information, SBA conducted tribal consultations where these rules were discussed.

3. Flexibility: Did the agency identify and consider regulatory approaches that reduce burdens and maintain flexibility and freedom of choice for the public?

Yes, the final rule implements statutory provisions and will provide clarification to rules that were requested by agencies and stakeholders. On many occasions, SBA made changes to language or provided additional examples, in response to public comment. The final rule will make it easier for small businesses to contract with the Federal government.

This action meets applicable standards set forth set forth in section 3(a) and 3(b)(2) of Executive Order 12988, Civil Justice Reform, to minimize litigation, eliminate ambiguity, and reduce burden. This action does not have any retroactive or preemptive effect.

SBA has determined that this final rule will not have substantial direct effects on the States, on the relationship between the national government and the States, or on the distribution of power and responsibilities among the various levels of government. Therefore, for the purposes of Executive Order 13132, SBA has determined that this rule has no federalism implications warranting preparation of a federalism assessment.

For the purposes of the Paperwork Reduction Act, SBA has determined that this rule would not impose new government-wide reporting requirements on small business concerns.

According to the Regulatory Flexibility Act (RFA), 5 U.S.C. 601, when an agency issues a rulemaking, it must prepare a regulatory flexibility analysis to address the impact of the rule on small entities. However, section 605 of the RFA allows an agency to certify a rule, in lieu of preparing an analysis, if the rulemaking is not expected to have a significant economic impact on a substantial number of small entities. The RFA defines “small entity” to include “small businesses,” “small organizations,” and “small governmental jurisdictions.” This final rule concerns various aspects of SBA's contracting programs, as such the rule relates to small business concerns but would not affect “small organizations” or “small governmental jurisdictions” because those programs generally apply only to “business concerns” as defined by SBA's regulations, in other words, to small businesses organized for profit. “Small organizations” or “small governmental jurisdictions” are non-profits or governmental entities and do not generally qualify as “business concerns” within the meaning of SBA's regulations.

There are approximately 300,000 concerns listed as small business concerns in the System for Award Management (SAM) in at least one industry category that could potentially be impacted by the implementation of the NDAA 2013 contracting provisions. However, we cannot say with any certainty how many will be impacted because we do not know how many of these concerns will team together to submit offers, nor do we know how many will be awarded contracts as teams. The number of firms participating in teaming will be lower than the number of firms registered in SAM. However, as discussed elsewhere in this rule, including section 2 of the Regulatory Impact Analysis, the final rule does not impose significant new compliance or other costs on small business concerns. Under current law, firms must adhere to certain performance requirements when performing set-aside contracts. SBA expects that costs now incurred by small business concerns as a result of ambiguous or indefinite regulations will be eliminated or reduced. Clarifying the confusion and uncertainty concerning the applicability of SBA's contracting regulations would also reduce the time burden on the small business contracting community and therefore make it easier for them to contract with the Federal Government. In sum, the final rule would not have a disparate impact on small businesses and would increase their opportunities to participate in Federal Government contracting without imposing any additional costs. For the reasons discussed, SBA certifies that this final rule would not have a significant economic impact on a substantial number of small business concerns.

Accordingly, for the reasons stated in the preamble, SBA amends 13 CFR parts 121, 124, 125, 126, and 127 as follows:

Discussion

We issued a notice of proposed rulemaking (NPRM) to amend 14 CFR part 39 by adding an AD that would apply to the specified products. The NPRM was published in the Federal Register on March 1, 2016 (81 FR 10544). The NPRM proposed to correct an unsafe condition for the specified products.

The European Aviation Safety Agency (EASA), which is the Technical Agent for the Member States of the European Community, has issued EASA AD 2016-0009, dated January 13, 2016 (referred to hereinafter as “the MCAI”), to correct an unsafe condition for the specified products. The MCAI states:

You may obtain further information by examining the MCAI in the AD docket on the Internet at http://www.regulations.gov by searching for and locating Docket No. FAA-2016-2859.

We gave the public the opportunity to participate in developing this AD. We received no comments on the NPRM (81 FR 10544, March 1, 2016).

We reviewed the available data and determined that air safety and the public interest require adopting this AD as proposed.

Turbomeca S.A. has issued Mandatory Service Bulletin (MSB) No. 292 72 1357, Version B, dated November 12, 2015. The MSB describes procedures for installing a post-modification (mod) TU357 gas generator module (M03). This service information is reasonably available because the interested parties have access to it through their normal course of business or by the means identified in the ADDRESSES section.

We estimate that this proposed AD affects 426 engines installed on helicopters of U.S. registry. We also estimate that it would take about 40 hours per engine to comply with this proposed AD. The average labor rate is $85 per hour. Required parts cost about $16,500 per engine. Based on these figures, we estimate the cost of this proposed AD on U.S. operators to be $8,477,400.

Title 49 of the United States Code specifies the FAA's authority to issue rules on aviation safety. Subtitle I, section 106, describes the authority of the FAA Administrator. “Subtitle VII: Aviation Programs,” describes in more detail the scope of the Agency's authority.

We are issuing this rulemaking under the authority described in “Subtitle VII, Part A, Subpart III, Section 44701: General requirements.” Under that section, Congress charges the FAA with promoting safe flight of civil aircraft in air commerce by prescribing regulations for practices, methods, and procedures the Administrator finds necessary for safety in air commerce. This regulation is within the scope of that authority because it addresses an unsafe condition that is likely to exist or develop on products identified in this rulemaking action.

We determined that this AD will not have federalism implications under Executive Order 13132. This AD will not have a substantial direct effect on the States, on the relationship between the national government and the States, or on the distribution of power and responsibilities among the various levels of government.

For the reasons discussed above, I certify this AD:

(1) Is not a “significant regulatory action” under Executive Order 12866,

(2) Is not a “significant rule” under the DOT Regulatory Policies and Procedures (44 FR 11034, February 26, 1979),

(3) Will not affect intrastate aviation in Alaska to the extent that it justifies making a regulatory distinction, and

(4) Will not have a significant economic impact, positive or negative, on a substantial number of small entities under the criteria of the Regulatory Flexibility Act.

Accordingly, under the authority delegated to me by the Administrator, the FAA amends 14 CFR part 39 as follows:

Authority for This Rulemaking

The FAA's authority to issue rules regarding aviation safety is found in Title 49 of the United States Code. Subtitle I, Section 106 describes the authority of the FAA Administrator. Subtitle VII, Aviation Programs, describes in more detail the scope of the agency's authority. This rulemaking is promulgated under the authority described in Subtitle VII, Part, A, Subpart I, Section 40103. Under that section, the FAA is charged with prescribing regulations to assign the use of airspace necessary to ensure the safety of aircraft and the efficient use of airspace. This regulation is within the scope of that authority as it establishes controlled airspace at Lisbon Municipal Airport, Lisbon, ND.

On February 17, 2016, the FAA published in the Federal Register a notice of proposed rulemaking (NPRM) to establish Class E Airspace in the Lisbon, ND area. (81 FR 8026) Docket No. FAA-2015-5800. Interested parties were invited to participate in this rulemaking effort by submitting written comments on the proposal to the FAA. No comments were received.

Class E airspace designations are published in paragraph 6005 of FAA Order 7400.9Z dated August 6, 2015, and effective September 15, 2015, which is incorporated by reference in 14 CFR 71.1. The Class E airspace designations listed in this document will be published subsequently in the Order.

This document amends FAA Order 7400.9Z, airspace Designations and Reporting Points, dated August 6, 2015, and effective September 15, 2015. FAA Order 7400.9Z is publicly available as listed in the ADDRESSES section of this document. FAA Order 7400.9Z lists Class A, B, C, D, and E airspace areas, air traffic service routes, and reporting points.

This amendment to Title 14, Code of Federal Regulations (14 CFR) part 71 establishes Class E airspace extending upward from 700 feet above the surface within a 6.5-mile radius of Lisbon Municipal Airport, Lisbon, ND, to accommodate new RNAV standard instrument approach procedures. Controlled airspace is needed for the safety and management of IFR operations at the airport.

Class E airspace designations are published in Paragraph 6005 of FAA Order 7400.9Z, dated August 6, 2015, and effective September 15, 2015, which is incorporated by reference in 14 CFR 71.1. The Class E airspace designations listed in this document will be published subsequently in the Order.

The FAA has determined that this regulation only involves an established body of technical regulations for which frequent and routine amendments are necessary to keep them operationally current, is non-controversial and unlikely to result in adverse or negative comments. It, therefore: (1) Is not a “significant regulatory action” under Executive Order 12866; (2) is not a “significant rule” under DOT Regulatory Policies and Procedures (44 FR 11034; February 26, 1979); and (3) does not warrant preparation of a Regulatory Evaluation as the anticipated impact is so minimal. Since this is a routine matter that only affects air traffic procedures and air navigation, it is certified that this rule, when promulgated, does not have a significant economic impact on a substantial number of small entities under the criteria of the Regulatory Flexibility Act.

The FAA has determined that this action qualifies for categorical exclusion under the National Environmental Policy Act in accordance with FAA Order 1050.1F, “Environmental Impacts: Policies and Procedures,” paragraph 5-6.5. This airspace action is not expected to cause any potentially significant environmental impacts, and no extraordinary circumstances exists that warrant preparation of an environmental assessment.

In consideration of the foregoing, the Federal Aviation Administration amends 14 CFR part 71 as follows:

I. Background

On March 12, 2015, NOAA expanded the boundaries of Gulf of the Farallones National Marine Sanctuary (now renamed Greater Farallones National Marine Sanctuary or GFNMS) and Cordell Bank National Marine Sanctuary (CBNMS) to an area north and west of their previous boundaries with a final rule (80 FR 13078). The final rule entered into effect on June 9, 2015 (80 FR 34047). To ensure that the March 12, 2015, rule does not undermine USCG's ability to perform its duties, at that time, NOAA postponed the effectiveness of the discharge requirements in both sanctuaries' regulations with regard to U.S. Coast Guard (USCG) activities for 6 months. An additional six month postponement of the effectiveness of the discharge requirements was published in the Federal Register on December 1, 2015 (80 FR 74985), to provide adequate time for completion of an environmental assessment and to determine NOAA's next steps. Without further NOAA action, the discharge regulations would become effective with regard to USCG activities June 9, 2016. However, NOAA needs more time to assess USCG activities, conduct public scoping, and develop alternatives for an environmental assessment developed pursuant to the requirements of the National Environmental Policy Act. Therefore, this notice postpones the effectiveness of the discharge requirements in the expansion areas of both sanctuaries with regard to USCG activities for another 6 months, until December 9, 2016. During this time, NOAA will consider how to address USCG's concerns and will consider, among other things, whether to exempt certain USCG activities in sanctuary regulations. The public, other federal agencies, and interested stakeholders will be given an opportunity to comment on various alternatives that are being considered. This will include the opportunity to review any proposed rule and related environmental analysis. In the course of the rule making to expand GFNMS and CBNMS, NOAA learned from USCG that the discharge regulations had the potential to impair the operations of USCG vessels and air craft conducting law enforcement and on-water training exercises in GFNMS and CBNMS. The USCG supports national marine sanctuary management by providing routine surveillance and dedicated law enforcement of the National Marine Sanctuaries Act and sanctuary regulations.

NOAA previously conducted an environmental analysis under the National Environmental Policy Act (NEPA) as part of the rulemaking process leading to the expansion of CBNMS and GFNMS, which addressed regulations regarding the discharge of any matter or material in the sanctuaries. The environmental impacts of the decision to postpone effectiveness reflect a continuation of the environmental baseline and the no action alternative presented in that analysis. Should NOAA decide to amend the regulations governing discharges for USGS activities in CBNMS and GFNMS, any additional environmental analysis required under NEPA would be prepared and released for public comment.

This action has been determined to be not significant for purposes of the meaning of Executive Order 12866.

The Assistant Administrator of National Ocean Service (NOS) finds good cause pursuant to 5 U.S.C. 553(b)(B) to waive the notice and comment requirements of the Administrative Procedure Act (APA) because this action is administrative in nature. This action postpones the effectiveness of the discharge requirements in the regulations for CBNMS and GFNMS in the areas added to the sanctuaries' boundaries in 2015 (subject to notice and comment review) with regard to U.S. Coast Guard activities for 6 months to provide adequate time for public scoping, completion of an environmental assessment, and subsequent rulemaking, as appropriate. Should NOAA decide to amend the regulations governing discharges in CBNMS and GFNMS, it would publish a proposed rule followed by an appropriate public comment period as required by the APA. The substance of the underlying regulations remains unchanged. Therefore, providing notice and opportunity for public comment under the Administrative Procedure Act would serve no useful purpose. The delay in effectiveness provided by this action will also enable NOAA to fully implement its statutory responsibilities under the NMSA to protect resources of a national marine sanctuary. For the reasons above, the Assistant Administrator also finds good cause under 5 U.S.C. 553(d) to waive the 30-day delay in effectiveness and make this action effective immediately upon publication.

I. Background

In accordance with section 513(f)(1) of the Federal Food, Drug, and Cosmetic Act (the FD&C Act) (21 U.S.C. 360c(f)(1)), devices that were not in commercial distribution before May 28, 1976 (the date of enactment of the Medical Device Amendments of 1976), generally referred to as postamendments devices, are classified automatically by statute into class III without any FDA rulemaking process. These devices remain in class III and require premarket approval, unless and until the device is classified or reclassified into class I or II, or FDA issues an order finding the device to be substantially equivalent, in accordance with section 513(i) of the FD&C Act, to a predicate device that does not require premarket approval. The Agency determines whether new devices are substantially equivalent to predicate devices by means of premarket notification procedures in section 510(k) of the FD&C Act (21 U.S.C. 360(k)) and part 807 (21 CFR part 807) of the regulations.

Section 513(f)(2) of the FD&C Act, as amended by section 607 of the Food and Drug Administration Safety and Innovation Act (Pub. L. 112-144), provides two procedures by which a person may request FDA to classify a device under the criteria set forth in section 513(a)(1) of the FD&C Act. Under the first procedure, the person submits a premarket notification under section 510(k) of the FD&C Act for a device that has not previously been classified and, within 30 days of receiving an order classifying the device into class III under section 513(f)(1) of the FD&C Act, the person requests a classification under section 513(f)(2). Under the second procedure, rather than first submitting a premarket notification under section 510(k) of the FD&C Act and then a request for classification under the first procedure, the person determines that there is no legally marketed device upon which to base a determination of substantial equivalence and requests a classification under section 513(f)(2) of the FD&C Act. If the person submits a request to classify the device under this second procedure, FDA may decline to undertake the classification request if FDA identifies a legally marketed device that could provide a reasonable basis for review of substantial equivalence with the device or if FDA determines that the device submitted is not of “low-moderate risk” or that general controls would be inadequate to control the risks and special controls to mitigate the risks cannot be developed.

In response to a request to classify a device under either procedure provided by section 513(f)(2) of the FD&C Act, FDA will classify the device by written order within 120 days. This classification will be the initial classification of the device.

On April 28, 2014, Sensimed AG submitted a request for classification of the SENSIMED Triggerfish® device under section 513(f)(2) of the FD&C Act. The manufacturer recommended that the device be classified into class II (Ref. 1).

In accordance with section 513(f)(2) of the FD&C Act, FDA reviewed the request in order to classify the device under the criteria for classification set forth in section 513(a)(1). FDA classifies devices into class II if general controls by themselves are insufficient to provide reasonable assurance of safety and effectiveness, but there is sufficient information to establish special controls to provide reasonable assurance of the safety and effectiveness of the device for its intended use. After review of the information submitted in the request, FDA determined that the device can be classified into class II with the establishment of special controls. FDA believes these special controls, in addition to general controls, will provide reasonable assurance of the safety and effectiveness of the device.

Therefore, on March 4, 2016, FDA issued an order to the requestor classifying the device into class II. FDA is codifying the classification of the device by adding 21 CFR 886.1925.

Following the effective date of this final classification order, any firm submitting a premarket notification (510(k)) for a diurnal pattern recorder system will need to comply with the special controls named in this final order.

The device is assigned the generic name diurnal pattern recorder system, and it is identified as a nonimplantable, prescription device incorporating a telemetric sensor to detect changes in ocular dimension for monitoring diurnal patterns of intraocular pressure (IOP) fluctuations.

FDA has identified the following risks to health associated with this type of device and the measures required to mitigate these risks in Table 1:

FDA believes that the special controls, in addition to the general controls, address these risks to health and provide reasonable assurance of safety and effectiveness.

Diurnal pattern recorder systems are not safe for use except under the supervision of a practitioner licensed by law to direct the use the device. As such, the device is a prescription device and must satisfy prescription labeling requirements (see 21 CFR 801.109 Prescription devices).

Section 510(m) of the FD&C Act provides that FDA may exempt a class II device from the premarket notification requirements under section 510(k) of the FD&C Act, if FDA determines that premarket notification is not necessary to provide reasonable assurance of the safety and effectiveness of the device. For this type of device, FDA has determined that premarket notification is necessary to provide reasonable assurance of the safety and effectiveness of the device. Therefore, this device type is not exempt from premarket notification requirements. Persons who intend to market this type of device must submit to FDA a premarket notification, prior to marketing the device, which contains information about the diurnal pattern recorder system they intend to market.

The Agency has determined under 21 CFR 25.34(b) that this action is of a type that does not individually or cumulatively have a significant effect on the human environment. Therefore, neither an environmental assessment nor an environmental impact statement is required.

This final order establishes special controls that refer to previously approved collections of information found in other FDA regulations. These collections of information are subject to review by the Office of Management and Budget (OMB) under the Paperwork Reduction Act of 1995 (44 U.S.C. 3501-3520). The collections of information in part 807, subpart E, regarding premarket notification submissions have been approved under OMB control number 0910-0120, and the collections of information in 21 CFR parts 801 and 809, regarding labeling, have been approved under OMB control number 0910-0485.

The following reference is on display in the Division of Dockets Management (HFA-305), Food and Drug Administration, 5630 Fishers Lane, Rm. 1061, Rockville, MD 20852, and is available for viewing by interested persons between 9 a.m. and 4 p.m., Monday through Friday; it is also available electronically at http://www.regulations.gov.

Therefore, under the Federal Food, Drug, and Cosmetic Act and under authority delegated to the Commissioner of Food and Drugs, 21 CFR part 886 is amended as follows:

Electronic Access and Filing

This document may be viewed online through the Federal eRulemaking portal at http://www.regulations.gov. Retrieval help and guidelines are available on the Web site. It is available 24 hours each day, 365 days a year. An electronic copy of this document may also be downloaded from the Office of the Federal Register home page at: http://www.ofr.gov and the Government Printing Office Web page at: http://www.thefederalregister.org.

On December 4, 2015, President Obama signed into law the FAST Act, Public Law 114-94, 129 Stat. 1312, which contains new requirements that FHWA and FTA (hereafter referred to as “the Agencies”) must meet in complying with the National Environmental Policy Act (NEPA) (42 U.S.C. 4321 et seq.). Section 1314(a) of the FAST Act amends section 1317 of the Moving Ahead for Progress in the 21st Century Act (MAP-21), Public Law 112-141, 126 Stat. 405, by inserting “(as adjusted annually by the Secretary to reflect any increases in the Consumer Price Index prepared by the Department of Labor)” after “$5,000,000” in paragraph (1)(A) and after “$30,000,000” in paragraph (1)(B) of the CE for projects receiving limited Federal financial assistance. The Agencies relied on the authority in MAP-21, section 1317 to establish limited Federal financial assistance CEs for FHWA at 23 CFR 771.117(c)(23) and for FTA at 23 CFR 771.118(c)(13). Those CEs were published in a final rule in the Federal Register on January 13, 2014 (79 FR 2107). With this final rule, the Agencies are amending the limited Federal financial assistance CEs to incorporate the adjustment for inflation requirement created by the FAST Act.

The Agencies included a reference to their respective Web sites (www.fhwa.dot.gov and www.fta.dot.gov) in the CE language in order to provide a source for locating the consumer price index (CPI), as adjusted annually. Per the FAST Act, section 1314(b), the first adjustment made pursuant to section 1314(a) must reflect the increase in the CPI since July 1, 2012. The Agencies divided the November 2015 CPI figure (237.336)—the latest data from the Department of Labor—by the July 2012 CPI figure (229.104), and multiplied the product (1.0359) by $5,000,000. The resulting value is $5,179,656.40, which is the $5 million limit found in sections 771.117(c)(23)(i) and 771.118(c)(13)(i) after adjusting for inflation, and should be considered when applying the limited Federal financial assistance CE to projects during the 2016 calendar year. Similarly, to determine the inflation figure for subparagraph (ii) under sections 771.117(c)(23) and 771.118(c)(13), the Agencies multiplied 1.0359 by $30,000,000 with the following result: $31,077,938.44. These figures ($5,179,656.40 and $31,077,938.44) are posted on the Agencies' Web sites and will be updated annually in January of subsequent years. Posting these figures also complies with section 1314(b)(1) which requires providing the first adjustment “not later than 60 days after the date of enactment of [the FAST] Act.”

Section 1315(b) requires FHWA to revise its CE regulation on programmatic agreements. Specifically, FHWA must revise 23 CFR 771.117(g) to allow a State Department of Transportation (State DOT) to make a CE determination on behalf of FHWA. The revision must clarify that the authority under such agreements may include the responsibility to make CE determinations for actions described in 23 CFR 771.117(c)-(d) that meet the criteria for a CE under 40 CFR 1508.4 (the President's Council on Environmental Quality's Regulations for Implementing the Procedural Provisions of NEPA) and are identified in the programmatic agreement.

This rulemaking adopts the language used in FAST Act section 1315(b) with two minor changes to retain the style used throughout the regulation: FHWA uses the abbreviation “CE” instead of “categorical exclusion” and “40 CFR 1508.4” instead of the statutory language of “section 1508.4 of title 40, Code of Federal Regulations.” The rule set forth below incorporates the new phrase “and that meet the criteria for a CE under 40 CFR 1508.4, and are identified in the programmatic agreement” into the otherwise existing regulatory language in 23 CFR 771.117(g). The FHWA reprints below the paragraph 771.117(g) to show how the statutory language is incorporated into the paragraph as a whole.

The Agencies have determined that a final rule is appropriate in this instance because the language in the FAST Act is clear and does not require interpretive text. Therefore the amendments to 23 CFR 771.117(c)(23), 23 CFR 771.118(c)(13), and 23 CFR 771.117(g) follow the statutory language without substantive modification.

Under the Administrative Procedure Act (5 U.S.C. 553(b)), an agency may waive the normal notice and comment procedure if it finds, for good cause, that it would be impracticable, unnecessary, or contrary to the public interest. The Agencies find good cause as notice and comment for this rule would be unnecessary due to the nature of the revisions (i.e., the rule simply incorporates the statutory language found in sections 1315(b) and 1314 of FAST without interpretation). The statutory language does not require regulatory interpretation to carry out its intent. The regulatory amendments in this final rule incorporate the statutory language, and comments cannot alter the regulation given the explicit mandate. Accordingly, the Agencies find good cause under 5 U.S.C. 553(b)(3)(B) to waive notice and opportunity for comment.

The Agencies have determined this action is not a significant regulatory action within the meaning of Executive Order 12866, and within the meaning of the U.S. Department of Transportation's regulatory policies and procedures. Since this rulemaking implements a congressional mandate to allow States to make a CE determination on behalf of FHWA in specific instances and to adjust existing monetary-based CEs for inflation, the Agencies anticipate that the economic impact of this rulemaking would be minimal. This final rule will not adversely affect, in a material way, any sector of the economy. Additionally, this action complies with the principles of Executive Order 13563. In addition, these changes will not interfere with any action taken or planned by another agency and would not materially alter the budgetary impact of any entitlements, grants, user fees, or loan programs. Consequently, a full regulatory evaluation is not required.

Since the Agencies find good cause under 5 U.S.C. 553(b)(3)(B) to waive notice and opportunity for comment for this rule, the provisions of the Regulatory Flexibility Act (Pub. L. 96-354, 5 U.S.C. 601-612) do not apply. However, the Agencies evaluated the effects of this action on small entities and determined the action would not have a significant economic impact on a substantial number of small entities. This final rule will not make any substantive changes to the Agencies' regulations or in the way that the Agencies' regulations affect small entities; it merely incorporates statutory text. For this reason, the Agencies certify that this action will not have a significant economic impact on a substantial number of small entities.

This final rule does not impose unfunded mandates as defined by the Unfunded Mandates Reform Act of 1995 (Pub. L. 104-4, 109 Stat. 48, March 22, 1995) as it will not result in the expenditure by State, local, tribal governments, in the aggregate, or by the private sector, of $155 million or more in any one year (2 U.S.C. 1532).

Executive Order 13132 requires agencies to assure meaningful and timely input by State and local officials in the development of regulatory policies that may have a substantial, direct effect on the States, on the relationship between the national government and the States, or on the distribution of power and responsibilities among the various levels of government. This action has been analyzed in accordance with the principles and criteria contained in Executive Order 13132 dated August 4, 1999, and the Agencies determined this action will not have a substantial direct effect or sufficient federalism implications on the States. The Agencies also determined this action will not preempt any State law or regulation or affect the States' ability to discharge traditional State governmental functions.

The regulations implementing Executive Order 12372 regarding intergovernmental consultation on Federal programs and activities apply to this program.

Under the Paperwork Reduction Act of 1995 (PRA) (44 U.S.C. 3501, et seq.), Federal agencies must obtain approval from the Office of Management and Budget for each collection of information they conduct, sponsor, or require through regulations. The Agencies analyzed this final rule under the PRA and determined this rule does not contain collection of information requirements for the purposes of the PRA.

Agencies are required to adopt implementing procedures for NEPA that establish specific criteria for, and identification of, three classes of actions: Those that normally require preparation of an Environmental Impact Statement; those that normally require preparation of an Environmental Assessment; and those that are categorically excluded from further NEPA review (40 CFR 1507.3(b)). The CEQ regulations do not direct agencies to prepare a NEPA analysis or document before establishing Agency procedures (such as this regulation) that supplement the CEQ regulations for implementing NEPA. The changes proposed in this rule are part of those agency procedures, and therefore establishing the proposed changes does not require preparation of a NEPA analysis or document. Agency NEPA procedures are generally procedural guidance to assist agencies in the fulfillment of agency responsibilities under NEPA, but are not the agency's final determination of what level of NEPA analysis is required for a particular proposed action. The requirements for establishing agency NEPA procedures are set forth at 40 CFR 1505.1 and 1507.3.

Executive Order 12898, Federal Actions to Address Environmental Justice in Minority Populations and Low-Income Populations, and DOT Order 5610.2(a), 77 FR 27534 (May 10, 2012) (available online at www.fhwa.dot.gov/environment/environmental_justice/ej_at_dot/order_56102a/index.cfm), require DOT agencies to achieve environmental justice (EJ) as part of their mission by identifying and addressing, as appropriate, disproportionately high and adverse human health or environmental effects, including interrelated social and economic effects, of their programs, policies, and activities on minority populations and low-income populations in the United States. The DOT Order requires DOT agencies to address compliance with the Executive Order and the DOT Order in all rulemaking activities. In addition, the Agencies have issued additional documents relating to administration of the Executive Order and the DOT Order. On June 14, 2012, FHWA issued an update to its EJ order, FHWA Order 6640.23A, FHWA Actions to Address Environmental Justice in Minority Populations and Low Income Populations (available online at www.fhwa.dot.gov/legsregs/directives/orders/664023a.cfm). The FTA also issued an update to its EJ policy, FTA Policy Guidance for Federal Transit Recipients, 77 FR 42077 (July 17, 2012) (available online at http://www.fta.dot.gov/legislation_law/12349_14740.html).

The Agencies have evaluated this final rule under the Executive Order, the DOT Order, the FHWA Order, and FTA Policy Guidance. They determined that the amendment would not cause disproportionately high and adverse human health and environmental effects on minority or low income populations.

At the time the Agencies apply the NEPA implementing procedures in 23 CFR part 771, they would have an independent obligation to conduct an evaluation of the proposed action under the applicable EJ orders and guidance to determine whether the proposed action has the potential for EJ effects. The rule would not affect the scope or outcome of that EJ evaluation. In any instance where there are potential EJ effects resulting from a proposed Agency action covered under any of the NEPA classes of action in 23 CFR part 771, public outreach under the applicable EJ orders and guidance would provide affected populations with the opportunity to raise any concerns about those potential EJ effects. See DOT Order 5610.2(a), FHWA Order 6640.23A, and FTA Policy Guidance for Transit Recipients (available at links above). Indeed, outreach to ensure the effective involvement of minority and low income populations where there is potential for EJ effects is a core aspect of the EJ orders and guidance. For these reasons, the Agencies have determined that no further EJ analysis is needed and no mitigation is required in connection with the proposed revisions to the Agencies' NEPA regulations (23 CFR parts 771).

The Agencies have analyzed this final rule under Executive Order 12630, Governmental Actions and Interference with Constitutionally Protected Property Rights. The Agencies found this final rule will not affect a taking of private property or otherwise have taking implications under Executive Order 12630.

This action meets applicable standards in sections 3(a) and 3(b)(2) of Executive Order 12988, Civil Justice Reform, to minimize litigation, eliminate ambiguity, and reduce burden.

The Agencies analyzed this rule under Executive Order 13045, Protection of Children from Environmental Health Risks and Safety Risks. The Agencies certify that this action would not cause an environmental risk to health or safety that might disproportionately affect children.

The Agencies have analyzed this action under Executive Order 13175, dated November 6, 2000, and determined the action will not have substantial direct effects on one or more Indian tribes; will not impose substantial direct compliance costs on Indian tribal governments; and will not preempt tribal laws. This final rule addresses obligations of Federal funds to States for Federal-aid highway projects and Federal funds to transit agencies for Federal public transportation projects and will not impose any direct compliance requirements on Indian tribal governments. Therefore, a tribal summary impact statement is not required.

The Agencies have analyzed this action under Executive Order 13211, Actions Concerning Regulations That Significantly Affect Energy Supply, Distribution, or Use. The Agencies determined this rule is not a significant energy action under that order since it is not a significant regulatory action under Executive Order 12866 and is not likely to have a significant adverse effect on the supply, distribution, or use of energy. Therefore, a Statement of Energy Effects is not required.

A regulation identification number (RIN) is assigned to each regulatory action listed in the Unified Agenda of Federal Regulations. The Regulatory Information Service Center publishes the Unified Agenda in April and October of each year. The RIN number contained in the heading of this document can be used to cross-reference this action with the Unified Agenda.

In consideration of the foregoing, the Agencies amend title 23, Code of Federal Regulations part 771, and title 49, Code of Federal Regulations part 662, as follows:

BOEM has the authority, under certain conditions, to disqualify a party from acquiring a lease or an interest in a lease on the Outer Continental Shelf (OCS). The title, as well as the verbiage, of § 556.403 in the final Leasing Rule, states that BOEM may disqualify entities from “holding,” a lease or lease interest on the OCS. This could be interpreted to imply that BOEM would not allow a disqualified party to retain a pre-existing OCS lease interest. That interpretation is incorrect. Disqualified entities may not acquire new leases or lease interests, but they may continue to hold existing leases or lease interests. BOEM is correcting the wording of § 556.403 to avoid the implication that the use of the word “hold” might authorize BOEM, under the conditions stated in § 556.403, to require forfeiture of leases already acquired. The final rule was issued under Docket ID: MMS-2007-OMM-0069, which has expired and is no longer accessible. Therefore, BOEM is utilizing a new Docket ID for this correction (BOEM-2016-0031).

Section V, Legal and Regulatory Analyses, of the final rule issued on March 30, 2016 (81 FR 18145), summarizes BOEM's analyses of that rule pursuant to applicable statutes and executive orders. This amendment does not change the conclusions described in that section because the amendment conforms the regulatory text to BOEM's intent in the final rule, as then analyzed. Therefore, no additional analysis is necessary.

The Administrative Procedure Act, 5 U.S.C. 553(b), provides that, when an agency for good cause finds that “notice and public procedure . . . are impracticable, unnecessary, or contrary to the public interest,” the agency may issue a rule without providing notice and an opportunity for prior public comment. To the extent this rule has substantive effects, it is to relieve regulated parties from sanctions. It does not require any party to change its conduct, and it does not change the rights of any party affected by the final rule. Therefore, BOEM believes that the public would not be interested in commenting on this correction, and thus notice and comment are unnecessary. Moreover, if BOEM were to first publish a proposed rule, allow the public sufficient time to submit comments, analyze the comments, and then publish a final rule, it would not be possible to correct this error and make it effective on the same day as the earlier final rule, May 31, 2016. Accordingly, notice and comment is impracticable. For these reasons, BOEM finds that soliciting public comment is unnecessary and impracticable and that there is good cause to promulgate this rule without first providing for public comment.

Similarly, BOEM finds that there is good cause to waive the usual 30-day delay in the effective date for this correction. This correction will not require any party to adjust its conduct and will not change the effect of the already published final rule. For these reasons, BOEM believes that the public does not need 30 days advance notice of this correction and that a delay in effectiveness is unnecessary. If this correction is not made effective on the same date, it would not become effective until after the erroneous language in the already published rule becomes effective, May 31, 2016. This could cause confusion to anyone potentially affected by § 556.403, making a 30-day delay in effectiveness impracticable. Therefore, pursuant to 5 U.S.C. 553(d), BOEM has determined that a 30-day delay in the effective date is unnecessary and impractical, and there is good cause to waive the delayed effective date for this final rule.

For the reasons stated in the preamble, BOEM amends 30 CFR part 556 (as amended by the final rule published on March 30, 2016, at 81 FR 18111) as follows:

The Coast Guard will enforce special local regulations in 33 CFR 100.1302 from 7 a.m. until 6 p.m. on June 11, 2016 and 7 a.m. until 6 p.m. on June 12, 2016, for the Portland Annual Dragon Boat races in the Willamette River. This action is being taken to provide for the safety of life on navigable waterways during the regatta. Our regulation for the Annual Dragon Boat Races, Portland, Oregon, § 100.1302, specifies the location of the regulated area for this regatta course as all waters of the Willamette River shore to shore, bordered on the north by the Hawthorne Bridge, and on the south by the Marquam Bridge. As specified in § 100.1302, during the enforcement period, no vessel may transit this regulated area without approval from the Captain of the Port Sector Columbia River (COTP) or a COTP designated representative.

This notice of enforcement is issued under authority of 33 CFR 100.1302 and 5 U.S.C. 552 (a). In addition to this notice of enforcement in the Federal Register, the Coast Guard plans to provide notification of this enforcement period via the Local Notice to Mariners and marine information broadcasts.

The Minnesota Department of Transportation requested a temporary deviation for the Stillwater Highway Bridge, across the St. Croix River, mile 23.4, at Stillwater, Minnesota. This deviation allows the bridge to remain in the closed-to-navigation position from 10 p.m. to 11:30 p.m. on July 4, 2016.

The Stillwater Highway Bridge currently operates in accordance with 33 CFR 117.667(b), which states specific seasonal and commuter hour operating requirements.

The Stillwater Highway Bridge provides a vertical clearance of 10.9 feet above normal pool in the closed-to-navigation position. Navigation on the waterway consists primarily of commercial sightseeing/dinner cruise boats and recreational watercraft. This temporary deviation has been coordinated with waterway users. No objections were received.

The bridge will not be able to open for emergencies and there are no alternate routes for vessels transiting this section of the St. Croix River. The Coast Guard will also inform the users of the waterway through our Local and Broadcast Notices to Mariners of the change in operating schedule for the bridge so the vessel operators can arrange their transits to minimize any impact caused by the temporary deviation.

In accordance with 33 CFR 117.35(e), the drawbridge must return to its regular operating schedule immediately at the end of the effective period of this temporary deviation. This deviation from the operating regulations is authorized under 33 CFR 117.35.

The Metro-North Devon Bridge, mile 3.9, across the Housatonic River, has a vertical clearance in the closed position of 19 feet at mean high water and 25 feet at mean low water. The existing bridge operating regulations are found at 33 CFR 117.207(b).

The waterway is transited by seasonal recreational vessels.

The bridge owner, Connecticut Department of Transportation, requested a temporary deviation from the normal operating schedule to perform timber ties and headblocks replacement at the bridge.

Under this temporary deviation, the Metro-North Devon Bridge will operate according to the schedule below:

Vessels able to pass under the bridge in the closed position may do so at anytime. The bridge will not be able to open for emergencies and there is no immediate alternate route for vessels to pass.

The Coast Guard will inform the users of the waterways through our Local Notice and Broadcast to Mariners of the change in operating schedule for the bridge so that vessel operations can arrange their transits to minimize any impact caused by the temporary deviation.

In accordance with 33 CFR 117.35(e), the drawbridge must return to its regular operating schedule immediately at the end of the effective period of this temporary deviation. This deviation from the operating regulations is authorized under 33 CFR 117.35.

On February 25, 2016, the Coast Guard published a temporary deviation entitled “Drawbridge Operation Regulation; Chester River, Chestertown, MD” in the Federal Register (81 FR 9338). Under that temporary deviation, the bridge would remain in the closed-to-navigation position from 6 a.m. on February 22, 2016 to 6 p.m. on June 1, 2016. The Maryland Department of Transportation State Highway Administration, that owns and operates the S213 (MD213) Bridge, has requested an extension of time for the temporary deviation from the current operating regulations to complete a bridge stringer replacement project, due to delays related to inclement weather. The bridge is a bascule draw bridge and has a vertical clearance in the closed position of 12 feet above mean high water.

The current operating schedule is open on signal if at least six hours notice is given as set out in 33 CFR 117.551. Under this modified temporary deviation, the bridge will remain in the closed-to-navigation position from 6 a.m. on February 22, 2016 to 6 p.m. on July 31, 2016.

The Chester River is used by a variety of vessels including small U.S. government and public vessels, small commercial vessels, and recreational vessels. The Coast Guard has carefully considered the nature and volume of vessel traffic on the waterway in publishing this temporary deviation.

During the closure times there will be limited opportunity for vessels able to safely pass through the bridge in the closed position to do so. Vessels able to safely pass through the bridge in the closed position may do so, after receiving confirmation from the bridge tender that it is safe to transit through the bridge. The bridge will be able to open for emergencies if at least six hours notice is given and there is no immediate alternate route for vessels to pass. The Coast Guard will also inform the users of the waterways through our Local and Broadcast Notices to Mariners of the change in operating schedule for the bridge so that vessel operators can arrange their transit to minimize any impact caused by the temporary deviation.

In accordance with 33 CFR 117.35(e), the drawbridge must return to its regular operating schedule immediately at the end of the effective period of this temporary deviation. This deviation from the operating regulations is authorized under 33 CFR 117.35.

The Norfolk Southern Corporation, that owns and operates the Norfolk and Western railroad bridge (Norfolk Southern V6.8 Bridge), has requested a temporary deviation from the current operating regulations to install a new tie deck across the vertical lift span and under the mitre joints on the fixed approach spans. The bridge is a vertical lift draw bridge and has a vertical clearance in the closed position of 10 feet above mean high water.

The current operating schedule is set out in 33 CFR 117.997(b). Under this temporary deviation, the bridge will remain in the closed-to-navigation position from 7 a.m. to 11:30 a.m. and from 12:30 p.m. to 5 p.m. from June 6, 2016 through June 9, 2016, June 13, 2016 through June 16, 2016, and June 20, 2016 through June 23, 2016. At all other times the bridge will operate per 33 CFR 117.997(b).

The South Branch of the Elizabeth River is used by a variety of vessels including deep draft ocean-going vessels, U.S. government vessels, small commercial vessels, recreational vessels and tug and barge traffic. The Coast Guard has carefully coordinated the restrictions with waterway users.

There will be limited opportunity for vessels to transit through the bridge in the closed position during this temporary deviation. Vessels able to pass through the bridge in the closed position may do so after receiving confirmation from the bridge tender that it is safe to transit through the bridge. The bridge will be able to open for emergencies and there is no immediate alternate route for vessels to pass. The Coast Guard will also inform the users of the waterways through our Local and Broadcast Notices to Mariners of the change in operating schedule for the bridge so that vessel operators can arrange their transit to minimize any impact caused by the temporary deviation.

In accordance with 33 CFR 117.35(e), the drawbridge must return to its regular operating schedule immediately at the end of the effective period of this temporary deviation. This deviation from the operating regulations is authorized under 33 CFR 117.35.

The Coast Guard is issuing this temporary rule without prior notice and opportunity to comment pursuant to authority under section 4(a) of the Administrative Procedure Act (APA) (5 U.S.C. 553(b)). This provision authorizes an agency to issue a rule without prior notice and opportunity to comment when the agency for good cause finds that those procedures are “impracticable, unnecessary, or contrary to the public interest.” Under 5 U.S.C. 553(b)(B), the Coast Guard finds that good cause exists for not publishing a notice of proposed rulemaking (NPRM) with respect to this rule is impracticable, because information about the fireworks on July 2, 2016 was not received by the Coast Guard with sufficient time to allow for an opportunity to comment on the proposed rule. Publishing an NPRM would also be contrary to the public interest as immediate action is needed to ensure the safety of the fireworks participants, patrol vessels, and other vessels transiting the fireworks display area. The Coast Guard will provide advance notifications to users of the affected waterway via marine information broadcasts and local notice to mariners. For the same reasons, we find good cause, under 5 U.S.C. 553(d)(3), for making this rule effective less than 30 days after publication in the Federal Register.

The Coast Guard is issuing this rule under authority in 33 U.S.C. 1231. The Captain of the Port Hampton Roads (COTP) has determine that potential hazards associated with the fireworks display starting on July 2, 2016 will be a safety concern for anyone within a 420-foot radius of the fireworks barge. This rule is needed to protect the participants, patrol vessels, and other vessels transiting the navigable waters of the Chesapeake Bay, in the vicinity of the Sunset Beach Resort in Cape Charles, VA from hazards associated with a fireworks display. The potential hazards to mariners within the safety zone include accidental discharge of fireworks, dangerous projectiles, and falling hot embers or other debris.

The Captain of the Port of Hampton Roads is establishing a safety zone on the Chesapeake Bay, in the vicinity of the Sunset Beach Resort, in Cape Charles, VA. The safety zone will encompass all navigable waters within a 420 foot radius of the fireworks display barge location. This safety zone still allows for navigation on the waterway. This safety zone will be effective and enforced from 8 p.m. through 8:30 p.m. on July 2, 2016. Access to the safety zone will be restricted during the effective period. Except for participants and vessels authorized by the Captain of the Port or his Representative, no person or vessel may enter or remain in the regulated area.

The Captain of the Port will give notice of the enforcement of the safety zone by all appropriate means to provide the widest dissemination of notice to the affected segments of the public. This includes publication in the Local Notice to Mariners and Marine Information Broadcasts.

We developed this rule after considering numerous statutes and executive orders (E.O.s) related to rulemaking. Below we summarize our analyses based on a number of these statutes and E.O.s, and we discuss First Amendment rights of protestors.

E.O.s 12866 and 13563 direct agencies to assess the costs and benefits of available regulatory alternatives and, if regulation is necessary, to select regulatory approaches that maximize net benefits. E.O. 13563 emphasizes the importance of quantifying both costs and benefits, of reducing costs, of harmonizing rules, and of promoting flexibility. This rule has not been designated a “significant regulatory action,” under E.O. 12866. Accordingly, it has not been reviewed by the Office of Management and Budget.

Although this safety zone restricts vessel traffic through the regulated area, the effect of this rule will not be significant because: (i) This rule will only be enforced for the limited size and duration of the event; and (ii) the Coast Guard will make extensive notification to the maritime community via marine information broadcasts so mariners may adjust their plans accordingly.

The Regulatory Flexibility Act of 1980, 5 U.S.C. 601-612, as amended, requires Federal agencies to consider the potential impact of regulations on small entities during rulemaking. The term “small entities” comprises small businesses, not-for-profit organizations that are independently owned and operated and are not dominant in their fields, and governmental jurisdictions with populations of less than 50,000. The Coast Guard certifies under 5 U.S.C. 605(b) that this rule will not have a significant economic impact on a substantial number of small entities.

While some owners or operators of vessels intending to transit the safety zone may be small entities, for the reasons stated in section V.A above, this rule will not have a significant economic impact on any vessel owner or operator.

Under section 213(a) of the Small Business Regulatory Enforcement Fairness Act of 1996 (Pub. L. 104-121), we want to assist small entities in understanding this rule. If the rule would affect your small business, organization, or governmental jurisdiction and you have questions concerning its provisions or options for compliance, please contact the person listed in the FOR FURTHER INFORMATION CONTACT section.

Small businesses may send comments on the actions of Federal employees who enforce, or otherwise determine compliance with, Federal regulations to the Small Business and Agriculture Regulatory Enforcement Ombudsman and the Regional Small Business Regulatory Fairness Boards. The Ombudsman evaluates these actions annually and rates each agency's responsiveness to small business. If you wish to comment on actions by employees of the Coast Guard, call 1-888-REG-FAIR (1-888-734-3247). The Coast Guard will not retaliate against small entities that question or complain about this rule or any policy or action of the Coast Guard.

This rule will not call for a new collection of information under the Paperwork Reduction Act of 1995 (44 U.S.C. 3501-3520).

A rule has implications for federalism under E.O. 13132, Federalism, if it has a substantial direct effect on the States, on the relationship between the national government and the States, or on the distribution of power and responsibilities among the various levels of government. We have analyzed this rule under that Order and have determined that it is consistent with the fundamental federalism principles and preemption requirements described in E.O. 13132.

Also, this rule does not have tribal implications under E.O. 13175, Consultation and Coordination with Indian Tribal Governments, because it does not have a substantial direct effect on one or more Indian tribes, on the relationship between the Federal Government and Indian tribes, or on the distribution of power and responsibilities between the Federal Government and Indian tribes. If you believe this rule has implications for federalism or Indian tribes, please contact the person listed in the FOR FURTHER INFORMATION CONTACT section above.

The Unfunded Mandates Reform Act of 1995 (2 U.S.C. 1531-1538) requires Federal agencies to assess the effects of their discretionary regulatory actions. In particular, the Act addresses actions that may result in the expenditure by a State, local, or tribal government, in the aggregate, or by the private sector of $100,000,000 (adjusted for inflation) or more in any one year. Though this rule will not result in such an expenditure, we do discuss the effects of this rule elsewhere in this preamble.

We have analyzed this rule under Department of Homeland Security Management Directive 023-01 and Commandant Instruction M16475.lD, which guide the Coast Guard in complying with the National Environmental Policy Act of 1969 (42 U.S.C. 4321-4370f), and have determined that this action is one of a category of actions that do not individually or cumulatively have a significant effect on the human environment. This rule involves a safety zone lasting less than 2 hours that will prohibit entry within 420 feet of the fireworks display. It is categorically excluded from further review under paragraph 34(g) of Figure 2-1 of the Commandant Instruction. An environmental analysis checklist supporting this determination and a Categorical Exclusion Determination are available in the docket where indicated under ADDRESSES. We seek any comments or information that may lead to the discovery of a significant environmental impact from this rule.

The Coast Guard respects the First Amendment rights of protesters. Protesters are asked to contact the person listed in the FOR FURTHER INFORMATION CONTACT section to coordinate protest activities so that your message can be received without jeopardizing the safety or security of people, places or vessels.

For the reasons discussed in the preamble, the Coast Guard amends 33 CFR part 165 as follows:

I. Table of Abbreviations CFR Code of Federal Regulations COTP Captain of the Port DHS Department of Homeland Security FR Federal Register NPRM Notice of proposed rulemaking § Section U.S.C. United States Code II. Background Information and Regulatory History

The Coast Guard is issuing this temporary rule without prior notice and opportunity to comment pursuant to authority under section 4(a) of the Administrative Procedure Act (APA) (5 U.S.C. 553(b)). This provision authorizes an agency to issue a rule without prior notice and opportunity to comment when the agency finds good cause that those procedures are “impracticable, unnecessary, or contrary to the public interest.” Under 5 U.S.C. 553(b)(B), the Coast Guard finds that good cause exists for not publishing a notice of proposed rulemaking (NPRM) with respect to these rules because fireworks displays on or over the navigable waterway poses safety concerns for waterway users. In this case, the Coast Guard was not notified of the fireworks displays until April 26, 2016 and May 16, 2016. After full review of the details for the planned and locally advertised displays, the Coast Guard determined action is needed to protect people and property from the safety hazards associated with the fireworks displays on the UMR near St. Louis, MO and St. Paul, MN. It is impracticable to publish an NPRM because we must establish these safety zones by June 2 and 11, and July 3 and 4, 2016.

We are issuing this rule, and under 5 U.S.C. 553(d)(3), the Coast Guard finds that good cause exists for making the rule effective less than 30 days after publication in the Federal Register. Delaying the effective date of the rule is contrary to the public interest as it would delay the effectiveness of the temporary safety zones needed to respond to potential related safety hazards until after the planned fireworks displays. This rule does provide approximately 7 to 30 days notice for the four safety zones related to the four planned fireworks displays on the UMR near St. Louis, MO and St. Paul, MN.

The Coast Guard is issuing this rule under authority in 33 U.S.C. 1231. The COTP has determined that potential hazards associated with fireworks displays taking place on or over these sections of navigable waterway will be a safety concern for anyone within the areas that are designated as the safety zones. This rule is needed to protect personnel, vessels, and the marine environment in the navigable waters within the safety zones during the fireworks displays.

This rule establishes four safety zones as follows:

(1) From 7:45 p.m. until 9 p.m. on June 2, 2016, for the Ribbon Cutting Celebration for the Completion of the Riverfront Component for the Great Rivers Greenway barge based fireworks display, all waters of the UMR from mile 179.2 to 180;

(2) from 9 p.m. until 11 p.m. on June 11, 2016, for the St. Louis Brewers Guild barge based fireworks display, all waters of the UMR from mile 179.2 to 180.5;

(3) from 8:30 p.m. until 11 p.m. on July 3, 2016, for the Lumiere Place July 3, 2016 barge based fireworks display, all waters of the UMR from mile 180 to 180.5; and

(4) from 10 p.m. until 10:30 p.m. on July 4, 2016, for the City of St. Paul July 4th Celebration, all waters of the UMR from mile 839.5 to 840.

Exact times of the closures and any changes to the planned scheduled will be communicated to mariners using Broadcast Notices to Mariners and Local Notices to Mariners. The safety zones are intended to protect personnel, vessels, and the marine environment in these navigable waters during the fireworks displays. No vessel or person will be permitted to enter the safety zones without obtaining permission from the COTP or a designated representative.

We developed this rule after considering numerous statutes and Executive Orders related to rulemaking. Below we summarize our analyses based on a number of these statutes and Executive Orders, and we discuss First Amendment rights of protestors.

Executive Orders 12866 and 13563 direct agencies to assess the costs and benefits of available regulatory alternatives and, if regulation is necessary, to select regulatory approaches that maximize net benefits. Executive Order 13563 emphasizes the importance of quantifying both costs and benefits, of reducing costs, of harmonizing rules, and of promoting flexibility. These rules have not been designated a “significant regulatory action,” under Executive Order 12866. Accordingly, they have not been reviewed by the Office of Management and Budget.

This temporary final rule establishes four safety zones, each of which will be enforced for a limited time period. During the enforcement periods, vessels are prohibited from entering into or remaining within the safety zones unless specifically authorized by the COTP or other designated representative. Based on the locations, limited safety zone sizes, and short duration of the enforcement periods, these rules do not pose a significant regulatory impact. Additionally, notice of the safety zones or any changes in the planned schedules will be made via Broadcast Notices to Mariners and Local Notices to Mariners. Deviation from these rules may be requested from the COTP or other designated representative and will be considered on a case-by-case basis.

The Regulatory Flexibility Act of 1980, 5 U.S.C. 601-612, as amended, requires Federal agencies to consider the potential impact of regulations on small entities during rulemaking. The term “small entities” comprises small businesses, not-for-profit organizations that are independently owned and operated and are not dominant in their fields, and governmental jurisdictions with populations of less than 50,000. The Coast Guard certifies under 5 U.S.C. 605(b) that this rule will not have a significant economic impact on a substantial number of small entities.

While some owners or operators of vessels intending to transit the safety zones may be small entities, for the reasons stated in section V.A. above, these rules will not have a significant economic impact on any vessel owner or operator.

Under section 213(a) of the Small Business Regulatory Enforcement Fairness Act of 1996 (Pub. L. 104-121), we want to assist small entities in understanding these rules. If the rules would affect your small business, organization, or governmental jurisdiction and you have questions concerning its provisions or options for compliance, please contact the person listed in the FOR FURTHER INFORMATION CONTACT section.

Small businesses may send comments on the actions of Federal employees who enforce, or otherwise determine compliance with, Federal regulations to the Small Business and Agriculture Regulatory Enforcement Ombudsman and the Regional Small Business Regulatory Fairness Boards. The Ombudsman evaluates these actions annually and rates each agency's responsiveness to small business. If you wish to comment on actions by employees of the Coast Guard, call 1-888-REG-FAIR (1-888-734-3247). The Coast Guard will not retaliate against small entities that question or complain about this rule or any policy or action of the Coast Guard.

This rule will not call for a new collection of information under the Paperwork Reduction Act of 1995 (44 U.S.C. 3501-3520).

A rule has implications for federalism under Executive Order 13132, Federalism, if it has a substantial direct effect on the States, on the relationship between the national government and the States, or on the distribution of power and responsibilities among the various levels of government. We have analyzed this rule under that Order and have determined that it is consistent with the fundamental federalism principles and preemption requirements described in Executive Order 13132.

Also, this rule does not have tribal implications under Executive Order 13175, Consultation and Coordination with Indian Tribal Governments, because it does not have a substantial direct effect on one or more Indian tribes, on the relationship between the Federal Government and Indian tribes, or on the distribution of power and responsibilities between the Federal Government and Indian tribes. If you believe this rule has implications for federalism or Indian tribes, please contact the person listed in the FOR FURTHER INFORMATION CONTACT section above.

The Unfunded Mandates Reform Act of 1995 (2 U.S.C. 1531-1538) requires Federal agencies to assess the effects of their discretionary regulatory actions. In particular, the Act addresses actions that may result in the expenditure by a State, local, or tribal government, in the aggregate, or by the private sector of $100,000,000 (adjusted for inflation) or more in any one year. Though this rule will not result in such an expenditure, we do discuss the effects of this rule elsewhere in this preamble.

We have analyzed this rule under Department of Homeland Security Management Directive 023-01 and Commandant Instruction M16475.lD, which guide the Coast Guard in complying with the National Environmental Policy Act of 1969 (42 U.S.C. 4321-4370f), and have determined that the actions are one of a category of actions that do not individually or cumulatively have a significant effect on the human environment. This rule involves safety zones, each lasting less than three hours that will limit access to specific areas on the UMR. These safety zones are categorically excluded from further review under paragraph 34(g) of Figure 2-1 of the Commandant Instruction. An environmental analysis checklist supporting this determination and a Categorical Exclusion Determination are available in the docket where indicated under ADDRESSES. We seek any comments or information that may lead to the discovery of a significant environmental impact from this rule.

The Coast Guard respects the First Amendment rights of protesters. Protesters are asked to contact the person listed in the FOR FURTHER INFORMATION CONTACT section to coordinate protest activities so that your message can be received without jeopardizing the safety or security of people, places or vessels.

For the reasons discussed in the preamble, the Coast Guard amends 33 CFR part 165 as follows:

I. Does this action apply to me?

The Agency included in the April 8, 2016 final rule a list of those who may be potentially affected by this action.

EPA issued a final rule in the Federal Register of April 8, 2016 (81 FR 20545) (FRL-9942-99) that was adding commodities including Vegetable cucurbit, group 9 to 40 CFR 180.574(a)(1). EPA inadvertently omitted the language in the codified text, which would have added Vegetable cucurbit, group 9.

Section 553 of the Administrative Procedure Act (APA) (5 U.S.C. 553(b)(3)(B)) provides that, when an agency for good cause finds that notice and public procedure are impracticable, unnecessary, or contrary to the public interest, the agency may issue a final rule without providing notice and an opportunity for public comment. EPA has determined that there is good cause for making this technical correction final without prior proposal and opportunity for comment, because this is correcting a typographical error. EPA finds that this constitutes good cause under 5 U.S.C. 553(b)(3)(B).

No. For a detailed discussion concerning the statutory and executive order review, refer to Unit VI. of the April 8, 2016 final rule.

Pursuant to the Congressional Review Act (5 U.S.C. 801 et seq.), EPA will submit a report containing this rule and other required information to the U.S. Senate, the U.S. House of Representatives, and the Comptroller General of the United States prior to publication of the rule in the Federal Register. This action is not a “major rule” as defined by 5 U.S.C. 804(2).

Therefore, 40 CFR part 180 is corrected as follows:

The reef fish fishery of the Caribbean, which includes triggerfish and filefish, wrasses, snappers in Snapper Unit 2, parrotfishes, and jacks, is managed under the Fishery Management Plan for the Reef Fish Fishery of Puerto Rico and the U.S. Virgin Islands (Reef Fish FMP). Caribbean spiny lobster is managed under the FMP for the Spiny Lobster Fishery of Puerto Rico and the U.S. Virgin Islands (Spiny Lobster FMP). The FMPs were prepared by the Caribbean Fishery Management Council (Council) and are implemented by NMFS under the authority of the Magnuson-Stevens Fishery Conservation and Management Act (Magnuson-Stevens Act) by regulations at 50 CFR part 622.

The 2010 Caribbean ACL Amendment (Amendment 2 to the FMP for the Queen Conch Resources of Puerto Rico and the U.S. Virgin Islands (Queen Conch FMP) and Amendment 5 to the Reef Fish FMP) and 2011 Caribbean ACL Amendment (Amendment 3 to the Queen Conch FMP, Amendment 6 to the Reef Fish FMP, Amendment 5 to the Spiny Lobster FMP, and Amendment 3 to FMP for Corals and Reef Associated Plants and Invertebrates of Puerto Rico and the U.S. Virgin Islands) revised the Reef Fish and Spiny lobster FMPs (76 FR 82404, December 30 2011, and 76 FR 82414, December 30, 2011). Among other actions, the 2010 and 2011 Caribbean ACL Amendments and the associated final rules established ACLs and AMs for Caribbean spiny lobster and reef fish, including the species and species groups identified in this temporary rule. The 2010 and 2011 Caribbean ACL Amendments and final rules also allocated ACLs among three Caribbean island management areas, i.e., the Puerto Rico, St. Croix, and St. Thomas/St. John management areas of the EEZ, as specified in Appendix E to part 622. The ACLs for species and species groups in the Puerto Rico management area, except for spiny lobster, were further allocated between the commercial and recreational sectors, and AMs apply to each of these sectors separately.

On May 11, 2016, NMFS published the final rule implementing the Comprehensive AM Application Amendment to the U.S. Caribbean FMPs: Application of Accountability Measures and additional regulatory clarifications (81 FR 29166). Among other things, the final rule clarified that the spiny lobster ACL for the Puerto Rico management area is applied as a single ACL for both the commercial and recreational sectors, consistent with the Council's intent in the 2011 Caribbean ACL Amendment. Additionally, the final rule clarified the fishing restrictions that occur in the Caribbean EEZ when an ACL is exceeded and an AM is implemented.

The ACLs for the applicable species and species groups, and fishing sectors in the EEZ off Puerto Rico covered by this temporary rule are as follows and are given in round weight:

• The commercial ACL for triggerfish and filefish, combined, is 58,475 lb (26,524 kg), as specified in § 622.12(a)(1)(i)(Q).

• The commercial ACL for wrasses is 54,147 lb (24,561 kg), as specified in § 622.12(a)(1)(i)(L).

• The commercial ACL for Snapper Unit 2 is 145,916 lb (66,186 kg), as specified in § 622.12(a)(1)(i)(D).

• The ACL for spiny lobster is 327,920 lb (148,742 kg), as specified in § 622.12(a)(1)(iii).

• The commercial ACL for parrotfishes is 52,737 lb (23,915 kg), as specified in § 622.12(a)(1)(i)(B).

• The recreational ACL for jacks is 51,001 lb (23,134 kg), as specified in § 622.12(a)(1)(ii)(M).

In accordance with regulations at 50 CFR 622.12(a), if landings from a Caribbean island management area are estimated to have exceeded the applicable ACL, the Assistant Administrator for NOAA Fisheries (AA), will file a notification with the Office of the Federal Register to reduce the length of the fishing season for the applicable species or species group the following fishing year by the amount necessary to ensure landings do not exceed the applicable ACL. NMFS evaluates landings relative to the applicable ACL based on a moving 3-year average of landings, as described in the FMPs.

Based on the most recent landings data, from the 2012-2014 fishing years, NMFS has determined that the ACLs for spiny lobster; the commercial sectors for triggerfish and filefish, wrasses, Snapper Unit 2, spiny lobster, and parrotfishes; and the recreational sector of jacks have been exceeded. In addition, NMFS has determined that the ACLs for these species and species groups were exceeded because of increased catches and not as a result of enhanced data collection and monitoring efforts.

This temporary rule implements AMs for the identified commercial and recreational sectors for the species and species groups listed in this temporary rule, to reduce the 2016 fishing season lengths to ensure that landings do not exceed the applicable ACLs in the 2016 fishing year. The 2016 fishing seasons for the applicable sectors for these species and species groups in the Puerto Rico management area of the EEZ are closed at the times and dates listed below. These closures remain in effect until the 2017 fishing seasons begin at 12:01 a.m., local time, January 1, 2017.

• The commercial sector for triggerfish and filefish, combined, is closed effective at 12:01 a.m., local time, October 16, 2016. Triggerfish and filefish, combined, include ocean (Canthidermis sufflamen), queen (Balistes vetula), and sargassum triggerfish (Xanthichthys ringens), scrawled (Aluterus scriptus) and whitespotted filefish (Cantherhines macrocerus), and black durgon (Melichthys niger);

• The recreational sector for jacks is closed effective at 12:01 a.m., local time, November 4, 2016. Jacks include horse-eye (Caranx latus), black (Caranx lugubris), almaco (Seriola rivoliana), bar (Caranx ruber), and yellow jack (Caranx bartholomaei), greater amberjack (Seriola dumerili), and blue runner (Caranx crysos);

• The commercial sector for wrasses is closed effective at 12:01 a.m., local time, November 16, 2016. Wrasses include hogfish (Lachnolaimus maximus), puddingwife (Halichoeres radiatus) and Spanish hogfish (Bodianus rufus);

• The commercial sector for Snapper Unit 2 is closed effective at 12:01 a.m., local time, November 26, 2016. Snapper Unit 2 include queen (Etelis oculatus) and cardinal snapper (Pristipomoides macrophthalmus);

• The commercial and recreational sectors for spiny lobster (Panulirus argus) are closed effective at 12:01 a.m., local time, December 10, 2016; and

• The commercial sector for parrotfishes is closed effective at 12:01 a.m., local time, December 19, 2016. Parrotfishes include queen (Scarus vetula), princess (Scarus taeniopterus), striped (Scarus iseri), redband (Sparisoma aurofrenatum), redfin (Sparisoma rubripinne), redtail (Sparisoma chrysopterum), and stoplight parrotfish (Sparisoma viride).

During the Puerto Rico commercial sector closures announced in this temporary rule, the commercial sectors for the indicated species or species groups are closed. All harvest or possession of the indicated species or species group in or from the Puerto Rico management area is limited to the recreational bag and possession limits specified in § 622.437, and the sale or purchase of the indicated species or species group in or from the Puerto Rico management area is prohibited. During the Puerto Rico recreational sector closure for jacks announced in this temporary rule, the jacks recreational sector is closed, and the recreational bag and possession limits for jacks in or from the Puerto Rico management area are zero.

During the spiny lobster closure in the Puerto Rico management area, both the commercial and recreational sectors fo spiny lobster are closed. The harvest, possession, purchase, or sale of spiny lobster in or from the Puerto Rico management area is prohibited. The bag and possession limits for spiny lobster in or from the Puerto Rico management area are zero.

The Regional Administrator, Southeast Region, NMFS, has determined this temporary rule is necessary for the conservation and management of the species and species groups included in this temporary rule, in the EEZ off Puerto Rico, and is consistent with the Magnuson-Stevens Act and other applicable laws.

This action is taken under 50 CFR 622.12(a)(1) and is exempt from review under Executive Order 12866.

These measures are exempt from the procedures of the Regulatory Flexibility Act because the temporary rule is issued without opportunity for prior notice and comment.

This action responds to the best scientific information available. The AA finds good cause to waive the requirements to provide prior notice and opportunity for public comment pursuant to the authority set forth at 5 U.S.C. 553(b)(B) as such prior notice and opportunity for public comment is unnecessary and contrary to the public interest. Such procedures are unnecessary because the rules implementing the ACLs and AMs for these species and species groups have been subject to notice and comment, and all that remains is to notify the public that the ACLs were exceeded and that the AMs are being implemented for the 2016 fishing year. Prior notice and opportunity for public comment on this action would be contrary to the public interest, because many of those affected by the length of the commercial and recreational fishing seasons, including commercial operations, and charter vessel and headboat operations that book trips for clients in advance, need advance notice to adjust their business plans to account for the reduced commercial and recreational fishing seasons.