[Federal Register Volume 78, Number 125 (Friday, June 28, 2013)]
[Rules and Regulations]
[Pages 38811-38821]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2013-15418]


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SMALL BUSINESS ADMINISTRATION

13 CFR Parts 121, 124, 125, 126, and 127

RIN 3245-AG23


Small Business Size and Status Integrity

AGENCY: Small Business Administration.

ACTION: Final rule.

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SUMMARY: This rule implements provisions of the Small Business Jobs Act 
of 2010 (Jobs Act) pertaining to small business size and status 
integrity. This rule amends the U.S. Small Business Administration's 
(SBA or Agency) program regulations to implement statutory provisions 
establishing that there a presumption of loss equal to the value of the 
contract or other instrument when a concern willfully seeks and 
receives an award by misrepresentation. The rule implements statutory 
provisions that provide that: The submission of an offer or application 
for an award intended for small business concerns will be deemed a size 
or status certification or representation in certain circumstances; an 
authorized official must sign in connection with a size or status 
certification or representation for a contract or other instrument; and 
concerns that fail to update their size or status in the Online 
Representations and Certifications Application (ORCA) database or a 
successor thereto (such as the System for Award Management (SAM) 
database) at least annually shall no longer be identified in the 
database as small or some other socioeconomic status, until the 
representation is updated. The rule also amends SBA's regulations to 
clarify when size is determined for purposes of entry into the 8(a) 
Business Development, HUBZone and Small Disadvantaged Business (SDB) 
programs.

DATES: This rule is effective August 27, 2013.

FOR FURTHER INFORMATION CONTACT: Dean R. Koppel, Office of Government 
Contracting, 409 Third Street SW., Washington, DC 20416; (202) 205-
7322; dean.koppel@sba.gov.

SUPPLEMENTARY INFORMATION: On September 27, 2010, Congress amended the 
Small Business Act to provide that if a concern willfully seeks and 
receives an award by misrepresenting its small business size or status, 
there is a presumption of loss to the United States equal to the value 
of the contract, subcontract, cooperative agreement, cooperative 
research and development agreement or grant. The Small Business Act was 
also amended to provide that certain actions, such as submitting an 
offer in response to a solicitation set aside for small business 
concerns, will be deemed a representation of small business size or 
status. The Small Business Act was amended to provide that the 
signature of an authorized official of a concern is required in making 
a small business size or status representation in connection with 
certain actions, such as submitting an offer. The Small Business Act 
now provides that concerns must update their size and status 
certifications in SAM at least annually, or the status will be lost 
until such time as the update is made. Finally, the Small Business Act 
provides that SBA must promulgate regulations to protect individuals 
and concerns from liability in cases of unintentional errors, technical 
malfunctions and other similar situations.
    SBA published a proposed rule regarding these statutory provisions 
in the Federal Register on October 7, 2011 (76 FR 62313), inviting the 
public to submit comments on or before November 7, 2011. This comment 
period was extended through December 8, 2011 by notice in the Federal 
Register published on November 8, 2011 (76 FR 69154).

Summary of Comments and SBA's Responses

    SBA received and considered twenty comments on the proposed rule. 
Two commenters fully supported the rule as proposed. One comment 
addressed the proposed Small Business Subcontracting Rule published at 
76 FR 61626 on October 5, 2011. This comment was outside the scope of 
this proposed rulemaking and was not

[[Page 38812]]

considered in adopting this final rule. The remaining comments, as well 
as SBA's response to them, are discussed below.

Presumption of Loss

    SBA received several comments regarding SBA's proposal that the 
presumption of loss to the United States for a willful 
misrepresentation of size or status be irrefutable. 13 CFR Sec. Sec.  
121.108(a), 121.411(d), 124.521(a), 124.1015(a), 125.29(a), 126.900(a), 
and 127.700(a). As noted in the proposed rule, SBA based its proposed 
imposition of an irrefutable presumption of loss on Senate Report 
language indicating that the presumption shall be ``irrefutable.'' 
Senate Rep. No. 111-343, p. 8, available at: http://www.gpo.gov.
    One commenter suggested that SBA eliminate ``irrefutable'' from the 
regulatory text. This commenter stressed that: (1) Irrefutable 
presumptions deny due process of law; and (2) Senate Report language 
does not possess statutory authority. Another commenter argued that the 
cited Senate Report was not the Senate Report for the legislation in 
question, but was instead a Senate Report for a prior piece of proposed 
legislation. Upon additional reflection, SBA has decided to remove the 
term ``irrefutable'' from the regulations, rendering the presumption 
rebuttable. SBA notes that the presumption of loss provisions will be 
utilized in civil and criminal Federal court proceedings, where due 
process will be provided. Further, SBA's regulations limit liability in 
the case of unintentional error, technical malfunction, or other 
similar situations. 13 CFR Sec. Sec.  121.108(d), 121.411(g), 
124.521(d), 124.1015(d), 125.29(d), 126.900(d), and 127.700(d). As 
such, an ``irrefutable'' presumption would be inappropriate in these 
instances.
    Another commenter suggested that SBA ensure firms have sufficient 
due process to contest a finding of willful misrepresentation before 
penalties are imposed. This commenter made several suggestions as to 
how SBA could ensure protection of business concerns' due process--
these suggestions included: (1) Provision of an agency level response 
period; and (2) empowering SBA's Office of Hearings and Appeals (OHA) 
to hear appeals of determinations under the proposed rule. As discussed 
above, the statutory presumption of loss provisions will be applied in 
Federal civil and criminal court proceedings where due process will be 
provided and as explained above, in certain instances, SBA's 
regulations limit liability. 13 CFR Sec. Sec.  121.108(d), 121.411(g), 
124.521(d), 124.1015(d), 125.29(d), 126.900(d), and 127.700(d). As 
such, SBA does not believe that this provision requires modification.
    One commenter suggested that SBA impose a rebuttable presumption 
where a size determination finds that a firm is small by itself (i.e., 
absent the firm's affiliates) that the firm did not willfully 
misrepresent its size. Likewise, this commenter suggested that SBA 
impose a rebuttable presumption that the firm willfully misrepresented 
its size when a size determination finds the firm to be other than 
small by itself (i.e., absent the firm's affiliates). As discussed 
above, the rule now provides that the presumption is rebuttable. The 
question of whether a firm has willfully misrepresented its size is a 
factual determination best made by a judge, jury, or other decider of 
fact. Given the fact-specific nature of such a finding, SBA declines to 
impose a presumption as to an actor's intent.
    Two commenters suggested clarification of the language in proposed 
13 CFR Sec. Sec.  121.108(a), 121.411(d), 124.521(a), 124.1015(a), 
125.29(a), 126.900(a), and 127.700(a) which provide that the 
presumption of loss applies ``whenever it is established'' that a firm 
willfully misrepresented its status. Specifically, the commenters 
requested clarification of who makes the finding of willful 
misrepresentation, how a firm is notified of such a finding, whether 
the determination is appealable, and how a company may defend its 
representation. Consistent with the intent of the Jobs Act, it is SBA's 
intent that the presumption of loss shall be applied in all manner of 
criminal, civil, administrative, contractual, common law, or other 
actions, which the United States government may take to redress willful 
misrepresentation. As such, the finder of fact, notice requirements, 
and means of defense must depend on the specific action taken against a 
business concern. SBA does not believe any changes to the proposed rule 
or other clarification would be appropriate and adopts the proposed 
provisions as final in this rule.
    Another commenter requested clarification as to whether an adverse 
size determination automatically leads to a presumption that the 
relevant firm willfully misrepresented its size. SBA recognizes that an 
unsophisticated firm or one new to the Federal government arena may 
certify its status as a small business in good faith, but may 
ultimately be found to be other than small. Similarly, a firm may 
incorrectly apply an ownership or control requirement for the service-
disabled veteran-owned (SDVO) or women-owned small business (WOSB) 
programs in good faith, and ultimately be found not to qualify as a 
SDVO or WOSB small business. In either case, if the situation truly is 
a good faith misinterpretation of SBA's rules, SBA does not believe 
that action should be taken against the firm or its principals. Again, 
the question of whether a firm submitted a misrepresentation in good 
faith or intentionally (or recklessly) submitted a false size or status 
representation or certification is a factual determination best made by 
a judge, jury, or other decider of fact.
    One commenter recommended that SBA amend the proposed rule to 
include a provision requiring the government to ``prominently mark'' 
any solicitation set aside as contemplated by the proposed rule. 
Currently, solicitations issued under the Federal Acquisition 
Regulation (FAR) must contain specific clauses providing notice 
regarding set-asides, reserves, partial set-asides, price evaluation 
preferences, source selection factors, and other mechanisms which 
somehow classify a solicitation as intended for award to specific 
entities. 48 CFR Sec. Sec.  52.219-3, 52.219-4, 52.219-6, 52.219-7, 
52.219-13, 52.219-18, 52.219-23, 52.219-27, 52.219-29, and 52.219-30. 
Therefore, SBA does not believe any change to the rule is necessary.
    One commenter requested clarification of situations where an offer 
may be ``otherwise classified as intended for award to small business'' 
without being specifically identified as set aside for small business. 
Consistent with the underlying statutory text, it is SBA's intent that 
the rule be broadly inclusive of set-asides, reserves, partial set-
asides, price evaluation preferences, source selection factors, and any 
other mechanisms which are not specifically addressed by the FAR. SBA 
does not feel that additional clarification is necessary and has 
adopted the proposed rule as final.

Deemed Certifications

    One commenter expressed concern that proposed Sec. Sec.  
121.108(b)(2), 121.411(e)(2), 124.521(b)(2), 124.1015(b)(2), 
125.29(b)(2), 126.900(b)(2), and 127.700(b)(2) are too broad and could 
permit attenuated acts or omissions to give rise to a deemed 
certification. SBA disagrees. Federal agencies are statutorily required 
to establish goals for the participation of small business concerns, 
SDVO small business concerns, HUBZone small business concerns, small 
disadvantaged business concerns, and WOSB concerns. 15 U.S.C. 644(g). 
At the conclusion of each fiscal year, Federal agencies must

[[Page 38813]]

compile reports as to the agencies' performance in attaining their 
contracting goals. 15 U.S.C. 644(h). It is SBA's intention that 
Sec. Sec.  121.108(b)(2), 121.411(e)(2), 124.521(b)(2), 124.1015(b)(2), 
125.29(b)(2), 126.900(b)(2), and 127.700(b)(2) shall be applied in 
cases where a specific offer encourages the procuring agency to 
classify the award as an award to a small business or other concern for 
the purposes of the agencies' contracting goals. Under 48 CFR Sec.  
4.1201, a Federal agency shall rely on a business concern's ORCA 
representations and certifications in determining how to classify the 
award. Accordingly, in most cases, it will be a firm's ORCA/SAM 
representations and certifications which would encourage a Federal 
agency to classify an award as having gone to a small business. 
Therefore, SBA believes that in practice, proposed Sec. Sec.  
121.108(b)(2), 121.411(e)(2), 124.521(b)(2), 124.1015(b)(2), 
125.29(b)(2), 126.900(b)(2), and 127.700(b)(2) have a narrow 
application and the provisions have been adopted as final in this rule.
    Another commenter recommended that SBA eliminate proposed 
Sec. Sec.  121.108(b)(3), 121.411(e)(3), 124.521(b)(3), 124.1015(b)(3), 
125.29(b)(3), 126.900(b)(3), and 127.700(b)(3), which provide that 
registration on any Federal electronic database for the purpose of 
being considered for award shall be deemed an affirmative, willful, and 
intentional certification as to the relevant concern's small business 
size and status. This is a statutory requirement that SBA cannot 
eliminate. The Jobs Act specifically deems registration on a Federal 
electronic database as a willful certification as to size and status. 
15 U.S.C. Sec.  632(w)(2)(C). As such, SBA is precluded by statute from 
eliminating these provisions and they remain in this final rule.

Signature Requirement

    SBA received two comments regarding proposed Sec. Sec.  121.108(c), 
121.411(f), 124.521(c), 124.1015(c), 125.29(c), 126.900(c), 127.700(c), 
which require an authorized official to sign the small business size 
and status certification page of any solicitation, bid or proposal for 
a Federal grant, contract, subcontract, cooperative agreement, or 
cooperative research and development agreement reserved for small 
business concerns. The first commenter suggested that the rule 
specifically give electronic signatures the same effect as wet 
signatures. For the purpose of Government contracts, such a provision 
already exists at 48 CFR Sec.  4.502(d) which provides that agencies 
may accept electronic signatures and records. However, SBA lacks the 
statutory authority to enact such a rule and has not adopted this 
comment.
    The second commenter questioned whether the signature requirement 
is superfluous given that a signature on an offer is meant to certify 
all the offer's contents. SBA considered this comment, but has adopted 
the proposed provisions as final in this rule. The Jobs Act 
specifically requires that a certification as to a firm's small 
business size or other status shall contain the signature of an 
authorized official on the same page as the certification. 15 U.S.C. 
632(w)(3)(B). As such, SBA is precluded by statute from eliminating the 
signature requirement. Further, the Federal Acquisition Council will 
implement the signature requirement in the Federal Acquisition 
Regulation and associated clauses. SBA has made minor wording changes 
in these provisions for clarity. The word ``solicitation'' has been 
replaced by the words ``offer'' and ``proposal'' to clarify that it is 
the offer that a contractor is signing, not the solicitation.

Limitation of Liability

    Two commenters suggested that SBA amend proposed Sec. Sec.  
121.108(d), 121.411(g), 124.521(d), 124.1015(d), 125.29(d), 126.900(d), 
and 127.700(d) to adopt the statutory language which protects firms 
from liability where misrepresentation was the result of 
``unintentional errors, technical malfunctions, or other similar 
situations.'' SBA feels that the addition of ``or other situations'' 
more accurately captures the breadth of situations in which liability 
is to be limited and has therefore adopted this comment in the final 
rule.
    Two commenters suggested that SBA clarify the standard of care 
required in making representations. Under proposed Sec. Sec.  
121.108(a), 121.411(d), 124.521(a), 124.1015(a), 125.29(a), 126.900(a), 
and 127.700(a), the presumption of loss applies only where a firm 
willfully misrepresents its small business size or other status. 
Sections 121.108(d), 121.411(g), 124.521(d), 124.1015(d), 125.29(d), 
126.900(d), and 127.700(d) further provide that misrepresentations 
which are the result of ``unintentional errors, technical malfunctions, 
or other similar situations'' are not considered to be willful. In 
addition, the statute and implementing regulations provide that certain 
actions are deemed to be willful and require an official to sign on the 
same page as size or status representation. As discussed above, whether 
a representation is willful or should result in liability or criminal 
penalty is a fact-based decision that will be made by a judge, jury or 
other decider of fact. SBA has made minor wording changes in the 
limitation of liability provisions to make clear that the question of 
whether a misrepresentation is willful is a fact-based decision that 
will be made, not by SBA, but by a judge, jury or other decider of 
fact. To clarify that the limitation of liability provisions convey 
discretion to the finder of fact, the phrase ``shall not apply'' has 
been amended as ``may be determined not to apply.'' Further, the phrase 
``consideration shall be given to'' has been changed to ``relevant 
factors to consider in making this determination may include.''
    One commenter asked if SBA would agree that thirty days is a 
reasonable amount of time in which to correct an erroneous 
representation. It is SBA's view that the question of whether an 
erroneous representation was corrected in a timely manner is dependent 
on the facts of a given case. SBA believes such a determination is best 
made by a judge, jury, or other decider of fact.
    Two commenters suggested that business concerns be protected from 
liability when their misrepresentation resulted from ambiguity in SBA's 
regulations. As discussed above, SBA believes that a good faith 
misinterpretation of SBA's rules should not be considered a willful 
misrepresentation of size or status. Whether a regulation is ambiguous 
and whether a misinterpretation is reasonable and made in good faith is 
a fact- specific determination that will be made by a judge, jury, or 
other decider of fact.
    Two commenters suggested that the list of mitigating factors set 
forth in the proposed rule be clarified and expanded. It is not SBA's 
intent that the list of mitigating factors included in the proposed 
rule be exhaustive. Again, the question of whether a firm willfully 
misrepresented its size or status is a factual determination best made 
by a judge, jury, or other decider of fact. SBA does not believe any 
additional changes or clarification is warranted.

Annual Recertification

    One commenter argued that annual recertification is too burdensome. 
SBA disagrees. This rule does not impose new reporting requirements--
concerns must certify their size and status annually in order to be 
identified as a small business or other socioeconomic concern in ORCA 
under existing regulations. 48 CFR Sec.  4.1201(b).

[[Page 38814]]

Moreover, annual certification of size and status is statutorily 
required. 15 U.S.C. 632(x). In addition, a firm is expected to verify 
its representation in SAM every time it submits an offer on a 
government contract. SBA has, however, identified SAM as the current 
successor to ORCA and has amended all references to ORCA in the 
proposed rule to instead reference SAM. As such, SBA adopts the annual 
SAM verification requirement in this final rule.
    Two commenters recommended that firms awarded contracts longer than 
five years be required to recertify only on the fifth year. SBA 
considered this comment but has adopted the proposed provisions as 
final. For purposes of establishing continuing eligibility for 
previously awarded long term contracts, recertification is required 
within 60 to 120 days prior to the end of the fifth year of the 
contract. 48 CFR Sec.  52.219-28; 13 CFR Sec.  121.404(g)(3). However, 
this requirement is distinct from the annual recertification 
requirements in the proposed rule. The annual recertification 
requirement contemplated in the proposed rule is for purposes of being 
considered for award of future contracts. Such a requirement already 
exists under 48 CFR Sec.  4.1201(b). Accordingly, SBA has not adopted 
this comment in the Final rule.
    One commenter suggested that SBA provide notification and an 
opportunity for business concerns to comply with the annual 
certification requirement. SBA does not believe such notification is 
necessary given that concerns are already required to certify their 
size and status annually under 48 CFR Sec.  4.1201(b). Further, SBA 
lacks the statutory authority to implement such a notification system. 
Accordingly, SBA has not adopted this comment in the Final rule.
    Another commenter suggested that SBA issue additional guidance to 
clarify the annual certification requirement as applied to business 
concerns operating in industries with a revenue-based size standard. 
This commenter expressed concern that an annual certification 
requirement would not take into consideration revenue fluctuations 
common to many small business concerns. SBA disagrees. At any given 
time, a firm's size may be determined under a revenue-based size 
standard by dividing the sum of firm's annual receipts from the past 
three completed fiscal years by three. 13 CFR Sec.  121.104(c). This 
method is specifically designed to account for revenue fluctuations and 
SBA does not believe the annual recertification requirement has any 
implications specific to those firms operating in industries with 
revenue-based size standards.
    Another commenter suggested that the annual recertification 
requirement be applied to 8(a) Business Development and HUBZone program 
participants. As noted in the proposed rule, SBA did not impose the 
recertification requirement for these programs because SBA is 
responsible for providing certification designations in federal 
procurement databases for these programs. Therefore, SBA has not 
adopted this comment in the final rule.

Other Comments

    One commenter recommended that SBA provide clarification as to the 
rule's application to misrepresentations by subcontractors. It is SBA's 
intent that the presumption of loss shall apply to subcontractors who 
willfully misrepresent their size or status in order to receive a 
subcontract award. Accordingly, proposed Sec. Sec.  121.108(a), 
121.411(d), 124.521(a), 124.1015(a), 125.29(a), 126.900(a), and 
127.700(a) explicitly provided that a presumption of loss to the United 
States shall be imposed whenever it is established that a business 
concern willfully sought and received award of a subcontract by 
misrepresentation. SBA does not believe any additional clarification is 
necessary. The same commenter also requested clarification of the prime 
contractor's liability when a subcontractor misrepresents its status to 
the prime contractor. Pursuant to 48 CFR Sec.  19.703(b), a prime 
contractor acting in good faith may rely on the written representation 
of its subcontractor regarding the subcontractor's small business size 
or status. When read in conjunction with the final rule, SBA believes 
this insulates prime contractors acting in good faith from liability 
for misrepresentations made by their subcontractors. In response to 
this comment, SBA has clarified this point in the limitation of 
liability sections of the Final rule.
    One commenter suggested that SBA provide clarification as to a 
contracting officer's duty to stop work on a contract if it becomes 
clear that the awardee misrepresented its status before completion of 
the contract. Under SBA's existing regulations, contracting officers 
have the authority to file a size protest at any time, even after 
award. 13 CFR Sec. Sec.  121.1004(b), 124.1010(c)(1)(iii), 
125.25(d)(3), 126.801(d)(3), and 127.603(c)(3). SBA's regulations also 
address the effect of a negative eligibility determination on the 
procurement in question. 13 CFR Sec. Sec.  121.1009(g), 124.1013(h), 
125.27(g), 126.803(d), and 127.604(f).
    Another commenter suggested that SBA amend its regulations to 
impose suspension and debarment only when misrepresentation resulted in 
actual award. SBA does not believe that receipt of an award should be a 
prerequisite for debarment, suspension or any other penalty outlined in 
the Small Business Act or SBA's regulations. Firms have an obligation 
to accurately represent their size and/or status. Any fraudulent 
misrepresentation which inhibits the government's ability to rely on 
future statements made by the contractor should be subject to possible 
suspension and debarment actions. Accordingly this comment has not been 
adopted in the final rule. However, for clarity and accuracy, the title 
``debarring official'' has been changed to ``suspension and debarment 
official'' in 13 CFR Sec. Sec.  121.108(e)(1), 121.411(h)(1), 
124.1015(e)(1), 125.29(e)(1), 126.900(e)(1), and 127.700(e)(1).
    One commenter recommended that ORCA/SAM be modified to require the 
contractor to make an affirmative acknowledgment that the software 
interface correctly determined the business's size. Proposed Sec. Sec.  
121.108(c), 121.411(f), 124.521(c), 124.1015(c), 125.29(c), 126.900(c), 
127.700(c) require an authorized official to sign the small business 
size and status certification page of any solicitation. SBA does not 
believe any additional clarification or changes to the proposed rule 
are necessary and adopts the provisions in the Final rule as proposed.
    Another commenter suggested that SBA address situations where a 
firm claims to be small under its primary NAICS code and submits an 
offer on a procurement issued under a different NAICS code with a more 
restrictive size standard. SBA believes its regulations are clear on 
this point. 13 CFR Sec.  121.402(a) provides that ``a concern must not 
exceed the size standard for the NAICS code specified in the 
solicitation,''and 13 CFR Sec.  121.405(a) further provides that ``a 
concern must self-certify it is small under the size standard specified 
in the solicitation.'' As such, SBA has not made additional changes to 
the rule in response to this comment.
    One commenter recommended the creation of an IRS portal through 
which relevant parties may look up a business's tax returns for 
purposes of determining size. Tax returns are not public documents and 
SBA lacks the statutory authority to implement such a system.
    One commenter proposed that footnote 18 to 13 CFR Sec.  121.201 be 
applied to all value-added resellers. The proposed rule did not address 
specific

[[Page 38815]]

size standards and, therefore, this comment is beyond the scope of the 
proposed rulemaking.
    Another commenter suggested that SBA eliminate all programs based 
on sex, race or minority status. The proposed rule did not address the 
elimination of any SBA programs and, therefore, this comment is beyond 
the scope of the proposed rulemaking.

Compliance with Executive Orders 12866, 13563, 12988, 13132, 13272, the 
Paperwork Reduction Act (44 U.S.C., Chapter 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 
rule is a significant regulatory action for purposes of Executive Order 
12866. In the proposed rule, SBA set forth its initial regulatory 
impact analysis, which addressed the following: Necessity of the 
regulation; the potential benefits and costs of the regulation; and 
alternative approaches to the proposed rule. SBA did not receive any 
comments which specifically addressed this regulatory impact analysis. 
Therefore, SBA adopts as final its initial regulatory impact analysis.

Executive Order 13563

    This final rule implements important statutory provisions intended 
to prevent and deter fraud and misrepresentation in small business 
government contracting and other programs. SBA has amended all 
applicable Parts of its regulations to put participants in those 
programs on notice of the penalties associated with misrepresentation, 
and to the extent practicable, utilized identical language in each 
Part. SBA has also included in each Part other relevant applicable 
statutory provisions concerning the penalties for misrepresentation. 
The costs associated with these rules, requiring a signature in 
connection with a size or status representation and requiring concerns 
to update online certifications annually, are minimal and required by 
statute. As part of its implementation of this executive order and 
consistent with its commitment to public participation in the 
rulemaking process, SBA held public forums around the country to 
discuss implementation of the Jobs Act, including the provisions in 
this rule.

Executive Order 12988

    For the purpose of Executive Order 12988, this final rule 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 rule has no preemptive or 
retroactive effect.

Executive Order 13132

    This final rule does not have federalism implications as defined in 
Executive Order 13132. It 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 layers of government, as specified in the order. As such it 
does not warrant the preparation of a Federalism Assessment.

Paperwork Reduction Act, 44 U.S.C., Ch. 35

    For the purpose of the Paperwork Reduction Act, 44 U.S.C. Chapter 
35, SBA has determined that this rule does not impose new reporting 
requirements and does not require new recordkeeping requirements. In 
accordance with 48 CFR Sec. Sec.  4.1202, 52.204-8, 52.219-1 and 13 CFR 
Sec. Sec.  121.404(a), 121.411, concerns must submit paper or 
electronic representations or certifications in connection with prime 
contracts and subcontracts. The Jobs Act requires that each offeror or 
applicant for a Federal contract, subcontract, or grant shall contain a 
certification concerning the small business size and status of a 
business concern seeking the Federal contract, subcontract or grant. 
The Jobs Act mandates that an authorized official must sign the 
certification on the same page containing the size and status claimed 
by the concern. Offerors are already required to sign their offers, 
bids or quotes (Standard Forms 18, 33, and 1449), so this provision 
does not create new reporting or recordkeeping requirements.

Regulatory Flexibility Act

    SBA has determined that this rule may have a significant economic 
impact on a substantial number of small entities within the meaning of 
the Regulatory Flexibility Act (RFA), 5 U.S.C. 601-612. Accordingly, 
SBA set forth an Initial Regulatory Flexibility Act (IRFA) analysis in 
the proposed rule. The IRFA addressed the impact of the proposed rule 
in accordance with 5 U.S.C. 603. The IRFA examined the objectives and 
legal basis for the proposed rule; the kind and number of small 
entities that may be affected; the projected recordkeeping, reporting, 
and other requirements; whether there were any Federal rules that may 
duplicate, overlap, or conflict with the proposed rule; and whether 
there were any significant alternatives to the proposed rule. The 
Agency's final regulatory flexibility analysis (FRFA) is set forth 
below.
(a) Need for, Objectives, and Legal Basis of the Rule
    These regulatory amendments implement Sections 1341 and 1342 of the 
Small Business Jobs Act of 2010, Public Law 111-240, 124 Stat. 2504, 
September 27, 2010 (Jobs Act); 15 U.S.C. 632(w), (x). The purpose of 
the statute and implementing regulations is to prevent or deter firms 
from misrepresenting their size or socioeconomic status.
(b) Estimate of the Number of Small Entities to Which the Rule Will 
Apply
    The RFA directs agencies to provide a description of and, where 
feasible, an estimate of the number of entities that may be affected by 
the proposed rules, if adopted. The RFA defines ``small entity'' to 
include ``small businesses,'' ``small organizations,'' and ``small 
governmental jurisdictions.'' SBA's programs do not apply to ``small 
organizations'' or ``small governmental jurisdictions'' because they 
are non-profit or governmental entities and do not generally qualify as 
``business concerns'' within the meaning of SBA's regulations. SBA's 
programs generally apply only to for-profit business concerns. 
Therefore, the regulation will not impact small organizations or small 
governmental jurisdictions.
    In fiscal year 2010, there were approximately 1.6 million small 
business contract actions (out of 3.36 million total small business 
eligible contract actions). This final rule's presumption of loss will 
only impact small business concerns that misrepresent their size or 
status in connection with a contract, subcontract, cooperative 
agreement, cooperative research and development agreement or grant in 
such a way that criminal prosecution or other action is taken by the 
Government in order to redress the misrepresentation. In fiscal year 
2010, SBA found approximately 200 firms to be ineligible for a contract 
(14 HUBZone, 33 Service-Disabled Veteran-Owned, 0 Women-Owned Small 
Business, 151 size). Not all of these firms would be criminally 
prosecuted or have others actions taken against them. Thus, the 
regulations concerning presumption of loss will impact very few 
concerns, and some of these concerns are not actually small.
    There are in approximately 348,000 concerns listed as small 
business concerns in the Dynamic Small Business Search (DSBS) database. 
The regulations concerning deemed certifications and the requirement 
for a

[[Page 38816]]

signature apply to all of these concerns, to the extent the concerns 
submit an offer for a prime contract that is set aside for small 
business concerns. In addition, there are small business concerns that 
are not registered in DSBS that submit offers or responses for grants, 
subcontracts, and other agreements. The annual certification 
requirement applies to all of the 348,000 firms registered in DSBS.
(c) Projected Reporting, Recordkeeping and Other Compliance 
Requirements
    This final rule does not impose a new information collection, 
recordkeeping or compliance requirement on small businesses. A firm's 
size or socioeconomic status is generally based on records that it 
already possesses, such as payroll records and annual tax returns. 
Firms currently must represent their size or status in connection with 
contracts and subcontracts, either electronically or in paper form. 48 
CFR Sec. Sec.  4.1202, 52.204-8, 52.219-1 and 13 CFR Sec. Sec.  
121.404(a), 121.411. The rule requires an authorized official to sign 
on the page containing a concern's size or status representation. 
Offerors are already required to sign their offers, so the burden on 
small business concerns to also sign their size or status 
representation or certification is minimal. Standard Forms 18, 33, 1447 
and 1449.
(d) Federal Rules Which May Duplicate, Overlap or Conflict With the 
Rule
    Section 1342 of the Jobs Act requires that firms that fail to meet 
the annual certification or representation requirement shall lose their 
status in the database. Firms will not be able submit offers for small 
business contracts based on their online representations or 
certifications (48 CFR Sec.  4.1201(c)), but instead must have an 
authorized official sign in connection with the firm's size or status. 
Firms must already sign offers, so the impact will be negligible. 
Standard Forms 18, 33, 1447 and 1449.
(e) Steps Taken To Minimize Impact on Small Entities
    This final rule implements Sections 1341 and 1342 of the Jobs Act. 
The final rule is directed at small business concerns seeking 
government contracts, subcontracts, grants, and cooperative agreements. 
The final rule is intended to prevent or deter firms from 
misrepresenting their size or socioeconomic status. The impact on firms 
that accurately represent their size or status will be minimal. An 
authorized official will have to sign an offer where the firm 
represents its size and status, but authorized officials are currently 
required to sign offers. Firms will have to update their size and 
socioeconomic status in ORCA/SAM at least annually, but that too is 
already required. 48 CFR Sec.  4.1201(b)(1).
(f) Issues Raised by Public Comments in Response to the Initial 
Regulatory Flexibility Analysis and the Agency's Assessment
    The SBA received one comment that addressed the IRFA or the 
subjects discussed in the IRFA. This commenter expressed concern 
regarding a portion of the IRFA which read: ``The proposed regulations 
concerning presumption of loss will only impact small business concerns 
that misrepresent their size or status in connection with a contract, 
subcontract, cooperative agreement, cooperative research and 
development agreement or grant in such a way that criminal prosecution 
or other action is taken by the Government.'' Specifically, the 
commenter felt that SBA's reference to ``other action'' requires 
clarification. As noted above, it is SBA's intent that the presumption 
of loss shall be applied in all manner of criminal, civil, 
administrative, contractual, common law, or other actions, which the 
United States government may take to redress willful misrepresentation. 
In fiscal year 2010, SBA found approximately 200 firms to be ineligible 
for a contract (14 HUBZone, 33 Service-Disabled Veteran-Owned, 0 Women-
Owned Small Business, 151 size). Not all of these firms willfully 
misrepresented their size or status. Thus, SBA continues to believe 
that the regulations concerning presumption of loss will impact very 
few concerns, most of which will not qualify as small.

List of Subjects

13 CFR Part 121

    Administrative practice and procedure, Reporting and recordkeeping 
requirements, and Small businesses.

13 CFR Part 124

    Administrative practice and procedure, Minority businesses, 
Reporting and recordkeeping requirements, and Technical assistance.

13 CFR Part 125

    Government contracts, Reporting and recordkeeping requirements, 
Small businesses, and Technical assistance.

13 CFR Part 126

    Administrative practice and procedure, Penalties, Reporting and 
recordkeeping requirements and Small businesses.

13 CFR Part 127

    Government procurement, Reporting and recordkeeping requirements, 
and Small businesses.

    For the reasons stated in the preamble, SBA amends parts 121, 124, 
125, 126 and 127 of title 13 of the Code of Federal Regulations as 
follows:

PART 121--SMALL BUSINESS SIZE REGULATIONS

0
1. The authority citation for part 121 continues to read as follows:

    Authority:  15 U.S.C. 632, 634(b)(6), 636(b), 637(a), 644 and 
662(5); and Pub. L. 105-135, sec. 401 et seq., 111 Stat. 2592.


0
2. Revise Sec.  121.108 to read as follows:


Sec.  121.108  What are the requirements for representing small 
business size status, and what are the penalties for misrepresentation?

    (a) Presumption of Loss Based on the Total Amount Expended. In 
every contract, subcontract, cooperative agreement, cooperative 
research and development agreement, or grant which is set aside, 
reserved, or otherwise classified as intended for award to small 
business concerns, there shall be a presumption of loss to the United 
States based on the total amount expended on the contract, subcontract, 
cooperative agreement, cooperative research and development agreement, 
or grant whenever it is established that a business concern other than 
a small business concern willfully sought and received the award by 
misrepresentation.
    (b) Deemed Certifications. The following actions shall be deemed 
affirmative, willful and intentional certifications of small business 
size and status:
    (1) Submission of a bid, proposal, application or offer for a 
Federal grant, contract, subcontract, cooperative agreement, or 
cooperative research and development agreement reserved, set aside, or 
otherwise classified as intended for award to small business concerns.
    (2) Submission of a bid, proposal, application or offer for a 
Federal grant, contract, subcontract, cooperative agreement or 
cooperative research and development agreement which in any way 
encourages a Federal agency to classify the bid or proposal, if 
awarded, as an award to a small business concern.
    (3) Registration on any Federal electronic database for the purpose 
of being considered for award of a Federal grant, contract, 
subcontract, cooperative agreement, or cooperative research and

[[Page 38817]]

development agreement, as a small business concern.
    (c) Signature Requirement. Each offer, proposal, bid, or 
application for a Federal contract, subcontract, or grant shall contain 
a certification concerning the small business size and status of a 
business concern seeking the Federal contract, subcontract or grant. An 
authorized official must sign the certification on the same page 
containing the size status claimed by the concern.
    (d) Limitation of Liability. Paragraphs (a) through (c) of this 
section may be determined not to apply in the case of unintentional 
errors, technical malfunctions, and other similar situations that 
demonstrate that a misrepresentation of size was not affirmative, 
intentional, willful or actionable under the False Claims Act, 31 
U.S.C. Sec. Sec.  3729, et seq. A prime contractor acting in good faith 
should not be held liable for misrepresentations made by its 
subcontractors regarding the subcontractors' size. Relevant factors to 
consider in making this determination may include the firm's internal 
management procedures governing size representation or certification, 
the clarity or ambiguity of the representation or certification 
requirement, and the efforts made to correct an incorrect or invalid 
representation or certification in a timely manner. An individual or 
firm may not be held liable where government personnel have erroneously 
identified a concern as small without any representation or 
certification having been made by the concern and where such 
identification is made without the knowledge of the individual or firm.
    (e) Penalties for Misrepresentation.
    (1) Suspension or debarment. The SBA suspension and debarment 
official or the agency suspension and debarment official may suspend or 
debar a person or concern for misrepresenting a firm's size status 
pursuant to the procedures set forth in 48 CFR subpart 9.4.
    (2) Civil Penalties. Persons or concerns are subject to severe 
penalties under the False Claims Act, 31 U.S.C. 3729-3733, and under 
the Program Fraud Civil Remedies Act, 331 U.S.C. 3801-3812, and any 
other applicable laws.
    (3) Criminal Penalties. Persons or concerns are subject to severe 
criminal penalties for knowingly misrepresenting the small business 
size status of a concern in connection with procurement programs 
pursuant to section 16(d) of the Small Business Act, 15 U.S.C. 645(d), 
as amended, 18 U.S.C. 1001, 18 U.S.C. 287, and any other applicable 
laws. Persons or concerns are subject to criminal penalties for 
knowingly making false statements or misrepresentations to SBA for the 
purpose of influencing any actions of SBA pursuant to section 16(a) of 
the Small Business Act, 15 U.S.C. 645(a), as amended, including failure 
to correct ``continuing representations'' that are no longer true.


0
3. Add new Sec.  121.109 to read as follows:


Sec.  121.109  What must a concern do in order to be identified as a 
small business concern in any Federal procurement databases?

    (a) In order to be identified as a small business concern in the 
System for Award Management (SAM) database (or any successor thereto), 
a concern must certify its size in connection with specific size 
standards at least annually.
    (b) If a firm identified as a small business concern in SAM fails 
to certify its size within one year of a size certification, the firm 
will not be listed as a small business concern in SAM, unless and until 
the firm recertifies its size.

Sec.  121.404  [Amended]

0
4. Amend Sec.  121.404(b) by removing ``and the date of certification 
by SBA'' and adding in its place ``and, where applicable, the date the 
SBA program office requests a formal size determination in connection 
with a concern that otherwise appears eligible for program 
certification.''


0
5. Amend Sec.  121.411 by adding new paragraphs (d) through (i) to read 
as follows:


Sec.  121.411  What are the size procedures for SBA's section 8(d) 
Subcontracting Program?

* * * * *
    (d) Presumption of Loss Based on the Total Amount Expended. In 
every contract, subcontract, cooperative agreement, cooperative 
research and development agreement, or grant which is set aside, 
reserved, or otherwise classified as intended for award to small 
business concerns, there shall be a presumption of loss to the United 
States based on the total amount expended on the contract, subcontract, 
cooperative agreement, cooperative research and development agreement, 
or grant whenever it is established that a business concern other than 
a small business concern willfully sought and received the award by 
misrepresentation.
    (e) Deemed Certifications. The following actions shall be deemed 
affirmative, willful and intentional certifications of small business 
size and status:
    (1) Submission of a bid, proposal, application or offer for a 
Federal grant, contract, subcontract, cooperative agreement, or 
cooperative research and development agreement reserved, set aside, or 
otherwise classified as intended for award to small business concerns.
    (2) Submission of a bid, proposal, application or offer for a 
Federal grant, contract, subcontract, cooperative agreement or 
cooperative research and development agreement which in any way 
encourages a Federal agency to classify the bid or proposal, if 
awarded, as an award to a small business concern.
    (3) Registration on any Federal electronic database for the purpose 
of being considered for award of a Federal grant, contract, 
subcontract, cooperative agreement, or cooperative research and 
development agreement, as a small business concern.
    (f) Signature Requirement. Each offer, proposal, bid, or 
application for a Federal contract, subcontract, or grant shall contain 
a certification concerning the small business size and status of a 
business concern seeking the Federal contract, subcontract or grant. An 
authorized official must sign the certification on the same page 
containing the size status claimed by the concern.
    (g) Limitation of Liability. Paragraphs (d) through (f) of this 
section may be determined not to apply in the case of unintentional 
errors, technical malfunctions, and other similar situations that 
demonstrate that a misrepresentation of size was not affirmative, 
intentional, willful or actionable under the False Claims Act, 31 
U.S.C. Sec. Sec.  3729, et seq. A prime contractor acting in good faith 
should not be held liable for misrepresentations made by its 
subcontractors regarding the subcontractors' size. Relevant factors to 
consider in making this determination may include the firm's internal 
management procedures governing size representation or certification, 
the clarity or ambiguity of the representation or certification 
requirement, and the efforts made to correct an incorrect or invalid 
representation or certification in a timely manner. An individual or 
firm may not be held liable where government personnel have erroneously 
identified a concern as small without any representation or 
certification having been made by the concern and where such 
identification is made without the knowledge of the individual or firm.

[[Page 38818]]

    (h) Penalties for Misrepresentation.
    (1) Suspension or debarment. The SBA suspension and debarment 
official or the agency suspension and debarment official may suspend or 
debar a person or concern for misrepresenting a firm's size status 
pursuant to the procedures set forth in 48 CFR subpart 9.4.
    (2) Civil Penalties. Persons or concerns are subject to severe 
penalties under the False Claims Act, 31 U.S.C. 3729-3733, and under 
the Program Fraud Civil Remedies Act, 331 U.S.C. 3801-3812, and any 
other applicable laws.
    (3) Criminal Penalties. Persons or concerns are subject to severe 
criminal penalties for knowingly misrepresenting the small business 
size status of a concern in connection with procurement programs 
pursuant to section 16(d) of the Small Business Act, 15 U.S.C. 645(d), 
as amended, 18 U.S.C. 1001, 18 U.S.C. 287, and any other applicable 
laws. Persons or concerns are subject to criminal penalties for 
knowingly making false statements or misrepresentations to SBA for the 
purpose of influencing any actions of SBA pursuant to section 16(a) of 
the Small Business Act, 15 U.S.C. 645(a), as amended, including failure 
to correct ``continuing representations'' that are no longer true.



0
6. Revise paragraph (f) of Sec.  121.1009 to read as follows:


Sec.  121.1009  What are the procedures for making size determinations?

* * * * *
    (f) Notification of determination. SBA will promptly notify the 
contracting officer, the protester, and the protested concern. SBA will 
send the notification by verifiable means, which may include facsimile, 
electronic mail, or overnight delivery service.
* * * * *

PART 124--8(a) BUSINESS DEVELOPMENT/SMALL DISADVANTAGED BUSINESS 
STATUS DETERMINATIONS

0
7. The authority citation for part 124 continues to read as follows:

    Authority: 15 U.S.C. 634(b)(6), 636(j), 637(a), 637(d) and Pub. 
L. 99-661, Pub. L. 100-656, sec. 1207, Pub. L. 101-37, Pub. L. 101-
574, section 8021, Pub. L. 108-87, and 42 U.S.C. 9815.


0
8. Add new Sec.  124.521 to read as follows:


Sec.  124.521  What are the requirements for representing 8(a) status, 
and what are the penalties for misrepresentation?

    (a) Presumption of Loss Based on the Total Amount Expended. In 
every contract, subcontract, cooperative agreement, cooperative 
research and development agreement, or grant which is set aside, 
reserved, or otherwise classified as intended for award to 8(a) 
Participants, there shall be a presumption of loss to the United States 
based on the total amount expended on the contract, subcontract, 
cooperative agreement, cooperative research and development agreement, 
or grant whenever it is established that a business concern other than 
an 8(a) Participant willfully sought and received the award by 
misrepresentation.
    (b) Deemed Certifications. The following actions shall be deemed 
affirmative, willful and intentional certifications of 8(a) status:
    (1) Submission of a bid or proposal for an 8(a) sole source or 
competitive contract.
    (2) Registration on any Federal electronic database for the purpose 
of being considered for award of a Federal grant, contract, 
subcontract, cooperative agreement, or cooperative research and 
development agreement, as a small disadvantaged business (SDB).
    (c) Signature Requirement. Each offer for an 8(a) contract shall 
contain a certification concerning the 8(a) status of a business 
concern seeking the contract. An authorized official must sign the 
certification on the same page containing the 8(a) status claimed by 
the concern.
    (d) Limitation of Liability. Paragraphs (a)-(c) of this section may 
be determined not to apply in the case of unintentional errors, 
technical malfunctions, and other similar situations that demonstrate 
that a misrepresentation of 8(a) status was not affirmative, 
intentional, willful or actionable under the False Claims Act, 31 
U.S.C. 3729, et seq. A prime contractor acting in good faith should not 
be held liable for misrepresentations made by its subcontractors 
regarding the subcontractors' 8(a) status. Relevant factors to consider 
in making this determination may include the firm's internal management 
procedures governing representation or certification as an eligible 
8(a) Participant, the clarity or ambiguity of the representation or 
certification requirement, and the efforts made to correct an incorrect 
or invalid representation or certification in a timely manner. An 
individual or firm may not be held liable where government personnel 
have erroneously identified a concern as an eligible 8(a) Participant 
without any representation or certification having been made by the 
concern and where such identification is made without the knowledge of 
the individual or firm.

0
9. Add new Sec.  124.1015 to read as follows:


Sec.  124.1015  What are the requirements for representing SDB status, 
and what are the penalties for misrepresentation?

    (a) Presumption of Loss Based on the Total Amount Expended. In 
every contract, subcontract, cooperative agreement, cooperative 
research and development agreement, or grant which is set aside, 
reserved, or otherwise classified as intended for award to SDB 
concerns, there shall be a presumption of loss to the United States 
based on the total amount expended on the contract, subcontract, 
cooperative agreement, cooperative research and development agreement, 
or grant whenever it is established that a business concern other than 
a SDB willfully sought and received the award by misrepresentation.
    (b) Deemed Certifications. The following actions shall be deemed 
affirmative, willful and intentional certifications of SDB status:
    (1) Submission of a bid, proposal, application or offer for a 
Federal grant, contract, subcontract, cooperative agreement, or 
cooperative research and development agreement reserved, set aside, or 
otherwise classified as intended for award to SDBs.
    (2) Submission of a bid, proposal, application or offer for a 
Federal grant, contract, subcontract, cooperative agreement or 
cooperative research and development agreement which in any way 
encourages a Federal agency to classify the bid or proposal, if 
awarded, as an award to a SDB.
    (3) Registration on any Federal electronic database for the purpose 
of being considered for award of a Federal grant, contract, 
subcontract, cooperative agreement, or cooperative research and 
development agreement, as a SDB.
    (c) Signature Requirement. Each offer, proposal, bid, or 
application for a Federal contract, subcontract, or grant shall contain 
a certification concerning the SDB status of a business concern seeking 
the Federal contract, subcontract or grant. An authorized official must 
sign the certification on the same page containing the SDB status 
claimed by the concern.
    (d) Limitation of Liability. Paragraphs (a) through (c) of this 
section may be determined not to apply in the case of unintentional 
errors, technical malfunctions, and other similar

[[Page 38819]]

situations that demonstrate that a misrepresentation of SDB status was 
not affirmative, intentional, willful or actionable under the False 
Claims Act, 31 U.S.C. 3729, et seq. A prime contractor acting in good 
faith should not be held liable for misrepresentations made by its 
subcontractors regarding the subcontractors' SDB status. Relevant 
factors to consider in making this determination may include the firm's 
internal management procedures governing SDB status representation or 
certification, the clarity or ambiguity of the representation or 
certification requirement, and the efforts made to correct an incorrect 
or invalid representation or certification in a timely manner. An 
individual or firm may not be held liable where government personnel 
have erroneously identified a concern as a SDB without any 
representation or certification having been made by the concern and 
where such identification is made without the knowledge of the 
individual or firm.
    (e) Penalties for Misrepresentation.
    (1) Suspension or debarment. The SBA suspension and debarment 
official or the agency suspension and debarment official may suspend or 
debar a person or concern for misrepresenting a firm's status as a SDB 
pursuant to the procedures set forth in 48 CFR subpart 9.4.
    (2) Civil Penalties. Persons or concerns are subject to severe 
penalties under the False Claims Act, 31 U.S.C. 3729-3733, and under 
the Program Fraud Civil Remedies Act, 331 U.S.C. 3801-3812, and any 
other applicable laws.
    (3) Criminal Penalties. Persons or concerns are subject to severe 
criminal penalties for knowingly misrepresenting the SDB status of a 
concern in connection with procurement programs pursuant to section 
16(d) of the Small Business Act, 15 U.S.C. 645(d), as amended, 18 
U.S.C. 1001, 18 U.S.C. 287, and any other applicable laws. Persons or 
concerns are subject to criminal penalties for knowingly making false 
statements or misrepresentations to SBA for the purpose of influencing 
any actions of SBA pursuant to section 16(a) of the Small Business Act, 
15 U.S.C. 645(a), as amended, including failure to correct ``continuing 
representations'' that are no longer true.

0
10. Add new Sec.  124.1016 to read as follows:


Sec.  124.1016  What must a concern do in order to be identified as a 
SDB in any Federal procurement database?

    (a) In order to be identified as a SDB in the System for Award 
Management (SAM) database (or any successor thereto), a concern must 
certify its SDB status in connection with specific eligibility 
requirements at least annually.
    (b) If a firm identified as a SDB in SAM fails to certify its 
status within one year of a status certification, the firm will not be 
listed as a SDB in SAM, unless and until the firm recertifies its SDB 
status.

PART 125--GOVERNMENT CONTRACTING PROGRAMS

0
11. The authority citation for part 125 is revised to read as follows:

    Authority: 15 U.S.C. 632, 634(b)(6), 637, 644 and 657f.

0
12. Revise Sec.  125.29 to read as follows:


Sec.  125.29  What are the requirements for representing SDVO SBC 
status, and what are the penalties for misrepresentation?

    (a) Presumption of Loss Based on the Total Amount Expended. In 
every contract, subcontract, cooperative agreement, cooperative 
research and development agreement, or grant which is set aside, 
reserved, or otherwise classified as intended for award to SDVO SBCs, 
there shall be a presumption of loss to the United States based on the 
total amount expended on the contract, subcontract, cooperative 
agreement, cooperative research and development agreement, or grant 
whenever it is established that a business concern other than a SDVO 
SBC willfully sought and received the award by misrepresentation.
    (b) Deemed Certifications. The following actions shall be deemed 
affirmative, willful and intentional certifications of SDVO SBC status:
    (1) Submission of a bid, proposal, application or offer for a 
Federal grant, contract, subcontract, cooperative agreement, or 
cooperative research and development agreement reserved, set aside, or 
otherwise classified as intended for award to SDVO SBCs.
    (2) Submission of a bid, proposal, application or offer for a 
Federal grant, contract, subcontract, cooperative agreement or 
cooperative research and development agreement which in any way 
encourages a Federal agency to classify the bid or proposal, if 
awarded, as an award to a SDVO SBC.
    (3) Registration on any Federal electronic database for the purpose 
of being considered for award of a Federal grant, contract, 
subcontract, cooperative agreement, or cooperative research and 
development agreement, as a SDVO SBC.
    (c) Signature Requirement. Each offer, proposal, bid, or 
application for a Federal contract, subcontract, or grant shall contain 
a certification concerning the SDVO SBC status of a business concern 
seeking the Federal contract, subcontract or grant. An authorized 
official must sign the certification on the same page containing the 
SDVO SBC status claimed by the concern.
    (d) Limitation of Liability. Paragraphs (a) through (c) of this 
section may be determined not to apply in the case of unintentional 
errors, technical malfunctions, and other similar situations that 
demonstrate that a misrepresentation of SDVO SBC status was not 
affirmative, intentional, willful or actionable under the False Claims 
Act, 31 U.S.C. Sec. Sec.  3729, et seq. A prime contractor acting in 
good faith should not be held liable for misrepresentations made by its 
subcontractors regarding the subcontractors' SDVO SBC status. Relevant 
factors to consider in making this determination may include the firm's 
internal management procedures governing SDVO SBC status 
representations or certifications, the clarity or ambiguity of the 
representation or certification requirement, and the efforts made to 
correct an incorrect or invalid representation or certification in a 
timely manner. An individual or firm may not be held liable where 
government personnel have erroneously identified a concern as a SDVO 
SBC without any representation or certification having been made by the 
concern and where such identification is made without the knowledge of 
the individual or firm.
    (e) Penalties for Misrepresentation.
    (1) Suspension or debarment. The SBA suspension and debarment 
official or the agency suspension and debarment official may suspend or 
debar a person or concern for misrepresenting a firm's status as a SDVO 
SBC pursuant to the procedures set forth in 48 CFR subpart 9.4.
    (2) Civil Penalties. Persons or concerns are subject to severe 
penalties under the False Claims Act, 31 U.S.C. 3729-3733, and under 
the Program Fraud Civil Remedies Act, 331 U.S.C. 3801-3812, and any 
other applicable laws.
    (3) Criminal Penalties. Persons or concerns are subject to severe 
criminal penalties for knowingly misrepresenting the SDVO SBC status of 
a concern in connection with procurement programs pursuant to section 
16(d) of the Small Business Act, 15 U.S.C. 645(d), as amended, 18 
U.S.C. 1001, 18 U.S.C. 287, and any other applicable laws. Persons or 
concerns are subject to criminal penalties for knowingly making false 
statements or misrepresentations to SBA

[[Page 38820]]

for the purpose of influencing any actions of SBA pursuant to section 
16(a) of the Small Business Act, 15 U.S.C. 645(a), as amended, 
including failure to correct ``continuing representations'' that are no 
longer true.


0
13. Add new Sec.  125.30 to read as follows:


Sec.  125.30  What must a concern do in order to be identified as a 
SDVO SBC in any Federal procurement databases?

    (a) In order to be identified as a SDVO SBC in the System for Award 
Management (SAM) database (or any successor thereto), a concern must 
certify its SDVO SBC status in connection with specific eligibility 
requirements at least annually.
    (b) If a firm identified as a SDVO SBC in SAM fails to certify its 
status within one year of a status certification, the firm will not be 
listed as a SDVO SBC in SAM, unless and until the firm recertifies its 
SDVO SBC status.

PART 126--HUBZONE PROGRAM

0
14. The authority citation for part 126 continues to read as follows:

    Authority:  15 U.S.C. 632(a), 632(j), 632(p) and 657a.


0
15. Revise Sec.  126.900 to read as follows:


Sec.  126.900  What are the requirements for representing HUBZone 
status, and what are the penalties for misrepresentation?

    (a) Presumption of Loss Based on the Total Amount Expended. In 
every contract, subcontract, cooperative agreement, cooperative 
research and development agreement, or grant which is set aside, 
reserved, or otherwise classified as intended for award to HUBZone 
SBCs, there shall be a presumption of loss to the United States based 
on the total amount expended on the contract, subcontract, cooperative 
agreement, cooperative research and development agreement, or grant 
whenever it is established that a business concern other than a HUBZone 
SBC willfully sought and received the award by misrepresentation.
    (b) Deemed Certifications. The following actions shall be deemed 
affirmative, willful and intentional certifications of HUBZone SBC 
status:
    (1) Submission of a bid, proposal, application or offer for a 
Federal grant, contract, subcontract, cooperative agreement, or 
cooperative research and development agreement reserved, set aside, or 
otherwise classified as intended for award to HUBZone SBCs.
    (2) Submission of a bid, proposal, application or offer for a 
Federal grant, contract, subcontract, cooperative agreement or 
cooperative research and development agreement which in any way 
encourages a Federal agency to classify the bid or proposal, if 
awarded, as an award to a HUBZone SBC.
    (3) Registration on any Federal electronic database for the purpose 
of being considered for award of a Federal grant, contract, 
subcontract, cooperative agreement, or cooperative research and 
development agreement, as a HUBZone SBC.
    (c) Signature Requirement. Each offer, proposal, bid, or 
application for a Federal contract, subcontract, or grant shall contain 
a certification concerning the HUBZone SBC status of a business concern 
seeking the Federal contract, subcontract or grant. An authorized 
official must sign the certification on the same page containing the 
HUBZone status claimed by the concern.
    (d) Limitation of Liability. Paragraphs (a)-(c) of this section may 
be determined not to apply in the case of unintentional errors, 
technical malfunctions, and other similar situations that demonstrate 
that a misrepresentation of HUBZone status was not affirmative, 
intentional, willful or actionable under the False Claims Act, 31 
U.S.C. Sec. Sec.  3729, et seq. A prime contractor acting in good faith 
should not be held liable for misrepresentations made by its 
subcontractors regarding the subcontractors' HUBZone status. Relevant 
factors to consider in making this determination may include the firm's 
internal management procedures governing HUBZone status representations 
or certifications, the clarity or ambiguity of the representation or 
certification requirement, and the efforts made to correct an incorrect 
or invalid representation or certification in a timely manner. An 
individual or firm may not be held liable where government personnel 
have erroneously identified a concern as a HUBZone SBC without any 
representation or certification having been made by the concern and 
where such identification is made without the knowledge of the 
individual or firm.
    (e) Penalties for Misrepresentation.
    (1) Suspension or debarment. The SBA suspension and debarment 
official or the agency suspension and debarment official may suspend or 
debar a person or concern for misrepresenting a firm's status as a 
HUBZone SBC pursuant to the procedures set forth in 48 CFR subpart 9.4.
    (2) Civil Penalties. Persons or concerns are subject to severe 
penalties under the False Claims Act, 31 U.S.C. 3729-3733, and under 
the Program Fraud Civil Remedies Act, 331 U.S.C. 3801-3812, and any 
other applicable laws.
    (3) Criminal Penalties. Persons or concerns are subject to severe 
criminal penalties for knowingly misrepresenting the HUBZone status of 
a concern in connection with procurement programs pursuant to section 
16(d) of the Small Business Act, 15 U.S.C. 645(d), as amended, 18 
U.S.C. 1001, 18 U.S.C. 287, and any other applicable laws. Persons or 
concerns are subject to criminal penalties for knowingly making false 
statements or misrepresentations to SBA for the purpose of influencing 
any actions of SBA pursuant to section 16(a) of the Small Business Act, 
15 U.S.C. 645(a), as amended, including failure to correct ``continuing 
representations'' that are no longer true.

PART 127--WOMEN-OWNED SMALL BUSINESS FEDERAL CONTRACT PROGRAM

0
16. The authority citation for part 127 is revised to read as follows:

    Authority:  15 U.S.C. 632, 634(b)(6), 637(m), and 644.


0
17. Revise Sec.  127.700 to read as follows:


Sec.  127.700  What are the requirements for representing EDWOSB or 
WOSB status, and what are the penalties for misrepresentation?

    (a) Presumption of Loss Based on the Total Amount Expended. In 
every contract, subcontract, cooperative agreement, cooperative 
research and development agreement, or grant which is set aside, 
reserved, or otherwise classified as intended for award to EDWOSBs or 
WOSBs, there shall be a presumption of loss to the United States based 
on the total amount expended on the contract, subcontract, cooperative 
agreement, cooperative research and development agreement, or grant 
whenever it is established that a business concern other than a EDWOSB 
or WOSB willfully sought and received the award by misrepresentation.
    (b) Deemed Certifications. The following actions shall be deemed 
affirmative, willful and intentional certifications of EDWOSB or WOSB 
status:
    (1) Submission of a bid, proposal, application or offer for a 
Federal grant, contract, subcontract, cooperative agreement, or 
cooperative research and development agreement reserved, set aside, or 
otherwise classified as intended for award to EDWOSBs or WOSBs.

[[Page 38821]]

    (2) Submission of a bid, proposal, application or offer for a 
Federal grant, contract, subcontract, cooperative agreement or 
cooperative research and development agreement which in any way 
encourages a Federal agency to classify the bid or proposal, if 
awarded, as an award to a EDWOSB or WOSB.
    (3) Registration on any Federal electronic database for the purpose 
of being considered for award of a Federal grant, contract, 
subcontract, cooperative agreement, or cooperative research and 
development agreement, as an EDWOSB or WOSB.
    (c) Signature Requirement. Each offer, proposal, bid, or 
application for a Federal contract, subcontract, or grant shall contain 
a certification concerning the EDWOSB or WOSB status of a business 
concern seeking the Federal contract, subcontract or grant. An 
authorized official must sign the certification on the same page 
containing the EDWOSB or WOSB status claimed by the concern.
    (d) Limitation of Liability. Paragraphs (a)-(c) of this section may 
be determined not to apply in the case of unintentional errors, 
technical malfunctions, and other similar situations that demonstrate 
that a misrepresentation of EDWOSB or WOSB status was not affirmative, 
intentional, willful or actionable under the False Claims Act, 31 
U.S.C. Sec. Sec.  3729, et seq. A prime contractor acting in good faith 
should not be held liable for misrepresentations made by its 
subcontractors regarding the subcontractors' EDWOSB or WOSB status. 
Relevant factors to consider in making this determination may include 
the firm's internal management procedures governing EDWOSB or WOSB 
status representations or certifications, the clarity or ambiguity of 
the representation or certification requirement, and the efforts made 
to correct an incorrect or invalid representation or certification in a 
timely manner. An individual or firm may not be held liable where 
government personnel have erroneously identified a concern as an EDWOSB 
or WOSB without any representation or certification having been made by 
the concern and where such identification is made without the knowledge 
of the individual or firm.
    (e) Penalties for Misrepresentation.
    (1) Suspension or debarment. The SBA suspension and debarment 
official or the agency suspension and debarment official may suspend or 
debar a person or concern for misrepresenting a firm's status as an 
EDWOSB or WOSB pursuant to the procedures set forth in 48 CFR subpart 
9.4.
    (2) Civil Penalties. Persons or concerns are subject to severe 
penalties under the False Claims Act, 31 U.S.C. 3729-3733, and under 
the Program Fraud Civil Remedies Act, 331 U.S.C. 3801-3812, and any 
other applicable laws.
    (3) Criminal Penalties. Persons or concerns are subject to severe 
criminal penalties for knowingly misrepresenting the EDWOSB or WOSB 
status of a concern in connection with procurement programs pursuant to 
section 16(d) of the Small Business Act, 15 U.S.C. 645(d), as amended, 
18 U.S.C. 1001, 18 U.S.C. 287, and any other applicable laws. Persons 
or concerns are subject to criminal penalties for knowingly making 
false statements or misrepresentations to SBA for the purpose of 
influencing any actions of SBA pursuant to section 16(a) of the Small 
Business Act, 15 U.S.C. 645(a), as amended, including failure to 
correct ``continuing representations'' that are no longer true.

0
18. Add new Sec.  127.701 to read as follows:


Sec.  127.701  What must a concern do in order to be identified as an 
EDWOSB or WOSB in any Federal procurement databases?

    (a) In order to be identified as an EDWOSB or WOSB in the System 
for Award Management (SAM) database (or any successor thereto), a 
concern must certify its EDWOSB or WOSB status in connection with 
specific eligibility requirements at least annually.
    (b) If a firm identified as an EDWOSB or WOSB in SAM fails to 
certify its status within one year of a status certification, the firm 
will not be listed as an EDWOSB or WOSB in SAM, unless and until the 
firm recertifies its EDWOSB or WOSB status.

Karen G. Mills,
Administrator.
[FR Doc. 2013-15418 Filed 6-27-13; 8:45 am]
BILLING CODE 8025-01-P