83 FR 54812 - Small Business HUBZone Program; Government Contracting Programs
SMALL BUSINESS ADMINISTRATION Federal Register Volume 83, Issue 211 (October 31, 2018)
Federal Register Volume 83, Issue 211 (October 31, 2018)
| Page Range | 54812-54835 | |
| FR Document | 2018-23285 |
[Federal Register Volume 83, Number 211 (Wednesday, October 31, 2018)] [Proposed Rules] [Pages 54812-54835] From the Federal Register Online [www.thefederalregister.org] [FR Doc No: 2018-23285] [[Page 54811]] Vol. 83 Wednesday, No. 211 October 31, 2018 Part II Small Business Administration ----------------------------------------------------------------------- 13 CFR Parts 115, 121, 125, et al. Small Business HUBZone Program; Government Contracting Programs; Proposed Rules Federal Register / Vol. 83 , No. 211 / Wednesday, October 31, 2018 / Proposed Rules [[Page 54812]] ----------------------------------------------------------------------- SMALL BUSINESS ADMINISTRATION 13 CFR Parts 115, 121, 125, and 126 RIN 3245-AG38 Small Business HUBZone Program; Government Contracting Programs AGENCY: U.S. Small Business Administration. ACTION: Proposed rule. ----------------------------------------------------------------------- SUMMARY: The U.S. Small Business Administration (SBA or Agency) proposes to amend its regulations for the Historically Underutilized Business Zone (HUBZone) Program to reduce the regulatory burdens imposed on HUBZone small business concerns and government agencies, implement new statutory provisions, and eliminate ambiguities in the regulations. SBA has reviewed all of its HUBZone regulations and is proposing a comprehensive revision to the HUBZone Program to clarify current HUBZone Program policies and procedures and to make changes that will benefit the small business community by making the HUBZone Program more efficient and effective. The proposed amendments are intended to make it easier for small business concerns to understand and comply with the program's requirements and to make the HUBZone program a more attractive avenue for procuring agencies. DATES: Comments must be received on or before December 31, 2018. ADDRESSES: You may submit comments, identified by RIN 3245-AG38, by any of the following methods:Federal eRulemaking Portal: http://www.regulations.gov and follow the instructions for submitting comments. Mail (for paper, disk, or CD-ROM submissions): Mariana Pardo, Director, HUBZone Program, 409 Third Street SW, Washington, DC 20416. Instructions: All submissions received must include the agency name and docket number or Regulatory Information Number (RIN) for this rulemaking. All comments received will be posted on http://www.regulations.gov. If you wish to submit confidential business information (CBI) as defined in the User Notice at http://www.regulations.gov, please submit the comments to Mariana Pardo and highlight the information that you consider to be CBI and explain why you believe this information should be held confidential. SBA will make a final determination as to whether the comments will be published or not. FOR FURTHER INFORMATION CONTACT: Mariana Pardo, Director, Office of HUBZone (D/HUB), 202-205-2985 or [email protected]. SUPPLEMENTARY INFORMATION: On January 30, 2017, President Trump issued Executive Order 13771 directing federal departments and agencies to reduce regulatory burdens and control regulatory costs. In response to this directive, SBA initiated a review of all of its regulations to determine which might be revised or eliminated. This proposed rule would implement revisions to the HUBZone program. The HUBZone program was established pursuant to the HUBZone Act of 1997 (HUBZone Act), Title VI of the Small Business Reauthorization Act of 1997, Public Law 105-135, enacted December 2, 1997. The stated purpose of the HUBZone program is to provide for Federal contracting assistance to HUBZone small business concerns. 15 U.S.C. 657a(a). In general, HUBZone small business concerns are those that have a principal place of business located in a HUBZone and 35 percent of their employees residing in one or more HUBZones. After SBA certifies eligible businesses into the program, they become eligible for HUBZone contracting preferences. HUBZone areas are generally defined as areas with low income levels, high poverty and unemployment rates, Indian reservations, closed military bases, or disaster areas. SBA has not issued a comprehensive regulatory amendment to the HUBZone program since the program's initial implementation nearly twenty years ago, although SBA has issued numerous smaller amendments to the HUBZone Program to implement specific changes in 1998, 2001, 2004, 2005, 2007, 2009, 2013, and 2016. As such, SBA's review of the HUBZone program in response to President Trump's directive highlighted several areas that needed revision. This proposed rule would clarify and modify a number of the regulations implementing the program to update the rules to reflect SBA's current policies, to eliminate ambiguities in the regulations, and to reduce burdens on small businesses and procuring agencies. As part of this proposed rulemaking process, SBA also held tribal consultations pursuant to Executive Order 13175, Tribal Consultations, in Anchorage, AK, Albuquerque, NM, and Oklahoma City, OK to provide interested tribal representatives with an opportunity to discuss their views on various HUBZone-related issues. SBA considers tribal consultation meetings a valuable component of its deliberations and believes that these tribal consultation meetings allowed for constructive dialogue with the Tribal community, Tribal Leaders, Tribal Elders, elected members of Alaska Native Villages or their appointed representatives, and principals of tribally-owned and Alaska Native Corporations (ANC) owned firms participating in the HUBZone program. SBA has taken these discussions into account in drafting this proposed rule. In addition, SBA is proposing to implement section 1701(i) of the National Defense Authorization Act for Fiscal Year 2018 (NDAA 2018), Public Law 115-91, Dec. 12, 2017, which allows certain certified HUBZone small business concerns to maintain their HUBZone status until 2021, by amending the definition of ``HUBZone small business concern.'' The major challenge with the HUBZone program over the last two decades is the lack of stability and predictability for program participants. HUBZones change at different times based on economic data. Once certified, it is unrealistic to expect a business concern, or employee, to relocate in order to attempt to maintain the concern's HUBZone status when the area where the business is located or the employee resides loses its HUBZone status. This rule proposes changes that will help the HUBZone program achieve its intended results-- investment in communities and continued employment. First, the rule proposes to treat an individual as a HUBZone resident if that individual worked for the firm and resided in a HUBZone at the time the concern was certified or recertified as a HUBZone small business concern and he or she continues to work for that same firm, even if the area where the individual lives no longer qualifies as a HUBZone or the individual has moved to a non-HUBZone area. Second, the proposed rule would eliminate the burden on HUBZone small businesses to continually demonstrate that they meet all eligibility requirements at the time of each offer and award for any HUBZone contract opportunity. It is hard for many firms to meet the requirement that at least 35% of the firm's employees must live in a HUBZone. Firms with a significant number of employees have a hard time meeting this requirement because it is often difficult to find a large number of individuals living in a HUBZone who possess the necessary qualifications. Smaller firms also have a hard time meeting this requirement because the loss of one employee could adversely affect their HUBZone eligibility. If a certified HUBZone small business receives a Federal contract (HUBZone or otherwise), it often must [[Page 54813]] hire additional employees to perform the contract and would lose its status as a certified HUBZone small business if it no longer meets the requirement that at least 35% of its employees reside in a HUBZone. This makes it ineligible for any future HUBZone contracts. The 35% HUBZone residency requirement also makes it hard for service contractors to perform contracts in other locations. For example, if a firm wins a contract in another state, it would most likely need to hire additional employees from that state. If there is no HUBZone near that location, the firm would have to hire non-HUBZone residents to perform the contract, which would most likely make it ineligible for future HUBZone contracts. To alleviate these problems, the proposed rule would require only annual recertification rather than immediate recertification at the time of every offer for a HUBZone contract award. This reduced burden on certified HUBZone small businesses would allow a firm to remain eligible for future HUBZone contracts for an entire year, without requiring it to demonstrate that it continues to meet all HUBZone eligibility requirements at the time it submits an offer for each additional HUBZone opportunity. A concern would represent that it is a certified HUBZone small business concern at the time of each offer, but its eligibility would relate back to the date of its certification or recertification, not to the date of the offer. The concern would be required to come into compliance with the 35% HUBZone residency requirement again at the time of its annual recertification in order to continue to be eligible for additional HUBZone contracts after the one-year certification period. During the tribal consultation process, SBA also received a few comments recommending that SBA count ``seasonal'' employees in a firm's count of total employees for purposes of determining whether it meets the 35% HUBZone residency requirement even if those individuals are currently employed by the firm. SBA is concerned that counting any individuals who are not currently on a firm's payroll (in the anticipation that they will again be employed by the firm at some point) would allow firms to circumvent the 35% residency requirement and subject the program to abuse. SBA requests comments on whether seasonal employees can or should be counted and still maintain the integrity of the eligibility requirements. SBA addresses each proposed amendment below. II. Section-by-Section Analysis 1. Definitions SBA has reviewed the current definitions set forth in 13 CFR 126.103 and has determined that several definitions need to be revised, added, or eliminated to remove ambiguities and make the HUBZone program easier for firms to use. SBA proposes to delete the definitions of ``Alaska Native Village'' and ``ANCSA'' (i.e., Alaska Native Claims Settlement Act) and incorporate those terms in an amended definition of ``Alaska Native Corporation (ANC)'' to make the regulations more readable. SBA proposes to amend the definition of ``attempt to maintain'' to clarify what happens if a HUBZone small business concern's HUBZone residency percentage drops too low. The Small Business Act provides that a HUBZone small business concern must ``attempt to maintain'' compliance with the 35% employee HUBZone residency requirement during the performance of a HUBZone contract. 15 U.S.C. 632(p)(5)(A)(i)(II). This statutory requirement seeks to ensure that funds from HUBZone contracts flow to HUBZone areas and the residents of those areas, while at the same time recognizing that a HUBZone small business may need to hire additional employees in order to fully meet the terms of a contract. Under the ``attempt to maintain'' requirement, when hiring additional employees to perform on a HUBZone contract, the HUBZone small business must make efforts to hire HUBZone residents in order to try to maintain compliance with the 35% HUBZone residency requirement. The current regulation provides that ``attempt to maintain'' means ``making substantive and documented efforts such as written offers of employment, published advertisements seeking employees, and attendance at job fairs.'' 13 CFR 126.103. SBA believes it is necessary to clarify that if the HUBZone residency percentage drops too low, then SBA will find that the HUBZone small business has not made its best efforts to ``attempt to maintain'' compliance with this requirement. Therefore, SBA is proposing to amend this definition to add that falling below 20% HUBZone residency during the performance of a HUBZone contract will be deemed a failure to attempt to maintain compliance with the statutory 35% HUBZone residency requirement. In such a case, SBA would propose that the concern be decertified from the HUBZone program. The concern would then have the opportunity to demonstrate that it in fact continues to have at least 20% HUBZone employees and that it continues to attempt to hire additional HUBZone residents in order to reach 35%. SBA does not intend to require that employees be hired in any particular order (i.e., in an order that ensures that at any moment in time, at least 20% of its total employees reside in a HUBZone), but merely that it always have at least 20% HUBZone employees once the hiring for contract performance is complete (and continues to attempt to hire more HUBZone employees). For example, if a certified HUBZone small business has 4 employees, 2 of which reside in a HUBZone, and wins a contract where it will be required to hire an additional 11 employees to perform the contract, SBA would not propose decertification if the first 8 new hires were non-HUBZone residents (meaning that for a time, only 2 employees out of 12 would be HUBZone residents, which is less than 20% of the firm's total employees), as long as the firm makes documented efforts to hire HUBZone residents and at least 1 of the remaining individuals hired to perform the contract lives in a HUBZone (i.e., after hiring is complete, the firm employs 3 HUBZone residents out of a total of 15 employees, which equals 20%, thus allowing the firm to be deemed to have attempted to maintain the 35% HUBZone resident requirement). Of course, SBA would not believe that a firm truly attempted to maintain the 35% HUBZone resident requirement if it hired one HUBZone resident (in the example above, if it hired the third HUBZone resident in total, or first of the 11 supposedly hired to perform the newly awarded contract) one day before its annual HUBZone eligibility review and that individual really had no input in contract performance. Thus, considering SBA's desire not to insert itself into a firm's business decisions in hiring individuals to perform a HUBZone contract and its responsibility to ensure that additional HUBZone employees are in fact hired to perform the contract and that the overall purposes of the program are served, SBA requests comments on how best to look at this 20% minimum requirement. SBA also believes that a lower percentage (i.e., allowing less than 20% HUBZone residents) would unreasonably diminish the impact of the program on the targeted areas and populations. However, SBA requests comments as to whether a different percentage is also reasonable and would accomplish the objectives of the HUBZone program while not unduly burdening firms performing HUBZone contracts. [[Page 54814]] SBA proposes to eliminate the definition of ``county unemployment rate'' and incorporate it into the definition of ``qualified non- metropolitan county (QNMC),'' as discussed further below. The proposed rule would amend the definition of ``D/HUB'' to make clear that this term refers to the Director of SBA's Office of HUBZone. SBA proposes to amend the definition of ``decertify'' to clarify that the decertification procedures described in part 126 are applicable to firms which voluntarily withdraw from the HUBZone program. If a certified HUBZone small business concern is unable to recertify its HUBZone eligibility at the time of its annual recertification, or if it acquires, is acquired by, or merges with another concern and no longer meets the HUBZone eligibility requirements, it should submit a request to SBA to voluntarily withdraw. Upon receipt of such request, SBA will remove the firm as a certified HUBZone small business concern from the Dynamic Small Business Search (DSBS) system. SBA proposes to amend the definition of the term ``employee.'' This term is key to the HUBZone program since the basic HUBZone eligibility requirements for a small business are to have at least 35% of its employees residing in a HUBZone and to have a principal office located in a HUBZone. SBA believes that a clarification is necessary because the existing definition's language--``a minimum of 40 hours per month''--is ambiguous. The proposed rule would explain that an individual is an employee if he or she works at least 40 hours during the four-week period immediately prior to the relevant date--either the date the concern submits its HUBZone application to SBA or the date of recertification. SBA will review a firm's payroll records for the most recently completed pay periods that account for the four-week period immediately prior to the date of application or date of recertification in order to determine which individuals meet this definition. If the firm has weekly pay periods, then SBA will review the payroll records for the most recently completed last four pay periods. If the firm has two-week pay periods, then SBA will review the payroll records for the last two most recently completed pay periods. If the payroll records demonstrate that an individual worked forty or more hours during that four-week period, he or she would be considered an employee of the concern. Additionally, SBA is considering revising the requirement from 40 hours per month to 20 hours per week, due to concerns that the 40 hours per month requirement is not sufficient to stimulate employment in HUBZones. Considering the purpose of the HUBZone program to stimulate meaningful employment in communities with high unemployment, SBA specifically requests comments on the number of hours SBA should require in order to count an individual as an employee of the firm for HUBZone eligibility purposes. The proposed definition of ``employee'' continues to specify that employees include temporary and leased employees, individuals obtained through a union agreement, and those co-employed through a professional employer organization (PEO) agreement. To further respond to the number of hours an individual must work in order to be considered an employee of the firm, SBA also requests comments on whether SBA should count only full-time employees or full-time equivalents. The proposed definition clarifies that all owners of a HUBZone applicant or HUBZone small business who work at least 40 hours per month will be considered employees, regardless of whether they receive compensation. This current interpretation responds to situations where the counting of one individual (i.e., a non-HUBZone resident owner who works at the firm but does not collect a direct salary and claims not to be an employee) would render the firm ineligible for HUBZone participation. SBA believes that any time an owner works at least 40 hours per month for the concern, he or she should be counted as an employee. In addition, the proposed definition adds that if the sole owner of a firm works less than 40 hours during the four-week period immediately prior to the relevant date of review, but has not hired another individual to direct the actions of the concern's employees, then that owner will be considered an employee as well. The proposed definition clarifies that individuals who do not receive compensation and those who receive deferred compensation are generally not considered employees. The proposed definition further clarifies that individuals who receive in-kind compensation commensurate with the work performed will be considered employees. This means that an individual who works at least 40 hours per month and receives in-kind compensation equaling the value of 10 working hours would generally not be considered an employee. SBA believes these clarifications are needed because there has been confusion about whether someone who receives in-kind compensation should be considered an employee, about what SBA considers in-kind compensation, and about what deferred compensation means. In general, in-kind compensation is non-monetary compensation, or anything other than cash, wages, salary or other monetary benefit received in exchange for work performed. An example of in-kind compensation is housing received in exchange for work performed. SBA generally treats individuals receiving in-kind compensation as employees because they are receiving an economic benefit from working for the firm, which is consistent with the purposes of the HUBZone program. In a previous proposed rule amending the definition of ``employee'' to address in-kind compensation, SBA explained: ``SBA intended the term compensation to be read broadly and to encompass more than wages. Thus, a person who receives food, housing, or other non-monetary compensation in exchange for work performed would not be considered a volunteer under that proposed regulation. SBA believes that allowing volunteers to be counted as employees would not fulfill the purpose of the HUBZone Act--job creation and economic growth in underutilized communities.'' 67 FR 3826 (Jan. 28, 2002). SBA requests comments on whether it is reasonable to continue treating in-kind compensation this way, and on how to measure whether in-kind compensation is commensurate with work performed. There has also been some confusion surrounding SBA's treatment of deferred compensation. In general, deferred compensation means compensation that is not received at the time it is earned, but is received sometime in the future. SBA does not treat individuals receiving deferred compensation as employees for HUBZone purposes because such individuals are not receiving a present economic benefit from working for the firm, which is not consistent with the purpose of the HUBZone program. The Court of Federal Claims has found this policy to be reasonable. In Aeolus Systems, LLC v. United States, 79 Fed. Cl. 1, 9 (2007), the Court held that: ``(1) the concept of deferred compensation is contrary to the program's goal of increasing gainful employment in HUBZones, and (2) the identification of non-owner individuals who work for deferred compensation as `employees' would open up the HUBZone program to potential abuse.'' The proposed definition also clarifies that independent contractors who receive compensation through Internal Revenue Service (IRS) Form 1099 generally are not considered employees, [[Page 54815]] as long as such individuals are not considered to be employees for size purposes under SBA's Size Policy Statement No. 1. SBA believes that it would not make sense to find an individual to be an employee of a firm when determining the concern's size, but to then not consider that same individual to be an employee when determining compliance with HUBZone eligibility rules. If an independent contractor meets the employee test under SBA Size Policy Statement No. 1, such individual should also be considered an employee for HUBZone eligibility purposes. If someone is truly acting as an independent contractor, that individual is acting as a subcontractor, not an employee. Such an individual does not receive the same benefits as an employee, but is also not under the same control as an employee. The proposed rule also clarifies that subcontractors are not considered employees when determining compliance with the HUBZone eligibility rules. Additionally, the proposed definition states that employees of affiliates may be counted as employees of a HUBZone applicant or certified HUBZone small business concern, if the totality of circumstances demonstrates that there is no clear line of fracture between the concerns. This has always been SBA's policy and this amendment is intended to eliminate ambiguities in the regulation. When looking at the totality of circumstances to determine whether individuals are employees of a concern, SBA will review all information, including criteria used by the Internal Revenue Service (IRS) for Federal income tax purposes and those set forth in SBA's Size Policy Statement No. 1. This means that SBA will consider the employees of an affiliate firm as employees of the HUBZone small business if there is no clear line of fracture between the business concerns in question, the employees are in fact shared, or there is evidence of intentional subterfuge. When determining whether there is a clear line of fracture, SBA will review, among other criteria, whether the firms: Operate in the same or similar line of business; operate in the same geographic location; share office space or equipment; share any employees; share payroll or other administrative or support services; share or have similar websites or email addresses; share telephone lines or facsimile machines; have entered into agreements together (e.g., subcontracting, teaming, joint venture, or leasing agreements) or otherwise use each other's services; share customers; have similar names; have key employees participating in each other's business decisions; or have hired each other's former employees. For example, if John Smith owns 100% of Company A and 51% of Company B, the two companies are affiliated under SBA's size regulations based on common ownership. Thus, SBA would look at the totality of circumstances to determine whether it would be reasonable to treat the employees of Company B as employees of Company A for HUBZone program purposes. If both companies do construction work and share office space and equipment, then SBA would find that there is not a clear line of fracture between the firms, and would treat the employees of Company B as employees of Company A for HUBZone program purposes. This means that the employees of Company B would be counted in determining Company A's compliance with the 35% HUBZone residency requirement and the principal office requirement. Conversely, SBA would not treat the employees of one company as employees of another for HUBZone program purposes if the two firms would not be considered affiliates for size purposes. SBA will look at the totality of circumstances to determine whether it would be reasonable to treat the employees of one concern as employees of another for HUBZone program purposes only where SBA first determines that the two firms should be considered affiliates for size purposes. SBA specifically requests comments on these proposed changes to the definition of ``employee.'' SBA also requests comments on how SBA should treat individuals who are employed through an agreement with a third-party business that specializes in providing HUBZone resident employees to prospective HUBZone small business concerns for the specific purpose of achieving and maintaining HUBZone eligibility. For example, one individual could work 10 hours per month for four separate businesses and be counted as a HUBZone resident employee for each of those businesses. SBA has seen this arrangement several times in recent years and requests public input on whether such an arrangement is consistent with the purposes of the HUBZone program and/or how such arrangements should be structured in order to be consistent with such purposes. SBA proposes to revise the definition of ``HUBZone small business concern'' to remove ambiguities in the regulation. Currently, the definition of this term is copied directly from the Small Business Act and addresses only the ownership and control requirements. SBA proposes to revise the definition to state that ``HUBZone small business concern'' or ``certified HUBZone small business concern'' means a small business concern that meets the requirements described in Sec. 126.200 and that SBA has certified as eligible for federal contracting assistance under the HUBZone program. In addition, SBA proposes to replace the term ``qualified HUBZone SBC'' with the term ``certified HUBZone small business concern'' to make the regulations more clear, since firms must apply to SBA and be certified as HUBZone small business concerns before they are can qualify to receive the benefits of the HUBZone program. Accordingly, this rule proposes to remove the phrase ``qualified HUBZone SBC'' or ``qualified HUBZone small business concern'' everywhere it appears in SBA's regulations and replace it with ``certified HUBZone small business concern.'' In addition, SBA proposes to implement section 1701(i) of the NDAA 2018 in the amended definition of ``HUBZone small business concern.'' The NDAA 2018 was enacted on December 12, 2017. Section 1701 of the act makes a number of amendments to sections 3(p) and 31 of the Small Business Act, 15. U.S.C. 632(p), 657a, which govern the HUBZone program. Most of these changes are not effective until January 1, 2020, with the exception of the provision contained in section 1701(i). In enacting section 1701(i), Congress intended for small businesses located in redesignated areas that are set to expire to retain their HUBZone eligibility until the date on which SBA updates the HUBZone maps in accordance with the broader changes described in section 1701. In other words, firms that were certified HUBZone small business concerns as of the date of enactment (December 12, 2017), and that had principal offices located in redesignated areas set to expire prior to January 1, 2020, shall remain certified HUBZone small business concerns until SBA updates the HUBZone maps after the 2020 decennial census, so long as all other HUBZone eligibility requirements described in Sec. 126.200 are met. This means that in order to continue to be considered a certified HUBZone small business concern, the firm must: Continue to meet the HUBZone ownership and control requirements; continue to meet the 35% HUBZone residency requirement; and maintain its principal office in the redesignated area or another qualified HUBZone. SBA [[Page 54816]] notes that to implement this change, SBA will ``freeze'' the HUBZone maps with respect to qualified census tracts, qualified non- metropolitan counties, and redesignated areas. As a result, for all redesignated areas in existence on December 12, 2017, the expiration of their HUBZone treatment has been extended until December 31, 2021. SBA selected this date because SBA estimates that the HUBZone maps will have been updated to incorporate the results of the 2020 census and to reflect the broad changes mandated by section 1701 by that time, and selecting a specific date provides stability to program participants. With respect to the 35% residency requirement, SBA notes that an employee of a certified HUBZone small business concern who resided in a redesignated area as of December 12, 2017, will continue to be treated as a HUBZone resident through December 31, 2021. SBA proposes to eliminate the definition of ``median household income'' and incorporate it into the definition of ``qualified non- metropolitan county,'' to make the regulations more readable and to clarify that SBA obtains the data on median household income from the Bureau of the Census' publication titled, ``American Community Survey 5-year estimates.'' SBA also proposes to remove the definition of ``non-metropolitan'' and incorporate it into the definition of ``qualified non-metropolitan county'' to make the regulations more clear and explain that the term ``non-metropolitan'' is defined by the Bureau of the Census, United States Department of Commerce, in its publications on the Census of Population, Social and Economic Characteristics. SBA proposes to remove the definition of ``metropolitan statistical area'' and incorporate it into the definitions of the terms ``qualified census tract'' and ``qualified non-metropolitan county'' to make the regulations more readable. SBA proposes to add a definition for ``primary industry classification'' that refers to SBA's definition of such term in 13 CFR 121.107. To be certified into the HUBZone program, an applicant must be small, which means it must meet the size standard corresponding to the North American Industry Classification System (NAICS) code associated with its primary industry classification. SBA proposes to amend the definition of ``principal office'' to eliminate ambiguities in the regulation. SBA proposes to clarify that when determining whether a concern's principal office is located in a HUBZone. SBA counts all employees of the concern, other than those employees who work at jobsites. This includes both HUBZone residents and non-HUBZone residents. SBA is proposing this clarification because some applicants have been under the mistaken impression that only HUBZone resident employees are counted for purposes of determining a firm's principal office, but this is not and has never been SBA's intent. In addition, SBA proposes to add that in order for a location to be considered a concern's principal office, the concern must demonstrate that it conducts business at this location. SBA has included this clarification to address situations such as when firms are only able to provide a lease document but not utility bills. SBA believes that evidence that business is being conducted at the location is necessary to ensure the purposes of the HUBZone Program are being fulfilled. Finally, SBA proposes to add examples to the definition of principal office, to illustrate how the agency treats situations in which employees work at multiple locations. The first example provides that if an employee spends more than 50% of his or her time at one location, the employee is deemed to work at that location. If the employee does not spend more than 50% of his or her time at any one location, then generally the employee will be deemed to work at a non- HUBZone location (assuming all locations are not in HUBZones). SBA specifically requests comments on these proposed changes. SBA proposes to amend the definition of ``qualified base closure area'' to remove ambiguities in the regulation and to be consistent with SBA's interpretation of the statutory text. In paragraph (1)(i) of the definition, SBA proposes to replace the language ``The date the Administrator makes a final determination as to whether or not to implement the applicable designations in accordance with the results of the decennial census conducted after the area was initially designated as a base closure area'' with ``the date on which the results of the decennial census conducted after the area was initially designated as a base closure area are released.'' In paragraph (2), SBA proposes to replace the language ``until such time as the Administrator makes a final determination as to whether or not to implement the applicable designations in accordance with the results of the 2020 decennial census are released'' with ``until the results of the 2020 decennial census are released.'' SBA believes these changes are needed to make clear that SBA interprets ``the date the Administrator makes a final determination as to whether or not to implement the applicable designations'' to mean the date that the public data is released. SBA proposes to amend the definition of ``qualified census tract'' to make the regulation more readable. The proposed definition provides the criteria used to define the term in the Internal Revenue Code, rather than simply cross-referencing it as the regulation currently does. SBA proposes to eliminate the definition of ``qualified HUBZone SBC,'' as discussed above. SBA proposes to amend the definition of ``qualified non- metropolitan county'' to include Difficult Development Areas (DDAs) and to reflect SBA's current policy of utilizing the most recent data from the Local Area Unemployment Statistics report, which is annually produced by the Department of Labor's Bureau of Labor and Statistics. The proposed definition explains that a DDA is an area defined by the Department of Housing and Urban Development that is within Alaska, Hawaii, or any territory or possession of the United Sates outside the 48 contiguous states. DDAs may be HUBZones if they are also nonmetropolitan counties. SBA notes that it has been including qualified non-metropolitan counties that are DDAs in its program since the statutory authority was enacted, but had not yet amended the term qualified non-metropolitan county to include DDAs. SBA proposes to amend the definition of ``redesignated area'' to delete an obsolete reference to the 2010 census. SBA proposes to define ``redesignated area'' as a census tract or non-metropolitan county that remains qualified as a HUBZone for 3 years after the date on which the area ceased to be either a qualified census tract or a qualified non- metropolitan county. The proposed rule would also amend the definition of ``reside.'' This term is used when analyzing whether an employee should be considered a HUBZone resident for purposes of determining a firm's compliance with the 35% HUBZone residency requirement. SBA proposes to remove the reference to primary residence, to eliminate the requirement that an individual demonstrate the intent to live somewhere indefinitely, and to provide clarifying examples. SBA proposes to remove the reference to primary residence because many individuals do not have primary residences as the term is traditionally defined. SBA proposes to remove the requirement to prove intent to live somewhere indefinitely [[Page 54817]] because SBA does not have a reasonably reliable method of enforcing this requirement. In the alternative, SBA proposes that ``reside'' means to live at a location full-time and for at least 180 days immediately prior to the date of application or date of recertification, as applicable. SBA believes that this is consistent with the purposes of the HUBZone program, while taking into account the realities of the unique living arrangements that may be utilized by certain small business' workforces. The definition also makes clear that to determine an individual's residence, SBA will first look to an individual's address as identified on his or her driver's license or voter's registration card, which is SBA's current and long-standing policy. Where such documentation is not available, SBA will require other specific proof of residency, such as deeds or leases, or utility bills. Additionally, this rule also proposes examples to add clarity to these revisions. SBA specifically requests comments on these proposed changes. In addition, SBA notes that more small businesses are performing contracts overseas and are faced with the problem of how to treat those employees who reside in a HUBZone when in the United States or its territories, but are temporarily residing overseas to perform a contract. SBA proposes that it will consider the residence located in the United States as that employee's residence, if the employee is working overseas for the period of a contract. SBA believes that as long as that employee can provide documents showing he or she is paying rent or owns a home in a HUBZone, then the employee should be counted as a HUBZone resident in determining whether the small business meets the 35% HUBZone residency requirement. Because of the proposed change, discussed below (which treats an individual as a HUBZone resident if that individual resided in a HUBZone at the time his or her employer was certified into the HUBZone program or at the time he or she first worked for the certified HUBZone small business concern (i.e., the individual was hired after the firm was certified into the HUBZone program), so long as he or she continues to work for that same firm, even if the area where the individual lives no longer qualifies as a HUBZone or the individual has moved to a non-HUBZone area) this provision would have meaning only with respect to firms that have employees performing overseas contracts and are applying to the HUBZone program for the first time. An individual who already qualified as a HUBZone resident for a certified HUBZone small business would continue to be treated as a resident of a HUBZone for HUBZone program eligibility purposes as long as he or she continued to work for the same certified HUBZone small business. SBA believes that this proposal strikes the right balance between acknowledging the increased prevalence of overseas contracting by small businesses and the need to ensure that the program benefits HUBZone areas. However, SBA requests comments on this issue. SBA proposes to eliminate the definition of ``small disadvantaged business (SDB)'' because SBA no longer certifies firms as SDBs, and SDB set-asides and price evaluation preferences no longer exist. However, the term SDB continues to be defined in part 124 for use in other contexts such as subcontracting. Finally, SBA proposes to remove the definition of ``statewide average unemployment rate'' and incorporate it into the definition of ``qualified non-metropolitan county'' to make the regulations more readable and to clarify that the statewide average unemployment rate is determined using the Local Area Unemployment Statistics report, which is produced by the Department of Labor's Bureau of Labor Statistics. 2. Eligibility Requirements SBA proposes to reorganize Sec. 126.200 to make the section more readable and to make the HUBZone eligibility requirements more clear. With respect to the 35% HUBZone residency requirement, SBA proposes to clarify that all employees are counted when determining a concern's compliance with this requirement, regardless of where the employee performs his or her work. This has always been SBA's policy, but it appears that some applicants have misinterpreted SBA's rules. SBA has received several comments indicating that some in the community mistakenly believe that SBA would look only at those employees performing work in the principal office, and not any employees performing work at job site locations, in determining whether the firm meets the 35% HUBZone residency requirement. This has never been the case. SBA counts all individuals considered ``employees'' under the HUBZone definition of the term toward the 35% HUBZone residency requirement. SBA believes that the misunderstanding stems from the definition of the term ``principal office.'' In determining a concern's ``principal office,'' SBA excludes the concern's employees who perform the majority of their work at job-site locations. That exclusion, however, applies only to the principal office determination, and not to whether a concern meets the 35% HUBZone residency requirement. The proposed rule seeks to clarify SBA's intent. In addition, SBA proposes to change its application of how SBA requires a firm to meet the 35% residency requirement when the calculation results in a fraction. Previously, when the calculation of 35% of a concern's total employees resulted in a fraction, SBA would round up to the nearest whole number. For example, under the current rule, if a firm has 6 total employees, since 35% of 6 is 2.1, then SBA would round 2.1 up to 3 and require the firm to employ 3 HUBZone residents to meet the 35% HUBZone residency requirement. This rule proposes rounding to the nearest whole number, rather than rounding up in every instance. This means that if 35% of a firm's employees equates to X plus .49 or less, SBA would round down to X and not up to the next whole number. Thus, in the example above, SBA would round 2.1 down to 2 and would only require the firm to employ 2 HUBZone residents. SBA believes that this proposed change would have a minimal impact, but would clear up confusion that several small businesses seeking HUBZone status have encountered. In addition, SBA has proposed new examples relating to the HUBZone residency requirement. With respect to the principal office and HUBZone residency requirements for tribally owned entities, SBA has clarified the regulatory language without making any substantive changes to the rule. Specifically, the proposed rule would replace the word ``adjoining'' with the word ``adjacent'' as it was used to describe HUBZones neighboring Indian reservations, because SBA believes this term is more accurate. In order to provide stability and certainty for program participants, SBA is also proposing that an employee that resides in a HUBZone at the time of a HUBZone small business concern's certification or recertification shall continue to count as a HUBZone employee as long as the individual remains an employee of the firm, even if the employee moves to a location that is not in a qualified HUBZone area or the area where the employee's residence is located is redesignated and no longer qualifies as a HUBZone. SBA understands that a few HUBZone concerns have become ineligible for further HUBZone contracts merely because one or two of their employees [[Page 54818]] have moved their residences from a HUBZone to non-HUBZone area. This has placed such businesses in the unenviable position of firing those individuals and replacing them with other individuals currently living in a HUBZone, or allowing the individuals to remain on the payroll and either becoming ineligible for the HUBZone program or having to hire additional HUBZone individuals that might cause a substantial hardship on very small businesses by increasing costs and reducing profits of those businesses. One of the purposes of the program is to promote job creation for individuals living in HUBZones, enabling them to better their lives and their communities. Someone who is hired by a HUBZone small business concern and who is then able to better the lives of his or her family by moving to a different location outside a HUBZone area (due to that newly created job) should not face losing his or her job because the HUBZone small business concern cannot maintain its HUBZone eligibility with that individual on the payroll. Under this proposed change, a certified HUBZone small business concern would have to maintain records of the employee's original HUBZone address, as well as records of the individual's continued and uninterrupted employment by the HUBZone small business concern, for the duration of the firm's participation in the HUBZone program. Further, SBA proposes to clarify in proposed Sec. 126.200(g) that the concern and its owners cannot have an active exclusion in the System for Award Management and be certified into the program. SBA believes that this logically follows from a debarred or suspended status, but would amend the regulations for clarity nevertheless. Debarred/suspended entities are ineligible for federal contracting assistance and would thus not receive any benefits from being certified as a HUBZone small business concern. In Sec. 126.204, SBA proposes to clarify that a HUBZone small business concern may have affiliates, but the affiliate's employees may be counted as employees of the HUBZone applicant/participant when determining the concern's compliance with the principal office and 35% percent HUBZone residency requirements. Proposed Sec. 126.204 clarifies that where there is evidence that a HUBZone applicant/ participant and its affiliate are intertwined and acting as one, SBA will count the employees of one as employees of the other. The HUBZone applicant or concern must demonstrate a clear line of fracture between it and any affiliate in order for SBA to not count the affiliate's employees when determining the concern's principal office or compliance with the 35% residency requirement. The above supplementary information on the proposed definition of the term ``employee'' discusses this issue in more detail. In Sec. 126.205, SBA proposes to delete the following: ``Participation in other SBA Programs is not a requirement for participation in the HUBZone Program.'' SBA believes that this language is unnecessary and may merely confuse prospective HUBZone small businesses. In Sec. 126.206, SBA proposes to replace the term ``non- manufacturers'' with ``nonmanufacturers'' to be consistent with SBA's regulations at Sec. 121.406(b). SBA proposes to amend the title and text of Sec. 126.207 to clarify that a HUBZone small business concern may have multiple offices, as long as the firm's principal office is located in a HUBZone, and to clarify that a different rule applies to concerns owned by Indian Tribal Governments. 3. Certification The HUBZone program is a certification program. In other words, a small business concern must submit an application and supporting documents to SBA in order for SBA to determine eligibility and certify the company into the program. SBA has proposed several clarifications to its certification process. SBA proposes to amend Sec. 126.300 by breaking up the section to make it clearer and more readable, to move the discussion of the adverse inference rule to Sec. 126.306, and to clarify that SBA may conduct site visits, conduct independent research, and review additional information (such as tax and property records, public utility records, postal records, and other relevant information). SBA proposes to revise Sec. 126.303 to update the instructions for submitting electronic applications. This proposed rule would also clarify that an applicant must submit a completed application and all documents and a representation that it meets the program's requirements as of the date of the application and that the information provided and any subsequent information provided is complete, true and accurate. Further, SBA proposes to require that the representation be electronically signed by a person who is authorized to represent the concern. SBA believes that this should either an owner or officer of the applicant, and not an administrative employee acting on behalf of an officer. Further, SBA proposes to clarify that after an application has been submitted, the applicant must notify SBA of any changes that could affect its eligibility. The applicant would have to provide information and documents to support the changes. SBA also proposes to clarify that if an applicant believes that an area is a HUBZone but SBA's website is not showing the area to be a qualified HUBZone, the applicant must note this on the application. Further, the applicant must provide documents demonstrating why it believes that the area meets the statutory criteria of a HUBZone. It cannot merely assert that it believes the area is underutilized and should be a HUBZone; it must show that the area meets the statutory criteria. SBA proposes to delete and reserve Sec. 126.305, addressing what format the certification to SBA must take, because this is addressed in Sec. 126.303. SBA proposes several changes to Sec. 126.306. First, SBA proposes to clarify that the agency must receive all required information, supporting documents, and a completed HUBZone representation before it will begin processing a concern's application and that SBA will make a final decision within 90 calendar days after receipt of a complete package, whenever practicable. SBA proposes to clarify that the burden of proof to demonstrate eligibility is on the applicant concern and if the concern does not provide requested information within the allotted time provided by SBA, or if it submits incomplete information, SBA may presume that disclosure of the missing information would adversely affect the business concern and demonstrate a lack of eligibility in the area or areas to which the information relates and decline the applicant. Similarly, SBA proposes to clarify that an applicant must be eligible as of the date it submitted its application and up until the time the D/HUB issues a decision. SBA cannot certify a business into the program that does not meet the eligibility requirements at that time. SBA proposes to amend Sec. 126.307 to make a general reference to the website where SBA identifies where firms are listed as certified HUBZone small business concerns so that the regulation itself does not have to be updated every time a change in the website location occurs. The proposed rule would also delete the reference to the ability of requesters to obtain a copy of the list of certified HUBZone small business concerns by writing to the D/HUB at SBA. An interested party may find all firms that are certified HUBZone small business concerns by searching the [[Page 54819]] Dynamic Small Business Search (DSBS) system, and can verify a specific concern's HUBZone certification. SBA believes that the availability of this search function makes written requests an outdated and inefficient way of obtaining current information about certified HUBZone small business concerns. SBA proposes to amend Sec. 126.308 to clarify that certified HUBZone small business concerns cannot ``opt out'' of being publicly displayed in the DSBS system. All certified HUBZone small business concerns appear in DSBS as certified HUBZone small business concerns, and those not so appearing will not be eligible for HUBZone contracts. Contracting officers refer to DSBS to ensure that potential awardees are in fact HUBZone certified small business concerns. SBA proposes to revise Sec. 126.309 to add a new provision permitting a firm to submit a formal request for reconsideration when it receives a determination denying admission to the HUBZone program. Under the proposed regulation, the business would be able to submit a request for reconsideration within 15 calendar days after receiving SBA's decision. SBA will presume that written notice was provided if SBA sends a communication to the concern at an address, email address, or fax number provided in the concern's System for Award Management (SAM) (or any successor system) profile. The applicant would be required to set forth the reasons why it believes the D/HUB's initial decision was erroneous and include information and documentation pertinent to overcoming the reasons for the initial decline, whether or not available at the time of initial application. Proposed Sec. 126.309(a)(4) would explain that SBA would not add a concern to DSBS as a certified HUBZone small business concern during the reconsideration process. SBA would recognize a concern as a certified HUBZone small business concern in DSBS only if the D/HUB certifies the concern into the program. The D/HUB would have 30 calendar days to issue a decision and could either approve the application, deny it on the same grounds as the original decision, or deny it on other grounds. If the D/HUB declines the application solely on issues not raised in the initial decline, the applicant could ask for reconsideration as if it were an initial decline. SBA proposes that if a concern that has been declined does not request reconsideration of the D/HUB's decision, the concern could reapply for certification 90 calendar days after the date of decline. If a concern that has been declined requests reconsideration and the decline is affirmed, the concern could apply for certification 90 calendar days after the date of the D/HUB's decision on the request for reconsideration. 4. Program Examinations As part of SBA's oversight responsibilities for the HUBZone program, SBA monitors the HUBZone program and certified HUBZone small business concerns, and verifies information submitted by HUBZone applicants, by conducting program examinations. SBA proposes to revise Sec. 126.401 to clarify what a program examination is. The proposed rule would provide that a program examination is a review by SBA that verifies the accuracy of any certification made or information provided as part of the HUBZone application or recertification process. SBA proposes to revise Sec. 126.403 to clarify what SBA will review during a program examination. SBA would be able to review any information related to the concern's HUBZone eligibility, including documentation related to the concern's ownership and principal office, compliance with the 35% HUBZone residency requirement, and the concern's ``attempt to maintain'' 35% of its employees from a HUBZone during the performance of a HUBZone contract. SBA proposes to add a new Sec. 126.404 to provide the procedures and possible outcomes of a program examination. Whether the concern is applying to the HUBZone program for the first time, is undergoing a recertification analysis, or is subject to a program examination for another reason, SBA's program examination can result in a decision finding the concern either to be eligible to participate in the program (either for the first time or to be able to continue in the program), or not eligible to participate in the program (which would result in a disapproval of an application or the decertification of a HUBZone concern). The proposed regulation provides that SBA will make its determination within 90 calendar days after receiving all requested information, when practicable, and that possible outcomes of a program examination include certification, denial of certification, continued certification, or proposed decertification. 5. Maintaining HUBZone Status SBA proposes to amend Sec. 126.500 to require HUBZone small business concerns to recertify annually to SBA that they continue to meet all of the HUBZone eligibility requirements, instead of requiring them to undergo a recertification by SBA every three years. The proposed rule also provides that when a concern fails to submit its annual recertification to SBA, SBA will start proceedings to decertify the concern. SBA proposes to amend Sec. 126.501 to clarify that once certified, a HUBZone small business concern will remain eligible for HUBZone contract awards for one year from the date of certification, provided that the concern qualifies as small for the size standard corresponding to the NAICS code assigned to the contract. On the one-year anniversary of the certification, the firm would be required to recertify that it continues to meet the HUBZone eligibility requirements or voluntarily withdraw from the HUBZone program. Although requiring annual recertification instead of every three years may appear to impose additional burdens on a HUBZone small business concern, the annual recertification burden would be easily offset by the elimination of the requirement that a firm must demonstrate that it continues to be an eligible HUBZone small business concern both at the time of offer and time of award for any HUBZone contract. As set forth in proposed Sec. 126.501(a), once SBA certifies a concern as eligible to participate in the HUBZone program, the concern would be treated as an eligible HUBZone small business for all HUBZone contracts for which the concern qualifies as small for a period of one year from the date of its initial certification or its annual recertification. Thus, any certification that the firm makes representing that it qualifies as a HUBZone small business concern relates back to the initial certification or annual recertification. The HUBZone concern would not have to review and demonstrate its continued compliance with all HUBZone eligibility requirements throughout the year for each new HUBZone contract that it seeks. HUBZone status protests would also relate back to the date of initial certification or most recent annual recertification (except for protests against HUBZone joint ventures). Thus, the protest would have to demonstrate that the information relied on by SBA in certifying or recertifying the concern as an eligible HUBZone small business concern was incorrect, not that there may have been changed circumstances since that certification that would render the concern ineligible. For HUBZone status protests filed against a [[Page 54820]] HUBZone joint venture in connection with a HUBZone contract, a protester could challenge both the HUBZone status of the HUBZone member(s) of the joint venture and the joint venture's compliance with the requirements governing HUBZone joint ventures, including the contents of the joint venture agreement. If a protester challenged the HUBZone status of the HUBZone member(s) of the joint venture, the protest would relate back to the date of that firm's initial certification or annual recertification (whichever was more recent) and the firm's HUBZone status would be determined as of that date. If the protester challenged the joint venture's compliance with the HUBZone joint venture requirements set forth in Sec. 126.616, the protest would relate to the date on which the joint venture submitted its initial offer including price and the joint venture's compliance with Sec. 126.616 would be determined as of that date. SBA will also utilize the program examination mechanism to review the status of selected firms on the date of initial certification or recertification. The proposed rule would also clarify that a HUBZone small business concern could voluntarily withdraw from the program at any time. This may be because the concern believes that it no longer meets the program's eligibility requirements and could not be recertified or it may simply no longer want to participate in the program for a variety of other reasons. The proposed rule would also clarify that any firm that voluntarily withdraws from the program could reapply to the program at any point after 90 calendar days from the date it was decertified. For a firm that voluntarily withdrew because it no longer met all the HUBZone eligibility requirements, it could make the necessary changes that would enable it to come back into compliance and reapply to the program after 90 days. SBA proposes to amend Sec. 126.503 to clarify that if SBA is unable to verify a HUBZone small business concern's eligibility or determines that it may not be eligible for the program, the SBA could conduct a program examination or propose the concern for decertification and the HUBZone small business concern would be required to rebut each of the reasons SBA sets forth in its written notification letter within 15 calendar days from the date that it receives SBA's notification. If SBA finds that the concern is not eligible, the SBA would provide notice to the concern stating the basis for the determination, decertify the concern and remove it as a certified HUBZone small business concern from DSBS. In addition, the proposed rule would authorize SBA to propose decertification of a HUBZone small business concern that is performing one or more HUBZone contracts if SBA determines that the concern no longer has at least 20% of its employees living in a HUBZone. As identified above, the proposed rule has defined the statutory requirement that a HUBZone small business concern ``attempt to maintain'' compliance with the 35% HUBZone while performing a HUBZone contract to mean having not less than 20% HUBZone employees. During the proposed decertification process, the concern could demonstrate that it does in fact continue to have at least 20% HUBZone employees and has otherwise attempted to meet the 35% requirement. SBA proposes to amend Sec. 126.504 to reflect the various ways that a HUBZone small business concern could lose its designation in DSBS as a certified HUBZone small business concern, including if it has: (1) Been decertified as a result of a protest; (2) been decertified as a result of the procedures set forth in the regulations; or (3) submitted a voluntary withdrawal agreement to SBA. SBA proposes to add a new Sec. 126.506 to provide that a decertified firm could reapply for admission to the HUBZone program after ninety (90) calendar days. This is the current rule for reapplying, but SBA has moved it to a new section to make the process clearer. 6. Contractual Assistance SBA proposes to revise Sec. 126.601 to remove the discussion of the acquisition-related dollar thresholds in paragraph (a) because this does not relate to additional requirements a certified HUBZone small business concern must meet to submit an offer on a HUBZone contract. In addition, SBA proposes to move the discussion of compliance with the limitations on subcontracting for multiple award contracts currently in paragraph Sec. 126.601(g) to proposed Sec. 126.700, which specifically addresses the limitations on subcontracting requirements for HUBZone contracts. Finally, SBA proposes to move the discussion of recertification currently in paragraph Sec. 126.601(h) to proposed new Sec. 126.619. SBA proposes to amend Sec. 126.602 to be consistent with the proposed change requiring certified HUBZone small businesses to demonstrate their eligibility at the time of initial certification and annual certification only. Under this proposed regulation, certified HUBZone small business concerns would no longer be required to meet the 35% HUBZone residency requirement at all times while certified in the program. This means that they no longer would have to meet this requirement at the time of offer and time of award for a HUBZone contract. HUBZone small businesses would continue to have to ``attempt to maintain'' compliance with this requirement during the performance of a HUBZone contract. With respect to HUBZone status for the underlying contract, the agency will get credit if the firm was in the HUBZone program at the time of offer, and that status will continue unless and until recertification for the contract is required. 7. Protests SBA proposes to amend Sec. 126.801 to clarify how a HUBZone status protest should be filed and referred to SBA. Among other clarifications, SBA proposes to clarify that HUBZone status protests may be filed against HUBZone joint ventures. The grounds for such protests would include (1) arguments that the HUBZone small business concern partner(s) to the joint venture did not meet the HUBZone eligibility requirements set forth in Sec. 126.200 at the time of the concern's initial certification or most recent annual recertification, and (2) arguments that the HUBZone joint venture did not meet the requirements set forth in Sec. 126.616 at the time the joint venture submitted its offer for the HUBZone contract. For consistency purposes, SBA proposes to also make these clarifications for Service-Disabled Veteran-Owned (SDVO) small business joint ventures and Women-Owned Small Business (WOSB) joint ventures by amending sections 125.28(b) and 127.602. For the SDVO and WOSB programs, unlike the HUBZone program, the eligibility of the SDVO/WOSB joint venture partner would continue to be determined as of the date of offer. SBA proposes to amend Sec. 126.803, addressing how SBA will process a HUBZone status protest, to reduce the timeframe by which a protested concern must respond to SBA's notification that an interested party has filed a protest to 3 business days after the date of receipt of the SBA's letter. SBA believes that businesses generally respond in a short period of time since an award on a contract is pending and the business has this information readily available. In addition to the above, SBA proposes to update all instructions contained in the HUBZone regulations related to submission of information and documentation to SBA to specify that such submissions must be completed [[Page 54821]] electronically. The appropriate email addresses have been added and updated where necessary, and mailing addresses and fax numbers have been removed. This change is intended to reduce the paperwork burden on program applicants and participants. Compliance With Executive Orders 12866, 13563, 12988, 13132, and 13771, the Paperwork Reduction Act (44 U.S.C. Ch. 35), and the Regulatory Flexibility Act (5 U.S.C. 601-612) Executive Order 12866 The Office of Management and Budget (OMB) has determined that this proposed rule is a significant regulatory action for purposes of Executive Order 12866. Accordingly, the next section contains SBA's Regulatory Impact Analysis. However, this is not a major rule under the Congressional Review Act, 5 U.S.C. 801, et seq. Regulatory Impact Analysis 1. Is there a need for the regulatory action? SBA is proposing to make several changes to clarify its regulations. Through the years, SBA has spoken with small business and representatives and has determined that several regulations need further refinement so that they are easier to understand and implement. Further, SBA has added in new provisions providing for reconsiderations of application denials and decertifications. Currently, there is no request for reconsideration process in the regulations, unlike SBA's other certification programs. SBA believes that making the programs as consistent and similar as possible, where practicable, will make it easier for small businesses to understand the process. 2. What are the potential benefits and costs of this regulatory action? The proposed regulations seek to address or clarify issues, which will provide clarity to small businesses and contracting personnel. Further, SBA is proposing a formal request for reconsideration process, which could increase costs to the government (e.g., additional workload for requests for reconsideration), but will provide consistency in the processes for SBA's programs. SBA declined approximately 87 applicants in fiscal year 2017. The cost for requesting reconsideration is estimated at one and a half hours, and we estimate that approximately ten applicants would request reconsideration. That equates to 15 hours at an estimated rate of $33.34 an hour, for a de minimis annual total of $500. However, a reconsideration process is beneficial to HUBZone applicants because it allows them to correct deficiencies and come into compliance without waiting 90 days to reapply for the program. This should enable additional firms to be more quickly certified for the HUBZone program, which should allow them to seek and be awarded HUBZone contracts sooner. Thus, any costs associated with the voluntary request for reconsideration would be outweighed by the potential benefit of allowing firms to request reconsideration, although it is difficult to quantify the opportunity cost avoidance associated with this benefit. For example, if only one of the ten HUBZone firms applying for reconsideration was able to be recertified earlier and received a set aside contract of $150,000, it would clearly offset the entire cost incurred by the ten applicants. SBA proposes to require HUBZone small business concerns to recertify annually to SBA that they continue to meet all of the HUBZone eligibility requirements, instead of requiring them to undergo a recertification by SBA every three years. There are approximately 5,000 firms in the HUBZone program. Under SBA's current rules, firms must recertify every three years. Approximately 1,200 firms recertify each year based on HUBZone data, and we estimate it takes approximately 1 hour to recertify. OMB Control #3245-0320. Consequently, these proposed changes would increase the annual hourly burden for HUBZone firms by 3,800 hours or an estimated annual cost of $126,692.00. Instead, of 1,200 firms recertifying annually, all 5,000 would have to recertify annually. SBA is also proposing that HUBZone small business concerns will not have to represent or certify that they are eligible at the time of offer and award for every HUBZone contract, which are the current program requirements. Under current rules, a HUBZone small business concern must be eligible both at the time of offer and award of a HUBZone contract. Based on FPDS data, approximately 2,100 new HUBZone contracts are awarded each fiscal year. We estimate it takes approximately 1 hour for a firm to determine it is eligible at the time of offer and approximately 1 hour for a firm to determine it is eligible at the time of award. Thus, this proposed rule will reduce burden on HUBZone small business concerns by approximately 4,200 hours for an estimated annual savings of $140,028.00. SBA is proposing that an employee who resides in a HUBZone at the time of a HUBZone concern's certification or recertification shall continue to count as a HUBZone employee as long as the individual remains an employee of the firm, even if the employee moves to a location that is not in a qualified HUBZone area or the area where the employee's residence is located is redesignated and no longer qualifies as a HUBZone. This will greatly reduce burden on firms, as they will not have to continuously track whether their employees still reside in a HUBZone or seek to employ new individuals if the location that one or more current employees reside loses its HUBZone status. We estimate that it takes 1 hour to determine eligibility and that this proposed change will save approximately 0.5 hours because once a HUBZone employee is hired, the firm will never again have to examine where that employee resides. Thus, this proposed rule should reduce the hourly burden on approximately 5,000 HUBZone small business concerns by 2,500 hours annually for an estimated annual savings of $83,350.00. 3. What are the alternatives to this final rule? The alternative to the proposed regulations would be the status quo, where a firm must be eligible at the time of offer and time of award. SBA has also identified other alternatives that SBA considered in the supplementary information to this proposed rule. With respect to the requirement to annually recertify, SBA could instead require firms to certify at time of offer, as is done for the other small business or socioeconomic set aside contract programs. In addition, SBA could propose only a formal request for reconsideration process or could have proposed no request for reconsideration process. However, as noted above, SBA has modeled these processes from its other contracting programs (e.g., 8(a) request for reconsideration) and believes that these processes have worked well for these programs and should therefore be utilized for the HUBZone program. SBA also considered whether eligibility or protest decisions should be appealed to the Office of Hearings and Appeals. Summary of Costs and Cost Savings Table 1: Summary of Incremental Costs and Cost Savings, below, sets out the estimated net incremental cost/(cost saving) associated with this proposed rule. Table 2: Detailed Breakdown of Incremental Costs and Cost Savings, below, provides a detailed explanation of the annual cost/(cost saving) estimates associated with this proposed rule. [[Page 54822]] Table 1--Summary of Incremental Costs and Cost Savings ------------------------------------------------------------------------ Regulatory action Annual cost/ (cost Item No. item saving) estimate ------------------------------------------------------------------------ 1............................ Annual $126,692 recertification instead of every 3 years. 2............................ Requiring a formal 500 request of reconsideration. 3............................ Removing requirement (140,028) to present eligibility at award. 4............................ Change to employee (83,350) count eligibility. ------------------- Estimated Net Incremental Cost/(Cost Saving).... (96,186) ------------------------------------------------------------------------ Table 2--Detailed Breakdown of Incremental Costs and Cost Savings ---------------------------------------------------------------------------------------------------------------- Annual cost/ (cost saving) estimate Item No. Regulatory action item details breakdown ---------------------------------------------------------------------------------------------------------------- 1....................................... Proposed regulatory change: SBA .................................... proposes to require HUBZone SBCs to recertify annually to SBA that they continue to meet all of the HUBZone eligibility requirements instead of requiring them to undergo a recertification by SBA every three years. Estimated number of impacted 3,800 entities. entities: There are approximately 5,000 firms in the HUBZone program, and under the proposed rule all these firms will need to recertify each year. However, since 1,200 firms recertify each year currently, the incremental increase in recertifications is 3,800 firms annually. Estimated average impact * 1 hour. (labor hour): SBA estimates that it takes the average participating firm about 1 hour to complete the recertification process. 2017 Median Pay ** (per hour): $33.34. Most HUBZone firms use an accountant or someone with similar skills for this task. ------------------------------------- Estimated Cost/(Cost Saving).......................................... $126,692. ---------------------------------------------------------------------------------------------------------------- 2....................................... Proposed regulatory change: SBA proposes to add a new provision permitting a firm to submit a formal request for reconsideration when it receives a determination denying admission to the HUBZone program. Estimated number of impacted 10 entities. entities: SBA declined 87 applications in FY 2017. Of these, we estimate that only 10 firms would seek reconsideration. Estimated average impact * 1.50 hours. (labor hour): SBA estimates that it would take 1.5 hours to respond to the denial and to request reconsideration. 2017 Median Pay ** (per hour): $33.34. Most HUBZone firms use an accountant or someone with similar skills for this task. ------------------------------------- Estimated Cost/(Cost Saving).......................................... $500. ---------------------------------------------------------------------------------------------------------------- 3....................................... Proposed regulatory change: .................................... Under current rules, a HUBZone firm must be eligible at the time of offer and award of a HUBZone contract. SBA is proposing that firms will not have to represent or certify that they are eligible at the time of offer and award for every contract, which are the current program requirements. Estimated number of impacted 4,200 entities. entities: Approximately 2,100 new HUBZone contracts awarded each fiscal year and each firm will need to certify twice per each contract. Estimated average impact * 1 hour. (labor hour): SBA estimates that it takes the average participating firm about 1 hour to complete the recertification process. 2017 Median Pay ** (per hour): $33.34. Most HUBZone firms use an accountant or someone with similar skills for this task. Estimated Cost/(Cost Saving).......................................... ($140,028). ---------------------------------------------------------------------------------------------------------------- 4....................................... Proposed regulatory change: SBA .................................... is proposing that an employee that resides in a HUBZone at the time of a HUBZone SBC's certification or recertification shall continue to count as a HUBZone employee as long as the individual remains an employee of the firm, even if the employee moves to a location that is not in a qualified HUBZone area or the area where the employee's residence is located is redesignated and no longer qualifies as a HUBZone. This will greatly reduce burden on firms, as they will not have to continually track whether their employees still reside in a HUBZone. Estimated number of impacted 5,000 entities. entities: SBA estimates that approximately 5,000 firms participate in the HUBZone program. All participating firms will be impacted by this change. Estimated average impact * 0.50 hours. (labor hour): SBA estimates that it would take 1 hour to determine eligibility but this proposed change will save 0.5, because once a HUBZone employee is hired the firm will never have to check residency for that employee. ------------------------------------- [[Page 54823]] 2017 Median Pay ** (per hour): $33.34. Most HUBZone firms use an accountant or someone with similar skills for this task. Estimated Cost/(Cost Saving).......................................... ($83,350). ---------------------------------------------------------------------------------------------------------------- Estimated Net Annual Impact........................................... ($96,186). ---------------------------------------------------------------------------------------------------------------- * This estimate is based on HUBZone and FPDS data, as well as best professional judgment. ** Source: Bureau of Labor Statistics, Accountants and Auditors. Executive Order 13563 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, DSBS and SAM. 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? SBA has also discussed some of the proposals in this rule with stakeholders at various small business procurement conferences, and received written comments on suggested changes to the HUBZone Program regulations generally in response to SBA's regulatory reform initiative implementing Executive Order 13771. The proposed rule will have a 60-day comment period and will be posted on www.regulations.gov to allow the public to comment meaningfully on its provisions. 3. Flexibility: Did the agency identify and consider regulatory approaches that reduce burdens and maintain flexibility and freedom of choice for the public? The proposed rule is intended to make it easier for firms to apply for, or participate in, the HUBZone program, as well as for procuring agencies to utilize the program. Executive Order 12988 This action meets applicable standards 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. Executive Order 13132 SBA has determined that this proposed 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 proposed rule has no federalism implications warranting preparation of a federalism assessment. Executive Order 13771 This proposed rule is expected to be an Executive Order 13771 deregulatory action. Details on the estimated cost savings of this proposed rule can be found in this rule's regulatory impact analysis. SBA proposes to require HUBZone small business concerns to recertify annually to SBA that they continue to meet all of the HUBZone eligibility requirements, instead of requiring them to undergo a recertification by SBA every three years. While the proposal to require firms to recertify annually will increase the burden on firms, this burden will be offset by the proposal to no longer require firms to be eligible at the time of offer and award for a contract, and will provide that if a firm hires a HUBZone resident, the firm will be able to count that employee towards the residency requirement, this reducing the burden on the firm to determine whether it meets the 35 percent residency requirement. Thus, the proposed rule will result in an estimated annual savings of $96,185.00 Paperwork Reduction Act, 44 U.S.C. Ch. 35 For the purposes of the Paperwork Reduction Act, SBA has determined that this rule, if adopted in final form, would impose new government- wide reporting requirements on HUBZone small business concerns. In the rule, SBA proposes that small businesses recertify annually to SBA concerning their status. At this time, HUBZone small businesses recertify every three years. Although requiring annual recertification instead of every three years may appear to impose additional burdens on a HUBZone small business concern, the annual recertification burden is offset by the elimination of the requirement to be eligible at the time of offer and award of a contract and the requirement to continually monitor the residency status of an employee that resides in a HUBZone at the time of hiring, resulting in an estimated annual savings of $96,186.00. In addition, SBA believes the annual recertification would assist in deterring fraud and abuse in the program. SBA also proposes that certified HUBZone small business concerns maintain records demonstrating the home address of employees who resided in a HUBZone at the time of the concern's certification or recertification, as well as records of the employee's continued employment with the firm. SBA believes allowing a HUBZone small business concern to continue employing individuals who once lived in HUBZones is consistent with the purpose of the HUBZone [[Page 54824]] program of increasing employment and would provide greater opportunities for certified HUBZone small business concerns to be eligible for and receive HUBZone contracts. Further, this will reduce burden as the firm will not have to continually determine whether the employee that resided in a HUBZone at the time of certification continues to reside in a HUBZone in connection with the offer and offer of each contract or future recertifications. A firm's ability to request reconsideration will be added to the existing information collection for the HUBZone program (OMB Control #3245-0320). Regulatory Flexibility Act, 5 U.S.C. 601-612 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 proposed rule concerns various aspects of SBA's HUBZone program, 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 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 5,000 certified HUBZone small business concerns that are listed as certified HUBZone small businesses in DSBS, and SBA receives approximately 1,500 applications annually. Most of the changes are clarification of current policy and therefore should not impact many of these concerns. Further, there is a new compliance or other costs imposed by the proposed rule on current or prospective HUBZone small business concerns. Under current law, HUBZone small business concerns must recertify every three years and under the proposed rule, the same firms will need to recertify every year. Nonetheless, most of these costs relating to reconsideration and appeals will be borne by the agency and not the small business. In addition, recertifying every year should not impose a significant cost on small business since the rules already require the business to actively monitor its compliance from the moment it applies to the program. As a result, SBA does not believe that the proposed amendments would have a disparate impact on small businesses or would impose any additional significant costs. For the reasons discussed, SBA certifies that this proposed rule would not have a significant economic impact on a substantial number of small business concerns. List of Subjects 13 CFR Part 115 Claims, Reporting and recordkeeping requirements, Small businesses, Surety bonds. 13 CFR Part 121 Administrative practice and procedure, Government procurement, Government property, Grant programs-business, Individuals with disabilities, Loan programs-business, Small businesses. 13 CFR Part 125 Government contracts, Government procurement, Reporting and recordkeeping requirements, Small businesses, Technical assistance, Veterans. 13 CFR Part 126 Administrative practice and procedure, Government procurement, Penalties, Reporting and recordkeeping requirements, Small businesses. For the reasons set forth in the preamble, SBA proposes to amend 13 CFR parts 115, 121, 125, and 126 as set forth below: PART 115--SURETY BOND GUARANTEE 0 1. The authority citation for part 115 continues to read as follows: Authority: 5 U.S.C. app 3; 15 U.S.C. 687b, 687c, 694a, 694b note; and Pub. L. 110-246, Sec. 12079, 122 Stat. 1651. Sec. 115.31 [Amended] 0 2. Amend Sec. 115.31(a)(2) by removing the phrase ``qualified HUBZone small business concern'' and adding in its place the phrase ``certified HUBZone small business concern''. PART 121--SMALL BUSINESS SIZE REGULATIONS 0 3. The authority citation for part 121 continues to read as follows: Authority: 15 U.S.C. 632, 634(b)(6), 662, and 694a(9). Sec. 121.404 [Amended] 0 4. Amend Sec. 121.404(g)(4) by removing the phrase ``HUBZone SBCs'' and adding in its place the phrase ``certified HUBZone small business concerns''. Sec. 121.1001 [Amended] 0 5. Amend Sec. 121.1001 as follows: 0 a. In paragraph (a)(6)(ii), remove the phrase ``qualified HUBZone SBC'' and add in its place the phrase ``certified HUBZone small business concern''; and 0 b. In paragraph (b)(8)(i), remove the phrase ``qualified HUBZone business concern'' and add in its place the phrase ``certified HUBZone small business concern''. PART 125--GOVERNMENT CONTRACTING PROGRAMS 0 6. The authority citation for part 125 is revised to read as follows: Authority: 15 U.S.C. 632(p), (q); 634(b)(6); 637; 644; 657f; 657q; 657r; and 657s. Sec. 125.1 [Amended] 0 7. In Sec. 125.1, amend the definition of ``similarly situated entity'' by removing the phrase ``qualified HUBZone small business concern'' and adding in its place the phrase ``certified HUBZone small business concern''. Sec. 125.2 [Amended] 0 8. Amend Sec. 125.2(c)(1)(i) by removing the phrase ``qualified HUBZone small business concerns'' and adding in its place the phrase ``certified HUBZone small business concerns''. Sec. 125.3 [Amended] 0 9. Amend Sec. 125.3(c)(1)(xi) by removing the phrase ``qualified HUBZone small business concerns'' and adding in its place the phrase ``certified HUBZone small business concerns''. Sec. 125.6 [Amended] 0 10. Amend Sec. 125.6 by removing paragraph (d) and redesignating paragraphs (e) through (h) as paragraphs (d) through (g), respectively. 0 11. Revise Sec. 125.28(b) to read as follows: Sec. 125.28 How does one file a service disabled veteran-owned status protest? * * * * * (b) Format and specificity. (1) Protests must be in writing and must specify all the grounds upon which the protest is based. A protest merely asserting that the protested concern is not an eligible SDVO SBC, without setting forth specific facts or allegations is insufficient. [[Page 54825]] Example to paragraph (b)(1): A protester submits a protest stating that the apparent successful offeror is not owned by a service-disabled veteran. The protest does not state any basis for this assertion. The protest allegation is insufficient. (2) For a protest filed against a SDVO SBC joint venture, the protest must state all specific grounds for why-- (i) The SDVO SBC partner to the joint venture did not meet the SDVO SBC eligibility requirements set forth in subpart B of part 125; and/or (ii) The protested SDVO SBC joint venture did not meet the requirements set forth in Sec. 125.18. * * * * * PART 126--HUBZONE PROGRAM 0 12. The authority citation for part 126 continues to read as follows: Authority: 15 U.S.C. 632(a), 632(j), 632(p), 644 and 657a. Sec. 126.101 [Amended] 0 13. Amend Sec. 126.101(b) by removing the phrase ``qualified HUBZone SBCs'' and adding in its place the phrase ``certified HUBZone small business concerns''. 0 14. Amend Sec. 126.103 as follows: 0 a. Remove the definitions of ``Alaska Native Village'', ``ANCSA'', ``County unemployment rate'', ``De-certify'', ``List'', ``Median household income'', ``Metropolitan statistical area'', ``Qualified HUBZone SBC'', ``Small Disadvantaged Business (SDB)'', and ``Statewide average unemployment rate''; 0 b. Revise the definitions of ``Alaska Native Corporation'', ``Attempt to maintain'', ``Certify'', ``D/HUB'', ``Employee'', ``HUBZone small business concern'', ``Interested party'', ``Principal office'', ``Qualified base closure area'', ``Qualified census tract'', ``Qualified non-metropolitan county'', ``Redesignated area'', ``Reside''; and 0 c. Add definitions for ``Decertify'', ``Dynamic Small Business Search (DSBS)'' and ``Primary industry classification or primary industry'' in alphabetical order. The revisions and additions read as follows: Sec. 126.103 What definitions are important in the HUBZone Program? * * * * * Alaska Native Corporation (ANC) has the same meaning as the term ``Native Corporation'' in section 3 of the Alaska Native Claims Settlement Act (ANCSA), 43 U.S.C. 1602. Attempt to maintain means making substantive and documented efforts, such as written offers of employment, published advertisements seeking employees, and attendance at job fairs and applies only to concerns during the performance of any HUBZone contract. A certified HUBZone small business concern that has less than 20% of its total employees residing in a HUBZone during the performance of a HUBZone contract has failed to attempt to maintain the HUBZone residency requirement. * * * * * Certify means the process by which SBA determines that a firm is qualified for the HUBZone program and eligible to be designated by SBA as a certified HUBZone small business concern in the Dynamic Small Business Search (DSBS) system (or successor system). * * * * * D/HUB means the Director of SBA's Office of HUBZone. Decertify means the process by which SBA determines that a concern no longer qualifies as a HUBZone small business concern and removes that concern as a certified HUBZone small business concern from DSBS (or successor system), or the process by which SBA removes a concern as a certified HUBZone small business concern from DSBS (or successor system) after receiving a request to voluntarily withdraw from the HUBZone program. Dynamic Small Business Search (DSBS) means the database that government agencies use to find small business contractors for upcoming contracts. The information a business provides when registering in the System for Award Management (SAM) is used to populate DSBS. For HUBZone Program purposes, a firm's DSBS profile will indicate whether it is a certified HUBZone small business concern, and if so, the date it was certified or recertified. Employee means all individuals employed on a full-time, part-time, or other basis, so long as that individual works a minimum of 40 hours during the four-week period immediately prior to the relevant date of review, which is either the date the concern submits its HUBZone application to SBA or the date of recertification. SBA will review a firm's payroll records for the most recently completed pay periods that account for the four-week period immediately prior to the date of application or date of recertification in order to determine which individuals meet this definition. To determine if an individual is an employee, SBA reviews the totality of circumstances, including criteria used by the Internal Revenue Service (IRS) for Federal income tax purposes and the factors set forth in SBA's Size Policy Statement No. 1 (51 FR 6099, Feb. 20, 1986). (1) In general, the following are considered employees: (i) Individuals obtained from a temporary employee agency, leasing concern, or through a union agreement, or co-employed pursuant to a professional employer organization agreement; (ii) An individual who has an ownership interest in the firm and who works for the firm a minimum of 40 hours during the four-week period immediately prior to the relevant date of review, whether or not the individual receives compensation; (iii) The sole owner of a firm who works less than 40 hours during the four-week period immediately prior to the relevant date of review, but who has not hired another individual to direct the actions of the concern's employees; (iv) Individuals who receive in-kind compensation commensurate with work performed. (2) In general, the following are not considered employees: (i) Individuals who receive no compensation (including no in-kind compensation) for work performed; (ii) Individuals who receive deferred compensation for work performed; (iii) Independent contractors that receive payment via IRS Form 1099 and are not considered employees under SBA's Size Policy Statement No. 1 (51 FR 6099, Feb. 20, 1986); and (iv) Subcontractors. (3) Employees of an affiliate may be considered employees, if the totality of the circumstances shows that there is no clear line of fracture between the HUBZone applicant (or certified HUBZone small business concern) and its affiliate(s) (see Sec. 126.204). * * * * * HUBZone small business concern or certified HUBZone small business concern (1) Means a small business concern that meets the requirements described in Sec. 126.200 and that SBA has certified as eligible for federal contracting assistance under the HUBZone program. (2) A firm that was a certified HUBZone small business concern as of December 12, 2017, and that had its principal office located in a redesignated area set to expire prior to January 1, 2020, shall remain a certified HUBZone small business concern until December 31, 2021, so long as all other HUBZone eligibility requirements are met. * * * * * Interested party means any concern that submits an offer for a specific [[Page 54826]] HUBZone set-aside contract (including Multiple Award Contracts) or order, any concern that submitted an offer in full and open competition and its opportunity for award will be affected by a price evaluation preference given a qualified HUBZone small business concern, any concern that submitted an offer in a full and open competition and its opportunity for award will be affected by a reserve of an award given to a qualified HUBZone small business concern, the contracting activity's contracting officer, or SBA. * * * * * Primary industry classification or primary industry means the six digit North American Industry Classification System (NAICS) code designation which best describes the primary business activity of the HUBZone applicant or HUBZone small business concern. SBA utilizes Sec. 121.107 of this chapter in determining a firm's primary industry classification. Principal office means the location where the greatest number of the concern's employees at any one location perform their work. (1) If an employee works at multiple locations, then the employee will be deemed to work at the location where the employee spends more than 50% of his or her time. If an employee does not spend more than 50% of his or her time at any one location and at least one of those locations is a non-HUBZone location, then the employee will be deemed to work at a non-HUBZone location; (2) In order for a location to be considered the principal office, the concern must conduct business at this location. (3) For those concerns whose ``primary industry classification'' is services or construction (see Sec. 121.201 of this chapter), the determination of principal office excludes the concern's employees who perform more than 50% of their work at job-site locations to fulfill specific contract obligations. If all of a concern's employees perform more than 50% of their work at job sites, the concern does not comply with the principal office requirement. Example 1: A business concern whose primary industry is construction has a total of 78 employees, including the owners. The business concern has one office (Office A), which is located in a HUBZone, with 3 employees working at that location. The business concern also has a job-site for a current contract, where 75 employees perform more than 50% of their work. The 75 job-site employees are excluded for purposes of determining principal office. Since the remaining 3 employees all work at Office A, Office A is the firm's principal office. Since Office A is in a HUBZone, the business concern complies with the principal office requirement. Example 2: A business concern has a total of 4 employees, including the owner. The business concern has one office located in a HUBZone (Office A), where 2 employees perform more than 50% of their work, and a second office not located in HUBZone (Office B), where 2 employees perform more than 50% of their work. Since there is not one location where the greatest number of the concern's employees at any one location perform their work, the business concern would not have a principal office in a HUBZone. Example 3: A business concern whose primary industry is services has a total of 6 employees, including the owner. Five of the employees perform all of their work at jobsites fulfilling specific contract obligations. The business concern's owner performs 45% of her work at jobsites, and 55% of her work at an office located in a HUBZone (Office A) conducting tasks such as writing proposals, generating payroll, and responding to emails. Office A would be considered the principal office of the firm since it is the only location where any employees of the firm work that is not a job site and the 1 individual working there spends more than 50% of her time at Office A. Since Office A is located in a HUBZone, the small business concern would meet the principal office requirement. Qualified base closure area means: (1) A base closure area that is treated by SBA as a HUBZone for a period of at least 8 years, beginning on the date the military installation undergoes final closure and ending on the latter of the following: (i) The date on which the results of the decennial census conducted after the area was initially designated as a base closure area are released; or (ii) The date 8 years after the base closure area was initially designated as a HUBZone. (2) However, if a base closure area was treated as a HUBZone at any time after 2010, it shall be treated as a HUBZone until the results of the 2020 decennial census are released. Qualified census tract (1) Means any census tract which is designated by the Secretary of Housing and Urban Development, and for the most recent year for which census data are available on household income in such tract, either in which 50 percent or more of the households have an income which is less than 60 percent of the area median gross income for such year or which has a poverty rate of at least 25 percent. See 26 U.S.C. 42(d)(5)(B)(ii)(I). (2) The portion of a metropolitan statistical area (as defined by the Bureau of the Census, United States Department of Commerce, in its publications on the Census of Population, Social and Economic Characteristics) which may be designated as ``qualified census tracts'' shall not exceed an area having 20 percent of the population of such metropolitan statistical area. See 26 U.S.C. 42(d)(5)(B)(ii)(II). This paragraph does not apply to any metropolitan statistical area in the Commonwealth of Puerto Rico until December 22, 2027, or the date on which the Financial Oversight and Management Board for the Commonwealth of Puerto Rico created by the Puerto Rico Oversight, Management, and Economic Stability Act (PROMESA) (Pub. L. 114-187, June 30, 2016) ceases to exist, whichever event occurs first. * * * * * Qualified non-metropolitan county means any county that was not located in a metropolitan statistical area (as defined by the Bureau of the Census, United States Department of Commerce, in its publications on the Census of Population, Social and Economic Characteristics) at the time of the most recent census taken for purposes of selecting qualified census tracts under section 26 U.S.C. 42(d)(5)(B)(ii), and in which: (1) The median household income is less than 80% of the non- metropolitan State median household income, based on the most recent data available from the American Community Survey 5-year estimates, published by the Bureau of the Census of the Department of Commerce; (2) The unemployment rate is not less than 140% of the average unemployment rate for the United States or for the State in which such county is located, whichever is less, based on the most recent data available from the Local Area Unemployment Statistics report, produced by the Department of Labor's Bureau of Labor Statistics; or (3) There is located a Difficult Development Area within Alaska, Hawaii, or any territory or possession of the United States outside the 48 contiguous States. A Difficult Development Area (DDA) is an area designated by the Secretary of the Department of Housing and Urban Development, in accordance with section 26 U.S.C. 42(d)(5)(B)(iii), with high construction, land, and utility costs relative to its Area Median Gross Income. Redesignated area (1) Means any census tract that ceases to be a ``qualified census tract'' or any non-metropolitan county that ceases to be a ``qualified non-metropolitan county.'' (2) A redesignated area generally shall be treated as a HUBZone for a period of three years, starting from the date on [[Page 54827]] which the area ceased to be a qualified census tract or a qualified non-metropolitan county. The date on which the census tract or non- metropolitan county ceases to be qualified is the date on which the official government data affecting the eligibility of the HUBZone is released to the public. However, an area that was a redesignated area on or after December 12, 2017 shall remain a redesignated area until December 31, 2021. Reside means to live at a location full-time and for at least 180 days immediately prior to the date of application or date of recertification, as applicable. (1) To determine residence, SBA will first look to an individual's address identified on his or her driver's license or voter's registration card. Where such documentation is not available, SBA will require other specific proof of residency, such as deeds, leases, and utility bills. (2) For HUBZone purposes, SBA will consider individuals temporarily residing overseas in connection with the performance of a contract to reside at their U.S. residence. Example 1: A person possesses the deed to a residential property and pays utilities and property taxes for that property. However, the person does not live at this property, but instead rents out this property to another individual. For HUBZone purposes, the person does not reside at the address listed on the deed. Example 2: A person moves into an apartment under a month-to- month lease and lives in that apartment full-time. SBA would consider the person to reside at the address listed on the lease if the person can show that he or she has lived at that address for at least 180 days immediately prior to the date of application or date of recertification. Example 3: A person is working overseas on a contract for the small business and is therefore temporarily living abroad. The employee can provide documents showing he is paying rent for an apartment located in a HUBZone. That person is deemed to reside in a HUBZone. * * * * * Subpart B--Requirements To Be a Certified HUBZone Small Business Concern 0 15. Revise the heading for subpart B to read as set forth above. 0 16. Revise Sec. 126.200 to read as follows: Sec. 126.200 What requirements must a concern meet to be eligible as a certified HUBZone small business concern? (a) Ownership. In order to be eligible for HUBZone certification and to continue to be certified, a small business concern must be owned in accordance with this paragraph. The concern must be: (1) At least 51% owned and controlled by one or more individuals who are United States citizens; (2) An ANC or at least 51% owned by an ANC or a wholly-owned business entity of an ANC; (3) At least 51% owned by one or more Indian Tribal Governments, or by a corporation that is wholly owned by one or more Indian Tribal Governments; (4) At least 51% owned by one or more CDCs; (5) A small agricultural cooperative organized or incorporated in the United States, or at least 51% owned by one or more small agricultural cooperatives organized or incorporated in the United States; or (6) At least 51% owned by one or more NHO, or by a corporation that is wholly owned by one or more NHO. (b) Size. (1) An applicant concern, together with its affiliates, must qualify as a small business under the size standard corresponding to its primary industry classification as defined in part 121 of this chapter. (2) In order to remain eligible as a certified HUBZone small business concern, a firm must qualify as small under the size standard corresponding to one or more NAICS codes in which it does business. (3) If the concern is a small agricultural cooperative, in determining size, the small agricultural cooperative is treated as a ``business concern'' and its member shareholders are not considered affiliated with the cooperative by virtue of their membership in the cooperative. (c) Principal office. (1) The concern's principal office must be located in a HUBZone, except for concerns owned in whole or in part by one or more Indian Tribal Governments. (2) A concern that is owned in whole or in part by one or more Indian Tribal Governments (or by a corporation that is wholly owned by Indian Tribal Governments) must either: (i) Maintain a principal office located in a HUBZone and ensure that at least 35% of its employees reside in a HUBZone as provided in paragraph (d)(1) of this section; or (ii) Certify that when performing a HUBZone contract, at least 35% of its employees engaged in performing that contract will reside within any Indian reservation governed by one or more of the Indian Tribal Government owners, or reside within any HUBZone adjacent to such Indian reservation. (d) Employees. (1) At least 35% of the concern's employees must reside in a HUBZone. When determining the percentage of employees that reside in a HUBZone, if the percentage results in a fraction, SBA rounds to the nearest whole number. Example 1 to paragraph (d)(1): A concern has 25 employees; 35% of 25, or 8.75, employees must reside in a HUBZone. The number 8.75 rounded to the nearest whole number is 9. Thus, 9 employees must reside in a HUBZone. Example 2 to paragraph (d)(1): A concern has 95 employees; 35% of 95, or 33.25, employees must reside in a HUBZone. The number 33.25 rounded to the nearest whole number is 33. Thus, 33 employees must reside in a HUBZone. (2) If the concern is owned in whole or in part by one or more Indian Tribal Governments (or by a corporation that is wholly owned by one or more Indian Tribal Governments), see paragraph (c)(2) of this section. (3) An employee who resides in a HUBZone at the time of certification or recertification shall continue to count as a HUBZone resident employee as long as the individual remains an employee of the firm, even if the employee moves to a location that is not in a HUBZone or the area in which the employee's residence is located no longer qualifies as a HUBZone. The certified HUBZone small business concern must maintain records of the employee's original HUBZone address, as well as records of the individual's continued and uninterrupted employment by the HUBZone small business concern, for the duration of the firm's participation in the HUBZone program. (e) Attempt to maintain. (1) At the time of application, an applicant concern must certify that it will ``attempt to maintain'' (see Sec. 126.103) having at least 35% of its employees reside in a HUBZone during the performance of any HUBZone contract it receives. (2) If the concern is owned in whole or in part by one or more Indian Tribal Governments (or by a corporation that is wholly owned by one or more Indian Tribal Governments), the concern must certify that it will ``attempt to maintain'' (see Sec. 126.103) the applicable employment percentage described in paragraph (c)(2) of this section during the performance of any HUBZone contract it receives. (f) Subcontracting. At the time of application, an applicant concern must certify that it will comply with the applicable limitations on subcontracting requirements in connection with any procurement that it receives as a certified HUBZone small business concern (see Sec. 126.5 and Sec. 126.700). (g) Suspension and Debarment. The concern and any of its owners must not [[Page 54828]] have an active exclusion in the System for Award Management, available at www.SAM.gov, at the time of application. Sec. 126.202 [Amended] 0 17. Amend Sec. 126.202 by removing the phrase ``Many persons share control'' and adding in its place the phrase ``Many persons may share control''. Sec. 126.203 [Amended] 0 18. Amend Sec. 126.203 paragraph (a) by removing the phrase ``qualified HUBZone SBC'' and adding in its place the phrase ``certified HUBZone small business concern''. 0 19. Revise Sec. 126.204 to read as follows: Sec. 126.204 May a HUBZone small business concern have affiliates? (a) A HUBZone small business concern may have affiliates, provided that the aggregate size of the concern together with all of its affiliates is small as defined in part 121 of this title, except as otherwise provided for small agricultural cooperatives in Sec. 126.103. (b) The employees of an affiliate may be counted as employees of a HUBZone applicant or HUBZone small business concern for purposes of determining compliance with the HUBZone program's principal office and 35% residency requirements. In determining whether individuals should be counted as employees of a HUBZone applicant or HUBZone small business concern, SBA will review all information, including criteria used by the Internal Revenue Service (IRS) for Federal income tax purposes and those set forth in SBA's Size Policy Statement No. 1 (Pub. L. 114-187, June 30, 2016). If the firms would be affiliated for size purposes and the totality of the circumstances shows that there is no clear line of fracture between the HUBZone applicant (or HUBZone small business concern) and the affiliate, SBA will consider the employees of the affiliate as employees of the HUBZone applicant (or HUBZone small business concern). 0 20. Revise Sec. 126.205 to read as follows: Sec. 126.205 May participants in other SBA programs be certified as HUBZone small business concerns? Participants in other SBA programs may be certified as HUBZone small business concerns if they meet all of the requirements set forth in this part. 0 21. Revise Sec. 126.206 to read as follows: Sec. 126.206 May nonmanufacturers be certified as HUBZone small business concerns? Nonmanufacturers (referred to in the HUBZone Act of 1997 as ``regular dealers'') may be certified as HUBZone small business concerns if they meet all of the requirements set forth in Sec. 126.200. For purposes of this part, a ``nonmanufacturer'' is defined in Sec. 121.406(b) of this chapter. 0 22. Revise Sec. 126.207 to read as follows: Sec. 126.207 Do all of the offices or facilities of a certified HUBZone small business concern have to be located in a HUBZone? A HUBZone small business concern may have offices or facilities in multiple HUBZones or even outside a HUBZone. However, in order to be certified as a HUBZone small business concern, the concern's principal office must be located in a HUBZone (except see Sec. 126.200(c)(2) for concerns owned by Indian Tribal Governments). 0 23. Revise Sec. 126.300 to read as follows: Sec. 126.300 How may a concern be certified as a HUBZone small business concern? (a) A concern must apply to SBA for HUBZone certification. SBA will consider the information provided by the concern in order to determine whether the concern qualifies. (b) SBA, at its discretion, may rely solely upon the information submitted, may request additional information, may conduct independent research, or may verify the information before making an eligibility determination. (c) If SBA determines that a concern meets the eligibility requirements of a HUBZone small business concern, it will notify the firm and designate the firm as a certified HUBZone small business concern in DSBS (or successor system). 0 24. Revise Sec. 126.303 to read as follows: Sec. 126.303 Where must a concern submit its application for certification? A concern seeking certification as a HUBZone small business concern must submit an electronic application to SBA's HUBZone Program Office via SBA's web page at www.SBA.gov. The application and any supporting documentation must be submitted by a person authorized to represent the concern. 0 25. Revise Sec. 126.304 to read as follows: Sec. 126.304 What must a concern submit to SBA in order to be certified as a HUBZone small business concern? (a) General. To be certified by SBA as a HUBZone small business concern, a concern must submit a completed application and all documents requested by SBA. The concern must also represent to SBA that it meets the requirements set forth in Sec. 126.200 and that all of the information provided as of the date of the application (and any subsequent information provided) is complete, true and accurate. The representation must be electronically signed by an owner of the applicant. (b) Supporting documents. (1) SBA may request documents to verify that the applicant meets the HUBZone program's eligibility requirements. The documents must show that the concern meets the program's requirements at the time it submits its application to SBA. (2) The concern must document compliance with the requirements listed in Sec. 126.200, including but not limited to employment records and documentation showing the address of each HUBZone resident employee. Records sufficient to demonstrate HUBZone residency include copies of driver's licenses and voter registration cards; only where such documentation is unavailable will SBA accept alternative documentation (such as copies of leases, deeds, and/or utility bills) accompanied by signed statements explaining why the alternative documentation is being provided. (c) Changes after submission of application. After submitting an application, a concern applying for HUBZone certification must notify SBA of any changes that could affect its eligibility, and provide information and documents to verify the changes. If the changed information indicates that the firm is not eligible, the applicant will be given the option to withdraw its application, or SBA will decline certification and the firm must wait 90 days to reapply. (d) HUBZone areas. Concerns applying for HUBZone status must use SBA's website (i.e., maps or other tools showing qualified HUBZones) to verify that the location of the concern's principal office and the residences of at least 35% of the concern's employees are within HUBZones. If SBA's website indicates that a particular location is not within a HUBZone and the applicant disagrees, then the applicant must note this on the application and submit relevant documents showing why the applicant believes the area meets the statutory criteria of a HUBZone. SBA will determine whether the location is within a HUBZone using available methods (e.g., contact Bureau of Indian Affairs for Indian reservations or Department of Defense for BRACs). (e) Record Maintenance. HUBZone small business concerns must retain [[Page 54829]] documentation demonstrating satisfaction of all qualifying requirements for 6 years from date of submission of all initial and continuing eligibility actions as required by this part. In addition, HUBZone small business concerns must retain documentation as required in Sec. 126.200(d)(3). Sec. 126.305 [Removed and reserved] 0 26. Remove and reserve Sec. 126.305. 0 27. Revise Sec. 126.306 to read as follows: Sec. 126.306 How will SBA process an application for HUBZone certification? (a) The D/HUB or designee is authorized to approve or decline applications for HUBZone certification. SBA will receive and review all applications and request supporting documents. SBA must receive all required information, supporting documents, and a completed HUBZone representation before it will begin processing a concern's application. SBA will not process incomplete packages. SBA will make its determination within 90 calendar days after receipt of a complete package whenever practicable. (b) The burden of proof to demonstrate eligibility is on the applicant concern. If a concern does not provide requested information within the allotted time provided by SBA, or if it submits incomplete information, SBA may draw an adverse inference and presume that the information that the applicant failed to provide would demonstrate ineligibility and deny certification on this basis. (c) SBA's decision will be based on the facts set forth in the application, any information received in response to SBA's request for clarification, any independent research conducted by SBA, and any changed circumstances. (d) In order to be certified into the program, the applicant must be eligible as of the date it submitted its application and at the time the D/HUB issues a decision. An applicant must inform SBA of any changes to its circumstances that occur after its application and before its certification that may affect its eligibility. SBA will consider such changed circumstances in determining whether to certify the firm. (e) If SBA approves the application, it will send a written notice to the concern and designate the firm as a certified HUBZone small business concern in DSBS (or successor system) as described in Sec. 126.307. (f) If SBA denies the application, it will send a written notice to the concern and state the specific reasons for denial. The decision will also state the reconsideration rights. (g) SBA will presume that notice of its decision was provided to an applicant if SBA sends a communication to the concern at a mailing address, email address, or fax number provided in the concern's profile in the System for Award Management (or successor system). 0 28. Revise Sec. 126.307 to read as follows: Sec. 126.307 Where is there a list of certified HUBZone small business concerns? SBA designates firms as certified HUBZone small business concerns in DSBS (or successor system). 0 29. Revise Sec. 126.308 to read as follows: Sec. 126.308 What happens if a HUBZone small business concern receives notice of its certification but it does not appear in DSBS as a certified HUBZone small business concern? (a) A certified HUBZone small business concern that has received SBA's notice of certification, but does not appear in DSBS (or successor system) as a certified HUBZone small business concern within 10 business days, should immediately notify the D/HUB via email at [email protected]. (b) A certified HUBZone small business concern that has received SBA's notice of certification must appear as a certified HUBZone small business concern in DSBS (or successor system) in order to be eligible for HUBZone contracts (i.e., it cannot ``opt out'' of a public display in the System for Award Management (SAM.gov) or DSBS (or successor systems)). 0 30. Revise Sec. 126.309 to read as follows: Sec. 126.309 May a declined concern request reconsideration or seek certification at a later date? (a) Reconsideration. An applicant may request that the D/HUB reconsider the initial decline decision by filing a request for reconsideration with SBA. (1) Method of submission. The applicant must submit its request for reconsideration to the SBA's HUBZone Program Office by email to [email protected]. (2) Filing deadline. The request for reconsideration must be submitted within 15 calendar days of receipt of written notice that the concern's application was declined. (3) Contents of request. The request for reconsideration must set forth the reasons why the D/HUB's initial decision was erroneous and include information and documentation pertinent to overcoming the reason(s) for the initial decline, whether or not available at the time of initial application. (4) Decision on reconsideration. The D/HUB will issue a written decision within 30 calendar days of SBA's receipt of the applicant's request for reconsideration. The D/HUB may approve the application, deny it on the same grounds as the original decision, or deny it on other grounds. (i) If denied, the D/HUB will provide written notice and explain why the applicant is not eligible for admission to the program and give specific reasons for the decline. (ii) If the D/HUB declines the application solely on issues not raised in the initial decline, the applicant can ask for reconsideration as if it were an initial decline. (b) Reapplying for certification. A declined concern may reapply for certification ninety (90) calendar days after the date of the final agency decision (i.e., the initial decision of the D/HUB where the concern does not seek reconsideration, or the decision on reconsideration), if it believes that it has overcome all reasons for decline through changed circumstances and is currently eligible. 0 31. Revise Sec. 126.401 to read as follows: Sec. 126.401 What is a program examination? A program examination is an investigation by SBA officials, which verifies the accuracy of any certification made or information provided as part of the HUBZone application or recertification process. Examiners may verify that the concern met the program's eligibility requirements at the time of its certification or, if applicable, at the time of its most recent recertification. Sec. 126.402 [Amended] 0 32. Amend Sec. 126.402 by removing the phrase ``qualified HUBZone SBC'' and adding in its place the phrase ``certified HUBZone small business concern''. 0 33. Revise Sec. 126.403 to read as follows: Sec. 126.403 What will SBA review during a program examination? (a) SBA may conduct a program examination, or parts of an examination, at one or more of the concern's offices. SBA will determine the location and scope of the examination and may review any information related to the concern's HUBZone eligibility including, but not limited to, documentation related to the location and ownership of the concern, compliance with the 35% HUBZone [[Page 54830]] residency requirement, and the concern's ``attempt to maintain'' (see Sec. 126.103) this percentage. (b) SBA may require that a HUBZone small business concern (or applicant) submit additional information as part of the program examination. If SBA requests additional information, SBA will presume that written notice of the request was provided when SBA sends such request to the concern at a mailing address, email address or fax number provided in the concern's profile in the Dynamic Small Business Search (DSBS) or the System for Award Management (SAM) (or successor systems). SBA may draw an adverse inference from a concern's failure to cooperate with a program examination or provide requested information and assume that the information that the HUBZone small business concern (or applicant) failed to provide would demonstrate ineligibility, and decertify (or deny certification) on this basis. (c) The concern must retain documentation provided in the course of a program examination for 6 years from the date of submission. 0 34. Add Sec. 126.404 to read as follows: Sec. 126.404 What are the possible outcomes of a program examination and when will SBA make its determination? (a) Timing. SBA will make its determination within 90 calendar days after SBA receives all requested information, when practicable. (b) Program examinations on certified HUBZone small business concerns. If the program examination was conducted on a certified HUBZone small business concern-- (1) And the D/HUB (or designee) determines that the firm is eligible, SBA will send a written notice to the HUBZone small business concern and continue to designate the concern as a certified HUBZone small business concern in DSBS (or successor system). (2) And the D/HUB (or designee) determines that the firm is not eligible, SBA will propose the concern for decertification pursuant to the procedures set forth in Sec. 126.503. (c) Program examinations on applicants. If the program examination was conducted on an applicant to the HUBZone program-- (1) And the D/HUB (or designee) determines that the firm is eligible, SBA will send a written certification notice to the firm and designate the concern as a certified HUBZone small business concern in DSBS (or successor system). (2) And the D/HUB (or designee) determines that the firm is ineligible, SBA will send a written decline notice to the firm. 0 35. Revise Sec. 126.500 to read as follows: Sec. 126.500 How does a concern maintain HUBZone certification? Any concern seeking to remain a certified HUBZone small business concern in DSBS (or successor system) must annually provide a written recertification to SBA that it continues to meet all HUBZone eligibility criteria (see Sec. 126.200) and provide supporting documentation when requested to do so by SBA. In order to remain in the program without any interruption, a HUBZone small business concern must recertify its eligibility to SBA on the anniversary of the date of its original HUBZone certification. The date of HUBZone certification is the date specified in the firm's certification letter. If the business fails to recertify, SBA may propose the firm for decertification pursuant to Sec. 126.503. 0 36. Revise Sec. 126.501 to read as follows: Sec. 126.501 How long does HUBZone certification last? (a) Once SBA certifies a concern as eligible to participate in the HUBZone program, the concern will be treated as a certified HUBZone small business concern eligible for all HUBZone contracts for which the concern qualifies as small, for a period of one year from the date of its initial certification or recertification, unless the concern acquires, is acquired by, or merges with another firm during that one- year period. Where a HUBZone small business concern acquires, is acquired by, or merges with another firm, the concern must demonstrate to SBA that it continues to meet the HUBZone eligibility requirements in order for it to remain eligible as a certified HUBZone small business concern. (b) On the annual anniversary of a firm's certification or recertification, the firm must recertify that it is fully compliant with all HUBZone eligibility requirements (see Sec. 126.200), or it can request to voluntarily withdraw from the HUBZone program. (c) SBA may review the firm's recertification through the program examination process. (1) If SBA determines that the firm is no longer eligible at the time of its annual recertification, SBA will propose the HUBZone small business concern for decertification pursuant to Sec. 126.503. (2) If SBA determines that the firm continues to be eligible, SBA will notify the firm of this determination. In such case, the concern will: (i) Continue to be designated as a certified HUBZone small business concern in DSBS (or successor system); and (ii) Be treated as an eligible HUBZone small business concern for all HUBZone contracts for which the concern qualifies as small for a period of one year from the date of the recertification. (d) Voluntary withdrawal. A HUBZone small business concern may request to voluntarily withdraw from the HUBZone program at any time. Once SBA concurs, SBA will decertify the concern and no longer designate it as a certified HUBZone small business concern in DSBS (or successor system). The concern may apply again for certification at any point after ninety (90) calendar days from the date of decertification. At that point, the concern would have to demonstrate that it meets all HUBZone eligibility requirements. 0 37. Revise Sec. 126.502 to read as follows: Sec. 126.502 Is there a limit to the length of time a concern may be a certified HUBZone small business concern? There is no limit to the length of time a concern may remain qualified as a certified HUBZone small business concern in DSBS (or successor system) so long as it continues to comply with the provisions of Sec. Sec. 126.200, 126.500, and 126.501. 0 38. Revise Sec. 126.503 to read as follows: Sec. 126.503 What happens if SBA is unable to verify a HUBZone small business concern's eligibility or determines that a concern is no longer eligible for the program? (a) Proposed decertification. (1) If SBA is unable to verify a certified HUBZone small business concern's eligibility or has information indicating that a firm was not eligible for the program at the time of certification or recertification, SBA may propose decertification of the concern. In addition, if during the one-year period of time after certification or recertification SBA believes that a HUBZone small business concern that is performing one or more HUBZone contracts no longer has at least 20% of its employees living in a HUBZone, SBA will propose the concern for decertification based on the concern's failure to attempt to maintain compliance with the 35% HUBZone residency requirement. (i) Notice of proposed decertification. SBA will notify the HUBZone small business concern in writing that SBA is proposing to decertify it and state the reasons for the proposed decertification. SBA will consider that written notice was provided if SBA sends the notice of [[Page 54831]] proposed decertification to the concern at a mailing address, email address, or fax number provided in the concern's profile in the System for Award Management (SAM.gov) or the Dynamic Small Business Search (DSBS) (or successor systems). (ii) Response to notice of proposed decertification. The HUBZone small business concern must respond to the notice of proposed decertification within the timeframe specified in the notice. In this response, the HUBZone small business concern must rebut each of the reasons set forth by SBA in the notice of proposed decertification, and where appropriate, the rebuttal must include documents showing that the concern is eligible for the HUBZone program as of the date specified in the notice. (iii) Adverse inference. If a HUBZone small business concern fails to cooperate with SBA or fails to provide the information requested, the D/HUB may draw an adverse inference and assume that the information that the concern failed to provide would demonstrate ineligibility. (2) SBA's decision. SBA will determine whether the HUBZone small business concern remains eligible for the program within 90 calendar days after receiving all requested information, when practicable. The D/HUB will provide written notice to the concern stating the basis for the determination. If SBA finds that the concern is not eligible, the D/HUB will decertify the concern and remove its designation as a certified HUBZone small business concern in DSBS (or successor system). If SBA finds that the concern is eligible, the concern will continue to be designated as a certified HUBZone small business concern in DSBS (or successor system). (b) Decertification pursuant to a protest. The procedures described in paragraph (a) of this section do not apply to HUBZone status protests. If the D/HUB sustains a protest pursuant to Sec. 126.803, SBA will decertify the HUBZone small business concern immediately and change the firm's status in DSBS (or successor system) to reflect that it no longer qualifies as a certified HUBZone small business concern without first proposing it for decertification. 0 39. Revise Sec. 126.504 to read as follows: Sec. 126.504 When will SBA remove the designation of a concern in DSBS (or successor system) as a certified HUBZone small business concern? (a) SBA will remove the designation of a concern in DSBS (or successor system) as a certified HUBZone small business concern if the concern has: (1) Been decertified as a result of a HUBZone status protest pursuant to Sec. 126.803; (2) Been decertified as a result of the procedures set forth in Sec. 126.503; or (3) Voluntarily withdrawn from the HUBZone program pursuant to Sec. 126.501(b). (b) SBA may remove the designation of a concern in DSBS (or successor system) as a certified HUBZone small business concern as soon as the D/HUB issues a decision decertifying the concern from the program. (c) After a concern has been removed as a certified HUBZone small business concern in DSBS (or successor system), it is ineligible for the HUBZone program and may not submit an offer on or be an awarded a HUBZone contract, or receive any other benefit as a HUBZone small business concern. Subpart F--Contracting with Certified HUBZone Small Business Concerns 0 40. Revise the heading of subpart F to read as set forth above. Sec. 126.600 [Amended] 0 41. Amend Sec. 126.600 as follows: 0 a. In the introductory text, remove the phrase ``qualified HUBZone SBC'' and add in its place the phrase ``certified HUBZone small business concern''; 0 b. In paragraphs (a), (b), and (c), remove the phrase ``qualified HUBZone SBCs'' wherever it appears and add in its place the phrase ``certified HUBZone small business concerns''; 0 c. In paragraphs (d) and (e), remove the phrase ``HUBZone SBCs'' wherever it appears and add in its place the phrase ``certified HUBZone small business concerns''; 0 d. In paragraph (e), remove the word ``against'' and add in its place the word ``under'' and remove the phrase ``, which had been'' and add in its place the phrase ``that was''. 0 42. Revise Sec. 126.601 to read as follows: Sec. 126.601 What additional requirements must a certified HUBZone small business concern meet to submit an offer on a HUBZone contract? (a) Only certified HUBZone small business concerns are eligible to submit offers for a HUBZone contract or to receive a price evaluation preference under Sec. 126.613. (b) At the time a certified HUBZone small business concern submits its initial offer (including price) on a specific HUBZone contract, it must certify to the contracting officer that it: (1) Is a certified HUBZone small business concern in DSBS (or successor system); (2) Is small, together with its affiliates, at the time of its offer under the size standard corresponding to the NAICS code assigned to the procurement; (3) Will ``attempt to maintain'' having at least 35% of its employees residing in a HUBZone during the performance of the contract, as set forth in Sec. 126.200(e); and (4) Will comply with the applicable limitations on subcontracting during performance of the contract, as set forth in Sec. 125.6 of this chapter and Sec. Sec. 126.200(f), and 126.700. (c) A certified HUBZone small business concern may submit an offer on a HUBZone contract for supplies as a nonmanufacturer if it meets the requirements of the nonmanufacturer rule set forth at Sec. 121.406 of this chapter. 0 43. Revise Sec. 126.602 to read as follows: Sec. 126.602 Must a certified HUBZone small business concern maintain the employee residency percentage during contract performance? (a) A certified HUBZone small business concern eligible for the program pursuant to Sec. 126.200(b) must have at least 35% of its employees residing within a HUBZone at the time of certification and annual recertification. Such a certified HUBZone small business concern must ``attempt to maintain'' (see Sec. 126.103) having at least 35% of its employees residing in a HUBZone during the performance of any HUBZone contract awarded to the concern on the basis of its HUBZone status. (b) For indefinite delivery, indefinite quantity contracts, including multiple award contracts, a certified HUBZone small business concern must ``attempt to maintain'' the HUBZone residency requirement during the performance of each order that is set aside for HUBZone small business concerns. (c) A certified HUBZone small business concern eligible for the program pursuant to Sec. 126.200(a) must have at least 35% of its employees engaged in performing a HUBZone contract residing within any Indian reservation governed by one or more of the concern's Indian Tribal Government owners, or residing within any HUBZone adjoining any such Indian reservation. (d) A certified HUBZone small business concern that has less than 20% of its total employees residing in a HUBZone during the performance of a HUBZone contract has failed to attempt [[Page 54832]] to maintain the HUBZone residency requirement. Such failure will result in proposed decertification pursuant to Sec. 126.503. Sec. 126.603 [Amended] 0 44. Amend Sec. 126.603 by removing the phrase ``qualified HUBZone SBCs'' and adding in its place the phrase ``certified HUBZone small business concerns''. 0 45. Amend Sec. 126.607 as follows: 0 a. Revise the section heading; 0 b. In paragraph (c), amend the introductory text by removing the phrase ``qualified HUBZone SBCs'' and adding in its place the phrase ``certified HUBZone small business concerns''; 0 c. In paragraph (c)(1), remove the phrase ``SBA's list of qualified HUBZone SBCs'' and add in its place the phrase ``the list of certified HUBZone small business concerns contained in DSBS (or successor system)''. The revision reads as follows: Sec. 126.607 When must a contracting officer set aside a requirement for certified HUBZone small business concerns? * * * * * Sec. 126.608 [Amended] 0 46. Amend Sec. 126.608 by removing the phrase ``HUBZone set-aside'' and adding in its place the phrase ``HUBZone set-aside or sole source award''. Sec. 126.611 [Amended] 0 47. Amend the heading of Sec. 126.611 by removing the phrase ``such an appeal'' and adding in its place the phrase ``an appeal of a contracting officer's decision not to issue a procurement as a HUBZone contract''. Sec. 126.612 [Amended] 0 48. Amend Sec. 126.612 as follows: 0 a. In the introductory text and paragraph (d), remove the phrase ``qualified HUBZone SBC'' wherever it appears and add in its place the phrase ``certified HUBZone small business concern''; 0 b. In paragraph (c), remove the phrase ``qualified HUBZone SBCs'' and add in its place the phrase ``certified HUBZone small business concerns''. Sec. 126.613 [Amended] 0 49. Amend Sec. 126.613 as follows: 0 a. In the section heading and paragraphs (a)(1), (a)(2), (b)(2), and (d), remove the phrase ``qualified HUBZone SBC'' wherever it appears and add in its place the phrase ``certified HUBZone small business concern''; 0 b. In paragraph (a)(1): 0 i. Remove the phrase ``another SBC'' and add in its place the phrase ``another small business concern''; 0 ii. In the final sentence, remove the phrase ``HUBZone SBC'' and add in its place the phrase ``certified HUBZone small business concern''; 0 iii. In the final sentence, remove the phrase ``HUBZone SBCs'' and add in its place the phrase ``certified HUBZone small business concerns''; 0 c. In Examples 1, 2, and 3 in paragraph (a)(2), remove the phrase ``non-HUBZone SBC'' wherever it appears and add in its place the phrase ``non-HUBZone small business concern'' 0 d. In the second and third sentences in Example 4 in paragraph (a)(2), remove the phrase ``HUBZone SBC'' wherever it appears and add in its place the phrase ``HUBZone small business concern''; 0 e. In the third sentence in Example 4 in paragraph (a)(2), remove the phrase ``HUBZone SBCs'' and add in its place the phrase ``certified HUBZone small business concerns''; 0 f. In paragraph (b)(2), remove the phrase ``qualified HUBZone SBCs'' and add in its place the phrase ``certified HUBZone small business concerns''; and 0 g. In paragraph (d), remove the phrase ``SBCs'' and add in its place the phrase ``small business concerns''. 0 50. Amend Sec. 126.616 as follows: 0 a. Revise the section heading; 0 b. Revise paragraph (a); 0 c. In paragraph (b) and (d)(1), remove the phrase ``qualified HUBZone SBC'' wherever it appears and add in its place the phrase ``certified HUBZone small business concern''; 0 d. In the introductory text of paragraph (c), remove the phrase ``HUBZone SBC'' and add in its place ``certified HUBZone small business concern''; 0 e. In paragraphs (c)(2) through (4), (c)(9), (c)(10), (d)(2), (g), and (i) remove the phrase ``HUBZone SBC'' wherever it appears'' and add in its place the phrase ``certified HUBZone small business concern''; 0 f. In paragraphs (c)(7), (i), (j)(2), and (k), remove the phrase ``performance of work'' wherever it appears and add in its place the phrase ``limitations on subcontracting''; and 0 g. Revise paragraph (e). The revisions read as follows: Sec. 126.616 What requirements must a joint venture satisfy to submit an offer and be eligible to perform on a HUBZone contract? (a) General. A certified HUBZone small business concern may enter into a joint venture agreement with one or more other small business concerns, or with an approved mentor authorized by Sec. 125.9 of this chapter (or, if also an 8(a) BD Participant, with an approved mentor authorized by Sec. 124.520 of this chapter), for the purpose of submitting an offer for a HUBZone contract. The joint venture itself need not be a certified HUBZone small business concern. * * * * * (e) Certification of compliance.--(1) At time of offer. If submitting an offer as a joint venture for a HUBZone contract, at the time of initial offer (and if applicable, final offer), each certified HUBZone small business concern joint venture partner must make the following certifications to the contracting officer separately under its own name: (i) It is a certified HUBZone small business concern that appears in DSBS (or successor system) as a certified HUBZone small business concern and it met the eligibility requirements in Sec. 126.200 at the time of its initial certification or, if applicable, at the time of its most recent recertification; (ii) It, together with its affiliates, is small under the size standard corresponding to the NAICS code assigned to the procurement; (iii) It will ``attempt to maintain'' having at least 35% of its employees residing in a HUBZone during performance of the contract; and (iv) It will comply with the applicable limitations on subcontracting during performance of the contract, as set forth in Sec. 125.6 of this chapter and Sec. Sec. 126.200(f) and 126.700. (2) Prior to performance. Prior to the performance of any HUBZone contract as a joint venture, the HUBZone small business concern partner to the joint venture must submit a written certification to the contracting officer and SBA, signed by an authorized official of each partner to the joint venture, stating the following: (i) The parties have entered into a joint venture agreement that fully complies with paragraph (c) of this section; and (ii) The parties will perform the contract in compliance with the joint venture agreement. * * * * * Sec. 126.617 [Amended] 0 51. Amend Sec. 126.617 as follows: 0 a. In the section heading, remove the phrase ``qualified HUBZone SBC'' and add in its place the phrase ``certified HUBZone small business concern''; 0 b. Remove the phrase ``qualified HUBZone SBC'' and add in its place the phrase ``certified HUBZone small business concern''. [[Page 54833]] Sec. 126.618 [Amended] 0 52. Amend Sec. 126.618 as follows: 0 a. In paragraph (a), remove the phrase ``the underlying HUBZone requirements'' and add in its place the phrase ``the HUBZone requirements described in Sec. 126.200''; 0 b. In paragraphs (a) through (c), remove the phrase ``qualified HUBZone SBC'' wherever it appears and add in its place the phrase ``certified HUBZone small business concern''; 0 c. In paragraph (c)(1), remove the phrase ``HUBZone SBC'' and add in its place the phrase ``certified HUBZone small business concern''; 0 d. In paragraphs (c)(1) and (c)(2), remove the phrase ``performance of work'' wherever it appears and add in its place the phrase ``limitations on subcontracting''. 0 53. Add Sec. 126.619 to read as follows: Sec. 126.619 When must a certified HUBZone small business concern recertify its status for a HUBZone contract? (a) A concern that is a certified HUBZone small business concern at the time of initial offer (including a Multiple Award Contract) is generally considered a HUBZone small business concern throughout the life of that contract. (1) If a concern is a certified HUBZone small business concern at the time of initial offer for a HUBZone Multiple Award Contract, then it will be considered a certified HUBZone small business concern for each order issued against the contract, unless a contracting officer requests a new HUBZone certification in connection with a specific order. (2) Where the underlying Multiple Award Contract is not a HUBZone contract and a procuring agency is setting aside an order for the HUBZone program, a firm must be a certified HUBZone small business concern and appear in DSBS (or successor system) as a certified HUBZone small business concern at the time it submits its offer for the order. (3) Where a HUBZone contract is novated to another business concern, the concern that will continue performance on the contract must certify its status as a certified HUBZone small business concern to the procuring agency, or inform the procuring agency that it is not a certified HUBZone small business concern, within 30 days of the novation approval. If the concern is not a certified HUBZone small business concern, the agency can no longer count any work performed under the contract, including any options or orders issued pursuant to the contract, from that point forward towards its HUBZone goals. (4) Where a concern that is performing a HUBZone contract acquires, is acquired by, or merges with another concern and contract novation is not required, the concern must, within 30 days of the transaction becoming final, recertify its status as a certified HUBZone small business concern status to the procuring agency, or inform the procuring agency that it no longer qualifies as a HUBZone small business concern. If the contractor is unable to recertify its status as a HUBZone small business concern, the agency can no longer count the options or orders issued pursuant to the contract, from that point forward, towards its HUBZone goals. The agency must immediately revise all applicable Federal contract databases to reflect the new status. (5) Where a concern is decertified after the award of a HUBZone contract, the procuring agency may exercise options and still count the award as an award to a HUBZone small business concern, except where recertification is required or requested under this section. (b) For the purposes of contracts (including Multiple Award Contracts) with durations of more than five years (including options), a contracting officer must request that a business concern recertify its status as a HUBZone small business concern no more than 120 days prior to the end of the fifth year of the contract, and no more than 120 days prior to exercising any option. (1) If the concern cannot recertify that it qualifies as a HUBZone small business concern, the agency can no longer count the options or orders issued pursuant to the contract, from that point forward, towards its HUBZone goals. This means that if the firm either no longer meets the HUBZone eligibility requirements or no longer qualifies as small for the size standard corresponding to NAICS code assigned to the contract, the agency can no longer count the options or orders issued pursuant to the contract, from that point forward, towards its HUBZone goals. (2) A concern that did not certify itself as a HUBZone small business concern, either initially or prior to an option being exercised, may recertify itself as a HUBZone small business concern for a subsequent option period if it meets the eligibility requirements at that time. (3) Recertification does not change the terms and conditions of the contract. The limitations on subcontracting, nonmanufacturer and subcontracting plan requirements in effect at the time of contract award remain in effect throughout the life of the contract. (4) Where the contracting officer explicitly requires concerns to recertify their status in response to a solicitation for an order, SBA will determine eligibility as of the date of the firm's initial certification or, if applicable, its most recent recertification. (c) A concern's status will be determined at the time of submission of its initial response to a solicitation for and award of an Agreement (including Blanket Purchase Agreements (BPAs), Basic Agreements, Basic Ordering Agreements, or any other Agreement that a contracting officer sets aside or reserves awards for certified HUBZone small business concerns) and each order issued pursuant to the Agreement. 0 54. Revise Sec. 126.700 to read as follows: Sec. 126.700 What are the limitations on subcontracting requirements for HUBZone contracts? (a) Other than Multiple Award Contracts. For other than a Multiple Award Contract, a prime contractor receiving an award as a certified HUBZone small business concern must meet the limitations on subcontracting requirements set forth in Sec. 125.6 of this chapter. (b) Multiple Award Contracts.--(1) Total Set-Aside Contracts. For a Multiple Award Contract that is totally set aside for certified HUBZone small business concerns, a certified HUBZone small business concern must comply with the applicable limitations on subcontracting (see Sec. 126.5), or if applicable, the nonmanufacturer rule (see Sec. 121.406 of this chapter), during the base term and during each subsequent option period. However, the contracting officer, at his or her discretion, may also require the concern to comply with the limitations on subcontracting or the nonmanufacturer rule for each individual order awarded under the Multiple Award Contract. (2) Partial Set-Aside Contracts. For Multiple Award Contracts that are partially set aside for certified HUBZone small business concerns, paragraph (b)(1) of this section applies to the set-aside portion of the contract. For orders awarded under the non-set-aside portion of a Multiple Award Contract, a certified HUBZone small business concern need not comply with any limitations on subcontracting or nonmanufacturer rule requirements. (3) Orders Set Aside for certified HUBZone small business concerns. For each individual order that is set aside for certified HUBZone small business concerns under a Multiple Award Contract that is not itself setaside for certified HUBZone small business [[Page 54834]] concerns, a certified HUBZone small business concern must comply with the applicable limitations on subcontracting (see Sec. 125.6 of this chapter), or if applicable, the nonmanufacturer rule (see Sec. 121.406 of this chapter), in the performance of such order. (4) Reserves. For an order that is set aside for certified HUBZone small business concerns against a Multiple Award Contract with a HUBZone reserve, a certified HUBZone small business concern must comply with the applicable limitations on subcontracting (see Sec. 125.6 of this chapter), or if applicable, the nonmanufacturer rule (see Sec. 121.406 of this chapter), in the performance of such order. However, the certified HUBZone small business concern does not have to comply with the limitations on subcontracting or the nonmanufacturer rule for any order issued against the Multiple Award Contract if the order is competed amongst certified HUBZone small business concerns and one or more other-than-small business concerns. Sec. 126.800 [Amended] 0 55. Amend Sec. 126.800 as follows: 0 a. Amend the section heading by removing the phrase ``qualified HUBZone SBC'' and adding in its place the phrase ``certified HUBZone small business concern''; and 0 b. In paragraphs (a) and (b), remove the phrase ``qualified HUBZone SBC'' wherever it appears and add in its place the phrase ``certified HUBZone small business concern''; 0 56. Amend Sec. 126.801 as follows: 0 a. Revise the section heading; 0 b. Revise paragraphs (a), (b), and (c)(3); and 0 c. Revise the second and third sentences in paragraph (e). The revisions read as follows: Sec. 126.801 How does an interested party file a HUBZone status protest? (a) General. (1) A HUBZone status protest is the process by which an interested party may challenge the HUBZone status of an apparent successful offeror on a HUBZone contract, including a HUBZone joint venture submitting an offer under Sec. 126.616. (2) The protest procedures described in this part are separate from those governing size protests and appeals. All protests relating to whether a certified HUBZone small business concern is other than small for purposes of any Federal program are subject to part 121 of this chapter and must be filed in accordance with that part. If a protester protests both the size of the HUBZone small business concern and whether the concern meets the HUBZone eligibility requirements set forth in Sec. 126.200, SBA will process the protests concurrently, under the procedures set forth in part 121 of this chapter and this part. (3) SBA does not review issues concerning the administration of a HUBZone contract. (b) Format and specificity. (1) Protests must be in writing and must state all specific grounds for why the protested concern did not meet the HUBZone eligibility requirements set forth in Sec. 126.200 at the time the concern applied for certification or at the time SBA last recertified the concern as a HUBZone small business concern. A protest merely asserting that the protested concern did not qualify as a HUBZone small business concern at the time of certification or recertification, without setting forth specific facts or allegations, is insufficient. A protest asserting that a firm was not in compliance with the HUBZone eligibility requirements at the time of offer or award will be dismissed. (2) For a protest filed against a HUBZone joint venture, the protest must state all specific grounds for why-- (i) The HUBZone small business concern partner to the joint venture did not meet the HUBZone eligibility requirements set forth in Sec. 126.200 at the time the concern applied for certification or at the time SBA last recertified the concern as a HUBZone small business concern; and/or (ii) The protested HUBZone joint venture did not meet the requirements set forth in Sec. 126.616 at the time the joint venture submitted an offer for a HUBZone contract. (c) * * * (3) Protestors may submit their protests by email to [email protected]. * * * * * (e) * * * The contracting officer must send the protest, along with a referral letter, to the D/HUB by email to [email protected]. The contracting officer's referral letter must include information pertaining to the solicitation that may be necessary for SBA to determine timeliness and standing, including the following: (1) The solicitation number; (2) The name, address, telephone number, email address, and facsimile number of the contracting officer; (3) The type of HUBZone contract at issue; (4) If the procurement was conducted using full and open competition with a HUBZone price evaluation preference, whether the protester's opportunity for award was affected by the preference; (5) If the procurement was a HUBZone set-aside, whether the protester submitted an offer; (6) Whether the protested concern was the apparent successful offeror; (7) Whether the procurement was conducted using sealed bid or negotiated procedures; (8) The bid opening date, if applicable; (9) The date the protester was notified of the apparent successful offeror; (10) The date the protest was submitted to the contracting officer; (11) The date the protested firm submitted its initial offer or bid to the contracting activity; and (12) Whether a contract has been awarded, and if applicable, the date of contract award and contract number. Sec. 126.802 [Amended] 0 57. Amend Sec. 126.802 by removing the phrase ``has qualified HUBZone status'' and adding in its place the phrase ``qualifies as a certified HUBZone small business concern''. 0 58. Amend Sec. 126.803 by: 0 a. Revising the section heading; 0 b. Redesignating paragraphs (a) through (d) as paragraphs (b) through (e), respectively; 0 c. Adding new paragraph (a); and 0 d. Revising newly redesignated paragraphs (b)(2), (c), and (e). The addition and revisions read as follows: Sec. 126.803 How will SBA process a HUBZone status protest and what are the possible outcomes? (a) Date at which eligibility determined. SBA will determine the eligibility of a concern subject to a HUBZone status protest as of the date of its initial certification or, if applicable, its most recent recertification. (b) * * * (2) If SBA determines the protest is timely and sufficiently specific, SBA will notify the protested concern of the protest and the identity of the protestor. The protested concern must submit information responsive to the protest within 3 business days of the date of receipt of the protest. (c) Time period for determination. (1) SBA will determine the HUBZone status of the protested concern within 15 business days after receipt of a complete protest referral. (2) If SBA does not issue its determination within 15 business days (or request an extension that is granted), the contracting officer may award the contract if he or she determines in writing that there is an immediate need to award the contract and that waiting until SBA makes its determination will [[Page 54835]] be disadvantageous to the Government. Notwithstanding such a determination, the provisions of paragraph (d) of this section apply to the procurement in question. * * * * * (e) Effect of determination. The determination is effective immediately and is final unless overturned on appeal by the AA/GC&BD, or designee, pursuant to Sec. 126.805. (1) Protest sustained. If the D/HUB finds the protested concern ineligible and sustains the protest, SBA will decertify the concern and remove its designation as a certified HUBZone small business concern in DSBS (or successor system). A contracting officer shall not award a contract to a protested concern that the D/HUB has determined is not an eligible HUBZone small business concern for the procurement in question. (i) No appeal filed. If a contracting officer receives a determination sustaining a protest after contract award, and no appeal has been filed, the contracting officer shall terminate the award. (ii) Appeal filed. (A) If a timely appeal is filed after contract award, the contracting officer must consider whether performance can be suspended until an appellate decision is rendered. (B) If the AA/GCBD affirms the initial determination finding the protested concern ineligible, the contracting officer shall either terminate the contract or not exercise the next option. (iii) Update FPDS-NG. Where the contract was awarded to a firm that is found not to qualify as a HUBZone small business concern, the contracting officer must update the Federal Procurement Data System- Next Generation (FPDS-NG) and other procurement reporting databases to reflect the final agency HUBZone decision (i.e., the D/HUB's decision if no appeal is filed, or the decision of the AA/GCBD if the protest is appealed). (2) Protest dismissed or denied. If the D/HUB denies or dismisses the protest, the contracting officer may award the contract to the protested concern. (i) No appeal filed. If a contracting officer receives a determination dismissing or denying a protest and no appeal has been filed, the contracting officer may: (A) Award the contract to the protested concern if it has not yet been awarded; or (B) Authorize contract performance to proceed if the contract has been awarded. (ii) Appeal filed. If the AA/GCBD overturns the initial determination or dismissal, the contracting officer may apply the appeal decision to the procurement in question. (3) A concern found to be ineligible is precluded from applying for HUBZone certification for ninety (90) calendar days from the date of the final agency decision (the D/HUB's decision if no appeal is filed, or the decision of the AA/GCBD if the protest is appealed). PART 127--WOMEN-OWNED SMALL BUSINESS FEDERAL CONTRACT PROGRAM 0 59. Amend Sec. 127.602 by redesignating the text of Sec. 127.602 as paragraph (a) and adding paragraph (b). The addition reads as follows: Sec. 127.602 What are the grounds for filing an EDWOSB or WOSB status protest? * * * * * (b) For a protest filed against an EDWOSB or WOSB joint venture, the protest must state all specific grounds for why-- (1) The EDOWSB or WOSB partner to the joint venture did not meet the EDWOSB or WOSB eligibility requirements set forth in Sec. 127.200; and/or (2) The protested EDWOSB or WOSB joint venture did not meet the requirements set forth in Sec. 127.506. Dated: October 19, 2018. Linda E. McMahon, Administrator. [FR Doc. 2018-23285 Filed 10-30-18; 8:45 am] BILLING CODE 8025-01-P
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program of increasing employment and will be borne by the agency and not the Authority: 15 U.S.C. 632, 634(b)(6), 662,
would provide greater opportunities for small business. In addition, recertifying and 694a(9).
certified HUBZone small business every year should not impose a § 121.404 [Amended]
concerns to be eligible for and receive significant cost on small business since
HUBZone contracts. Further, this will the rules already require the business to ■ 4. Amend § 121.404(g)(4) by removing
reduce burden as the firm will not have actively monitor its compliance from the phrase ‘‘HUBZone SBCs’’ and
to continually determine whether the the moment it applies to the program. adding in its place the phrase ‘‘certified
employee that resided in a HUBZone at As a result, SBA does not believe that HUBZone small business concerns’’.
the time of certification continues to the proposed amendments would have § 121.1001 [Amended]
reside in a HUBZone in connection with a disparate impact on small businesses
the offer and offer of each contract or or would impose any additional ■ 5. Amend § 121.1001 as follows:
future recertifications. A firm’s ability to significant costs. For the reasons ■ a. In paragraph (a)(6)(ii), remove the
request reconsideration will be added to discussed, SBA certifies that this phrase ‘‘qualified HUBZone SBC’’ and
the existing information collection for proposed rule would not have a add in its place the phrase ‘‘certified
the HUBZone program (OMB Control significant economic impact on a HUBZone small business concern’’; and
#3245–0320). substantial number of small business ■ b. In paragraph (b)(8)(i), remove the
concerns. phrase ‘‘qualified HUBZone business
Regulatory Flexibility Act, 5 U.S.C. 601– concern’’ and add in its place the phrase
612 List of Subjects ‘‘certified HUBZone small business
According to the Regulatory 13 CFR Part 115 concern’’.
Flexibility Act (RFA), 5 U.S.C. 601,
Claims, Reporting and recordkeeping PART 125—GOVERNMENT
when an agency issues a rulemaking, it
requirements, Small businesses, Surety CONTRACTING PROGRAMS
must prepare a regulatory flexibility
bonds.
analysis to address the impact of the ■ 6. The authority citation for part 125
rule on small entities. However, section 13 CFR Part 121 is revised to read as follows:
605 of the RFA allows an agency to Administrative practice and
certify a rule, in lieu of preparing an Authority: 15 U.S.C. 632(p), (q); 634(b)(6);
procedure, Government procurement, 637; 644; 657f; 657q; 657r; and 657s.
analysis, if the rulemaking is not Government property, Grant programs-
expected to have a significant economic business, Individuals with disabilities, § 125.1 [Amended]
impact on a substantial number of small Loan programs-business, Small ■ 7. In § 125.1, amend the definition of
entities. The RFA defines ‘‘small entity’’ businesses. ‘‘similarly situated entity’’ by removing
to include ‘‘small businesses,’’ ‘‘small
13 CFR Part 125 the phrase ‘‘qualified HUBZone small
organizations,’’ and ‘‘small
business concern’’ and adding in its
governmental jurisdictions.’’ This Government contracts, Government place the phrase ‘‘certified HUBZone
proposed rule concerns various aspects procurement, Reporting and small business concern’’.
of SBA’s HUBZone program, as such the recordkeeping requirements, Small
rule relates to small business concerns businesses, Technical assistance, § 125.2 [Amended]
but would not affect ‘‘small Veterans. ■ 8. Amend § 125.2(c)(1)(i) by removing
organizations’’ or ‘‘small governmental the phrase ‘‘qualified HUBZone small
jurisdictions’’ because those programs 13 CFR Part 126
business concerns’’ and adding in its
generally apply only to ‘‘business Administrative practice and place the phrase ‘‘certified HUBZone
concerns’’ as defined by SBA procedure, Government procurement, small business concerns’’.
regulations, in other words, to small Penalties, Reporting and recordkeeping
businesses organized for profit. ‘‘Small requirements, Small businesses. § 125.3 [Amended]
organizations’’ or ‘‘small governmental For the reasons set forth in the ■ 9. Amend § 125.3(c)(1)(xi) by
jurisdictions’’ are non-profits or preamble, SBA proposes to amend 13 removing the phrase ‘‘qualified
governmental entities and do not CFR parts 115, 121, 125, and 126 as set HUBZone small business concerns’’ and
generally qualify as ‘‘business concerns’’ forth below: adding in its place the phrase ‘‘certified
within the meaning of SBA’s HUBZone small business concerns’’.
regulations. PART 115—SURETY BOND
There are approximately 5,000 GUARANTEE § 125.6 [Amended]
certified HUBZone small business ■ 10. Amend § 125.6 by removing
concerns that are listed as certified ■ 1. The authority citation for part 115 paragraph (d) and redesignating
HUBZone small businesses in DSBS, continues to read as follows: paragraphs (e) through (h) as paragraphs
and SBA receives approximately 1,500 Authority: 5 U.S.C. app 3; 15 U.S.C. 687b, (d) through (g), respectively.
applications annually. Most of the 687c, 694a, 694b note; and Pub. L. 110–246, ■ 11. Revise § 125.28(b) to read as
changes are clarification of current Sec. 12079, 122 Stat. 1651. follows:
policy and therefore should not impact
§ 115.31 [Amended] § 125.28 How does one file a service
many of these concerns. Further, there
is a new compliance or other costs ■ 2. Amend § 115.31(a)(2) by removing disabled veteran-owned status protest?
imposed by the proposed rule on the phrase ‘‘qualified HUBZone small * * * * *
amozie on DSK3GDR082PROD with PROPOSALS2
current or prospective HUBZone small business concern’’ and adding in its (b) Format and specificity. (1) Protests
business concerns. Under current law, place the phrase ‘‘certified HUBZone must be in writing and must specify all
HUBZone small business concerns must small business concern’’. the grounds upon which the protest is
recertify every three years and under the based. A protest merely asserting that
PART 121—SMALL BUSINESS SIZE
proposed rule, the same firms will need the protested concern is not an eligible
REGULATIONS
to recertify every year. SDVO SBC, without setting forth
Nonetheless, most of these costs ■ 3. The authority citation for part 121 specific facts or allegations is
relating to reconsideration and appeals continues to read as follows: insufficient.
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![Federal Register / Vol. 83, No. 211 / Wednesday, October 31, 2018 / Proposed Rules 54825
Example to paragraph (b)(1): A protester employees, and attendance at job fairs SBA’s Size Policy Statement No. 1 (51
submits a protest stating that the apparent and applies only to concerns during the FR 6099, Feb. 20, 1986).
successful offeror is not owned by a service- performance of any HUBZone contract. (1) In general, the following are
disabled veteran. The protest does not state A certified HUBZone small business considered employees:
any basis for this assertion. The protest
allegation is insufficient.
concern that has less than 20% of its (i) Individuals obtained from a
total employees residing in a HUBZone temporary employee agency, leasing
(2) For a protest filed against a SDVO during the performance of a HUBZone concern, or through a union agreement,
SBC joint venture, the protest must state contract has failed to attempt to or co-employed pursuant to a
all specific grounds for why— maintain the HUBZone residency professional employer organization
(i) The SDVO SBC partner to the joint requirement. agreement;
venture did not meet the SDVO SBC (ii) An individual who has an
eligibility requirements set forth in * * * * *
Certify means the process by which ownership interest in the firm and who
subpart B of part 125; and/or works for the firm a minimum of 40
(ii) The protested SDVO SBC joint SBA determines that a firm is qualified
for the HUBZone program and eligible hours during the four-week period
venture did not meet the requirements immediately prior to the relevant date of
set forth in § 125.18. to be designated by SBA as a certified
HUBZone small business concern in the review, whether or not the individual
* * * * * Dynamic Small Business Search (DSBS) receives compensation;
system (or successor system). (iii) The sole owner of a firm who
PART 126—HUBZONE PROGRAM works less than 40 hours during the
* * * * *
■ 12. The authority citation for part 126 D/HUB means the Director of SBA’s four-week period immediately prior to
continues to read as follows: Office of HUBZone. the relevant date of review, but who has
Decertify means the process by which not hired another individual to direct
Authority: 15 U.S.C. 632(a), 632(j), 632(p),
644 and 657a. SBA determines that a concern no the actions of the concern’s employees;
longer qualifies as a HUBZone small (iv) Individuals who receive in-kind
§ 126.101 [Amended] business concern and removes that compensation commensurate with work
■ 13. Amend § 126.101(b) by removing concern as a certified HUBZone small performed.
the phrase ‘‘qualified HUBZone SBCs’’ business concern from DSBS (or (2) In general, the following are not
and adding in its place the phrase successor system), or the process by considered employees:
‘‘certified HUBZone small business which SBA removes a concern as a (i) Individuals who receive no
concerns’’. certified HUBZone small business compensation (including no in-kind
■ 14. Amend § 126.103 as follows:
concern from DSBS (or successor compensation) for work performed;
■ a. Remove the definitions of ‘‘Alaska (ii) Individuals who receive deferred
system) after receiving a request to
Native Village’’, ‘‘ANCSA’’, ‘‘County voluntarily withdraw from the compensation for work performed;
unemployment rate’’, ‘‘De-certify’’, HUBZone program. (iii) Independent contractors that
‘‘List’’, ‘‘Median household income’’, Dynamic Small Business Search receive payment via IRS Form 1099 and
‘‘Metropolitan statistical area’’, (DSBS) means the database that are not considered employees under
‘‘Qualified HUBZone SBC’’, ‘‘Small government agencies use to find small SBA’s Size Policy Statement No. 1 (51
Disadvantaged Business (SDB)’’, and business contractors for upcoming FR 6099, Feb. 20, 1986); and
‘‘Statewide average unemployment contracts. The information a business (iv) Subcontractors.
rate’’; provides when registering in the System (3) Employees of an affiliate may be
■ b. Revise the definitions of ‘‘Alaska considered employees, if the totality of
for Award Management (SAM) is used
Native Corporation’’, ‘‘Attempt to the circumstances shows that there is no
to populate DSBS. For HUBZone
maintain’’, ‘‘Certify’’, ‘‘D/HUB’’, clear line of fracture between the
Program purposes, a firm’s DSBS profile
‘‘Employee’’, ‘‘HUBZone small business HUBZone applicant (or certified
will indicate whether it is a certified
concern’’, ‘‘Interested party’’, ‘‘Principal HUBZone small business concern) and
HUBZone small business concern, and
office’’, ‘‘Qualified base closure area’’, its affiliate(s) (see § 126.204).
if so, the date it was certified or
‘‘Qualified census tract’’, ‘‘Qualified * * * * *
recertified.
non-metropolitan county’’, Employee means all individuals HUBZone small business concern or
‘‘Redesignated area’’, ‘‘Reside’’; and employed on a full-time, part-time, or certified HUBZone small business
■ c. Add definitions for ‘‘Decertify’’, concern (1) Means a small business
other basis, so long as that individual
‘‘Dynamic Small Business Search concern that meets the requirements
works a minimum of 40 hours during
(DSBS)’’ and ‘‘Primary industry described in § 126.200 and that SBA has
the four-week period immediately prior
classification or primary industry’’ in certified as eligible for federal
to the relevant date of review, which is
alphabetical order. contracting assistance under the
The revisions and additions read as either the date the concern submits its
HUBZone application to SBA or the HUBZone program.
follows: (2) A firm that was a certified
date of recertification. SBA will review
§ 126.103 What definitions are important in a firm’s payroll records for the most HUBZone small business concern as of
the HUBZone Program? recently completed pay periods that December 12, 2017, and that had its
* * * * * account for the four-week period principal office located in a
Alaska Native Corporation (ANC) has immediately prior to the date of redesignated area set to expire prior to
amozie on DSK3GDR082PROD with PROPOSALS2
the same meaning as the term ‘‘Native application or date of recertification in January 1, 2020, shall remain a certified
Corporation’’ in section 3 of the Alaska order to determine which individuals HUBZone small business concern until
Native Claims Settlement Act (ANCSA), meet this definition. To determine if an December 31, 2021, so long as all other
43 U.S.C. 1602. individual is an employee, SBA reviews HUBZone eligibility requirements are
Attempt to maintain means making the totality of circumstances, including met.
substantive and documented efforts, criteria used by the Internal Revenue * * * * *
such as written offers of employment, Service (IRS) for Federal income tax Interested party means any concern
published advertisements seeking purposes and the factors set forth in that submits an offer for a specific
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![54828 Federal Register / Vol. 83, No. 211 / Wednesday, October 31, 2018 / Proposed Rules
have an active exclusion in the System § 126.206 May nonmanufacturers be concern must submit a completed
for Award Management, available at certified as HUBZone small business application and all documents
www.SAM.gov, at the time of concerns? requested by SBA. The concern must
application. Nonmanufacturers (referred to in the also represent to SBA that it meets the
HUBZone Act of 1997 as ‘‘regular requirements set forth in § 126.200 and
§ 126.202 [Amended] dealers’’) may be certified as HUBZone that all of the information provided as
■ 17. Amend § 126.202 by removing the small business concerns if they meet all of the date of the application (and any
phrase ‘‘Many persons share control’’ of the requirements set forth in subsequent information provided) is
and adding in its place the phrase § 126.200. For purposes of this part, a complete, true and accurate. The
‘‘Many persons may share control’’. ‘‘nonmanufacturer’’ is defined in representation must be electronically
§ 121.406(b) of this chapter. signed by an owner of the applicant.
§ 126.203 [Amended] ■ 22. Revise § 126.207 to read as (b) Supporting documents. (1) SBA
follows: may request documents to verify that
■ 18. Amend § 126.203 paragraph (a) by
removing the phrase ‘‘qualified § 126.207 Do all of the offices or facilities
the applicant meets the HUBZone
HUBZone SBC’’ and adding in its place of a certified HUBZone small business program’s eligibility requirements. The
the phrase ‘‘certified HUBZone small concern have to be located in a HUBZone? documents must show that the concern
business concern’’. A HUBZone small business concern meets the program’s requirements at the
may have offices or facilities in multiple time it submits its application to SBA.
■ 19. Revise § 126.204 to read as (2) The concern must document
follows: HUBZones or even outside a HUBZone.
However, in order to be certified as a compliance with the requirements listed
§ 126.204 May a HUBZone small business HUBZone small business concern, the in § 126.200, including but not limited
concern have affiliates? concern’s principal office must be to employment records and
located in a HUBZone (except see documentation showing the address of
(a) A HUBZone small business each HUBZone resident employee.
concern may have affiliates, provided § 126.200(c)(2) for concerns owned by
Indian Tribal Governments). Records sufficient to demonstrate
that the aggregate size of the concern HUBZone residency include copies of
■ 23. Revise § 126.300 to read as
together with all of its affiliates is small driver’s licenses and voter registration
follows:
as defined in part 121 of this title, cards; only where such documentation
except as otherwise provided for small § 126.300 How may a concern be certified is unavailable will SBA accept
agricultural cooperatives in § 126.103. as a HUBZone small business concern? alternative documentation (such as
(b) The employees of an affiliate may (a) A concern must apply to SBA for copies of leases, deeds, and/or utility
be counted as employees of a HUBZone HUBZone certification. SBA will bills) accompanied by signed statements
applicant or HUBZone small business consider the information provided by explaining why the alternative
concern for purposes of determining the concern in order to determine documentation is being provided.
compliance with the HUBZone whether the concern qualifies. (c) Changes after submission of
program’s principal office and 35% (b) SBA, at its discretion, may rely application. After submitting an
residency requirements. In determining solely upon the information submitted, application, a concern applying for
whether individuals should be counted may request additional information, HUBZone certification must notify SBA
as employees of a HUBZone applicant may conduct independent research, or of any changes that could affect its
or HUBZone small business concern, may verify the information before eligibility, and provide information and
SBA will review all information, making an eligibility determination. documents to verify the changes. If the
(c) If SBA determines that a concern changed information indicates that the
including criteria used by the Internal
meets the eligibility requirements of a firm is not eligible, the applicant will be
Revenue Service (IRS) for Federal
HUBZone small business concern, it given the option to withdraw its
income tax purposes and those set forth
will notify the firm and designate the application, or SBA will decline
in SBA’s Size Policy Statement No. 1
firm as a certified HUBZone small certification and the firm must wait 90
(Pub. L. 114–187, June 30, 2016). If the
business concern in DSBS (or successor days to reapply.
firms would be affiliated for size
system). (d) HUBZone areas. Concerns
purposes and the totality of the ■ 24. Revise § 126.303 to read as applying for HUBZone status must use
circumstances shows that there is no follows: SBA’s website (i.e., maps or other tools
clear line of fracture between the
showing qualified HUBZones) to verify
HUBZone applicant (or HUBZone small § 126.303 Where must a concern submit
that the location of the concern’s
business concern) and the affiliate, SBA its application for certification?
principal office and the residences of at
will consider the employees of the A concern seeking certification as a
least 35% of the concern’s employees
affiliate as employees of the HUBZone HUBZone small business concern must
are within HUBZones. If SBA’s website
applicant (or HUBZone small business submit an electronic application to
indicates that a particular location is not
concern). SBA’s HUBZone Program Office via
within a HUBZone and the applicant
■ 20. Revise § 126.205 to read as SBA’s web page at www.SBA.gov. The
disagrees, then the applicant must note
follows: application and any supporting
this on the application and submit
documentation must be submitted by a
§ 126.205 May participants in other SBA relevant documents showing why the
person authorized to represent the
programs be certified as HUBZone small applicant believes the area meets the
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concern.
business concerns? ■ 25. Revise § 126.304 to read as
statutory criteria of a HUBZone. SBA
follows: will determine whether the location is
Participants in other SBA programs within a HUBZone using available
may be certified as HUBZone small § 126.304 What must a concern submit to methods (e.g., contact Bureau of Indian
business concerns if they meet all of the SBA in order to be certified as a HUBZone Affairs for Indian reservations or
requirements set forth in this part. small business concern? Department of Defense for BRACs).
■ 21. Revise § 126.206 to read as (a) General. To be certified by SBA as (e) Record Maintenance. HUBZone
follows: a HUBZone small business concern, a small business concerns must retain
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documentation demonstrating The decision will also state the for the initial decline, whether or not
satisfaction of all qualifying reconsideration rights. available at the time of initial
requirements for 6 years from date of (g) SBA will presume that notice of its application.
submission of all initial and continuing decision was provided to an applicant if (4) Decision on reconsideration. The
eligibility actions as required by this SBA sends a communication to the D/HUB will issue a written decision
part. In addition, HUBZone small concern at a mailing address, email within 30 calendar days of SBA’s
business concerns must retain address, or fax number provided in the receipt of the applicant’s request for
documentation as required in concern’s profile in the System for reconsideration. The D/HUB may
§ 126.200(d)(3). Award Management (or successor approve the application, deny it on the
system). same grounds as the original decision,
§ 126.305 [Removed and reserved] ■ 28. Revise § 126.307 to read as or deny it on other grounds.
■ 26. Remove and reserve § 126.305. follows: (i) If denied, the D/HUB will provide
■ 27. Revise § 126.306 to read as written notice and explain why the
§ 126.307 Where is there a list of certified
follows: HUBZone small business concerns?
applicant is not eligible for admission to
the program and give specific reasons
§ 126.306 How will SBA process an SBA designates firms as certified for the decline.
application for HUBZone certification? HUBZone small business concerns in (ii) If the D/HUB declines the
(a) The D/HUB or designee is DSBS (or successor system). application solely on issues not raised
authorized to approve or decline ■ 29. Revise § 126.308 to read as
in the initial decline, the applicant can
applications for HUBZone certification. follows:
ask for reconsideration as if it were an
SBA will receive and review all § 126.308 What happens if a HUBZone initial decline.
applications and request supporting small business concern receives notice of (b) Reapplying for certification. A
documents. SBA must receive all its certification but it does not appear in declined concern may reapply for
required information, supporting DSBS as a certified HUBZone small certification ninety (90) calendar days
documents, and a completed HUBZone business concern? after the date of the final agency
representation before it will begin (a) A certified HUBZone small decision (i.e., the initial decision of the
processing a concern’s application. SBA business concern that has received D/HUB where the concern does not seek
will not process incomplete packages. SBA’s notice of certification, but does reconsideration, or the decision on
SBA will make its determination within not appear in DSBS (or successor reconsideration), if it believes that it has
90 calendar days after receipt of a system) as a certified HUBZone small overcome all reasons for decline
complete package whenever practicable. business concern within 10 business through changed circumstances and is
(b) The burden of proof to days, should immediately notify the D/ currently eligible.
demonstrate eligibility is on the HUB via email at hubzone@sba.gov. ■ 31. Revise § 126.401 to read as
applicant concern. If a concern does not (b) A certified HUBZone small follows:
provide requested information within business concern that has received
the allotted time provided by SBA, or if SBA’s notice of certification must § 126.401 What is a program examination?
it submits incomplete information, SBA appear as a certified HUBZone small A program examination is an
may draw an adverse inference and business concern in DSBS (or successor investigation by SBA officials, which
presume that the information that the system) in order to be eligible for verifies the accuracy of any certification
applicant failed to provide would HUBZone contracts (i.e., it cannot ‘‘opt made or information provided as part of
demonstrate ineligibility and deny out’’ of a public display in the System the HUBZone application or
certification on this basis. for Award Management (SAM.gov) or recertification process. Examiners may
(c) SBA’s decision will be based on DSBS (or successor systems)). verify that the concern met the
the facts set forth in the application, any ■ 30. Revise § 126.309 to read as program’s eligibility requirements at the
information received in response to follows: time of its certification or, if applicable,
SBA’s request for clarification, any at the time of its most recent
§ 126.309 May a declined concern request recertification.
independent research conducted by reconsideration or seek certification at a
SBA, and any changed circumstances. later date? § 126.402 [Amended]
(d) In order to be certified into the (a) Reconsideration. An applicant may ■ 32. Amend § 126.402 by removing the
program, the applicant must be eligible request that the D/HUB reconsider the phrase ‘‘qualified HUBZone SBC’’ and
as of the date it submitted its initial decline decision by filing a adding in its place the phrase ‘‘certified
application and at the time the D/HUB request for reconsideration with SBA. HUBZone small business concern’’.
issues a decision. An applicant must (1) Method of submission. The ■ 33. Revise § 126.403 to read as
inform SBA of any changes to its applicant must submit its request for follows:
circumstances that occur after its reconsideration to the SBA’s HUBZone
application and before its certification Program Office by email to hubzone@ § 126.403 What will SBA review during a
that may affect its eligibility. SBA will sba.gov. program examination?
consider such changed circumstances in (2) Filing deadline. The request for (a) SBA may conduct a program
determining whether to certify the firm. reconsideration must be submitted examination, or parts of an examination,
(e) If SBA approves the application, it within 15 calendar days of receipt of at one or more of the concern’s offices.
amozie on DSK3GDR082PROD with PROPOSALS2
will send a written notice to the concern written notice that the concern’s SBA will determine the location and
and designate the firm as a certified application was declined. scope of the examination and may
HUBZone small business concern in (3) Contents of request. The request review any information related to the
DSBS (or successor system) as described for reconsideration must set forth the concern’s HUBZone eligibility
in § 126.307. reasons why the D/HUB’s initial including, but not limited to,
(f) If SBA denies the application, it decision was erroneous and include documentation related to the location
will send a written notice to the concern information and documentation and ownership of the concern,
and state the specific reasons for denial. pertinent to overcoming the reason(s) compliance with the 35% HUBZone
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proposed decertification to the concern system) as a certified HUBZone small (1) Is a certified HUBZone small
at a mailing address, email address, or business concern if the concern has: business concern in DSBS (or successor
fax number provided in the concern’s (1) Been decertified as a result of a system);
profile in the System for Award HUBZone status protest pursuant to (2) Is small, together with its affiliates,
Management (SAM.gov) or the Dynamic § 126.803; at the time of its offer under the size
Small Business Search (DSBS) (or (2) Been decertified as a result of the standard corresponding to the NAICS
successor systems). procedures set forth in § 126.503; or code assigned to the procurement;
(ii) Response to notice of proposed (3) Voluntarily withdrawn from the (3) Will ‘‘attempt to maintain’’ having
decertification. The HUBZone small HUBZone program pursuant to at least 35% of its employees residing in
business concern must respond to the § 126.501(b). a HUBZone during the performance of
notice of proposed decertification (b) SBA may remove the designation the contract, as set forth in § 126.200(e);
within the timeframe specified in the of a concern in DSBS (or successor and
notice. In this response, the HUBZone system) as a certified HUBZone small (4) Will comply with the applicable
small business concern must rebut each business concern as soon as the D/HUB limitations on subcontracting during
of the reasons set forth by SBA in the issues a decision decertifying the performance of the contract, as set forth
notice of proposed decertification, and concern from the program. in § 125.6 of this chapter and
where appropriate, the rebuttal must (c) After a concern has been removed §§ 126.200(f), and 126.700.
include documents showing that the as a certified HUBZone small business (c) A certified HUBZone small
concern is eligible for the HUBZone concern in DSBS (or successor system), business concern may submit an offer
program as of the date specified in the it is ineligible for the HUBZone program on a HUBZone contract for supplies as
notice. and may not submit an offer on or be an a nonmanufacturer if it meets the
(iii) Adverse inference. If a HUBZone awarded a HUBZone contract, or receive requirements of the nonmanufacturer
small business concern fails to any other benefit as a HUBZone small rule set forth at § 121.406 of this
cooperate with SBA or fails to provide business concern. chapter.
the information requested, the D/HUB ■ 43. Revise § 126.602 to read as
may draw an adverse inference and Subpart F—Contracting with Certified follows:
assume that the information that the HUBZone Small Business Concerns § 126.602 Must a certified HUBZone small
concern failed to provide would business concern maintain the employee
demonstrate ineligibility. ■ 40. Revise the heading of subpart F to
residency percentage during contract
(2) SBA’s decision. SBA will read as set forth above.
performance?
determine whether the HUBZone small § 126.600 [Amended] (a) A certified HUBZone small
business concern remains eligible for business concern eligible for the
the program within 90 calendar days ■ 41. Amend § 126.600 as follows:
■ a. In the introductory text, remove the program pursuant to § 126.200(b) must
after receiving all requested have at least 35% of its employees
information, when practicable. The D/ phrase ‘‘qualified HUBZone SBC’’ and
add in its place the phrase ‘‘certified residing within a HUBZone at the time
HUB will provide written notice to the of certification and annual
concern stating the basis for the HUBZone small business concern’’;
■ b. In paragraphs (a), (b), and (c), recertification. Such a certified
determination. If SBA finds that the HUBZone small business concern must
concern is not eligible, the D/HUB will remove the phrase ‘‘qualified HUBZone
SBCs’’ wherever it appears and add in ‘‘attempt to maintain’’ (see § 126.103)
decertify the concern and remove its having at least 35% of its employees
designation as a certified HUBZone its place the phrase ‘‘certified HUBZone
small business concerns’’; residing in a HUBZone during the
small business concern in DSBS (or performance of any HUBZone contract
successor system). If SBA finds that the ■ c. In paragraphs (d) and (e), remove
the phrase ‘‘HUBZone SBCs’’ wherever awarded to the concern on the basis of
concern is eligible, the concern will its HUBZone status.
continue to be designated as a certified it appears and add in its place the
phrase ‘‘certified HUBZone small (b) For indefinite delivery, indefinite
HUBZone small business concern in quantity contracts, including multiple
DSBS (or successor system). business concerns’’;
■ d. In paragraph (e), remove the word
award contracts, a certified HUBZone
(b) Decertification pursuant to a
‘‘against’’ and add in its place the word small business concern must ‘‘attempt
protest. The procedures described in
‘‘under’’ and remove the phrase ‘‘, to maintain’’ the HUBZone residency
paragraph (a) of this section do not
which had been’’ and add in its place requirement during the performance of
apply to HUBZone status protests. If the
the phrase ‘‘that was’’. each order that is set aside for HUBZone
D/HUB sustains a protest pursuant to
■ 42. Revise § 126.601 to read as
small business concerns.
§ 126.803, SBA will decertify the (c) A certified HUBZone small
HUBZone small business concern follows:
business concern eligible for the
immediately and change the firm’s § 126.601 What additional requirements program pursuant to § 126.200(a) must
status in DSBS (or successor system) to must a certified HUBZone small business have at least 35% of its employees
reflect that it no longer qualifies as a concern meet to submit an offer on a engaged in performing a HUBZone
certified HUBZone small business HUBZone contract? contract residing within any Indian
concern without first proposing it for (a) Only certified HUBZone small reservation governed by one or more of
decertification. business concerns are eligible to submit the concern’s Indian Tribal Government
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■ 39. Revise § 126.504 to read as
offers for a HUBZone contract or to owners, or residing within any
follows: receive a price evaluation preference HUBZone adjoining any such Indian
§ 126.504 When will SBA remove the under § 126.613. reservation.
designation of a concern in DSBS (or (b) At the time a certified HUBZone (d) A certified HUBZone small
successor system) as a certified HUBZone small business concern submits its business concern that has less than 20%
small business concern? initial offer (including price) on a of its total employees residing in a
(a) SBA will remove the designation specific HUBZone contract, it must HUBZone during the performance of a
of a concern in DSBS (or successor certify to the contracting officer that it: HUBZone contract has failed to attempt
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to maintain the HUBZone residency ■ ii. In the final sentence, remove the BD Participant, with an approved
requirement. Such failure will result in phrase ‘‘HUBZone SBC’’ and add in its mentor authorized by § 124.520 of this
proposed decertification pursuant to place the phrase ‘‘certified HUBZone chapter), for the purpose of submitting
§ 126.503. small business concern’’; an offer for a HUBZone contract. The
■ iii. In the final sentence, remove the joint venture itself need not be a
§ 126.603 [Amended]
phrase ‘‘HUBZone SBCs’’ and add in its certified HUBZone small business
■ 44. Amend § 126.603 by removing the place the phrase ‘‘certified HUBZone concern.
phrase ‘‘qualified HUBZone SBCs’’ and small business concerns’’; * * * * *
adding in its place the phrase ‘‘certified ■ c. In Examples 1, 2, and 3 in
HUBZone small business concerns’’. (e) Certification of compliance.—(1)
paragraph (a)(2), remove the phrase At time of offer. If submitting an offer
■ 45. Amend § 126.607 as follows:
‘‘non-HUBZone SBC’’ wherever it as a joint venture for a HUBZone
■ a. Revise the section heading;
appears and add in its place the phrase contract, at the time of initial offer (and
■ b. In paragraph (c), amend the
‘‘non-HUBZone small business if applicable, final offer), each certified
introductory text by removing the
concern’’ HUBZone small business concern joint
phrase ‘‘qualified HUBZone SBCs’’ and
■ d. In the second and third sentences
adding in its place the phrase ‘‘certified venture partner must make the
in Example 4 in paragraph (a)(2), following certifications to the
HUBZone small business concerns’’;
■ c. In paragraph (c)(1), remove the
remove the phrase ‘‘HUBZone SBC’’ contracting officer separately under its
phrase ‘‘SBA’s list of qualified wherever it appears and add in its place own name:
HUBZone SBCs’’ and add in its place the phrase ‘‘HUBZone small business
(i) It is a certified HUBZone small
the phrase ‘‘the list of certified concern’’;
business concern that appears in DSBS
■ e. In the third sentence in Example 4
HUBZone small business concerns (or successor system) as a certified
contained in DSBS (or successor in paragraph (a)(2), remove the phrase
HUBZone small business concern and it
system)’’. ‘‘HUBZone SBCs’’ and add in its place
met the eligibility requirements in
The revision reads as follows: the phrase ‘‘certified HUBZone small
§ 126.200 at the time of its initial
business concerns’’;
certification or, if applicable, at the time
§ 126.607 When must a contracting officer ■ f. In paragraph (b)(2), remove the
set aside a requirement for certified of its most recent recertification;
phrase ‘‘qualified HUBZone SBCs’’ and
HUBZone small business concerns? add in its place the phrase ‘‘certified (ii) It, together with its affiliates, is
* * * * * HUBZone small business concerns’’; small under the size standard
and corresponding to the NAICS code
§ 126.608 [Amended] assigned to the procurement;
■ g. In paragraph (d), remove the phrase
■ 46. Amend § 126.608 by removing the ‘‘SBCs’’ and add in its place the phrase (iii) It will ‘‘attempt to maintain’’
phrase ‘‘HUBZone set-aside’’ and ‘‘small business concerns’’. having at least 35% of its employees
adding in its place the phrase ■ 50. Amend § 126.616 as follows: residing in a HUBZone during
‘‘HUBZone set-aside or sole source ■ a. Revise the section heading; performance of the contract; and
award’’. ■ b. Revise paragraph (a); (iv) It will comply with the applicable
§ 126.611 [Amended] ■ c. In paragraph (b) and (d)(1), remove limitations on subcontracting during
the phrase ‘‘qualified HUBZone SBC’’ performance of the contract, as set forth
■ 47. Amend the heading of § 126.611
wherever it appears and add in its place in § 125.6 of this chapter and
by removing the phrase ‘‘such an
the phrase ‘‘certified HUBZone small §§ 126.200(f) and 126.700.
appeal’’ and adding in its place the
business concern’’; (2) Prior to performance. Prior to the
phrase ‘‘an appeal of a contracting
■ d. In the introductory text of performance of any HUBZone contract
officer’s decision not to issue a
paragraph (c), remove the phrase as a joint venture, the HUBZone small
procurement as a HUBZone contract’’.
‘‘HUBZone SBC’’ and add in its place business concern partner to the joint
§ 126.612 [Amended] ‘‘certified HUBZone small business venture must submit a written
■ 48. Amend § 126.612 as follows: concern’’; certification to the contracting officer
■ a. In the introductory text and ■ e. In paragraphs (c)(2) through (4), and SBA, signed by an authorized
paragraph (d), remove the phrase (c)(9), (c)(10), (d)(2), (g), and (i) remove official of each partner to the joint
‘‘qualified HUBZone SBC’’ wherever it the phrase ‘‘HUBZone SBC’’ wherever it venture, stating the following:
appears and add in its place the phrase appears’’ and add in its place the phrase (i) The parties have entered into a
‘‘certified HUBZone small business ‘‘certified HUBZone small business joint venture agreement that fully
concern’’; concern’’; complies with paragraph (c) of this
■ b. In paragraph (c), remove the phrase ■ f. In paragraphs (c)(7), (i), (j)(2), and section; and
‘‘qualified HUBZone SBCs’’ and add in (k), remove the phrase ‘‘performance of (ii) The parties will perform the
its place the phrase ‘‘certified HUBZone work’’ wherever it appears and add in contract in compliance with the joint
small business concerns’’. its place the phrase ‘‘limitations on venture agreement.
subcontracting’’; and
§ 126.613 [Amended] * * * * *
■ g. Revise paragraph (e).
■ 49. Amend § 126.613 as follows: The revisions read as follows: § 126.617 [Amended]
■ a. In the section heading and
paragraphs (a)(1), (a)(2), (b)(2), and (d), § 126.616 What requirements must a joint ■ 51. Amend § 126.617 as follows:
amozie on DSK3GDR082PROD with PROPOSALS2
remove the phrase ‘‘qualified HUBZone venture satisfy to submit an offer and be ■ a. In the section heading, remove the
SBC’’ wherever it appears and add in its eligible to perform on a HUBZone contract? phrase ‘‘qualified HUBZone SBC’’ and
place the phrase ‘‘certified HUBZone (a) General. A certified HUBZone add in its place the phrase ‘‘certified
small business concern’’; small business concern may enter into HUBZone small business concern’’;
■ b. In paragraph (a)(1): a joint venture agreement with one or ■ b. Remove the phrase ‘‘qualified
■ i. Remove the phrase ‘‘another SBC’’ more other small business concerns, or HUBZone SBC’’ and add in its place the
and add in its place the phrase ‘‘another with an approved mentor authorized by phrase ‘‘certified HUBZone small
small business concern’’; § 125.9 of this chapter (or, if also an 8(a) business concern’’.
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§ 126.618 [Amended] (4) Where a concern that is (4) Where the contracting officer
■ 52. Amend § 126.618 as follows: performing a HUBZone contract explicitly requires concerns to recertify
■ a. In paragraph (a), remove the phrase acquires, is acquired by, or merges with their status in response to a solicitation
‘‘the underlying HUBZone another concern and contract novation for an order, SBA will determine
requirements’’ and add in its place the is not required, the concern must, eligibility as of the date of the firm’s
phrase ‘‘the HUBZone requirements within 30 days of the transaction initial certification or, if applicable, its
described in § 126.200’’; becoming final, recertify its status as a most recent recertification.
■ b. In paragraphs (a) through (c), certified HUBZone small business (c) A concern’s status will be
remove the phrase ‘‘qualified HUBZone concern status to the procuring agency, determined at the time of submission of
SBC’’ wherever it appears and add in its or inform the procuring agency that it its initial response to a solicitation for
place the phrase ‘‘certified HUBZone no longer qualifies as a HUBZone small and award of an Agreement (including
small business concern’’; business concern. If the contractor is Blanket Purchase Agreements (BPAs),
■ c. In paragraph (c)(1), remove the unable to recertify its status as a Basic Agreements, Basic Ordering
phrase ‘‘HUBZone SBC’’ and add in its HUBZone small business concern, the Agreements, or any other Agreement
place the phrase ‘‘certified HUBZone agency can no longer count the options that a contracting officer sets aside or
small business concern’’; or orders issued pursuant to the reserves awards for certified HUBZone
■ d. In paragraphs (c)(1) and (c)(2), contract, from that point forward, small business concerns) and each order
remove the phrase ‘‘performance of towards its HUBZone goals. The agency issued pursuant to the Agreement.
work’’ wherever it appears and add in must immediately revise all applicable ■ 54. Revise § 126.700 to read as
its place the phrase ‘‘limitations on Federal contract databases to reflect the follows:
subcontracting’’. new status.
■ 53. Add § 126.619 to read as follows: § 126.700 What are the limitations on
(5) Where a concern is decertified subcontracting requirements for HUBZone
§ 126.619 When must a certified HUBZone after the award of a HUBZone contract, contracts?
small business concern recertify its status the procuring agency may exercise (a) Other than Multiple Award
for a HUBZone contract? options and still count the award as an Contracts. For other than a Multiple
(a) A concern that is a certified award to a HUBZone small business Award Contract, a prime contractor
HUBZone small business concern at the concern, except where recertification is receiving an award as a certified
time of initial offer (including a required or requested under this section. HUBZone small business concern must
Multiple Award Contract) is generally (b) For the purposes of contracts meet the limitations on subcontracting
considered a HUBZone small business (including Multiple Award Contracts) requirements set forth in § 125.6 of this
concern throughout the life of that with durations of more than five years chapter.
contract. (including options), a contracting officer (b) Multiple Award Contracts.—(1)
(1) If a concern is a certified HUBZone must request that a business concern Total Set-Aside Contracts. For a
small business concern at the time of recertify its status as a HUBZone small Multiple Award Contract that is totally
initial offer for a HUBZone Multiple business concern no more than 120 days set aside for certified HUBZone small
Award Contract, then it will be prior to the end of the fifth year of the business concerns, a certified HUBZone
considered a certified HUBZone small contract, and no more than 120 days small business concern must comply
business concern for each order issued prior to exercising any option. with the applicable limitations on
against the contract, unless a contracting (1) If the concern cannot recertify that subcontracting (see § 126.5), or if
officer requests a new HUBZone it qualifies as a HUBZone small applicable, the nonmanufacturer rule
certification in connection with a business concern, the agency can no (see § 121.406 of this chapter), during
specific order. longer count the options or orders the base term and during each
(2) Where the underlying Multiple issued pursuant to the contract, from subsequent option period. However, the
Award Contract is not a HUBZone that point forward, towards its contracting officer, at his or her
contract and a procuring agency is HUBZone goals. This means that if the discretion, may also require the concern
setting aside an order for the HUBZone firm either no longer meets the to comply with the limitations on
program, a firm must be a certified HUBZone eligibility requirements or no subcontracting or the nonmanufacturer
HUBZone small business concern and longer qualifies as small for the size rule for each individual order awarded
appear in DSBS (or successor system) as standard corresponding to NAICS code under the Multiple Award Contract.
a certified HUBZone small business assigned to the contract, the agency can (2) Partial Set-Aside Contracts. For
concern at the time it submits its offer no longer count the options or orders Multiple Award Contracts that are
for the order. issued pursuant to the contract, from partially set aside for certified HUBZone
(3) Where a HUBZone contract is that point forward, towards its small business concerns, paragraph
novated to another business concern, HUBZone goals. (b)(1) of this section applies to the set-
the concern that will continue (2) A concern that did not certify itself aside portion of the contract. For orders
performance on the contract must as a HUBZone small business concern, awarded under the non-set-aside
certify its status as a certified HUBZone either initially or prior to an option portion of a Multiple Award Contract, a
small business concern to the procuring being exercised, may recertify itself as a certified HUBZone small business
agency, or inform the procuring agency HUBZone small business concern for a concern need not comply with any
that it is not a certified HUBZone small subsequent option period if it meets the limitations on subcontracting or
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business concern, within 30 days of the eligibility requirements at that time. nonmanufacturer rule requirements.
novation approval. If the concern is not (3) Recertification does not change the (3) Orders Set Aside for certified
a certified HUBZone small business terms and conditions of the contract. HUBZone small business concerns. For
concern, the agency can no longer count The limitations on subcontracting, each individual order that is set aside
any work performed under the contract, nonmanufacturer and subcontracting for certified HUBZone small business
including any options or orders issued plan requirements in effect at the time concerns under a Multiple Award
pursuant to the contract, from that point of contract award remain in effect Contract that is not itself setaside for
forward towards its HUBZone goals. throughout the life of the contract. certified HUBZone small business
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![54834 Federal Register / Vol. 83, No. 211 / Wednesday, October 31, 2018 / Proposed Rules
concerns, a certified HUBZone small concern meets the HUBZone eligibility (5) If the procurement was a
business concern must comply with the requirements set forth in § 126.200, SBA HUBZone set-aside, whether the
applicable limitations on subcontracting will process the protests concurrently, protester submitted an offer;
(see § 125.6 of this chapter), or if under the procedures set forth in part (6) Whether the protested concern
applicable, the nonmanufacturer rule 121 of this chapter and this part. was the apparent successful offeror;
(see § 121.406 of this chapter), in the (3) SBA does not review issues (7) Whether the procurement was
performance of such order. concerning the administration of a conducted using sealed bid or
(4) Reserves. For an order that is set HUBZone contract. negotiated procedures;
aside for certified HUBZone small (b) Format and specificity. (1) Protests (8) The bid opening date, if
business concerns against a Multiple must be in writing and must state all applicable;
Award Contract with a HUBZone specific grounds for why the protested (9) The date the protester was notified
reserve, a certified HUBZone small concern did not meet the HUBZone of the apparent successful offeror;
business concern must comply with the eligibility requirements set forth in (10) The date the protest was
applicable limitations on subcontracting § 126.200 at the time the concern submitted to the contracting officer;
(see § 125.6 of this chapter), or if applied for certification or at the time (11) The date the protested firm
applicable, the nonmanufacturer rule SBA last recertified the concern as a submitted its initial offer or bid to the
(see § 121.406 of this chapter), in the HUBZone small business concern. A contracting activity; and
performance of such order. However, protest merely asserting that the (12) Whether a contract has been
the certified HUBZone small business protested concern did not qualify as a awarded, and if applicable, the date of
concern does not have to comply with HUBZone small business concern at the contract award and contract number.
the limitations on subcontracting or the time of certification or recertification,
§ 126.802 [Amended]
nonmanufacturer rule for any order without setting forth specific facts or
issued against the Multiple Award allegations, is insufficient. A protest ■ 57. Amend § 126.802 by removing the
Contract if the order is competed asserting that a firm was not in phrase ‘‘has qualified HUBZone status’’
amongst certified HUBZone small compliance with the HUBZone and adding in its place the phrase
business concerns and one or more eligibility requirements at the time of ‘‘qualifies as a certified HUBZone small
other-than-small business concerns. offer or award will be dismissed. business concern’’.
(2) For a protest filed against a ■ 58. Amend § 126.803 by:
§ 126.800 [Amended] ■ a. Revising the section heading;
HUBZone joint venture, the protest
■ 55. Amend § 126.800 as follows: must state all specific grounds for ■ b. Redesignating paragraphs (a)
■ a. Amend the section heading by why— through (d) as paragraphs (b) through
removing the phrase ‘‘qualified (i) The HUBZone small business (e), respectively;
HUBZone SBC’’ and adding in its place concern partner to the joint venture did ■ c. Adding new paragraph (a); and
the phrase ‘‘certified HUBZone small not meet the HUBZone eligibility ■ d. Revising newly redesignated
business concern’’; and requirements set forth in § 126.200 at paragraphs (b)(2), (c), and (e).
■ b. In paragraphs (a) and (b), remove the time the concern applied for The addition and revisions read as
the phrase ‘‘qualified HUBZone SBC’’ certification or at the time SBA last follows:
wherever it appears and add in its place recertified the concern as a HUBZone § 126.803 How will SBA process a
the phrase ‘‘certified HUBZone small small business concern; and/or HUBZone status protest and what are the
business concern’’; (ii) The protested HUBZone joint possible outcomes?
■ 56. Amend § 126.801 as follows: venture did not meet the requirements
■ a. Revise the section heading;
(a) Date at which eligibility
set forth in § 126.616 at the time the determined. SBA will determine the
■ b. Revise paragraphs (a), (b), and
joint venture submitted an offer for a eligibility of a concern subject to a
(c)(3); and HUBZone contract.
■ c. Revise the second and third HUBZone status protest as of the date of
(c) * * * its initial certification or, if applicable,
sentences in paragraph (e). (3) Protestors may submit their
The revisions read as follows: its most recent recertification.
protests by email to hzprotests@sba.gov. (b) * * *
§ 126.801 How does an interested party file * * * * * (2) If SBA determines the protest is
a HUBZone status protest? (e) * * * The contracting officer must timely and sufficiently specific, SBA
(a) General. (1) A HUBZone status send the protest, along with a referral will notify the protested concern of the
protest is the process by which an letter, to the D/HUB by email to protest and the identity of the protestor.
interested party may challenge the hzprotests@sba.gov. The contracting The protested concern must submit
HUBZone status of an apparent officer’s referral letter must include information responsive to the protest
successful offeror on a HUBZone information pertaining to the within 3 business days of the date of
contract, including a HUBZone joint solicitation that may be necessary for receipt of the protest.
venture submitting an offer under SBA to determine timeliness and (c) Time period for determination. (1)
§ 126.616. standing, including the following: SBA will determine the HUBZone status
(2) The protest procedures described (1) The solicitation number; of the protested concern within 15
in this part are separate from those (2) The name, address, telephone business days after receipt of a complete
governing size protests and appeals. All number, email address, and facsimile protest referral.
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protests relating to whether a certified number of the contracting officer; (2) If SBA does not issue its
HUBZone small business concern is (3) The type of HUBZone contract at determination within 15 business days
other than small for purposes of any issue; (or request an extension that is granted),
Federal program are subject to part 121 (4) If the procurement was conducted the contracting officer may award the
of this chapter and must be filed in using full and open competition with a contract if he or she determines in
accordance with that part. If a protester HUBZone price evaluation preference, writing that there is an immediate need
protests both the size of the HUBZone whether the protester’s opportunity for to award the contract and that waiting
small business concern and whether the award was affected by the preference; until SBA makes its determination will
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![Federal Register / Vol. 83, No. 211 / Wednesday, October 31, 2018 / Proposed Rules 54835
be disadvantageous to the Government. concern ineligible, the contracting certification for ninety (90) calendar
Notwithstanding such a determination, officer shall either terminate the days from the date of the final agency
the provisions of paragraph (d) of this contract or not exercise the next option. decision (the D/HUB’s decision if no
section apply to the procurement in (iii) Update FPDS–NG. Where the appeal is filed, or the decision of the
question. contract was awarded to a firm that is AA/GCBD if the protest is appealed).
* * * * * found not to qualify as a HUBZone
(e) Effect of determination. The small business concern, the contracting PART 127—WOMEN-OWNED SMALL
determination is effective immediately officer must update the Federal BUSINESS FEDERAL CONTRACT
and is final unless overturned on appeal Procurement Data System-Next PROGRAM
by the AA/GC&BD, or designee, Generation (FPDS–NG) and other
procurement reporting databases to ■ 59. Amend § 127.602 by redesignating
pursuant to § 126.805.
reflect the final agency HUBZone the text of § 127.602 as paragraph (a)
(1) Protest sustained. If the D/HUB
decision (i.e., the D/HUB’s decision if and adding paragraph (b).
finds the protested concern ineligible
and sustains the protest, SBA will no appeal is filed, or the decision of the The addition reads as follows:
decertify the concern and remove its AA/GCBD if the protest is appealed).
(2) Protest dismissed or denied. If the § 127.602 What are the grounds for filing
designation as a certified HUBZone an EDWOSB or WOSB status protest?
D/HUB denies or dismisses the protest,
small business concern in DSBS (or
the contracting officer may award the * * * * *
successor system). A contracting officer
contract to the protested concern. (b) For a protest filed against an
shall not award a contract to a protested (i) No appeal filed. If a contracting
concern that the D/HUB has determined EDWOSB or WOSB joint venture, the
officer receives a determination protest must state all specific grounds
is not an eligible HUBZone small dismissing or denying a protest and no
business concern for the procurement in for why—
appeal has been filed, the contracting
question. officer may: (1) The EDOWSB or WOSB partner to
(i) No appeal filed. If a contracting (A) Award the contract to the the joint venture did not meet the
officer receives a determination protested concern if it has not yet been EDWOSB or WOSB eligibility
sustaining a protest after contract award, awarded; or requirements set forth in § 127.200; and/
and no appeal has been filed, the (B) Authorize contract performance to or
contracting officer shall terminate the proceed if the contract has been (2) The protested EDWOSB or WOSB
award. awarded. joint venture did not meet the
(ii) Appeal filed. (A) If a timely appeal (ii) Appeal filed. If the AA/GCBD requirements set forth in § 127.506.
is filed after contract award, the overturns the initial determination or
contracting officer must consider Dated: October 19, 2018.
dismissal, the contracting officer may
whether performance can be suspended apply the appeal decision to the Linda E. McMahon,
until an appellate decision is rendered. procurement in question. Administrator.
(B) If the AA/GCBD affirms the initial (3) A concern found to be ineligible is [FR Doc. 2018–23285 Filed 10–30–18; 8:45 am]
determination finding the protested precluded from applying for HUBZone BILLING CODE 8025–01–P
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Document Created: 2018-10-31 00:33:29
Document Modified: 2018-10-31 00:33:29
| Category | Regulatory Information | |
| Collection | Federal Register | |
| sudoc Class | AE 2.7: GS 4.107: AE 2.106: | |
| Publisher | Office of the Federal Register, National Archives and Records Administration | |
| Section | Proposed Rules | |
| Action | Proposed rule. | |
| Dates | Comments must be received on or before December 31, 2018. | |
| Contact | Mariana Pardo, Director, Office of HUBZone (D/HUB), 202-205-2985 or [email protected] | |
| FR Citation | 83 FR 54812 | |
| RIN Number | 3245-AG38 | |
| CFR Citation | 13
CFR
115 13 CFR 121 13 CFR 125 13 CFR 126 | |
| CFR Associated | Claims; Reporting and Recordkeeping Requirements; Small Businesses; Surety Bonds; Administrative Practice and Procedure; Government Procurement; Government Property; Grant Programs-Business; Individuals with Disabilities; Loan Programs-Business; Government Contracts; Technical Assistance; Veterans and Penalties |
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