[Federal Register Volume 65, Number 192 (Tuesday, October 3, 2000)]
[Proposed Rules]
[Pages 58963-58965]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 00-25291]
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Proposed Rules
Federal Register
________________________________________________________________________
This section of the FEDERAL REGISTER contains notices to the public of
the proposed issuance of rules and regulations. The purpose of these
notices is to give interested persons an opportunity to participate in
the rule making prior to the adoption of the final rules.
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Federal Register / Vol. 65, No. 192 / Tuesday, October 3, 2000 /
Proposed Rules
[[Page 58963]]
SMALL BUSINESS ADMINISTRATION
13 CFR Part 126
HUBZone Program
AGENCY: Small Business Administration.
ACTION: Proposed rule.
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SUMMARY: The Small Business Administration (SBA) proposes to amend its
regulations governing the HUBZone Empowerment Contracting Program
(HUBZone program). Now that SBA has officially launched the program,
has received over two thousand applications for HUBZone certification,
and has certified concerns into the program, SBA believes that it
should make the following four regulatory amendments and clarifications
to improve the administration and operation of the HUBZone program.
First, SBA proposes to amend the provisions governing the application
of the HUBZone program to various government departments and agencies.
It proposes to add three federal agencies to the current list of
agencies that are affected directly by the HUBZone program and to
clarify that the HUBZone program does not apply to contracts awarded by
state and local governments. Second, SBA proposes to amend the
definition of the term ``principal office'' to accommodate those
concerns whose industries require employees to perform their work at
various job sites. Third, SBA proposes to eliminate the existing
program eligibility restrictions on allowable affiliations of HUBZone
small business concerns, since those requirements have proven to be
unduly burdensome on otherwise eligible concerns. Finally, SBA proposes
to ease the program eligibility requirements and procurement
restrictions concerning qualified HUBZone small business concerns that
operate as non-manufacturers because those requirements are unnecessary
and overly restrictive.
DATES: Submit comments on or before November 2, 2000.
ADDRESSES: Send your comments to Michael McHale, Associate
Administrator for the HUBZone Program, 409 Third Street, SW,
Washington, DC 20416.
FOR FURTHER INFORMATION CONTACT: Michael McHale, Associate
Administrator for the HUBZone Program, (202) 205-6731 or
[email protected].
SUPPLEMENTARY INFORMATION: The HUBZone program was established pursuant
to the HUBZone Act of 1997 (HUBZone Act), Title VI of the Small
Business Reauthorization Act of 1997, Pub. L. No. 105-135, enacted
December 2, 1997. The purpose of the HUBZone program is ``to provide
for Federal contracting assistance to qualified HUBZone small business
concerns.'' 15 U.S.C. 657a(a). The HUBZone Act authorizes the SBA
Administrator to publish regulations implementing the program. Pub. L.
No. 105-135, Sec. 605. On April 2, 1998, SBA published its proposed
rules for the HUBZone program. 63 FR 16148. After the close of the
public comment period and review of the comments, SBA published its
final regulations, which became effective on September 9, 1998. 63 FR
31896 (June 11, 1998). The final HUBZone regulations, among other
things, set forth the definition of key terms used in the regulations,
the criteria for qualification as a HUBZone small business concern
(SBC) and the Federal contracting assistance available to qualified
HUBZone SBCs.
Based upon the operation of the program since the effective date of
the final HUBZone regulations, SBA has become aware of certain
amendments that it believes should be made to the program's
regulations. SBA proposes these amendments to clarify existing
regulations, streamline the operation of the HUBZone program and ease
program eligibility requirements perceived to be burdensome on
concerns.
SBA proposes to amend Sec. 126.101, concerning the application of
the HUBZone program to various government departments and agencies.
Specifically, paragraph (a) of that section lists the ten federal
agencies to which the HUBZone Act originally applied and provides in
paragraph (b) that after September 30, 2000, the HUBZone program will
apply to all federal departments and agencies which employ one or more
contracting officers as defined by 41 U.S.C. 423(f)(5). On November 29,
1999, Congress enacted Pub. L. 106-113. Section 212 of that statute
requires that the HUBZone Act also apply to three additional agencies:
the Department of Commerce, the Department of Justice, and the
Department of State. This proposed rule would add these three federal
agencies to the list in paragraph (a).
This proposed rule would also add a new paragraph (c) to
Sec. 126.101, to make clear that the HUBZone program does not apply to
contracts awarded by state and local governments, since the HUBZone Act
only applies to the federal government. The proposed paragraph (c)
would also indicate that state and local governments that have programs
similar to the HUBZone program are free to use SBA's List of qualified
HUBZone SBCs to identify such concerns.
SBA proposes to amend the definition of ``principal office.''
Currently, Sec. 126.103 defines ``principal office'' to mean the
location where the greatest number of the concern's employees at any
one location perform their work. SBA proposes to amend that definition
to accommodate those concerns whose primary industry requires employees
to perform their work at various job sites. SBA received several
comments on this definition of ``principal office'' when it originally
proposed the current rule, but believed that the definition would not
prevent those concerns from participating in the HUBZone program. See
63 FR 31898. SBA has re-evaluated this definition in light of
experience and has found that maintaining compliance with the current
definition of ``principal office'' is difficult for those concerns
engaged in the service and construction industries because under this
definition, their principal office is subject to change from contract
to contract. As a result, SBA proposes that for concerns whose primary
industry is services or construction (i.e., other than manufacturing),
the principal office would be the location where the greatest number of
the concern's employees perform their work, but excluding those
employees who perform their work at job-site locations to fulfill
specific contract obligations. For example, a construction concern
might have an office in a HUBZone where 10 employees perform their
work. This
[[Page 58964]]
same firm might have a construction contract at a local government
facility not located in a HUBZone, where 50 of the concern's employees
work to fulfill the obligations of the construction contract. According
to the proposed definition, the concern's principal office would be in
the HUBZone.
SBA requests public comment regarding our proposal to restrict this
change only to the construction and service industries. We chose not to
include manufacturing concerns in this change because such firms tend
to operate with fixed plant, equipment and personnel tied to one
location. Further, we believe that the exclusion of manufacturing firms
from this revised definition is consistent with the purpose of the
HUBZone Act of 1997, to both encourage employment opportunities and
increase the level of investment in HUBZones.
Next, SBA proposes to amend Sec. 126.204, which provides certain
restrictions on the allowable affiliations of a qualified HUBZone SBC.
Currently, Sec. 126.204 permits a qualified HUBZone SBC to have
affiliates only if those affiliates are qualified HUBZone SBCs,
participants in the 8(a) Business Development (8(a) BD) program, or
woman-owned businesses (WOBs). Although that restriction is not
required by statute, SBA included it in both the proposed and final
HUBZone regulations to ensure that the HUBZone program was implemented
in a manner that supported rather than undermined existing programs
designed to assist small businesses. 63 FR 16150. As a means of support
to the 8(a) BD program, SBA explained in the preamble to the proposed
HUBZone regulation that minimizing the restrictions on the
participation of 8(a) BD participants in the HUBZone program would
provide an additional source of government contract assistance for 8(a)
BD participants and would therefore enhance the business development
objectives of that program. 63 FR 16151. SBA also explained in the
preamble that allowing WOBs the maximum opportunity to qualify as
HUBZone SBCs would provide the type of assistance that Congress
determined in the Small Business Act was necessary to remove the
discriminatory barriers to the development of WOBs. Id. SBA adopted
this approach in its final regulations. 63 FR 31899.
Since the effective date of the final HUBZone regulations, SBA has
received over two thousand applications for certification under the
HUBZone program. As a result of the limitation on allowable
affiliations with only the three types of SBCs specified in the current
Sec. 126.204, SBA has had to decline a number of otherwise eligible
applicants for HUBZone certification. The restrictions likewise have
operated to limit HUBZone certification of 8(a) BD participants and
WOBs that have affiliates that are not themselves qualified HUBZone
SBCs, 8(a) BD participants or WOBs. As a result 8(a) BD participants,
WOBs, as well as other otherwise eligible SBCs alike, have been
declined HUBZone certification by reason of the restriction in
Sec. 126.204. SBA now believes that the current affiliation requirement
is unnecessarily restrictive and should be removed. In addition, the
removal of this restriction will allow SBCs in non-HUBZone areas to
establish new business ventures in HUBZones. This is especially
critical due to the historical lack of investment capital in HUBZones
and the need for such capital to establish new businesses that will
promote economic development and create jobs.
Accordingly, SBA proposes to eliminate the existing restrictions on
affiliation under Sec. 126.204. The proposed Sec. 126.204 would allow a
qualified HUBZone SBC to have affiliates as long as it, when combined
with its affiliates, is still small pursuant to SBA's size regulations
contained in part 121 of this title.
Finally, SBA proposes to amend two separate, but related,
provisions concerning non-manufacturers. The first proposed amendment
would delete the eligibility requirement for non-manufacturers
contained in Sec. 126.206. Under this proposed rule, non-manufacturer
HUBZone concerns would no longer be required to demonstrate that they
can provide product or products manufactured by qualified HUBZone SBCs.
The second proposed amendment would revise Sec. 126.601. Currently,
that section provides that a qualified HUBZone SBC that operates as a
non-manufacturer may submit an offer on a HUBZone contract for supplies
only if the concern's small manufacturer is also a qualified HUBZone
SBC. This proposed rule would amend that provision to allow qualified
HUBZone SBCs that are non-manufacturers the opportunity to supply the
product of any business for HUBZone contracts at or below $25,000 in
total value. The reason for this proposed change is that SBA believes
that for many products purchased in small dollar quantities (at or
below $25,000), there are often too few or no small business
manufacturers participating in the federal market. Thus, SBA proposes
to allow a qualified HUBZone SBC to use any manufacturer, including a
large business, for HUBZone contracts at or below $25,000 in total
value. This provision will encourage the participation of small
business non-manufacturers that are located in HUBZones.
SBA believes that an exemption for contracts greater than $25,000
would harm qualified HUBZone SBCs that are manufacturers and possibly
impact the program's goal of attracting capital investment and jobs in
HUBZones. SBA further believes that this proposed exemption for
contracts under $25,000 and the requirement in Sec. 126.601 that a
qualified HUBZone SBC that is a non-manufacturer may bid on HUBZone
contracts for supplies only if the concern's small manufacturer is also
a qualified HUBZone SBC, also support SBA's proposal to eliminate the
eligibility requirement in Sec. 126.206, that non-manufacturers
demonstrate at the time of application that they can provide the
product or products manufactured by a qualified HUBZone SBC. With
respect to the proposed $25,000 exemption, if the HUBZone contract is
valued at or below the $25,000 threshold, the SBC would not be required
to use the products of a qualified HUBZone SBC and so should not be
required to demonstrate that they would do so as a precondition to
HUBZone certification. With respect to contracts above the $25,000
threshold, Sec. 126.601(d) requires qualified HUBZone SBCs to use a
qualified HUBZone SBC manufacturer. It is therefore unnecessary to have
a separate eligibility requirement that the concern demonstrate at the
time of application that it can provide the product or products
manufactured by a qualified HUBZone SBC.
SBA solicits comments from the public addressing the issues raised
in this proposed rule, including more effective ways to address these
issues and whether we have solved adequately the problems identified.
Compliance With Executive Orders 12866, 12988, and 13132, the
Paperwork Reduction Act (44 U.S.C. Ch. 35), and the Regulatory
Flexibility Act (5 U.S.C. 601-602)
The Office of Management and Budget (OMB) reviewed this rule as a
``significant'' regulatory action under Executive Order 12866.
For purposes of Executive Order 12988, SBA has drafted this
proposed rule, to the extent practicable, in accordance with the
standards set forth in section 3 of that Order.
For purposes of Executive Order 13132, SBA has determined that this
proposed rule has no federalism
[[Page 58965]]
implications warranting the preparation of a Federalism Assessment.
For purposes of the Paperwork Reduction Act, 44 U.S.C. Ch. 35, SBA
has determined that this proposed rule does not impose new reporting or
recordkeeping requirements.
SBA has determined that this proposed rule may have a significant
beneficial economic impact on a substantial number of small entities
within the meaning of the Regulatory Flexibility Act (RFA), 5 U.S.C.
601, et seq. The amendments proposed in this rule involve revising the
definition of ``principal office'' and eliminating certain requirements
governing the allowable affiliations of qualified HUBZone SBCs and SBCs
that operate as non-manufacturers. These amendments will affect a large
percentage of the over 30,000 SBCs that SBA believes are now eligible
or will become eligible for certification as qualified HUBZone SBCs
over the life of the program. Thus, SBA has prepared an Initial
Regulatory Flexibility Analysis (IRFA) and has submitted a complete
copy of the IRFA to the Chief Counsel for Advocacy of the Small
Business Administration. For a complete copy of the IRFA, please
contact Michael McHale at (202) 205-6731.
The IRFA explains that this proposed rule will affect primarily
those SBCs that participate in Federal procurements, that have
affiliates, or that are non-manufacturers. The proposed rule will make
it easier for qualified SBCs to participate in the program because it
provides a definition of ``principal office'' that accommodates the
fluid nature of the construction and service industries and it allows
qualified HUBZone SBCs to have any affiliates provided that they,
together with their affiliates, do not exceed their applicable size
standard under part 121 of title 13 of the Code of Federal Regulations.
This proposed rule will also facilitate the certification of qualified
HUBZone SBCs and open the door to more HUBZone contracts by eliminating
the eligibility requirement that non-manufacturers must demonstrate
that they can supply the goods of a qualified SBC as a prerequisite for
program certification, and by exempting non-manufacturers from making
that showing when submitting offers to supply goods for HUBZone
contracts with a total value of $25,000 or less.
The IRFA further explains that these proposed amendments do not
duplicate, overlap or conflict with relevant Federal regulations. It
also indicates that SBA has reviewed several alternatives to the
proposed amendments and that it believes that the amendments proposed
are in the best interest of SBCs and the HUBZone Program.
(Catalog of Federal Domestic Assistance Programs, No. 59,009)
List of Subjects in 13 CFR Part 126
Administrative practice and procedure, Government procurement,
Reporting and recordkeeping requirements, Small businesses.
Accordingly, for the reasons set forth above, SBA proposes to amend
13 CFR part 126, as follows:
PART 126--HUBZONE PROGRAM [AMENDED]
1. Amend the authority citation for 13 CFR part 126 to read as
follows:
Authority: 15 U.S.C. 632(a); Pub. L. 106-113 sec. 212, 113 Stat.
1537-289; Pub. L. 105-135 sec. 601 et seq., 111 Stat. 2592.
2. Amend Sec. 126.101 by removing paragraphs (a)(1) through
(a)(10), by adding new paragraphs (a)(1) through (a)(13), and by adding
a new paragraph (c) to read as follows:
Sec. 126.101 Which government departments or agencies are affected
directly by the HUBZone program?
(a) * * *
(1) Department of Agriculture;
(2) Department of Commerce;
(3) Department of Defense;
(4) Department of Energy;
(5) Department of Health and Human Services;
(6) Department of Housing and Urban Development;
(7) Department of Justice;
(8) Department of State;
(9) Department of Transportation;
(10) Department of Veterans Affairs;
(11) Environmental Protection Agency;
(12) General Services Administration; and
(13)National Aeronautics and Space Administration.
* * * * *
(c) The HUBZone program does not apply to contracts awarded by
state and local governments. However, state and local governments may
use the List of qualified HUBZone SBCs to identify qualified HUBZone
SBCs for similar programs authorized under state or local law.
3. Amend Sec. 126.103 to revise the definition of ``principal
office'' to read as follows:
Sec. 126.103 What definitions are important in the HUBZone program?
* * * * *
Principal office means the location where the greatest number of
the concern's employees at any one location perform their work.
However, for those concerns whose ``primary industry'' (see 13 CFR
121.107) is service or construction (see 13 CFR 121.201), the
determination of principal office excludes the concern's employees who
perform the majority of their work at job-site locations to fulfill
specific contract obligations.
* * * * *
4. Revise Sec. 126.204 to read as follows:
Sec. 126.204 May a qualified HUBZone SBC have affiliates?
A concern may have affiliates provided that the aggregate size of
the concern and all its affiliates is small as defined in part 121 of
this title.
5. Revise Sec. 126.205 to read as follows:
Sec. 126.205 May non-manufacturers be certified as qualified HUBZone
SBCs?
Non-manufacturers (referred to in the HUBZone Act of 1997 as
``regular dealers'') may be certified as qualified HUBZone SBCs if they
meet all of the requirements set forth in Sec. 126.200. ``Non-
manufacturer'' is defined in Sec. 121.406(b)(1) of this title.
6. Amend Sec. 126.601 by revising paragraph (d) to read as follows:
Sec. 126.601 What additional requirements must a qualified HUBZone SBC
meet to bid on a contract?
* * * * *
(d) A qualified HUBZone SBC which is a non-manufacturer may submit
an offer on a HUBZone contract for supplies if it meets the
requirements under the non-manufacturer rule as defined in
Sec. 121.406(b) of this title, and if the small manufacturer providing
the end item for the contract is also a qualified HUBZone SBC. However,
for HUBZone contracts at or below $25,000 in total value, a qualified
HUBZone SBC may supply the end item of any manufacturer, including a
large business.
Dated: September 26, 2000.
Aida Alvarez,
Administrator.
[FR Doc. 00-25291 Filed 10-2-00; 8:45 am]
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