Federal Acquisition Regulation; Confirmation of HUBZone Certification

AGENCIES:

Department of Defense (DoD), General Services Administration (GSA), and National Aeronautics and Space Administration (NASA).

ACTION:

Interim rule with request for comments.

SUMMARY:

The Civilian Agency Acquisition Council and the Defense Acquisition Regulations Council (Councils) have agreed to an interim rule amending the Federal Acquisition Regulation (FAR) to clarify that prime contractors must confirm that a subcontractor representing itself as a Historically Underutilized Business Zone (HUBZone) small business concern is certified, consistent with the requirements of 15 U.S.C. 632 et seq., as amended.

DATES:

Effective Date: July 27, 2005.

Comment Date: Interested parties should submit comments to the FAR Secretariat at the address shown below on or before September 26, 2005 to be considered in the formulation of a final rule.

ADDRESSES:

Submit comments identified by FAC 2005-05, FAR case 2005-009, by any of the following methods:

• Federal eRulemaking Portal: http://www.regulations.gov . Follow the instructions for submitting comments.
• Agency Web Site: http://www.acqnet.gov/far/ProposedRules/proposed.htm . Click on the FAR case number to submit comments.
• E-mail: farcase.2005-009@gsa.gov. Include FAC 2005-05, FAR case 2005-009 in the subject line of the message.
• Fax: 202-501-4067.
• Mail: General Services Administration, Regulatory Secretariat (VIR), 1800 F Street, NW, Room 4035, ATTN: Laurieann Duarte, Washington, DC 20405.

Instructions: Please submit comments only and cite FAC 2005-05, FAR case 2005-009, in all correspondence related to this case. All comments received will be posted without change to http://www.acqnet.gov/far/ProposedRules/proposed.htm , including any personal information provided.

FOR FURTHER INFORMATION CONTACT:

The FAR Secretariat at (202) 501-4755, for information pertaining to status or publication schedules. For clarification of content, contact Ms. Rhonda Cundiff, Procurement Analyst, at (202) 501-0044. Please cite FAC 2005-05, FAR case 2005-009.

SUPPLEMENTARY INFORMATION:

A. Background

Title 15 of the United States Code, section 632 requires that a qualified Historically Underutilized Business Zone (HUBZone) small business concern be certified by the Small Business Administration (SBA). A Department of Defense Inspector General report D-2003-019 “DoD Contractor Subcontracting With Historically Underutilized Business Zones (HUBZones) Small Businesses” found that prime contractors were overstating their HUBZone accomplishments because subcontractor's representations were not being verified. The FAR is being revised to clarify that prime contractors must confirm a subcontractor representing itself as a HUBZone small business concern is certified, consistent with the requirements of 15 U.S.C. 632 et seq., as amended.

The specific changes revise FAR 19.703 and the clause at 52.219-9 to clarify that contractors shall confirm that a subcontractor representing itself as a HUBZone small business concern is certified by SBA as a HUBZone small business concern by accessing the Central Contractor Registration or by contacting the SBA.

This is not a significant regulatory action and, therefore, was not subject to review under Section 6(b) of Executive Order 12866, Regulatory Planning and Review, dated September 30, 1993. This rule is not a major rule under 5 U.S.C. 804.

B. Regulatory Flexibility Act

The changes may have a significant economic impact on a substantial number of small entities within the meaning of the Regulatory Flexibility Act, 5 U.S.C. 601 et seq., because this rule change will have a positive effect on small businesses who are certified HUBZone small business concerns and are losing subcontracting opportunities taken by another company falsely claiming to be a certified HUBZone small business concern. The FAR Secretariat has submitted a copy of the Initial Regulatory Flexibility Analysis to the Chief Counsel for Advocacy of the Small Business Administration. The analysis is summarized as follows:

Title 15 of the United States Code, section 632 requires that a qualified Historically Underutilized Business Zone (HUBZone) small business concern be on the list of qualified HUBZone small business concerns maintained by the Small Business Administration. A Department of Defense Inspector General report D-2003-019 “DoD Contractor Subcontracting With Historically Underutilized Business Zones (HUBZones) Small Businesses” found that prime contractors were overstating their HUBZone accomplishments because subcontractor's representations were not being verified. This interim rule revises the Federal Acquisition Regulation to require prime contractors to verify that its HUBZone small business concerns are qualified as required by 15 U.S.C. 632 et seq., as amended.

The changes may have a significant economic impact on a substantial number of small entities within the meaning of the Regulatory Flexibility Act, 5 U.S.C. 601 et seq., because certified HUBZone small business concerns will have additional subcontracting opportunities previously taken by other companies falsely claiming to be certified HUBZone small business concerns.

Interested parties may obtain a copy from the FAR Secretariat. The Councils will consider comments from small entities concerning the affected FAR Parts 19 and 52 in accordance with 5 U.S.C. 610. Interested parties must submit such comments separately and should cite 5 U.S.C 601, et seq. (FAC 2005-05, FAR case 2005-009), in correspondence.

C. Paperwork Reduction Act

The Paperwork Reduction Act does not apply because the changes to the FAR do not impose information collection requirements that require the approval of the Office of Management and Budget under 44 U.S.C. 3501, et seq.

D. Determination to Issue an Interim Rule

A determination has been made under the authority of the Secretary of Defense (DoD), the Administrator of General Services (GSA), and the Administrator of the National Aeronautics and Space Administration (NASA) that urgent and compelling reasons exist to promulgate this interim rule without prior opportunity for public comment. This action is necessary because some subcontractors incorrectly claim to be certified HUBZone small business concerns. Since prime contractors are not currently required to verify their subcontractors' HUBZone certifications through the SBA prior to reporting their subcontracting awards to DoD, many real HUBZone small business concerns are losing opportunities that they should have. This also results in the reporting of inaccurate data on the HUBZone program to Congress and SBA. Awards to improperly certified subcontractors can be stopped immediately, if prime contractors make a simple check on the CCR database or contact SBA. Pursuant to Public Law 98-577 and FAR 1.501, the Councils will consider public comments received in response to this interim rule in the formation of the final rule.

List of Subjects in 48 CFR Parts 19 and 52

• Government procurement

Therefore, DoD, GSA, and NASA amend 48 CFR parts 19 and 52 as set forth below:

1. The authority citation for 48 CFR parts 19 and 52 is revised to read as follows:

Authority: 40 U.S.C. 121(c); 10 U.S.C. chapter 137; and 42 U.S.C. 2473(c).

PART 19—SMALL BUSINESS PROGRAMS

2. Amend section 19.703 by—

a. Removing “HUBZone small business,” from the first sentence of paragraph (b);

b. Removing the last sentence of paragraph (b); and

c. Adding paragraph (c) to read as follows:

(c)(1) The contractor shall confirm that a subcontractor representing itself as a HUBZone small business concern is certified by SBA as a HUBZone small business concern by accessing the Central Contractor Registration (CCR) database or by contacting the SBA. Options for contacting the SBA include—

(i) HUBZone web page at http://dsbs.sba.gov/dsbs/dsp_searchhubzone.cfm ;

(ii) In writing to the AA/HUB at U.S. Small Business Administration, 409 3rd Street, S.W., Washington DC 20416; or

(iii) E-mail at hubzone@sba.gov.

(2) Protests challenging HUBZone small business concern size status must be filed in accordance with 13 CFR 121.411.

PART 52—SOLICITATION PROVISIONS AND CONTRACT CLAUSES

3. Amend section 52.212-5 by—

a. Revising the date of the clause; and

b. Removing from paragraph (b)(8)(i) “(JAN 2002”) and adding “(JUL 2005”).

The revised and added text reads as follows:

CONTRACT TERMS AND CONDITIONS REQUIRED TO IMPLEMENT STATUTES OR EXECUTIVE ORDERS—COMMERCIAL ITEMS (JUL 2005)

4. Amend section 52.219-9 by—

a. Revising the date of the clause;

b. Redesignating paragraph (e)(4) as paragraph (e)(5); and

c. Adding a new paragraph (e)(4).

The revised and added text reads as follows:

SMALL BUSINESS SUBCONTRACTING PLAN (JUL 2005)

(e) * * *

(4) Confirm that a subcontractor representing itself as a HUBZone small business concern is identified as a certified HUBZone small business concern by accessing the Central Contractor Registration (CCR) database or by contacting SBA.