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The U.S. Small Business Administration (SBA or Agency) is amending its regulations to implement provisions of the National Defense Authorization Act of 2013, which pertain to performance requirements applicable to small business and socioeconomic program set aside contracts and small business subcontracting. SBA is also proposing to make changes to its regulations concerning the nonmanufacturer rule and affiliation rules. Further, SBA is proposing to allow a joint venture to qualify as small for any government procurement as long as each partner to the joint venture qualifies individually as small under the size standard corresponding to the NAICS code assigned in the solicitation. 

Overall Description of Deadline: Section 1696 requires guidance on the statutory limitations on subcontracting to be issued, pursuant to notice and comment rulemaking within 180 days (July 2, 2013) after enactment of the NDAA.

Statement of Need:

The National Defense Authorization Act of 2013 (NDAA), Pub. L. 112-239, 126 Stat. 1632 (Jan. 2013), made several amendments to SBA’s contracting programs as authorized by the Small Business Act. This rule is necessary in order to implement these amendments to the Small Business Act and ensure consistency between SBA’s contracting regulations and the statute. The rule also contains other changes not specifically resulting from the NDAA but which are either necessary to create conformance with the NDAA amendments, or are necessary to clarify existing ambiguities and simplify certain regulations governing SBA’s size and government contracting programs, including the exception to affiliation for certain joint ventures and the non-manufacturer regulations.  

Summary of the Legal Basis:

This proposed rule implements Sections 1621, 1651, 1652, and 1653 of the NDAA. As a result of changes in section 1621 of the NDAA, as codified at 15 U.S.C. 644(l), the rule amends the regulations regarding the responsibilities of Procurement Center Representatives as set forth in 13 CFR 125. Section 1651 of the NDAA, codified at 15 U.S.C. 657s, amendments regarding the limitations on subcontracting for full or partial small business set-aside contracts, 8(a) Business Development contracts, Service Disabled Veteran-Owned contracts, HUBZone contracts, and Women Owned Small Business (WOSB) and Economically Disadvantaged WOSB contracts, authorizes the changes to the applicable regulations governing each of these types of contracts as set forth in 13 CFR Parts 124, 125, 126, and 127. Section 1652 of the NDAA, codified at 15 U.S.C. 645, prescribes penalties for concerns that violate the limitations on subcontracting. Changes will be made to 13 CFR 125 to implement this statutory authority. Section 1653 of the NDAA, as codified at 15 U.S.C. 637(d), amends the requirements for subcontracting plans, including corrective action plans. This rule amends 13 CFR 125 to incorporate implementing regulations.

Alternatives:

The National Defense Authorization Act of 2013 (NDAA), Pub. L. 112-239, 126 Stat. 1632 (Jan. 2013), made several amendments to SBA’s contracting programs as authorized by the Small Business Act. This rule is necessary in order to implement these amendments to the Small Business Act and ensure consistency between SBA’s contracting regulations and the statute. SBA must implement the statutory provisions in the NDAA. There is no alternative to implementing those provisions. There is also no viable alternative to not implementing the non-statutory based changes; to retain the status quo would mean continued confusion, litigation and controversy particularly with respect to the joint venture and nonmanufacturer regulations.  

Anticipated Costs and Benefits:

These final regulations should benefit small business concerns by allowing small business concern prime contractors to use similarly situated small business concern subcontractors in the performance of a set aside contract, thereby expanding the capacity of the small business prime contractor and potentially enabling the firm to compete for and obtain larger contracts. It also strengthens the small business subcontracting provisions, which may result in more subcontract awards to small business concerns. The final rule also seeks to address or clarify issues that are ambiguous or subject to dispute, thereby providing clarity to contracting officers as well as small business concerns. Clarifying the confusion and uncertainty concerning the applicability of SBA contracting regulations will reduce the time burden on the small business contracting community and therefore make it easier for them to contract with the Federal Government. This rule does not impose any significant new compliance or other costs on small business concerns. Under current law, firms must adhere to certain requirements when performing set aside contracts; the rule does not change those requirements. Further, SBA expects that costs now incurred by small business concerns as a result of ambiguous or indefinite regulations will be eliminated or reduced.

Risks:

None identified.