Federal Register / Vol. 70, No. 167 / Tuesday, August 30, 2005 / Rules and Regulations 51243
Housing Enterprise Oversight hereby I 2. Revise Subpart E of part 1780 to with the Federal Civil Penalties
amends 12 CFR part 1780 as follows: read as follows: Inflation Adjustment Act of 1990, as
amended by the Debt Collection
PART 1780—RULES OF PRACTICE Subpart E—Civil Money Penalty Improvement Act of 1996 (28 U.S.C.
AND PROCEDURE Inflation Adjustments 2461 note) as follows:
I 1. The authority citation for part 1780 § 1780.80 Inflation adjustments.
is revised to read as follows: The maximum amount of each civil
Authority: 12 U.S.C. 4501, 4513(b), 4517, money penalty within OFHEO’s
4521, 4631–4641. jurisdiction is adjusted in accordance
New adjusted
U.S. code citation Description maximum
penalty amount
12 U.S.C. 4636(b)(1) ................................. First Tier ................................................................................................................... 6,500
12 U.S.C. 4636(b)(2) ................................. Second Tier (Executive Officer or Director) ............................................................ 11,000
12 U.S.C. 4636(b)(2) ................................. Second Tier (Enterprise) ......................................................................................... 32,500
12 U.S.C. 4636(b)(3) ................................. Third Tier (Executive Officer or Director) ................................................................ 130,000
12 U.S.C. 4636(b)(3) ................................. Third Tier (Enterprise) ............................................................................................. 1,275,000
§ 1780.81 Applicability. HUBZone concerns; extends qualified the Reauthorization Act amended
The inflation adjustments in § 1780.80 HUBZone areas to include military base certain provisions of the Small Business
apply to civil money penalties assessed closure areas for a period of five years; Act, 15 U.S.C. 631 et. seq., that govern
in accordance with the provisions of 12 revises the definition of a ‘‘qualified the HUBZone program and the
U.S.C. 4636 for violations occurring non-metropolitan county;’’ extends the definition of small agricultural
after the effective date, August 30, 2005. redesignation period for HUBZone areas cooperative.
Dated: August 25, 2005.
through the release of the 2010 census 1. Section 151 of the Reauthorization
data; and provides a five percent Act
Stephen A. Blumenthal,
HUBZone evaluation price preference
Acting Director, Office of Federal Housing for agricultural commodities in In particular, Section 151 of the
Enterprise Oversight. Reauthorization Act relaxed the
international food aid procurements.
[FR Doc. 05–17232 Filed 8–29–05; 8:45 am] Pursuant to the Administrative statutory requirement that a HUBZone
BILLING CODE 4220–01–U Procedure Act, SBA has determined that small business concern (SBC) must be
there is good cause to issue this rule as entirely owned by U.S. citizens.
an interim rule with an immediate Congress concluded that this statutory
SMALL BUSINESS ADMINISTRATION effective date. However, SBA mandate precluded small business
encourages and will consider all timely owners from taking advantage of
13 CFR Parts 121, 124, 125 and 126 public comments in developing the final available forms of business
rule. organizations that limit the personal
RIN 3245–AF31
liability of business owners. It also
DATES: This interim rule is effective
HUBZone, Government Contracting, precluded ownership by small
August 30, 2005. Comments must be
8(a) Business Development and Small agricultural cooperatives that operate in
received on or before October 31, 2005.
Business Size Standard Programs rural HUBZones, and thereby deprived
ADDRESSES: You may submit comments, those communities of the economic
AGENCY: U.S. Small Business identified by RIN #3245–AF31, by any benefits of increased HUBZone
Administration (SBA). of the following methods: contracting opportunities.
Internet: http://www.regulations.gov. As a result, Section 151 of the
ACTION: Interim rule with request for
Follow the instructions for submitting Reauthorization Act amended the
comments.
comments. E-mail: hubzone@sba.gov. definition of ‘‘HUBZone SBC’’ in section
SUMMARY: This interim rule amends Fax: (202) 481–5593. 3(p)(3)(A) of the Small Business Act, 15
SBA’s HUBZone, 8(a) Business Mail or Hand Deliver: Michael U.S.C 632(p)(3)(A), to require that SBCs
Development, Government Contracting McHale, Associate Administrator for the eligible for HUBZone certification be 51
and Size Standard regulations to HUBZone Program, 409 Third Street, percent (instead of 100 percent) owned
implement provisions of the Small SW., Washington, DC, 20416. and controlled by U.S. citizens. It also
Business Act including the FOR FURTHER INFORMATION CONTACT: added a new section 3(p)(3)(E) to the
Consolidated Appropriations Act, 2005, Sheryl J. Swed, Office of Government Small Business Act, 15 U.S.C
specifically, Subtitle E of Division K Contracting, at (202) 205–6413 or by 632(p)(3)(E), to include as HUBZone
entitled the Small Business e-mail at: sheryl.swed@sba.gov. SBCs small agricultural cooperatives or
Reauthorization and Manufacturing SUPPLEMENTARY INFORMATION: SBCs wholly or partially-owned by
Assistance Act of 2004. Consistent with small agricultural cooperatives
the new statutory requirements under A. Statutory Authority organized and incorporated in the
Subtitle E, this interim rule: Amends the On December 8, 2004, the President United States. Also in connection with
definitions of the terms ‘‘business signed into law the Consolidated agricultural cooperatives, Section 151
concern,’’ ‘‘affiliation,’’ ‘‘HUBZone Appropriations Act, 2005, Public Law further amended Section 3(j) of the
small business concern’’ and ‘‘qualified 108–447 which contained the Small Small Business Act, 15 U.S.C. 632(j), to
HUBZone small business concern;’’ Business Reauthorization and require that small agricultural
amends the HUBZone eligibility Manufacturing Assistance Act of 2004 cooperatives be treated as business
requirements for tribally-owned (the Reauthorization Act). Subtitle E of concerns for purposes of the Small
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51244 Federal Register / Vol. 70, No. 167 / Tuesday, August 30, 2005 / Rules and Regulations
Business Act. This section also states 2. Section 152 of the Reauthorization 3. Section 153 of the Reauthorization
that when determining size, SBA should Act Act
not include the income or employees of Finally, in Section 153 of the
the underlying members of the In Section 152 of the Reauthorization
Act, Congress provided three basic Reauthorization Act, Congress provided
cooperative. Because SBA’s programs a five percent HUBZone evaluation
and services were created for the benefit amendments to expand the areas that
price preference in international food
of the small business community, SBA qualify as HUBZones. First, Section 152
aid procurements by the Secretary of
interprets this section to mean that the added new Sections 3(p)(1)(E) and
Agriculture. Congress explained that the
members of any small agricultural 3(p)(4)(D) to the Small Business Act, 15 previously authorized price evaluation
cooperative applying for SBA assistance U.S.C. 632(p)(1)(E), 632(p)(4)(D), to preference regime may have made it
must also qualify as a small business authorize military base closure areas more difficult for non-HUBZone SBCs to
concern or small agricultural that have undergone final closure to be compete in food aid tender auctions
cooperative in order to qualify for SBA treated as qualified HUBZones for a and, in turn, may have had the
assistance. To interpret the statute period of five years. Congress unintended effect of diminishing the
otherwise would circumvent the recognized that many base closure areas competitive supplier base. Section 153
Agency’s mission. are not located in qualified HUBZones, therefore amended Section 31(b)(3) of
In addition, Section 151 of the and therefore do not benefit from the job the Small Business Act, 15 U.S.C.
Reauthorization Act expanded the creation and economic revitalization 657a(b)(3), to apply a five percent price
employee residency requirement for potential of the HUBZone program. evaluation preference on the first 20
tribally-owned HUBZone SBCs. Second, Section 152 revised the percent of U.S. Department of
Previously, the Small Business Act did Agriculture’s procurements of
statutory definition of ‘‘qualified non-
not mandate that tribally-owned commodities used for international food
metropolitan county’’ in Section
concerns maintain a principal office in aid export operations.
3(p)(4)(B)(ii)(II) of the Small Business
a qualified HUBZone and hire at least This interim rule amends Parts 121,
Act, 15 U.S.C. 632(p)(4)(B)(ii)(II). Under
35 percent of their employees from any 124, 125 and 126 of SBA’s regulations
HUBZone area, as is the requirement for the previous definition, some of the
poorest rural communities in states with to adopt the specific statutory changes
other HUBZone SBCs. Instead, section provided under Subtitle E of the
3(p)(5)(A)(i)(I)(bb) of the Small Business high unemployment did not qualify as
a HUBZone based on unemployment Reauthorization Act. In accordance with
Act, 15 U.S.C. 632(p)(5)(A)(i)(I)(bb), the express statutory language and
required that at least 35 percent of the because the unemployment
declared legislative purposes of those
tribally-owned HUBZone SBC’s qualification was based solely on the
changes, this interim rule amends the
employees performing a HUBZone statewide unemployment average.
exceptions to SBA’s affiliation rules in
contract must reside within an Indian Accordingly, Section 152 revised the 13 CFR 121.103 and the definition of
Reservation governed by one or more of definition of ‘‘qualified non- business concern in § 121.105; for
the tribal government owners or an metropolitan county’’ to allow for a consistency purposes, amends
adjoining HUBZone. Although that comparison of a county’s §§ 124.503 and 126.607 to incorporate
requirement was originally intended to unemployment rate to the lower of the the preference for HUBZone, 8(a) and
encourage economic development of statewide or the national average, in service disabled veterans (SDV) over
tribes, Congress determined that, over determining eligibility. small business set-asides set forth in
time, it had the unintended Third, Section 152 of the SBA’s SDV regulations, clarifies the
consequence of limiting the kinds of Reauthorization Act expanded qualified definition of ‘‘employee’’ for the
contracts that tribally-owned concerns HUBZones by extending the HUBZone program in § 125.6; adds new
could perform and of inhibiting their redesignation period for HUBZone areas definitions and amends existing
potential synergies with other business through the public release of the 2010 definitions in § 126.103; amends the
organizations. census data. The previous statutory employee residency requirement for
To remedy the disparity this separate definition of ‘‘redesignated area’’ in tribally-owned HUBZone SBCs and
employee residency requirement created Section 3(p)(4)(C) of the Small Business adds the requirements for small
for tribally-owned HUBZone SBCs (as Act, 15 U.S.C. 632(p)(4)(C), allowed agricultural cooperatives to be
compared to other HUBZone SBCs), considered qualified HUBZone SBCs in
those areas that no longer qualify as
Section 151 of the Reauthorization Act § 126.200; amends the corporate stock
HUBZones to remain in the program for
added as an option for tribally-owned ownership example to reflect the change
a period of three years. Congress
concerns the same residency and in ownership requirements in § 126.201;
determined that this three-year
principal office requirement that applies amends § 126.204 to include
to other HUBZone SBCs. As amended, grandfather period did not provide
agricultural cooperatives; clarifies the
Section 3(p)(5)(A)(i)(I)(aa) of the Small sufficient time for firms to recoup a
application of requirements for SBCs
Business Act, 15 U.S.C. return on their investment in locating
applying for HUBZone status based on
632(p)(5)(A)(i)(I)(aa), now allows their businesses in qualified HUBZone
a location in a qualified base closure
tribally-owned concerns the option of areas, adjusting their ownership area in § 126.304; amends the price
either maintaining their principal office structure, and recruiting HUBZone evaluation preference for agricultural
in a HUBZone and hiring at least 35 residents as employees. To allow firms commodities in § 126.613 and
percent of their employees from any additional time to reap the benefits of reorganizes and clarifies § 126.700 to
HUBZone area, or complying with the their HUBZone investment, Section 152 make it consistent with SBA’s other
existing separate requirement that 35 extended the redesignation period until regulations regarding contractor
percent of their employees performing a the later of the date on which the performance requirements.
HUBZone contract reside within an Census Bureau publicly releases the first
Indian Reservation governed by one or results from the 2010 decennial census B. Section-by-Section Analysis
more of the tribal government owners or or 3 years after the date on which the Statutory changes to the definition of
adjoining HUBZone. area ceased to qualify as a HUBZone. small agricultural cooperative require
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Federal Register / Vol. 70, No. 167 / Tuesday, August 30, 2005 / Rules and Regulations 51245
SBA to add another exception to its cooperative is considered a ‘‘business first results from the 2010 decennial
affiliation rule in § 121.103 and to concern’’ and that the income or census or three years after the date on
modify its definition of business employees of any member of the which the area ceased to qualify as a
concern in § 121.105. cooperative is not included in the HUBZone.
To make the HUBZone regulations calculation of size. The definition of With respect to the new eligibility
consistent with SBA’s recently ‘‘small agricultural cooperative’’ in requirements for tribally-owned
published SDV regulations, SBA is § 126.103 further indicates that any concerns under Section 3(p)(5)(A)(i)(I)
adding paragraph (j) to § 124.503 and entity other than an SBC, small of the Small Business Act, 15 U.S.C.
revising § 126.607 to incorporate cooperative or U.S. citizen may not be 632(p)(5)(A)(i)(I), SBA is amending
contracting preferences for HUBZone, a member of a small agricultural § 126.200, which provides the eligibility
8(a) and SDV over small business set- cooperative. requirements for such concerns. As
asides. This change will ensure SBA is also revising the definition of amended, § 126.200 now allows tribally-
consistent guidance throughout 13 CFR several existing terms in § 126.103. With owned concerns located in qualified
Chapter 1. respect to base closure areas, SBA is HUBZones the option of either
To clarify the definition of amending the definition of ‘‘HUBZone’’ maintaining their principal office in a
‘‘employee’’ as it relates to the in § 126.103, to include a ‘‘qualified HUBZone and hiring at least 35 percent
HUBZone program, SBA is adding more base closure area’’ as a designated of their employees from any HUBZone
explicit language to § 125.6(e)(6) to HUBZone. In implementing the area, or of complying with the existing
indicate that for purposes of the statutory changes regarding ownership separate requirement that 35 percent of
HUBZone program, the definition of of HUBZone SBCs by U.S. citizens and their employees performing a HUBZone
‘‘employee’’ in § 126.103 controls. by small agricultural cooperatives, SBA contract reside within an Indian
SBA is adding several new definitions is amending the definition of a Reservation governed by one or more of
in § 126.103 to implement the statutory ‘‘HUBZone small business concern.’’ As the tribal government owners or
changes under the Reauthorization Act. expressly provided in the amended adjoining HUBZone.
To incorporate the new statutory Section 3(p)(3)(A) of the Small Business SBA is also adding the requirements
requirement for the treatment of military Act, 15 U.S.C. 632(p)(3)(A), SBA is for small agricultural cooperatives to
base closure areas as qualified amending the definition of a ‘‘HUBZone § 126.200(c) in accordance with Section
HUBZones, SBA is adding a definition SBC’’ in § 126.103, to include a SBC that 3(p)(5)(A)(i)(I) of the Small Business
for the terms ‘‘base closure area’’ and is at least 51 percent owned and Act, 15 U.S.C. 632(p)(5)(A)(i)(I). To be a
‘‘qualified base closure area’’ in controlled by one or more U.S. citizens. qualified HUBZone SBC, a small
§ 126.103. With respect to the term Likewise, as expressly provided in the agricultural cooperative must meet the
‘‘base closure area,’’ the interim rule amended Section 3(p)(3)(E) of the Small ownership requirements of 15 U.S.C.
adopts the identical definition of that Business Act, 15 U.S.C. 632(p)(3)(E), the 632(p)(3)(E), have a principal office
term provided in the amended Section interim rule amends the definition of located in a HUBZone and employ at
3(p)(4)(D) of the Small Business Act, 15 ‘‘HUBZone SBC’’ to include SBCs that least 35% of its employees from a
U.S.C. 632(p)(4)(D). Under that are small agricultural cooperatives HUBZone.
definition, a ‘‘base closure area’’ means organized or incorporated in the United The examples in §§ 126.200(b)(1) and
lands within the external boundaries of States, wholly owned by one or more 126.201(a) have also been amended to
a military installation that were closed small agricultural cooperatives or reflect the new requirement that SBCs
through a privatization process under partially owned by one or more small be at least 51% owned and controlled
specified authority. To accommodate agricultural cooperatives organized or by U.S. citizens.
the statutory five-year period in which incorporated in the United States, Section 126.204, relating to SBA’s
a base closure area qualifies as a provided that all other owners are small consideration of affiliates when
HUBZone, the interim rule adds the business concerns or U.S. citizens. determining qualified HUBZone SBC’s,
new term ‘‘qualified base closure area,’’ Also in connection with § 126.103, has also been amended to provide an
which limits the qualifying period of a SBA is amending the definition of the exception for agricultural cooperatives
base closure area to five years from the term ‘‘qualified non-metropolitan in accordance with Section 3(j) of the
date of final closure of the base or five county,’’ to incorporate the new Small Business Act, 15 U.S.C. 632(j).
years from the date of signing of the statutory definition of the term in The statutory definition of agricultural
legislation, December 8, 2004. SBA will Section 3(p)(4)(B)(ii)(II) of the Small cooperative in the Small Business Act
rely on the Department of Defense, Business Act, 15 U.S.C. provides that when determining the size
Office of Economic Adjustment, as the 632(p)(4)(B)(ii)(II). Consistent with that of a cooperative, SBA may not include
authority to determine whether a base is definition, the interim rule revises the the income or employees of the
closed. definition of a ‘‘qualified non- cooperative members. 15 U.S.C. 632(j).
In addition, since the amended metropolitan county’’ to allow a This means the cooperative and its
Section 3(p)(3)(E) of the Small Business comparison between the statewide members are not considered affiliated
Act, 15 U.S.C. 632(p)(3)(E), now unemployment average and the national by virtue of their membership in the
authorizes ownership in a HUBZone average in determining whether a non- cooperative.
SBC by small agricultural cooperatives metropolitan county qualifies as a SBA is amending § 126.304 to
organized or incorporated in the U.S., HUBZone based on unemployment. describe the process for verifying the
this interim rule adds a definition for SBA is also amending the definition specific areas that are considered
the term ‘‘small agricultural of ‘‘redesignated area’’ in § 126.103, in ‘‘qualified base closure areas.’’ The
cooperative.’’ Amended § 126.103 accordance with the statutory interim rule adds a new § 126.304(d),
adopts the existing definition of a amendments of the term in Section which explains that concerns applying
‘‘small agricultural cooperative’’ 3(p)(4)(C) of the Small Business Act, 15 for HUBZone status based on a location
provided in Section 3(j) of the Small U.S.C. 632(p)(4)(C). Under the revised within a qualified base closure area
Business Act, 15 U.S.C. 632(j). That § 126.103, a ‘‘redesignated area’’ is must use SBA’s List of Qualified Base
definition makes clear that in defined as the later of the date on which Closure Areas to verify that the location
determining size, an agricultural the Census Bureau publicly releases the is within a qualified base closure area.
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51246 Federal Register / Vol. 70, No. 167 / Tuesday, August 30, 2005 / Rules and Regulations
The HUBZone map will be modified to of work requirements by stating that not important HUBZone requirements. In
reflect these areas. It also describes the more than 50% of the cost of contract addition, immediate implementation of
information concerns may submit to incurred for personnel may be the statute is in the public interest, since
SBA if they believe the List fails to subcontracted to a non-qualified the legislative amendments expand the
identify a particular location as a HUBZone SBC. opportunities for HUBZone contracting.
qualified base closure area. Although SBA is issuing this rule as Specifically, the time it will take to
SBA is making a technical correction an interim rule with an immediate afford prior public participation in this
to § 126.503 by changing the word effective date, it encourages public rulemaking will deprive newly eligible
‘‘may,’’ found in subparagraph (c), to comments on these regulatory firms and economically depressed
‘‘will’’ in order to be consistent with the amendments. In developing the final communities of the needed economic
language of § 126.803(d). Section rule, SBA will consider all timely benefits of the HUBZone program, and
126.503(c) cross references § 126.803, comments received. will frustrate the ability of Federal
therefore the language in both sections contracting agencies to utilize the
C. Justification for Publication as an
needs to be consistent. expanded program to achieve the
SBA is amending § 126.613 to Interim Rule
statutory HUBZone procurement goal.
incorporate the new statutory price In general, SBA publishes a proposed Accordingly, SBA has determined
evaluation preference for international rule for public comment before issuing that there is good cause to issue this rule
food aid procurements provided under a final rule, in accordance with the without prior public participation. SBA
Section 31(b)(3) of the Small Business Administrative Procedure Act and SBA does, however, encourage the public to
Act, 15 U.S.C. 657a(b)(3). The amended regulations. 5 U.S.C. 553, and 13 CFR comment on the interim rule, especially
§ 126.613 provides a 5% price 101.108. The Administrative Procedure the clarifications to § 126.700 and will
evaluation preference on the first 20% Act provides an exception to this consider all timely comments in
of the USDA procurements for standard rulemaking process when an
preparing the final rule.
commodities used for international food agency finds good cause to adopt a rule
aid export operations. without prior public participation. 5 D. Justification for Immediate Effective
Finally, SBA is making a technical U.S.C 553(b)(3)(B). The good cause Date of Interim Rule
correction to § 126.700 by changing the requirement is satisfied when prior The Administrative Procedure Act
citation from § 125.6(b) to § 125.6(c) and public participation is impracticable, requires that ‘‘publication or service of
further clarifying the section by unnecessary, or contrary to the public a substantive rule shall be made not less
reorganizing the paragraphs and adding interest. Under such circumstances, an than 30 days before its effective date,
more explicit language in order to be agency may publish an interim rule except * * * as otherwise provided by
consistent with § 125.6(c) and the Small without soliciting prior public the agency for good cause found and
Business Act. As currently drafted, comment.
published with the rule.’’ 5 U.S.C.
§ 126.700 is a source of confusion for SBA has determined that there is good
553(d)(3). SBA has determined that
many SBCs and this confusion may lead cause to issue this rule without prior
notice and opportunity for public there is good cause for an immediate
to misapplication of SBA’s regulations
comment because it is impracticable, effective date of this interim rule,
resulting in the award of subcontracts to
unnecessary, and contrary to the public instead of observing the 30-day period
non-qualified HUBZone concerns. It is
interest to do so under the present between publication and effective date.
also inconsistent with § 125.6 and
circumstances. As discussed above, As discussed more fully above in the
§ 3(p)(5)(C) of the Small Business Act as
Congress amended several HUBZone Justification of Publication of Interim
it incorrectly requires that for
provisions in the Small Business Act to Rule, any delay in the effective date of
construction contracts a qualified
expand the program’s reach over the this interim rule will unduly perpetuate
HUBZone SBC must perform 50% of the
Nation’s economically distressed existing inconsistencies between certain
cost of the contract and at least 15% (or
communities and to eliminate unduly provisions of SBA’s HUBZone
25% depending on type of contract) of
the cost of contract for personnel. As restrictive HUBZone requirements that regulations and sections of the Small
currently drafted, the two percentages impede the achievement of the Business Act. It will also hinder the
do not measure the same base, that is, HUBZone goals. These statutory accomplishment of the HUBZone goals.
one relates to the overall cost of the changes became effective on December E. Compliance With Executive Orders
contract and one to the cost of the 8, 2004. 12866, 12988, and 13132, the
contract incurred for personnel. This As a result of these recent legislative Paperwork Reduction Act (44 U.S.C.
discrepancy was never intended and is amendments, important provisions of Ch. 35), and the Regulatory Flexibility
not consistent with the requirements of SBA’s existing HUBZone, Government Act (5 U.S.C. 601–602)
the Small Business Act. To clarify this Contracting, 8(a) Business Development
and Size Standard regulations are now OMB determined that this rule
inconsistency, this rule changes the
current performance of work inconsistent with governing sections of constitutes a ‘‘significant regulatory
requirement for construction contracts the Small Business Act. It is both action’’ under Executive Order 12866.
from ‘‘at least 50% of the contract’’ to unnecessary and impracticable to SBA’s Regulatory Impact Analysis is set
‘‘at least 50% of the cost of contract provide advance notice and public forth below.
incurred for personnel.’’ This standard participation in implementing the Regulatory Impact Analysis
is what is referenced throughout the recent statutory changes because SBA is
Small Business Act (see §§ 3(p)(5)(C), simply adopting the identical 1. General Considerations
8(a)(14)(A) and 15(o)) and in § 125.6 of amendments mandated by the a. Is there a need for the regulatory
SBA’s regulations, and the change to Reauthorization Act and ensuring action?
one standard ensures consistency consistency with existing provisions of SBA has determined that this
throughout SBA’s regulations. More the Small Business Act, and any delay regulatory action is necessary. SBA is
explicit language was also added to in revising the inconsistent provisions statutorily authorized to administer the
clarify the relationship between the in SBA’s existing regulations will HUBZone program and is required to
prime and subcontracting performance hamper the proper application of implement all statutory changes to the
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Federal Register / Vol. 70, No. 167 / Tuesday, August 30, 2005 / Rules and Regulations 51247
program. The Reauthorization Act Federal agencies will use the program. 4. Other Considerations, Including
amended several provisions of the Small Furthermore, when more Federal Distributional Effects, Equity
Business Act governing the HUBZone agencies use the program, more Considerations and Uncertainty
program. To implement these statutory concerns will want to take advantage of SBA anticipates that the distribution
changes, SBA must amend its existing the contract assistance available under of contracts among different
HUBZone regulations. The amendments the program. According to available procurement vehicles will change. Non-
are also necessary and appropriate to data, there are an estimated 220 HUBZone concerns currently
better serve the needs of small business counties to be added as a result of this participating in the Federal marketplace
concerns (SBCs) and the statutory goals new legislation. In addition, over 150 will be affected economically as a result
of the HUBZone program. There are no locations may be designated as of their ineligibility to compete for
practical alternatives to this HUBZone locations as a result of HUBZone contracts. These costs will
implementation of the statutory military base closures. As these areas vary based on the goods and services
changes. are defined by the Department of provided by newly eligible HUBZone
b. What is the baseline? Defense, they will be posted on the
SBA considered several baselines in SBCs. In some industries there may be
HUBZone Web site and map. very little impact, while in other
formulating this interim rule. These
include the existing HUBZone program b. Greater administrative efficiency industries there may be a substantial
regulations and definitions that the and program integrity. impact.
interim rule revises; the estimated Large Federal prime contractors may
Because the amendments in this
universe of potential HUBZone SBCs; experience some decrease in contract
interim rule relax some of the previous
the existing statutory requirements; the opportunities as Federal agencies
program requirements, the interim rule
achievement of the three percent increase their utilization of the
will likely streamline and improve the
HUBZone contracting goal; and the HUBZone program. However, these
effective administration of the HUBZone
current procurement practices of changes are insignificant in light of the
program. It will also enhance SBA’s
Federal agencies. magnitude of Federal procurement
ability to administer the program with
It is difficult to obtain precise versus HUBZone procurement. The
existing resources and better focus the
quantitative estimates of the impact Federal government spent $277 billion
program benefits on the businesses that on goods and services in fiscal year
these changes might have on these operate in areas of low income or high
baseline criteria. However, SBA 2003. Of this amount, $3.4 billion, or
unemployment. 1.23% of total procurements, was
estimates that adoption of this interim
c. Greater contracting efficiency for awarded to HUBZone firms. This level
rule will increase the number of
Federal agencies. is significantly lower than the $8.3
HUBZone SBCs, increase the number of
HUBZone procurement actions by SBA believes that by increasing the billion that would have been awarded to
Federal agencies, and result in better level of activity and participation in the HUBZone firms if the 3% goal set by
and more efficient administration of the HUBZone program, it will increase Congress for the program had been
program. Ultimately, the program would economic savings to the Federal achieved.
move closer to meeting its statutory government on HUBZone awards. In 5. Conclusion
objectives of creating jobs and infusing particular, an increase in the number of
eligible HUBZone concerns will provide Most of the benefits of this interim
capital into distressed communities.
c. Were there any alternatives? procuring agencies with a larger base of rule will accrue to HUBZone
There are no alternatives to HUBZone vendors. This will ultimately communities. Expanded eligibility for
implementing the statutorily mandated reduce the cost of HUBZone contracts SBCs and designated areas and
provisions detailed in the interim rule. through increased competition among increased HUBZone contacting should
The amendments of the Reauthorization result in more Federal contract dollars
HUBZone SBCs.
Act, require SBA to amend the going to distressed communities.
HUBZone regulations so that they will 3. Cost Estimates Overall, SBA believes that increasing
conform to the new statutory provisions. the efficiency and access to the
SBA expects that as a result of this HUBZone program to both Federal
The regulatory amendments also interim rule, there will be significant
facilitate the growth of the program to agencies and small businesses will
increases in the number of concerns result in increased use of the program
Congressionally-established levels,
participating in the HUBZone program and a higher probability that the
better serve the program’s small
and in the number of HUBZone contract HUBZone program will meet its
business participants, and assist in
dollars. To the extent that this objectives to create jobs and increase
accommodating the procurement needs
materializes, there may be attendant capital investment in HUBZone
of Federal agencies.
cost increases to the government in communities.
2. Benefit Estimates terms of the costs of goods and services SBA has determined that this interim
The most significant benefits to and slightly increased administrative rule does not impose additional
implementing the changes included in costs. However, existing provisions of reporting or recordkeeping requirements
this interim rule are: the Federal Acquisition Regulation under the Paperwork Reduction Act, 44
a. Increased benefits to both small concerning the determination of ‘‘fair U.S.C., chapter 35.
businesses and Federal agencies. and reasonable’’ pricing will mitigate This interim rule meets applicable
SBA believes that the changes in this any significant monetary costs to the standards set forth in §§ 3(a) and 3(b)(2)
interim rule will increase the base government as a result of this interim of Executive Order 12988, Civil Justice
number of small businesses in the rule. SBA does not believe these Reform, to minimize litigation,
HUBZone program and increase the changes will result in significantly eliminate ambiguity, and reduce
program’s viability and utilization by higher costs to HUBZone SBCs because burden. This action does not have
Federal agencies. These two effects are the amendments do not create retroactive or preemptive effect.
mutually dependent in that the more additional burdens or restrictions on This interim rule will not have
firms that are in the program, the more SBCs. substantial direct effects on the States,
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51248 Federal Register / Vol. 70, No. 167 / Tuesday, August 30, 2005 / Rules and Regulations
on the relationship between the Federal by SBA for other similar agricultural I A. Add the terms and definitions for
government and the States, or on the small business concerns. A small ‘‘Base closure area,’’ ‘‘Qualified base
distribution of power and agricultural cooperative’s member closure area,’’ and ‘‘Small agricultural
responsibilities among the various shareholders are not considered to be cooperative;’’ and
levels of government. Therefore, for the affiliates of the cooperative by virtue of I B. Revise the definitions of
purposes of Executive Order 13132, their membership in the cooperative. ‘‘HUBZone,’’ paragraph (ii) of the
SBA determines that this rule has no However, a business concern or definition of ‘‘Qualified non-
federalism implications warranting cooperative that does not qualify as metropolitan county,’’ ‘‘Redesignated
preparation of a federalism assessment. small under this part may not be a area’’ and paragraphs (1), (5), (6), and (7)
Because this rule has been issued as member of a small agricultural of the definition for ‘‘HUBZone small
an interim final, there is no requirement cooperative. business concern (HUBZone SBC).’’
for SBA to prepare a Regulatory * * * * * The added and revised terms read as
Flexibility Act analysis. follows:
PART 124—8(a) BUSINESS § 126.103 What definitions are important in
List of Subjects in 13 CFR Parts 121,
DEVELOPMENT/SMALL the HUBZone Program?
124, 125 and 126
DISADVANTAGED BUSINESS STATUS * * * * *
Administrative practice and DETERMINATIONS Base closure area means lands within
procedure, Government procurement,
I 3a. The authority citation for part 124 the external boundaries of a military
Small businesses.
continues to read as follows: installation that were closed through a
I For the reasons set forth above, SBA privatization process under the
amends 13 CFR parts 121, 124, 125, and Authority: 15 U.S.C. 634(b)(6), 636(j), authority of:
126, as follows: 637(a), 637(d) and Pub. L. 99–661, Pub. L. (1) The Defense Base Closure and
100–656, sec. 1207, Pub. L. 101–37, Pub. L.
Realignment Act of 1990 (part A of title
PART 121—SMALL BUSINESS SIZE 101–574, and 42 U.S.C. 9815.
XXIX of division B of Public Law 101–
REGULATIONS I 4. Amend § 124.503 to add a new 510; 10 U.S.C. 2687 note);
I 1. The authority citation for part 121 paragraph (j) as follows: (2) Title II of the Defense
is revised to read as follows: Authorization Amendments and Base
§ 124.503 How does SBA accept a Closure and Realignment Act (Pub. L.
Authority: 15 U.S.C. 632(a), 632(j), 632(p), procurement for award through the 8(a) BD 100–526; 10 U.S.C. 2687 note);
634(b)(6), 636(b), 637(a), 644(c) and 662(5); program? (3) 10 U.S.C. 2687; or
Sec. 304, Pub. L. 103–403, 108 Stat. 4175, * * * * * (4) Any other provision of law
4188; Pub. L. 105–135 sec. 601 et seq., 111 (j) The contracting officer should authorizing or directing the Secretary of
Stat. 2592; Pub. L. 106–24, 113 Stat. 39. consider setting aside the requirement Defense or the Secretary of a military
I 2. Amend § 121.103 to add a new for HUBZone, 8(a) or SDVO SBC department to dispose of real property
paragraph (b)(7) to read as follows: participation before considering to set at the military installation for purposes
aside the requirement as a small relating to base closures of
§ 121.103 How does SBA determine business set-aside.
affiliation? redevelopment, while retaining the
authority to enter into a leaseback of all
* * * * * or a portion of the property for military
PART 125—GOVERNMENT
(b) * * *
CONTRACTING PROGRAMS use.
(7) The member shareholders of a
small agricultural cooperative, as * * * * *
I 4a. The authority citation for part 125 HUBZone means a historically
defined in the Agricultural Marketing continues to read as follows:
Act (12 U.S.C. 1141j), are not considered underutilized business zone, which is
affiliated with the cooperative by virtue Authority: 15 U.S.C. 634(b)(6), 637, 744,
an area located within one or more:
and 657f; 31 U.S.C. 9701, 9702.
(1) Qualified census tracts;
of their membership in the cooperative. (2) Qualified non-metropolitan
* * * * * I 5. Revise § 125.6(e)(6) to read as counties;
I 3. Revise § 121.105(a) to read as follows: (3) Lands within the external
follows: § 125.6 Prime contractor performance boundaries of an Indian reservation;
requirements (limitations on (4) Qualified base closure area; or
§ 121.105 How does SBA define ‘‘business (5) Redesignated area.
concern or concern’’ subcontracting).
HUBZone small business concern
(a)(1) Except for small agricultural * * * * * (HUBZone SBC) means an SBC that is:
cooperatives, a business concern eligible (e) * * * (1) At least 51% owned and
(6) Personnel. Individuals who are
for assistance from SBA as a small controlled by 1 or more persons, each of
‘‘employees’’ under § 121.106 of this
business is a business entity organized whom is a United States citizen;
chapter except for purposes of the
for profit, with a place of business * * * * *
HUBZone program, where the definition
located in the United States, and which (5) An SBC that is owned in part by
of ‘‘employee’’ is found in § 126.103 of
operates primarily within the United one or more Indian Tribal Governments
this chapter.
States or which makes a significant or in part by a corporation that is wholly
contribution to the U.S. economy * * * * * owned by one or more Indian Tribal
through payment of taxes or use of Governments, if all other owners are
PART 126—HUBZONE PROGRAM
American products, materials or labor. either United States citizens or SBCs;
(a)(2) A small agricultural cooperative I 6. The authority citation of part 126 is (6) An SBC that is wholly owned by
is an association (corporate or revised to read as follows: a CDC or owned in part by one or more
otherwise) acting pursuant to the CDCs, if all other owners are either
Authority: 15 U.S.C. 632(a), 632(j), 632(p)
provisions of the Agricultural Marketing United States citizens or SBCs; or
and 657a.
Act (12 U.S.C.A. 1141j) whose size does (7) An SBC that is a small agricultural
not exceed the size standard established I 7. Amend § 126.103 as follows: cooperative organized or incorporated
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Federal Register / Vol. 70, No. 167 / Tuesday, August 30, 2005 / Rules and Regulations 51249
in the United States, wholly owned by § 126.200 What requirements must a (4) Employees. At least 35% of the
one or more small agricultural concern meet to receive SBA certification cooperative’s employees must reside in
cooperatives organized or incorporated as a qualified HUBZone SBC? a HUBZone. When determining the
in the United States or owned in part by (a) * * * percentage of employees that reside in
one or more small agricultural (3) Other Requirements. The concern a HUBZone, if the percentage results in
cooperatives organized or incorporated must either: a fraction, round up to the nearest
in the United States, provided that all (i) Maintain a principal office located whole number.
other owners are small business in a HUBZone and ensure that at least (5) Contract Performance. The
concerns or United States citizens. 35% of its employees reside in a concern must represent, as provided in
HUBZone as provided in paragraph the application, that it will ‘‘attempt to
* * * * *
(b)(4) of this section; or maintain’’ (see § 126.103) having 35% of
Qualified base closure area means a (ii) Certify that when performing a
base closure area for a period of 5 years its employees reside in a HUBZone
HUBZone contract, at least 35% of its during the performance of any
either from December 8, 2004, or from employees engaged in performing that
the date of final base closure, whichever HUBZone contract it receives.
contract will reside within any Indian (d) Subcontracting. The concern must
is later. reservation governed by one or more of represent, as provided in the
* * * * * the Indian Tribal Government owners, application, that it will ensure that it
Qualified non-metropolitan county or reside within any HUBZone will comply with certain contract
* * * * * adjoining such Indian reservation. A performance requirements in
(ii) The unemployment rate is not less HUBZone and Indian reservation are connection with contracts awarded to it
than 140 percent of the average adjoining when the two areas are next as a qualified HUBZone SBC, as set
unemployment rate for the United to and in contact with each other; and forth in § 126.700.
States or for the State in which such (iii) The concern will ‘‘attempt to * * * * *
county is located, whichever is less, maintain’’ (see § 126.103) that
I 9. Amend § 126.201 by revising the
based on the most recent data available applicable employment percentage
stated above during the performance of example following paragraph (a) to read
from the Secretary of Labor. as follows:
any HUBZone contract it receives.
* * * * * (b) * * * § 126.201 Who does SBA consider to own
Redesignated area means any census (1) * * * a HUBZone SBC?
tract or any non-metropolitan county (i) The concern must be at least 51%
that ceases to be a qualified HUBZone, * * * * *
unconditionally and directly owned and (a) * * *
except that such census tracts or non- controlled by persons who are United Example: U.S. citizens own all of the
metropolitan counties may be States citizens; stock of a corporation. A corporate
‘‘redesignated areas’’ only until the later Example: A concern that is a officer, a non-U.S. citizen, owns no
of: partnership owned 50% by an stock in the corporation but owns
(1) The date on which the Census individual who is a United States options to purchase stock in the
Bureau publicly releases the first results citizen and 50% by someone who is not, corporation. SBA will consider the
from the 2010 decennial census; or is not an eligible concern because it is options exercised and the individual to
(2) Three years after the date on not at least 51% owned by United States be an owner. Therefore, if that corporate
which the census tract or non- citizens. officer has options to purchase 50% or
metropolitan county ceased to be so * * * * * more of the corporate stock, pursuant to
qualified. The date on which the census (c) Concerns owned by small § 126.200, the corporation would not be
tract or non-metropolitan county ceases agricultural cooperatives. (1) eligible to be a qualified HUBZone SBC
to be qualified is the date that the Ownership. (i) A small agricultural because it is not at least 51% owned and
official government data, which affects cooperative organized or incorporated controlled by persons who are U.S.
the eligibility of the HUBZone, is in the United States; citizens.
released to the public. (ii) A small business concern wholly * * * * *
* * * * * owned by one or more small agricultural
I 10. Revise § 126.204 to read as
Small agricultural cooperative means cooperatives organized or incorporated
follows:
an association (corporate or otherwise), in the United States; or
comprised exclusively of other small (iii) A small business concern owned § 126.204 May a qualified HUBZone SBC
agricultural cooperatives, small business in part by one or more small agricultural have affiliates?
concerns, or U.S. citizens, pursuant to cooperatives organized or incorporated A concern may have affiliates
the provisions of the Agricultural in the United States, provided that all provided that the aggregate size of the
Marketing Act, 12 U.S.C. 1141j, whose other owners are small business concern and all of its affiliates is small
size does not exceed the applicable size concerns or United States citizens. as defined in part 121 of this title,
standard pursuant to part 121 of this (2) Size. The small agricultural except as otherwise provided for small
chapter. In determining such size, an cooperative must meet the size standard agricultural cooperatives in § 126.103.
agricultural cooperative is treated as a corresponding to its primary industry I 11. Amend § 126.304 to redesignate
‘‘business concern’’ and its member classification as defined in part 121 of the current paragraph (c) as paragraph
shareholders are not considered this chapter. However, in determining (d), and to add a new paragraph (c) to
affiliated with the cooperative by virtue such size, an agricultural cooperative is read as follows:
of their membership in the cooperative. treated as a ‘‘business concern’’ and its
member shareholders are not considered § 126.304 What must a concern submit to
* * * * * affiliated with the cooperative by virtue SBA?
I 8. Amend § 126.200 to revise of their membership in the cooperative. * * * * *
paragraphs (a)(3) and (b)(1)(i), and to (3) Principal office. The cooperative’s (c) Concerns applying for HUBZone
add paragraphs (c) and (d) to read as principal office must be located in a status based on a location within a
follows: HUBZone. qualified base closure area must use
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51250 Federal Register / Vol. 70, No. 167 / Tuesday, August 30, 2005 / Rules and Regulations
SBA’s List of Qualified Base Closure § 126.613 How does a price evaluation HUBZone SBCs cannot meet the
Areas (located at http://www.sba.gov/ preference affect the bid of a qualified requirement. Where a waiver is granted,
hubzone) to verify that the location is HUBZone SBC in full and open the qualified HUBZone SBC prime
competition?
within a qualified base closure area. If contractor must still meet the
a concern disagrees with the failure of * * * * * performance of work requirements set
SBA’s List of Qualified Base Closure (c) For purchases by the Secretary of
forth in § 125.6(c) of this chapter.
Areas to include a particular area as a Agriculture of agricultural commodities
for export operations through Dated: June 17, 2005.
qualified base closure area, then the
concern must submit relevant international food aid programs Hector V. Barreto,
documentation from the Department of administered by the Farm Service Administrator.
Defense, Office of Economic Agency, the price evaluation preference [FR Doc. 05–17206 Filed 8–29–05; 8:45 am]
Adjustment, or the military department shall be 5% on the first portion of a
BILLING CODE 8025–01–P
responsible for closing that installation. contract to be awarded that is not
greater than 20% of the total volume
* * * * * being procured for each commodity in
I 12. Revise § 126.306 as follows: a single IFB.
DEPARTMENT OF TRANSPORTATION
§ 126.306 How will SBA process this * * * * *
certification? I 16. Revise § 126.700 to read as Federal Aviation Administration
(a) The AA/HUB or designee is follows:
authorized to approve or decline § 126.700 What are the performance of
14 CFR Part 71
certifications. * * * The decision of the work requirements for HUBZone contracts?
AA/HUB or designee is the final agency (a) A prime contractor receiving an [Docket No. FAA–2005–21704; Airspace
decision. award as a qualified HUBZone SBC Docket No. 05–ACE–20]
I 13. Revise § 126.503(c) as follows: must meet the performance of work
requirements set forth in § 125.6(c) of Modification of Class E Airspace;
§ 126.503 What happens if SBA is unable Newton, KS
to verify a qualified HUBZone SBC’s
this chapter.
eligibility or determines that the concern is (b) In addition to the requirements set
forth in § 125.6(c), one or more qualified AGENCY:Federal Aviation
no longer eligible for the program?
HUBZone SBCs must spend at least Administration (FAA), DOT.
* * * * *
50% of the cost of the contract incurred ACTION: Direct final rule; confirmation of
(c) Decertifying Pursuant to a Protest.
for personnel on its own employees or effective date.
SBA will decertify a qualified HUBZone
employees of other qualified HUBZone
SBC and remove its name from the List
SBCs. SUMMARY: This document confirms the
without first proposing it for (1) A qualified HUBZone SBC prime
decertification if the AA/HUB upholds effective date of the direct final rule
contractor receiving a HUBZone
a protest pursuant to § 126.803 and the contract for general construction may which revises Class E airspace at
AA/HUB’s decision is not overturned meet this requirement itself by Newton, KS.
pursuant to § 126.805. expending at least 50% of the cost of the EFFECTIVE DATE: 0901 UTC, October 27,
I 14. Revise § 126.607(b) and (c) to read contract incurred for personnel on its 2005.
as follows: employees or it may subcontract at least
35% of the cost of the contract FOR FURTHER INFORMATION CONTACT:
§ 126.607 When must a contracting officer Brenda Mumper, Air Traffic Division,
set aside a requirement for qualified performance incurred for personnel to
one or more qualified HUBZone SBCs. Airspace Branch, ACE–520A, DOT
HUBZone SBCs?
A qualified HUBZone SBC prime Regional Headquarters Building, Federal
* * * * * Aviation Administration, 901 Locust,
contractor may not, however,
(b) If the contracting officer Kansas City, MO 64106; telephone:
subcontract more than 50% of the cost
determines that § 126.605 does not (816) 329–2524.
of the contract incurred for personnel to
apply, the contracting officer shall set
non-qualified HUBZone SBCs. SUPPLEMENTARY INFORMATION: The FAA
aside the requirement for HUBZone, 8(a) (2) A qualified HUBZone SBC prime
or SDVO SBC contracting before setting published this direct final rule with a
contractor receiving a HUBZone
aside the requirement as a small request for comments in the Federal
contract for specialty construction may
business set-aside. Register on July 21, 2005 (70 FR 41949).
meet this requirement itself by
(c) If the contracting officer decides to expending at least 50% of the cost of the The FAA uses the direct final
set aside the requirement for contract incurred for personnel on its rulemaking procedure for a non-
competition restricted to qualified employees or it may subcontract at least controversial rule where the FAA
HUBZone SBCs, the contracting officer 25% of the cost of the contract believes that there will be no adverse
must: performance incurred for personnel to public comment. This direct final rule
(1) Have a reasonable expectation one or more qualified HUBZone SBCs. advised the public that no adverse
after reviewing SBA’s list of qualified A qualified HUBZone SBC prime comments were anticipated, and that
HUBZone SBCs that at least two contractor may not, however, unless a written adverse comment, or a
responsible qualified HUBZone SBCs subcontract more than 50% of the cost written notice of intent to submit such
will submit offers; and of the contract incurred for personnel to an adverse comment, were received
(2) Determine that award can be made non-qualified HUBZone SBCs. within the comment period, the
at fair market price. (c) A contracting officer may waive regulation would become effective on
I 15. Amend § 126.613 to redesignate the 50% requirement set forth in October 27, 2005. No adverse comments
the current paragraph (c) as paragraph paragraph (b) of this section for a were received, and thus this notice
(d), and to add a new paragraph (c) to particular procurement after confirms that this direct final rule will
read as follows: determining that at least two qualified become effective on that date.
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