Sponsored: SBA Loans — What Makes Them Enticing To Small Businesses? - Hudson Valley One

Sponsored: SBA Loans — What Makes Them Enticing To Small Businesses? - Hudson Valley One


Sponsored: SBA Loans — What Makes Them Enticing To Small Businesses? - Hudson Valley One

Posted: 05 Jun 2020 08:39 AM PDT

At every phase or point of running a business, small business owners know that someday they might need extra capital to help them achieve the desired goal. It is common to open a new business with loans from family members or personal savings.

However, once these sources run dry, small businesses will have to take up formal business financing to cover business needs like renovations, expanding to new locations, and cover payroll gaps. The problem is that not all small business loans have the borrower's best interest in mind.

That said, it's where the Small Business Administration (SBA) enters. This government agency aids in disseminating funds or financial resources to small businesses through the SBA loan program. The appeal of the SBA loan program is robust. For most companies, it is their golden ticket to fund their venture.

Below are a few reasons why small business owners need to check out their qualifications for an SBA loan.

Vested Interest In Surveying Borrowers Succeed

The Small Business Administration has a special interest or concern in seeing your startup succeed with their SBA loan program. It's because they guarantee up to 85 percent of the loan to the bank.

Evidently, no good creditor would want the debtor to default on a loan because it will be a no-win situation for all parties. Even so, no lender will offer the level of resources that the SBA provides, such as training, counseling, and connecting you with people who can help you towards success.

As a matter of fact, this federal agency makes tons of their resources for existing and new small business owners readily available and obtainable to anyone, kicking off with their Local Assistance database and SBA Business Guide. What's more, borrowers will get more assistance or help once repaying a loan is on the line.

This support and reinforcement will undoubtedly be necessary for small business owners, especially if they have poor credit.

Multiple SBA Loans

In case you didn't know, the SBA loan is not just suitable for all purposes. In fact, there are many different loan products you can be eligible for, whatever business stage you're in. For instance, the three most popular and prevalent SBA products are the Microloan, 504/CDC, and 7(a) program.

The Microloan program is limited to $50,000 and is mainly designed for new business owners. Also, it is geared toward business owners from deprived entrepreneurial communities, like veterans, minorities, and women.

On the other hand, the 7(a) loan can be used for buying inventory, refinancing debt, and other working capital needs. Out of all the SBA loans, the 7(a) is the most flexible. Whereas, the 504/CDC loan is used for purchasing commercial real estate. Both the 7(a) and 504/CDC loans are exclusively for businesses that have been up and running for several years and could also be for millions of dollars.

But even if you just opened your business last month or a decade ago, there is undoubtedly an SBA loan product that can meet your needs.

Makes Bank Loans Possible

The vast majority of small business owners looking to finance their business will not have the capital, revenue, or business credit history to qualify for a bank loan. Take note that bank creditors consider small businesses as a bigger risk to lend.

Also, the amount of money small business owners usually need is not worth the effort and time required to underwrite them. That said, an SBA loan might be the first bank loan product for a small business owner.

Moreover, if getting and paying off the SBA loan goes smoothly, small businesses will then be able to qualify for bank loans in the future.

There Are SBA Loan Products For Every Business Need

As we've mentioned, some SBA loan products are intended to be used for working capital, while others are for covering startup costs or purchasing real estate. What's more, you can use an SBA loan to consolidate debt from your other loans.

Even those who find it hard to get business funding can obtain an SBA loan that is aimed at their needs. As a matter of fact, if you have gotten an SBA loan, you are not limited to taking out a second loan. However, you cannot use it to refinance your first SBA loan.

Takeaway

Keep in mind that all loans come with risks. There's no risk-free loan option. Applying for business loans will need you to improve your credit score, pay off interest, and put up assets, particularly if you default on your loan.

However, an SBA loan is considered as the least risky option available today for small business owners. That said, if you want to grow a business or have been planning to start a business, then SBA is the place to seek financial help.

Federal Acquisition Regulation: Policy on Joint Ventures - NASA - Space Ref

Posted: 05 Jun 2020 07:19 AM PDT

Federal Acquisition Regulation: Policy on Joint Ventures - NASA

Status Report From: NASA HQ
Posted: Friday, June 5, 2020

[Federal Register Volume 85, Number 109 (Friday, June 5, 2020)] [Proposed Rules] [Pages 34561-34569] From the Federal Register Online via the Government Publishing Office [www.gpo.gov] [FR Doc No: 2020-11159]

DEPARTMENT OF DEFENSE

GENERAL SERVICES ADMINISTRATION

NATIONAL AERONAUTICS AND SPACE ADMINISTRATION

48 CFR Parts 2, 9, 15, 19, and 52

[FAR Case 2017-019; Docket No. FAR-2017-0019, Sequence No. 1] RIN 9000-AN59

Federal Acquisition Regulation: Policy on Joint Ventures

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

ACTION: Proposed rule.

SUMMARY: DoD, GSA, and NASA are proposing to amend the Federal Acquisition Regulation (FAR) to implement statutory and regulatory changes regarding joint ventures made by the Small Business Administration (SBA) in its final rule published in the Federal Register on July 25, 2016, and to clarify that 8(a) joint ventures are not certified into the 8(a) program and that 8(a) joint venture agreements need only be approved by the SBA prior to contract award.

DATES: Interested parties should submit written comments at the address shown below on or before August 4, 2020 to be considered in the formation of the final rule.

ADDRESSES: Submit comments in response to FAR Case 2017-019 to Regulations.gov: http://www.regulations.gov. Submit comments via the Federal eRulemaking portal by searching for ``FAR Case 2017-019.'' Select the link ``Comment Now'' that corresponds with FAR Case 2017- 019. Follow the instructions provided at the ``Comment Now'' screen. Please include your name, company name (if any), and ``FAR Case 2017- 019'' on your attached document. If your comment cannot be submitted using https://www.regulations.gov, call or email the points of contact in the FOR FURTHER INFORMATION CONTACT section of this document for alternate instructions. Instructions: Please submit comments only and cite FAR Case 2017- 019, in all correspondence related to this case. Comments received generally will be posted without change to http://www.regulations.gov, including any personal and/or business confidential information provided. To confirm receipt of your comment(s), please check www.regulations.gov, approximately two to three days after submission to verify posting.

FOR FURTHER INFORMATION CONTACT: Ms. Malissa Jones, Procurement Analyst, at 703-605-2815 or by email at Malissa.Jones@gsa.gov for clarification of content. For information pertaining to status or publication schedules, contact the Regulatory Secretariat Division at 202-501-4755 or GSARegSec@gsa.gov. Please cite FAR Case 2017-019.

SUPPLEMENTARY INFORMATION:

I. Background

DoD, GSA, and NASA are proposing to revise the FAR to implement statutory and regulatory changes made by the Small Business Administration (SBA) regarding joint ventures. These changes allow a joint venture comprised of a prot[eacute]g[eacute] and its mentor to qualify as a small business or under a socioeconomic program (e.g., 8(a)) for which the prot[eacute]g[eacute] qualifies. These changes also provide updated requirements for other joint ventures to qualify as a small business or under a socioeconomic program.

Section 1347 of the Small Business Jobs Act of 2010 (Pub. L. 111- 240) and section 1641 of the National Defense Authorization Act (NDAA) for Fiscal Year (FY) 2013 (Pub. L. 112-239; 15 U.S.C. 657r) authorized the SBA Administrator to establish mentor-prot[eacute]g[eacute] programs for small business concerns, service-disabled veteran-owned small business (SDVOSB) concerns, women-owned small business concerns in the Women-Owned Small Business (WOSB) Program, and HUBZone small business concerns modeled on the mentor-prot[eacute]g[eacute] program under section 8(a) of the Small Business Act (15 U.S.C. 637(a)). On July 25, 2016, SBA issued a final rule (81 FR 48558) that implemented the mentor-prot[eacute]g[eacute] programs at 13 CFR 125.9. SBA's final rule allows a joint venture comprised of a prot[eacute]g[eacute] and its mentor to seek any type of small business contract, including under a socioeconomic program, for which the prot[eacute]g[eacute] qualifies.

SBA's final rule updated requirements for a joint venture to qualify as a small business concern or under a socioeconomic program. A joint venture qualifies as a small business concern when each of the parties to the joint venture qualifies as small for the size standard associated with the North American Industry Classification System (NAICS) code in the solicitation. A joint venture may qualify under a socioeconomic program when at least one party to the joint venture qualifies under a socioeconomic program, and the joint venture meets the applicable joint venture requirements specified in the SBA regulations.

SBA's final rule also revised the joint venture regulations at 13 CFR 124.513 for 8(a) participants, 125.18(b) for SDVOSBs; 126.616 for HUBZone small business concerns; and 127.506 for WOSB and economically disadvantaged WOSB concerns. SBA required agencies to consider past performance of each party to a small business joint venture in addition to any work performed by the joint venture itself.

DoD, GSA, and NASA are proposing to amend the FAR to require contracting officers to consider the past performance of the joint venture, and to consider the past performance of each party to the joint venture if the joint venture does not demonstrate past performance. For consistency and fairness, DoD, GSA, and NASA are proposing to amend the FAR to apply this requirement to joint ventures regardless of size status.

Additionally, DoD, GSA, and NASA are proposing to amend the FAR to clarify that 8(a) joint ventures are not certified into the 8(a) program and that 8(a) joint venture agreements need only be approved by the SBA prior to contract award. This clarification is necessary because Government Accountability Office (GAO) sustained a protest (BGI-Fiore JV, LLC, B-409520, May 29, 2014) in which an agency rejected an 8(a) joint venture's proposal on the basis that the 8(a) joint venture had not been certified by the SBA prior to submission of proposals. Currently, paragraph (a) of the clause at FAR 52.219-18, Notification of Competition Limited to Eligible 8(a) Concerns, states that, ``Offers are solicited only from small business concerns expressly certified by the Small Business Administration (SBA) for participation in the SBA's 8(a) program and which meet the following criteria at the time of submission of offer . . . .'' This language could be interpreted to mean that 8(a) joint ventures that submit an offer for an 8(a) contract need to be ``certified'' by the SBA and that their joint venture agreement needs to be approved by the SBA by ``the time of submission of offer.'' This rule proposes clarifications to prevent the improper elimination of 8(a) joint venture proposals in the future.

II. Discussion and Analysis

The proposed changes to the FAR are summarized in the following paragraphs.

A. Definition of ``small business concern.'' The definition of ``small business concern'' is revised in subpart 2.1, as well as in the following provisions and clauses: FAR 52.212-3, Offeror Representations and Certification--Commercial Items; FAR 52.219-1, Small Business Program Representations; FAR 52.219-8, Utilization of Small Business Concerns; and FAR 52.219-28, Post-Award Small Business Program Rerepresentation. This revision removes extraneous material concerning how to determine whether a small business concern is ``not dominant in its field of operation.'' That determination is made by SBA and is addressed in SBA regulations at 13 CFR 121.102(b).

B. Consideration of past performance of parties to a joint venture. This rule clarifies that the contracting officer shall consider the past performance of the joint venture. If the joint venture does not demonstrate past performance for award, the contracting officer shall consider the past performance of each party to the joint venture when making a responsibility determination and when past performance is an evaluation factor for source selection. This clarification is made in subpart 9.1, Responsible Prospective Contractors, and in subpart 15.3, Source Selection.

C. Qualification of joint ventures as small business concerns. Subpart 19.3, Determination of Small Business Status for Small Business Programs, is amended to address how a joint venture may qualify for an award as a small business concern or under the socioeconomic programs. A joint venture may qualify as a small business concern if each participant in the joint venture qualifies as small under the size standard for the solicitation; or the prot[eacute]g[eacute] is small under the size standard for the solicitation in a joint venture comprised of a mentor and prot[eacute]g[eacute] with an approved agreement under a SBA mentor-prot[eacute]g[eacute] program. A joint venture may qualify under socioeconomic programs when the joint venture qualifies as a small business joint venture and one of the parties to the joint venture qualifies under one or more of the socioeconomic programs. Similar text is added to subparts 19.13, Historically Underutilized Business Zone (HUBZone) Program; 19.14, Service-Disabled Veteran-Owned Small Business Procurement Program; and 19.15, Women- Owned Small Business Program. Similar text is also added to the following provisions and clauses: FAR 52.212-3, Offeror Representations and Certifications--Commercial Items; FAR 52.219-1, Small Business Program Representations; FAR 52.219-8, Utilization of Small Business Concerns; FAR 52.219-18, Notification of Competition Limited to Eligible 8(a) Participants; FAR 52.219-27, Notice of Service-Disabled Veteran-Owned Small Business Set-Aside; FAR 52.219-29, Notice of Set- Aside for, or Sole Source Award to, Economically Disadvantaged Women- Owned Small Business Concerns; and FAR 52.219-30, Notice of Set-Aside for, or Sole Source Award to, Women-Owned Small Business Concerns Eligible Under the Women-Owned Small Business Program.

D. Subpart 19.7, The Small Business Subcontracting Program. This subpart is amended to remove instructions for contractors that already exist in the clause at FAR 52.219-8, Utilization of Small Business Concerns.

E. Subpart 19.8, Contracting with the Small Business Administration (the 8(a) Program). This subpart is amended to add language to FAR sections 19.804-3, SBA acceptance, and 19.805-2, Procedures, to clarify that at least one party to the joint venture must be certified as an 8(a) program participant at the time of proposal submission and that the 8(a) joint venture agreement shall be approved prior to contract award. In addition, pursuant to 13 CFR 124.503 and 13 CFR 124.507, language is added to clarify the general time period within which SBA expects to approve the joint venture agreement prior to award and the procedure to follow if a response is not received within that time period. The rule also proposes to delete text from 19.805-2(b) relating to how SBA determines eligibility because it creates confusion regarding the timing of SBA's determination.

F. Performance requirement for certain joint ventures. This rule proposes to amend the following contract clauses to add the requirement that certain small business or socioeconomic parties to a joint venture perform 40 percent of the work performed by the joint venture and that the work performed must be more than administrative functions: FAR 52.219-3, Notice of HUBZone Set-Aside or Sole Source Award; FAR 52.219- 4, Notice of Price Evaluation Preference for HUBZone Small Business Concerns; FAR 52.219-14, Limitations on Subcontracting; FAR 52.219-27, Notice of Service-Disabled Veteran-Owned Small Business Set-Aside; FAR 52.219-29, Notice of Set-Aside for, or Sole Source Award to, Economically Disadvantaged Women-Owned Small Business Concerns; and FAR 52.219-30, Notice of Set-Aside for, or Sole Source Award to, Women- Owned Small Business Concerns Eligible Under the Women-Owned Small Business Program.

III. Applicability to Contracts at or Below the Simplified Acquisition Threshold (SAT) and for Commercial Items, Including Commercially Available Off-the-Shelf (COTS) Items

This rule proposes to amend subparts 2.1, Definitions, 9.1, Responsible Prospective Contractors, and 15.3, Source Selection; multiple subparts of part 19, Small Business Programs; and multiple provisions and clauses related to small business programs. The objective of this rule is to update the FAR to align with SBA regulations regarding joint ventures and to provide clarifications for 8(a) joint ventures.

The Federal Acquisition Regulatory (FAR) Council has made the following preliminary determinations with respect to the proposed rule's application of section 1641 of the NDAA for FY 2013 to contracts at or below the simplified acquisition threshold (SAT) and for the acquisition of commercial items. The Administrator for Federal Procurement Policy has made the following preliminary determination with respect to commercially available off-the-shelf (COTS) items. Discussion of these preliminary determinations is set forth below. The FAR Council will consider public feedback before making a final determination on the scope of the final rule.

A. Applicability to Contracts at or Below the SAT

Pursuant to 41 U.S.C. 1905, a provision of law is not applicable to acquisitions at or below the SAT unless the law (i) contains criminal or civil penalties; (ii) specifically refers to 41 U.S.C. 1905 and states that the law applies to acquisitions at or below the SAT; or (iii) the FAR Council makes a written determination that it is not in the best interest of the Federal Government to exempt contracts or subcontracts at or below the SAT. If none of these conditions are met, the FAR is required to include the statutory requirement(s) on a list of provisions of law that are inapplicable to acquisitions at or below the SAT.

The purpose of this rule is to implement section 1641 of the NDAA for FY 2013. Section 1641 authorized the SBA Administrator to establish mentor-prot[eacute]g[eacute] programs for small business concerns, SDVOSB concerns, WOSB concerns in the WOSB Program, and HUBZone small business concerns modeled on the mentor-prot[eacute]g[eacute] program under section 8(a) of the Small Business Act (15 U.S.C. 637(a)).

These statutory requirements are reflected in SBA's final rule published in the Federal Register at 81 FR 48558, on July 25, 2016, which did not exempt acquisitions at or below the SAT.

The law is silent on the applicability of these requirements to acquisitions at or below the SAT and does not independently provide for criminal or civil penalties; nor does it include terms making express reference to 41 U.S.C. 1905 and its application to acquisitions at or below the SAT. Therefore, it does not apply to acquisitions at or below the SAT unless the FAR Council makes a written determination as provided at 41 U.S.C. 1905.

Application of the law to acquisitions at or below the SAT will ensure that the benefits from socioeconomic set-aside and sole source contracts flow to the intended parties. According to the Federal Procurement Data System, an average of 283,374 contracts per year resulted from FAR part 19 set-asides and sole-source awards at or below the simplified acquisition threshold during fiscal years 2016-2018. Not applying section 1641 to the maximum extent possible would exclude a significant number of acquisitions and impede the Administration's objectives to assist small businesses, including SDVOSB, HUBZone small business, and WOSB concerns, to succeed in enhancing their capabilities and improving their ability to successfully compete for both Government and commercial contracts.

The provisions and clauses proposed for revision in this rule currently apply to all solicitations and contracts, as applicable, including those at or below the SAT. The proposed rule continues the existing applicability to solicitations and contracts below the SAT, while revising these clauses to implement the requirements of section 1641 concerning joint ventures. Exclusion of these acquisitions would create confusion among contractors and the Federal contracting workforce. Under the FAR clauses amended by this rule, contractors are already required to comply with small business program set-aside requirements. The effort required for contractors to comply with the new requirements will be relatively small.

For these reasons, it is in the best interest of the Federal Government to apply the requirements of the rule to acquisitions at or below the SAT.

B. Applicability to Contracts for the Acquisition of Commercial Items

Pursuant to 41 U.S.C. 1906, acquisitions of commercial items (other than acquisitions of COTS items, which are addressed in 41 U.S.C. 1907) are exempt from a provision of law unless the law (i) contains criminal or civil penalties; (ii) specifically refers to 41 U.S.C. 1906 and states that the law applies to acquisitions of commercial items; or (iii) the FAR Council makes a written determination and finding that it would not be in the best interest of the Federal Government to exempt contracts for the procurement of commercial items from the provision of law. If none of these conditions are met, the FAR is required to include the statutory requirement(s) on a list of provisions of law that are inapplicable to acquisitions of commercial items.

The purpose of this rule is to implement section 1641 of the NDAA for FY 2013. Section 1641 allows a joint venture comprised of a prot[eacute]g[eacute] and its mentor to qualify as a small business or under a socioeconomic program for which the prot[eacute]g[eacute] qualifies and implements SBA regulations establishing mentor- prot[eacute]g[eacute] programs for small business concerns, SDVOSB concerns, WOSB concerns in the WOSB Program, and HUBZone small business concerns modeled on the mentor-prot[eacute]g[eacute] program under section 8(a) of the Small Business Act (15 U.S.C. 637(a)).

These statutory requirements are reflected in SBA's final rule published in the Federal Register at 81 FR 48558, on July 25, 2016, which did not exempt acquisitions of commercial items.

The law is silent on the applicability of these requirements to acquisitions of commercial items and does not independently provide for criminal or civil penalties; nor does it include terms making express reference to 41 U.S.C. 1906 and its application to acquisitions of commercial items. Therefore, it does not apply to acquisitions of commercial items unless the FAR Council makes a written determination as provided at 41 U.S.C. 1906.

The law furthers the Administration's goal of supporting small business. It advances the interests of small business concerns by allowing for more joint ventures that include a small business to qualify as a small business or under a socioeconomic program. Therefore, more small businesses can qualify for set-aside procurements. Exclusion of a large segment of Federal contracting, such as acquisitions for commercial items, will limit the full implementation of these objectives.

The provisions and clauses proposed for revision in this rule currently apply to all solicitations and contracts, as applicable, including those for acquisition of commercial items. The proposed rule continues the existing applicability to the acquisition of commercial items as defined at FAR 2.101. Exclusion of acquisitions for commercial items from these requirements would create confusion among contractors and the Federal contracting workforce. Under the FAR clauses amended by this rule, contractors are already required to comply with small business program set-aside requirements. The effort required for contractors to comply with the new requirements will be relatively small.

For these reasons, it is in the best interest of the Federal Government to apply the requirements of the rule to the acquisition of commercial items.

C. Applicability to Contracts for the Acquisition of COTS Items

Pursuant to 41 U.S.C. 1907, acquisitions of COTS items will be exempt from a provision of law unless the law (i) contains criminal or civil penalties; (ii) specifically refers to 41 U.S.C. 1907 and states that the law applies to acquisitions of COTS items; (iii) concerns authorities or responsibilities under the Small Business Act (15 U.S.C. 644) or bid protest procedures developed under the authority of 31 U.S.C. 3551 et seq., 10 U.S.C. 2305(e) and (f), or 41 U.S.C. 3706 and 3707; or (iv) the Administrator for Federal Procurement Policy makes a written determination and finding that it would not be in the best interest of the Federal Government to exempt contracts for the procurement of COTS items from the provision of law. If none of these conditions are met, the FAR is required to include the statutory requirement(s) on a list of provisions of law that are inapplicable to acquisitions of COTS items.

The purpose of this rule is to implement section 1641 of the NDAA for FY 2013. Section 1641 allows a joint venture comprised of a prot[eacute]g[eacute] and its mentor to qualify as a small business or under a socioeconomic program for which the prot[eacute]g[eacute] qualifies, and implements SBA regulations establishing mentor- prot[eacute]g[eacute] programs for small business concerns, SDVOSB concerns, WOSB concerns in the WOSB Program, and HUBZone small business concerns modeled on the mentor-prot[eacute]g[eacute] program under section 8(a) of the Small Business Act (15 U.S.C. 637(a)).

These statutory requirements are reflected in SBA's final rule published in the Federal Register at 81 FR 48558, on July 25, 2016, which did not exempt acquisitions of COTS items.

The law is silent on the applicability of these requirements to acquisitions of COTS items and does not independently provide for criminal or civil penalties; nor does it include terms making express reference to 41 U.S.C. 1907 and its application to acquisitions of COTS items. Therefore, it does not apply to acquisitions of COTS items unless the Administrator for Federal Procurement Policy makes a written determination as provided at 41 U.S.C. 1907.

Section 1641 furthers the Administration's goal of supporting small business. It advances the interests of small business concerns by allowing for more joint ventures that include a small business to qualify as a small business concern or under a socioeconomic program. Therefore, more small businesses can qualify for set-aside procurements. Exclusion of a large segment of Federal contracting, such as acquisitions for COTS items, will limit the full implementation of these objectives.

The provisions and clauses proposed for revision in this rule currently apply to all solicitations and contracts, as applicable, including those for acquisition of COTS items. The proposed rule continues the existing applicability to the acquisition of COTS items as defined at FAR 2.101. Exclusion of these acquisitions would create confusion among contractors and the Federal contracting workforce. Under the FAR clauses amended by this rule, contractors are already required to comply with small business program set-aside requirements. The effort required for contractors to comply with the new requirements will be relatively small.

For these reasons, it is in the best interest of the Federal Government to apply the requirements of the rule to the acquisition of COTS items.

IV. Executive Orders 12866 and 13563

Executive Orders (E.O.s) 12866 and 13563 direct agencies to assess all costs and benefits of available regulatory alternatives and, if regulation is necessary, to select regulatory approaches that maximize net benefits (including potential economic, environmental, public health and safety effects, distributive impacts, and equity). E.O. 13563 emphasizes the importance of quantifying both costs and benefits, of reducing costs, of harmonizing rules, and of promoting flexibility. This is not a significant regulatory action and, therefore, was not subject to review under section 6(b) of E.O. 12866, Regulatory Planning and Review, dated September 30, 1993. This rule is not a major rule under 5 U.S.C. 804.

V. Executive Order 13771

This rule is not expected to be subject to E.O. 13771, because this rule is not a significant regulatory action under E.O. 12866.

VI. Regulatory Flexibility Act

This proposed rule may have a significant economic impact on a substantial number of small entities within the meaning of the Regulatory Flexibility Act, 5 U.S.C. 601 et seq. The Initial Regulatory Flexibility Analysis (IRFA) is summarized as follows:

DoD, GSA, and NASA are proposing to amend the FAR to update joint venture requirements to align with the changes SBA made in its final rule dated July 25, 2016 (81 FR 48558), and to add clarifications regarding 8(a) joint ventures to address issues identified in a GAO protest decision (B-409520).

Section 1347 of the Small Business Jobs Act of 2010 and section 1641 of the NDAA for FY 2013 authorized SBA to establish mentor- prot[eacute]g[eacute] programs for small business concerns, service- disabled veteran-owned small business concerns, women-owned small business concerns in the Women-Owned Small Business (WOSB) Program, and HUBZone small business concerns. SBA issued a final rule (81 FR 48558) that implemented the mentor-prot[eacute]g[eacute] programs at 13 CFR 125.9. SBA's final rule allows a joint venture comprised of a prot[eacute]g[eacute] and its mentor to qualify as a small business or under a socioeconomic program for which the prot[eacute]g[eacute] qualifies. The rule also revised the requirements for joint ventures outside the mentor-prot[eacute]g[eacute] programs to qualify as small or for one of the socioeconomic programs. Updates are required in the FAR to reflect these regulatory changes.

On May 29, 2014, the GAO sustained a protest (B-409520, BGI- Fiore JV, LLC) because an 8(a) joint venture proposal was improperly eliminated on the grounds that the joint venture had not been certified for the 8(a) program by the SBA and that the joint venture agreement had not been approved by the SBA by the time of offer submission. The procuring agency had interpreted existing text in the clause at FAR 52.219-18 to require 8(a) joint ventures be certified by SBA and for the joint venture agreement to be approved by SBA at time of offer submission. Clarification for contracting officers is necessary in the FAR to more clearly reflect SBA's regulations at 13 CFR 124.503(a), 124.507(b), and 124.513(e) as well as GAO's bid protest decision.

The proposed rule may have a significant economic impact on a substantial number of small entities within the meaning of the Regulatory Flexibility Act, 5 U.S.C. 601, et seq. This rule will impact small business joint ventures and small business entities in an SBA mentor-prot[eacute]g[eacute] program. Based on joint venture data in the System for Award Management (SAM), the estimated number of small business joint ventures is 3,500. Assuming that each joint venture includes 2 small businesses, the number of small entities impacted is 7,000. According to SBA's final rule, there are an estimated 2,000 pairs of mentors and prot[eacute]g[eacute]s that may be impacted. Therefore, the estimated number of total small entities to which the rule applies is 9,000.

This proposed rule does not include any recordkeeping or other compliance requirements for small businesses. Joint ventures will be required to represent themselves as small businesses in accordance with the updated representation provisions at FAR 52.212-3 or 52.219-1. Representation is currently required for all small entities doing business with the Government; representation is not a new requirement. The number of options for the entities to select from has increased to include joint venture options; however the number of selections a small entity must make (i.e., check boxes) has not increased. Therefore, the potential impact is minimal.

This rule may have a positive economic impact on small entities. The updated SBA regulations allow for more joint ventures that include a small business to qualify as a small business or under a socioeconomic program; and therefore, more small businesses can qualify for set-aside procurements.

This proposed rule does not duplicate, overlap, or conflict with any other Federal rules.

There are no known significant alternative approaches to the proposed rule.

The Regulatory Secretariat Division has submitted a copy of the IRFA to the Chief Counsel for Advocacy of the SBA. A copy of the IRFA may be obtained from the Regulatory Secretariat Division. DoD, GSA, and NASA invite comments from small business concerns and other interested parties on the expected impact of this rule on small entities.

DoD, GSA, and NASA will also consider comments from small entities concerning the existing regulations in subparts affected by this rule in accordance with 5 U.S.C. 610. Interested parties must submit comments separately and should cite 5 U.S.C. 610 (FAR case 2017-019) in correspondence.

VII. Paperwork Reduction Act

The Paperwork Reduction Act (44 U.S.C. chapter 35) applies as this proposed rule contains information collection requirements. This rule affects the certification and information collection requirements in the provisions at FAR 52.212-3, Offeror Representations and Certifications--Commercial Items, and 52.204-7, System for Award Management, currently approved under OMB Control Numbers 9000-0136 and 9000-0097, respectively. The impact, however, is negligible because the public reporting burden for these collections remains unchanged from the approved burden.

List of Subjects in 48 CFR Parts 2, 9, 15, 19, and 52

Government procurement.

William F. Clark, Director, Office of Government-wide Acquisition Policy, Office of Acquisition Policy, Office of Government-wide Policy.

    Therefore, DoD, GSA, and NASA propose amending 48 CFR parts 2, 9, 

15, 19, and 52 as set forth below:

0

1. The authority citation for 48 CFR parts 2, 9, 15, 19, and 52 

continues to read as follows:

    Authority:  40 U.S.C. 121(c); 10 U.S.C. chapter 137; and 51 

U.S.C. 20113.

PART 2--DEFINITIONS OF WORDS AND TERMS

0

2. Amend section 2.101, in paragraph (b) by revising the definition of 

``Small business concern'' to read as follows:

2.101   Definitions.

* * * * *

    (b) * * *

    Small business concern means a concern, including its affiliates, 

that is independently owned and operated, not dominant in its field of 

operation and qualified as a small business under the criteria and size 

standards in 13 CFR part 121 (see 19.102).

* * * * *

PART 9--CONTRACTOR QUALIFICATIONS

0

3. Amend section 9.104-3 by redesignating paragraph (c) as paragraph 

(c)(1) and adding paragraph (c)(2) to read as follows:

9.104-3   Application of standards.

* * * * *

    (c)(1) * * *

    (2) Joint ventures. For a prospective contractor that is a joint 

venture, the contracting officer shall consider the past performance of 

the joint venture. If the joint venture does not demonstrate past 

performance for award, the contracting officer shall consider the past 

performance of each party to the joint venture.

* * * * *

PART 15--CONTRACTING BY NEGOTIATION

0

4. Amend section 15.305 by adding paragraph (a)(2)(vi) to read as 

follows:

15.305  Proposal evaluation.

    (a) * * *

    (2) * * *

    (vi) For offerors that are joint ventures, the evaluation shall 

take into account past performance of the joint venture. If the joint 

venture does not demonstrate past performance for award, the 

contracting officer shall consider the past performance of each party 

to the joint venture.

* * * * *

PART 19--SMALL BUSINESS PROGRAMS

0

5. Amend section 19.301-1 by revising paragraph (a) to read as follows:

19.301-1   Representation by the offeror.

    (a)(1) To be eligible for award as a small business concern 

identified in 19.000(a)(3), an offeror is required to represent in good 

faith--

    (i)(A) That it meets the small business size standard corresponding 

to the North American Industry Classification System (NAICS) code 

identified in the solicitation; or

    (B) For a multiple-award contract where there is more than one 

NAICS code assigned, that it meets the small business size standard for 

each distinct portion or category (e.g., line item numbers, Special 

Item Numbers (SINs), sectors, functional areas, or the equivalent) for 

which it submits an offer. If the small business concern submits an 

offer for the entire multiple-award contract, it must meet the size 

standard for each distinct portion or category (e.g., line item number, 

SIN, sector, functional area, or equivalent); and

    (ii) The Small Business Administration (SBA) has not issued a 

written determination stating otherwise pursuant to 13 CFR 121.1009.

    (2)(i) A joint venture may qualify as a small business concern if 

the joint venture complies with the requirements of 13 CFR 121.103(h) 

and 13 CFR 125.8(a) and (b) and if--

    (A) Each party to the joint venture qualifies as small under the 

size standard for the solicitation; or

    (B) The prot[eacute]g[eacute] is small under the size standard for 

the solicitation in a joint venture comprised of a mentor and 

prot[eacute]g[eacute] with an approved mentor-prot[eacute]g[eacute] 

agreement under an SBA mentor-prot[eacute]g[eacute] program.

    (ii) A joint venture may qualify for an award under the 

socioeconomic programs as described in subparts 19.8, 19.13, 19.14, and 

19.15.

* * * * *

0

6. Amend section 19.703 by revising paragraph (d) to read as follows:

19.703  Eligibility requirements for participating in the program.

* * * * *

    (d) Protests challenging the socioeconomic status of a HUBZone 

small business concern must be filed in accordance with 13 CFR 126.801.

* * * * *

0

7. Amend section 19.804-3, in paragraph (c) introductory text, by 

adding a sentence to the end of the paragraph to read as follows:

19.804-3  SBA acceptance.

* * * * *

    (c) * * * For a joint venture, SBA will determine eligibility as 

part of its acceptance of a sole source requirement and will approve 

the joint venture agreement prior to award in accordance with 13 CFR 

124.513(e).

* * * * *

0

8. Amend section 19.805-2 by revising paragraph (b) introductory text, 

and adding paragraphs (d) and (e) to read as follows:

19.805-2  Procedures.

* * * * *

    (b) The SBA will determine the eligibility of the apparent 

successful offeror. Eligibility is based on section 8(a) program 

criteria. See paragraphs (d) and (e) of this section regarding 

eligibility of joint ventures.

* * * * *

    (d)(1) SBA does not certify joint ventures, as entities, into the 

8(a) program.

    (2) A contracting officer may consider a joint venture for contract 

award if the SBA district office servicing the joint venture approves 

the joint venture agreement and provides a determination of eligibility 

pursuant to 13 CFR 124.507(b) prior to contract award.

    (e) If SBA does not approve the joint venture agreement within 5 

working days after receipt of the contracting activity's request for an 

eligibility determination, the contracting activity may seek SBA's 

approval through the

[[Page 34566]]

SBA Associate Administrator for Business Development.

0

9. Amend section 19.1303 by revising paragraph (c) to read as follows:

19.1303  Status as a HUBZone small business concern.

* * * * *

    (c) A joint venture may be considered a HUBZone small business 

concern if--

    (1) The joint venture qualifies as small under 19.301-1(a)(2)(i);

    (2) At least one party to the joint venture is a HUBZone small 

business concern; and

    (3) The joint venture complies with 13 CFR 126.616(a) through (c).

* * * * *

0

10. Amend section 19.1403 by revising paragraph (c) to read as follows:

19.1403  Status as a service-disabled veteran-owned small business 

concern.

* * * * *

    (c) A joint venture may be considered a service-disabled veteran 

owned small business concern if--

    (1) The joint venture qualifies as small under 19.301-1(a)(2)(i);

    (2) At least one party to the joint venture is a service-disabled 

veteran-owned small business concern, and makes the representations in 

paragraph (b) of this section; and

    (3) The joint venture complies with the requirements of 13 CFR 

125.18(b).

* * * * *

0

11. Amend section 19.1503 by revising paragraph (f) to read as follows:

19.1503  Status.

* * * * *

    (f) A joint venture may be considered an EDWOSB concern or WOSB 

concern eligible under the WOSB Program if--

    (1) The joint venture qualifies as small under 19.301-1(a)(2)(i);

    (2) At least one party to the joint venture is an EDWOSB or WOSB, 

and complies with the criteria in paragraph (b) of this section; and

    (3) The joint venture complies with the requirements of 13 CFR 

127.506(a) through (c).

PART 52--SOLICITATION PROVISIONS AND CONTRACT CLAUSES

0

12. Amend section 52.212-3 by--

0

a. Revising the date of the provision;

0

b. Removing from the introductory text ``(c) through (v))'' and adding 

``(c) through (v)'' in its place;

0

c. In paragraph (a), revising the definition of ``Small business 

concern'';

0

d. Revising paragraphs (c)(1) and (3);

0

e. Removing from the end of paragraph (c)(6)(i) ``and'' and adding 

``or'' in its place;

0

f. Revising paragraph (c)(6)(ii);

0

g. Removing from the end of paragraph (c)(7)(i) ``and'' and adding 

``or'' in its place;

0

h. Revising paragraph (c)(7)(ii);

0

i. Removing from the end of paragraph (c)(10)(i) ``13 CFR Part 126; 

and'' and adding ``13 CFR 126.200; or'' in its place; and

0

j. Revising paragraph (c)(10)(ii).

    The revisions read as follows:

52.212-3  Offeror Representations and Certifications--Commercial Items.

* * * * *

Offeror Representations and Certifications--Commercial Items (DATE)

* * * * *

    Small business concern means a concern, including its affiliates, 

that is independently owned and operated, not dominant in its field of 

operation and qualified as a small business under the criteria in 13 

CFR part 121 and size standards in this solicitation.

* * * * *

    (c) * * *

    (1) Small business concern. The offeror represents as part of its 

offer that--

    (i) It [square] is, [square] is not a small business concern; or

    (ii) It [square] is, [square] is not a small business joint venture 

that complies with the requirements of 13 CFR 121.103(h) and 13 CFR 

125.8(a) and (b). [The offeror shall enter the unique entity identifier 

of each party to the joint venture: _____.]

* * * * *

    (3) Service-disabled veteran-owned small business concern. 

[Complete only if the offeror represented itself as a veteran-owned 

small business concern in paragraph (c)(2) of this provision.] The 

offeror represents as part of its offer that--

    (i) It [square] is, [square] is not a service-disabled veteran-

owned small business concern; or

    (ii) It [square] is, [square] is not a joint venture that complies 

with the requirements of 13 CFR 125.18(b)(1) and (2). [The offeror 

shall enter the unique entity identifier of each party to the joint 

venture: _____.] Each service-disabled veteran-owned small business 

concern participating in the joint venture shall provide representation 

of its service-disabled veteran-owned small business concern status.

* * * * *

    (6) * * *

    (ii) It [square] is, [square] is not a joint venture that complies 

with the requirements of 13 CFR 127.506(a) through (c). [The offeror 

shall enter the unique entity identifier of each party to the joint 

venture: _____.] Each WOSB concern eligible under the WOSB Program 

participating in the joint venture shall provide representation of its 

WOSB status.

    (7) * * *

    (ii) It [square] is, [square] is not a joint venture that complies 

with the requirements of 13 CFR 127.506(a) through (c). [The offeror 

shall enter the unique entity identifier of each party to the joint 

venture: _____.] Each EDWOSB concern participating in the joint venture 

shall provide representation of its EDWOSB status.

    Note to paragraphs (c)(8) and (9): Complete paragraphs (c)(8) and 

(9) only if this solicitation is expected to exceed the simplified 

acquisition threshold.

* * * * *

    (10) * * *

    (ii) It [square] is, [square] is not a HUBZone joint venture that 

complies with the requirements of 13 CFR 126.616(a) through (c). [The 

offeror shall enter the unique entity identifier of each party to the 

joint venture: _____.] Each HUBZone small business concern 

participating in the HUBZone joint venture shall provide representation 

of its HUBZone status.

* * * * *

0

13. Amend section 52.212-5 by--

0

 a. Revising the date of the clause;

0

 b. Removing from paragraph (b)(11)(i) ``(MAR 2020)'' and adding 

``(DATE)'' in its place;

0

 c. Removing from paragraph (b)(12)(i) ``(MAR 2020)'' and adding 

``(DATE)'' in its place;

0

 d. Removing from paragraph (b)(16) ``(OCT 2018)'' and adding 

``(DATE)'' in its place;

0

 e. Removing from paragraph (b)(17)(i) ``(MAR 2020)'' and adding 

``(DATE)'' in its place;

0

 f. Removing from paragraph (b)(19) ``(MAR 2020)'' and adding 

``(DATE)'' in its place;

0

 g. Removing from paragraph (b)(21) ``(MAR 2020)'' and adding 

``(DATE)'' in its place;

0

 h. Removing from paragraph (b)(22)(i) ``(MAR 2020)'' and adding 

``(DATE)'' in its place;

0

 i. Removing from paragraph (b)(23) ``(MAR 2020)'' and adding 

``(DATE)'' in its place;

0

 j. Removing from paragraph (b)(24) ``(MAR 2020)'' and adding 

``(DATE)'' in its place;

0

k. Removing from paragraph (e)(1)(v) ``(OCT 2018)'' and adding 

``(DATE)'' in its place;

0

 l. Revising the date of Alternate II; and

0

 m. Removing from paragraph (e)(1)(ii)(E) of Alternate II ``(OCT 

2018)'' and adding ``(DATE)'' in its place.

[[Page 34567]]

    The revisions read as follows:

52.212-5   Contract Terms and Conditions Required To Implement Statutes 

or Executive Orders--Commercial Items.

* * * * *

Contract Terms and Conditions Required to Implement Statutes or 

Executive Orders--Commercial Items (DATE)

* * * * *

    Alternate II (DATE). * * *

* * * * *

0

 14. Amend section 52.213-4 by--

0

 a. Revising the date of the clause; and

0

 b. Removing from paragraph (a)(2)(viii) ``(AUG 2019)'' and adding 

``(DATE)'' in its place.

    The revision reads as follows:

52.213-4   Terms and Conditions--Simplified Acquisitions (Other Than 

Commercial Items).

* * * * *

Terms and Conditions--Simplified Acquisitions (Other Than Commercial 

Items) (DATE)

* * * * *

0

15. Amend section 52.219-1 by--

0

 a. Revising the date of the provision;

0

 b. In paragraph (a), revising the definition of ``Small business 

concern'';

0

 c. Revising paragraph (c)(1);

0

 d. Removing from the end of paragraph (c)(4)(i) ``and'' and adding 

``or'' in its place, and revising paragraph (c)(4)(ii);

0

 e. Removing from the end of paragraph (c)(5)(i) ``and'' and adding 

``or'' in its place; and revising paragraph (c)(5)(ii);

0

 f. Revising paragraph (c)(7); and

0

g. Removing from the end of paragraph (c)(8)(i) ``13 CFR Part 126; 

and'' and adding ``13 CFR 126.200; or'' in its place, and revising 

paragraph (c)(8)(ii);

    The revisions read as follows:

52.219-1   Small Business Program Representations.

* * * * *

Small Business Program Representations (DATE)

* * * * *

    Small business concern means a concern, including its affiliates, 

that is independently owned and operated, not dominant in its field of 

operation and qualified as a small business under the criteria in 13 

CFR part 121 and the size standard in paragraph (b) of this provision.

* * * * *

    (c) * * * (1) The offeror represents as part of its offer that--

    (i) It [square] is, [square] is not a small business concern; or

    (ii) It [square] is, [square] is not a small business joint venture 

that complies with the requirements of 13 CFR 121.103(h) and 13 CFR 

125.8(a) and (b). [The offeror shall enter the unique entity identifier 

of each party to the joint venture: _____.]

* * * * *

    (4) * * *

    (ii) It [square] is, [square] is not a joint venture that complies 

with the requirements of 13 CFR 127.506(a) through (c). [The offeror 

shall enter the unique entity identifier of each party to the joint 

venture: _____.] Each WOSB concern eligible under the WOSB Program 

participating in the joint venture shall provide representation of its 

WOSB status.

* * * * *

    (5) * * *

    (ii) It [square] is, [square] is not a joint venture that complies 

with the requirements of 13 CFR 127.506(a) through (c). [The offeror 

shall enter the unique entity identifier of each party to the joint 

venture: _____.] Each EDWOSB concern participating in the joint venture 

shall provide representation of its EDWOSB status.

* * * * *

    (7) [Complete only if the offeror represented itself as a veteran-

owned small business concern in paragraph (c)(6) of this provision.] 

The offeror represents as part of its offer that--

    (i) It [square] is, [square] is not a service-disabled veteran-

owned small business concern; or

    (ii) It [square] is, [square] is not a service-disabled veteran-

owned joint venture that complies with the requirements of 13 CFR 

125.18(b)(1) and (2). [The offeror shall enter the unique entity 

identifier of each party to the joint venture: _____.] Each service-

disabled veteran-owned small business concern participating in the 

joint venture shall provide representation of its service-disabled 

veteran-owned small business concern status.

    (8) * * *

    (ii) It [square] is, [square] is not a HUBZone joint venture that 

complies with the requirements of 13 CFR 126.616(a) through (c). [The 

offeror shall enter the unique entity identifier of each party to the 

joint venture: _____.] Each HUBZone small business concern 

participating in the HUBZone joint venture shall provide representation 

of its HUBZone status.

* * * * *

0

16. Amend section 52.219-3 by--

0

 a. Revising the date of the clause;

0

b. Redesignating paragraphs (f) and (g) as paragraphs (g) and (h), and 

adding a new paragraph (f); and

0

 c. Revising the newly redesignated paragraph (g).

    The revisions read as follows:

52.219-3  Notice of HUBZone Set-Aside or Sole Source Award.

* * * * *

Notice of HUBZone Set-Aside or Sole Source Award (DATE)

* * * * *

    (f) Joint venture. A joint venture may be considered a HUBZone 

concern if--

    (1) At least one party to the joint venture is a HUBZone small 

business concern and complies with 13 CFR 126.616(c); and

    (2) Each party to the joint venture qualifies as small under the 

size standard for the solicitation, or the prot[eacute]g[eacute] is 

small under the size standard for the solicitation in a joint venture 

comprised of a mentor and prot[eacute]g[eacute] with an approved 

mentor-prot[eacute]g[eacute] agreement under the SBA mentor-

prot[eacute]g[eacute] program.

    (g) A HUBZone joint venture agrees that, in the performance of the 

contract, the applicable percentage specified in paragraph (d) of this 

clause shall be performed by the aggregate of the parties to the joint 

venture. At least 40 percent of the aggregate work performed by the 

joint venture shall be completed by the HUBZone small business parties 

to the joint venture. Work performed by the HUBZone small business 

party or parties to the joint venture must be more than administrative 

functions.

* * * * *

0

17. Amend section 52.219-4 by revising the clause title, date, and 

paragraph (e) to read as follows:

52.219-4  Notice of Price Evaluation Preference for HUBZone Small 

Business Concerns.

* * * * *

Notice of Price Evaluation Preference for HUBZone Small Business 

Concerns (DATE)

* * * * *

    (e) A HUBZone joint venture agrees that, in the performance of the 

contract, the applicable percentage specified in paragraph (d) of this 

clause shall be performed by the aggregate of the parties to the joint 

venture. At least 40 percent of the aggregate work performed by the 

joint venture shall be completed by the HUBZone small business parties 

to the joint venture. Work performed by the HUBZone small business 

parties to the joint venture must be more than administrative 

functions.

* * * * *

0

18. Amend section 52.219-8 by--

0

 a. Revising the date of the clause;

0

 b. In paragraph (a), revising the definition ``Small business 

concern'';

[[Page 34568]]

0

 c. Redesignating paragraphs (c) and (d) as paragraphs (d) and (e), and 

adding a new paragraph (c); and

0

 d. Revising the newly redesignated paragraph (e)(5) introductory text.

    The revisions read as follows:

52.219-8   Utilization of Small Business Concerns.

* * * * *

Utilization of Small Business Concerns (DATE)

* * * * *

    (a) * * *

    Small business concern means a concern, including its affiliates, 

that is independently owned and operated, not dominant in its field of 

operation and qualified as a small business under the criteria and size 

standards in 13 CFR part 121, including the size standard that 

corresponds to the NAICS code assigned to the contract or subcontract.

* * * * *

    (c)(1) A joint venture qualifies as a small business concern if--

    (i) Each party to the joint venture qualifies as small under the 

size standard for the solicitation; or

    (ii) The prot[eacute]g[eacute] is small under the size standard for 

the solicitation in a joint venture comprised of a mentor and 

prot[eacute]g[eacute] with an approved mentor-prot[eacute]g[eacute] 

agreement under a SBA mentor-prot[eacute]g[eacute] program.

    (2) A joint venture qualifies as--

    (i) A service-disabled veteran-owned small business concern if it 

complies with the requirements in 13 CFR part 125; or

    (ii) A HUBZone small business concern if it complies with the 

requirements in 13 CFR 126.616(a) through (c).

* * * * *

    (e) * * *

    (5) The Contractor shall confirm that a subcontractor representing 

itself as a HUBZone small business concern is certified by SBA as a 

HUBZone small business concern. If the subcontractor is a joint 

venture, the Contractor shall confirm that at least one party to the 

joint venture is certified by SBA as a HUBZone small business concern. 

The Contractor may confirm the representation by accessing the System 

for Award Management or contacting SBA. Options for contacting the SBA 

include--

* * * * *

0

19. Amend section 52.219-9 by--

0

 a. Revising the date of the clause; and

0

 b. Removing from paragraph (e)(4) ``52.219-8(d)(2)'' and adding 

``52.219-8(e)(2)'' in its place.

    The revision reads as follows:

52.219-9  Small Business Subcontracting Plan.

* * * * *

Small Business Subcontracting Plan (DATE)

* * * * *

0

20. Amend section 52.219-14 by revising the date of the clause and 

adding paragraph (e) to read as follows:

52.219-14   Limitations on Subcontracting.

* * * * *

Limitations on Subcontracting (DATE)

* * * * *

    (e) Joint ventures. (1) In a joint venture comprised of a small 

business prot[eacute]g[eacute] and its mentor approved by the Small 

Business Administration, the small business prot[eacute]g[eacute] shall 

perform at least 40 percent of the work performed by the joint venture. 

Work performed by the small business prot[eacute]g[eacute] in the joint 

venture must be more than administrative functions.

    (2) In an 8(a) joint venture, the 8(a) participant(s) shall perform 

at least 40 percent of the work performed by the joint venture. Work 

performed by the 8(a) participants in the joint venture must be more 

than administrative functions.

* * * * *

0

21. Amend section 52.219-18 by--

0

a. Revising the date of the clause and paragraph (a);

0

 b. Removing from paragraph (b) ``all of the'' and adding ``the 

applicable'' in its place; and

0

 c. Adding paragraph (e);

0

 d. Revising Alternate I.

    The revisions and addition read as follows:

52.219-18   Notification of Competition Limited to Eligible 8(a) 

Participants.

* * * * *

Notification of Competition Limited to Eligible 8(a) Participants 

(DATE)

    (a) Offers are solicited only from--

    (1) Small business concerns expressly certified by the Small 

Business Administration (SBA) for participation in the SBA's 8(a) 

program and which meet the following criteria at the time of submission 

of offer--

    (i) The Offeror is in conformance with the 8(a) support limitation 

set forth in its approved business plan; and

    (ii) The Offeror is in conformance with the Business Activity 

Targets set forth in its approved business plan or any remedial action 

directed by the SBA; or

    (2) A joint venture, in which at least one of the 8(a) program 

participants that is a party to the joint venture complies with the 

criteria set forth in paragraph (a)(1) of this clause, that complies 

with 13 CFR 124.513(c); or

    (3) A joint venture--

    (i) That is comprised of a mentor and an 8(a) prot[eacute]g[eacute] 

with an approved mentor-prot[eacute]g[eacute] agreement under the 8(a) 

program;

    (ii) In which at least one of the 8(a) program participants that is 

a party to the joint venture complies with the criteria set forth in 

paragraph (a)(1) of this clause; and

    (iii) That complies with 13 CFR 124.513(c).

* * * * *

    (e) 8(a) joint ventures. The Contracting Officer may consider a 

joint venture for contract award if SBA approves the joint venture 

agreement and provides a determination of eligibility pursuant to 13 

CFR 124.507(b) prior to contract award.

* * * * *

    Alternate I (DATE). If the competition is to be limited to 8(a) 

participants within one or more specific SBA regions or districts, add 

the following paragraph (a)(1)(iii) to paragraph (a) of the clause:

    (iii) The offeror's approved business plan is on the file and 

serviced by _____ [Contracting Officer completes by inserting the 

appropriate SBA District and/or Regional Office(s) as identified by the 

SBA].

0

22. Amend section 52.219-27 by--

0

 a. Revising the date of the clause, and paragraph (f); and

0

 b. Adding paragraph (g).

    The revisions and addition read as follows:

52.219-27  Notice of Service-Disabled Veteran-Owned Small Business Set-

Aside.

* * * * *

Notice of Service-Disabled Veteran-Owned Small Business Set-Aside 

(DATE)

* * * * *

    (f) A joint venture may be considered a service-disabled veteran 

owned small business concern if--

    (1) At least one party to the joint venture complies with the 

criteria defined in paragraph (a) of this clause and 13 CFR 

125.18(b)(2); and

    (2) Each party to the joint venture is small under the size 

standard corresponding to the NAICS code assigned to the procurement, 

or the prot[eacute]g[eacute] is small under the size standard 

corresponding to the NAICS code assigned to the procurement in a joint 

venture comprised of a mentor and prot[eacute]g[eacute] with an 

approved mentor-prot[eacute]g[eacute] agreement under an SBA mentor-

prot[eacute]g[eacute] program.

[[Page 34569]]

    (g) In a joint venture that complies with paragraph (f) of this 

clause, the service-disabled veteran-owned small business party or 

parties to the joint venture shall perform at least 40 percent of the 

work performed by the joint venture. Work performed by the service-

disabled veteran-owned small business party or parties to the joint 

venture must be more than administrative functions.

* * * * *

0

 23. Amend section 52.219-28 by revising the date of the clause, and in 

paragraph (a) revising the definition of ``Small business concern'' to 

read as follows:

52.219-28   Post-Award Small Business Program Rerepresentation.

* * * * *

Post-Award Small Business Program Rerepresentation (DATE)

    (a) * * *

    Small business concern means a concern, including its affiliates, 

that is independently owned and operated, not dominant in its field of 

operation and qualified as a small business under the criteria in 13 

CFR part 121 and the size standard in paragraph (d) of this clause.

* * * * *

0

24. Amend section 52.219-29 by--

0

a. Revising the date of the clause;

0

 b. In paragraph (a), in the definition ``Economically disadvantaged 

women-owned small business (EDWOSB)'' removing ``It automatically'' and 

adding ``An EDWOSB concern automatically'' in its place;

0

 c. Revising paragraph (f); and

0

d. Adding a new paragraph (g).

    The revisions and addition read as follows:

52.219-29   Notice of Set-Aside for, or Sole Source Award to, 

Economically Disadvantaged Women-Owned Small Business Concerns.

* * * * *

Notice of Set-Aside for, or Sole Source Award to, Economically 

Disadvantaged Women-Owned Small Business Concerns (DATE)

* * * * *

    (f) Joint Venture. A joint venture may be considered an EDWOSB 

concern if--

    (1) At least one party to the joint venture complies with the 

criteria defined in paragraph (a) and paragraph (c)(3) of this clause, 

and 13 CFR 127.506(c); and

    (2) Each party to the joint venture qualifies as small under the 

size standard for the solicitation, or the prot[eacute]g[eacute] is 

small under the size standard for the solicitation in a joint venture 

comprised of a mentor and prot[eacute]g[eacute] with an approved 

mentor-prot[eacute]g[eacute] agreement under the SBA mentor-

prot[eacute]g[eacute] program.

    (g) In a joint venture that complies with paragraph (f) of this 

clause, the EDWOSB party or parties to the joint venture shall perform 

at least 40 percent of the work performed by the joint venture. Work 

performed by the EDWOSB party or parties to the joint venture must be 

more than administrative functions.

* * * * *

0

25. Amend section 52.219-30 by--

0

 a. Revising the date of the clause and paragraph (f); and

0

b. Adding paragraph (g).

    The revisions and addition read as follows:

52.219-30   Notice of Set-Aside for, or Sole Source Award to, Women-

Owned Small Business Concerns Eligible Under the Women-Owned Small 

Business Program.

* * * * *

Notice of Set-Aside for, or Sole Source Award to, Women-Owned Small 

Business Concerns Eligible Under the Women-Owned Small Business Program 

(DATE)

* * * * *

    (f) Joint Venture. A joint venture may be considered a WOSB concern 

eligible under the WOSB Program if--

    (1) At least one party to the joint venture complies with the 

criteria defined in paragraph (a) and (c)(3) of this clause, and 13 CFR 

127.506(c); and

    (2) Each party to the joint venture qualifies as small under the 

size standard for the solicitation, or the prot[eacute]g[eacute] is 

small under the size standard for the solicitation in a joint venture 

comprised of a mentor and prot[eacute]g[eacute] with an approved 

mentor-prot[eacute]g[eacute] agreement under the SBA mentor-

prot[eacute]g[eacute] program.

    (g) In a joint venture that complies with paragraph (f) of this 

clause, the WOSB party or parties to the joint venture shall perform at 

least 40 percent of the work performed by the joint venture. Work 

performed by the WOSB party or parties to the joint venture must be 

more than administrative functions.

* * * * *

0

26. Amend section 52.244-6 by--

0

a. Revising the date of the clause; and

0

 b. Removing from paragraph (c)(1)(vii) ``(OCT 2018)'' and adding 

``(DATE)'' in its place.

    The revision reads as follows:

52.244-6  Subcontracts for Commercial Items.

// end //

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The Small Business Reorganization Act of 2019: Subchapter V | New York Law Journal - Law.com

Posted: 05 Jun 2020 11:00 AM PDT

<i>Photo: kentoh/Shutterstock </i>Photo: kentoh/Shutterstock

On Aug. 23, 2019, the Small Business Reorganization Act of 2019 (SBRA) was signed into law and created a new Subchapter V. The general purpose of Subchapter V was to streamline the Chapter 11 bankruptcy process for small businesses and individuals engaged in business to administer their bankruptcy estate in an efficient and less costly manner.

The debt ceiling for a small business to file under Subchapter V was recently increased temporarily to $7.5 million under the Coronavirus Aid, Relief and Economic Security act of 2020 (the CARES Act). This debt ceiling increase expands access to bankruptcy relief to thousands of small businesses.

However, there is a remarkable irony between the laudable purpose of this legislation to help small businesses navigate efficiently through bankruptcy and its execution in the COVID-19 environment. One fly in the ointment is whether small business debtors can use PPP loans in bankruptcy.

By way of background, the CARES Act provided $349 billion for financing "small businesses" under the Paycheck Protection Program (PPP). Under the PPP, eligible small businesses are entitled to receive loans up to $10 million guaranteed by the Small Business Administration (SBA).

Neither the CARES Act nor the Small Business Act, however, expressly prohibits companies who have filed for bankruptcy from receiving PPP loans but this is undercut by the fact that the SBA requires that lenders use an SBA loan application form that expressly disqualifies any small business in bankruptcy. To reinforce this position the SBA promulgated an interim final rule that makes debtors ineligible to receive PPP loans.

The reason for the rule was that PPP loans to entities in bankruptcy would present an unacceptably high risk of an "unauthorized use" of funds or non-repayment of unforgiven loans. But does this make sense? Under the CARES Act, PPP loans are really not loans, but instead are treated as grants if 75% of the loan proceeds are used for payroll and the remaining 25% for rent, utilities and other operating expenses. If the borrower complies with these guidelines, the loan essentially will be forgiven. So, do small businesses that file bankruptcy really presents an unacceptably high risk of unauthorized use of funds or non-payment of unforgiven loans? One could argue to the contrary that a small business with bankruptcy court supervision and a standing trustee is under more scrutiny than a non-debtor. Quite frankly, small businesses in bankruptcy are likely less risky.

In the interim, bankruptcy courts are actively addressing this issue. There are a number of cases percolating through the system with respect to the use of PPP loans by Chapter 11 debtors. In some cases, Chapter 11 debtors sought approval to use PPP loans for DIP financing. In other instances, the debtors filed motions to turn over the loans proceeds that had been approved but not funded. One interesting issue being raised in a number of cases is whether the SBA's position violates §525(a) of the Bankruptcy Code which in substance prohibits the government from unfairly discriminating against any entity that was or is in bankruptcy.

In this regard one court recently allowed two hospitals (Calais Regional Hospital, 19-10486), and (Penobscot Valley Hospital, 19-10034) to seek PPP loans by issuing TRO's requiring the SBA to allow each hospital to apply for PPP funding. The SBA argued it was immune from the debtor hospitals' claims for injunctive relief under the anti-injunction provision of 15 U.S.C §634(b). Judge Fagone dismissed this argument, noting that any anti-injunction language "should not be interpreted as a bar to judicial review or agency actions that exceed agency authority where the remedies would not interfere with internal agency operations." Judge Fagone further found that the SBA's refusal to extend funds to bankrupt debtors likely violated §525(a) because, in his view, the SBA is not administrating a loan program under the PPP but is rather administering a grant program.

In In re Hidalgo County Emergency Service Foundation (Bankr. S.D. Tex. April 25, 2020), the court issued a TRO ordering the SBA to accept debtor's PPP application, finding that the SBA position that the PPP loan applicant certify that is not involved in any bankruptcy proceeding to qualify was not required under CARES Act or Small Business Act

In In re Village East 20-31144 (Bankr. W.D. Ky.), the debtor initially was approved for PPP loan and then filed Chapter 11. The bank cancelled the loan based upon "material change in circumstances." The debtor moved for a turnover of the loan but the motion was denied, presumably because of the SBA interim final rule.

Despite struggling to obtain PPP loans what are the good things small businesses can expect under Subchapter V? Some highlights follow.

Debtor Eligibility for and Election of Subchapter V Treatment

Eligibility for Subchapter V relief involves several criteria. First, debt must be incurred in connection with commercial or business activities. One court, however, has recently determined that a debtor is not required to be conducting business when filing its original petition. In re Wright 20-01035 (Bankr. D.S.C. April 27, 2020) dealing with a defunct business is enough to qualify. Second, the debt ceiling of $7.5 million must be satisfied. Third, not less than 50% of that debt must arise from commercial or business activities. And finally, a debtor whose primary activity is to own or operate more than one real property is now eligible for Subchapter V.

In order to proceed under Subchapter V a debtor must opt in as part of its voluntary bankruptcy petition. The U.S. Trustee or other parties can object to the debtor's self-designation.

Case Administration, Retention of Professionals, Committees and Standing Trustee

The debtor generally has the powers to perform the functions of a debtor-in-possession. A 60-day mandatory conference and filing a pre-conference report by the debtor 14 days before the conference describing the efforts taken and to be taken to reach a consensual plan of reorganization is required. This conference provides the bankruptcy court with information about whether the debtor is on track to timely file its plan.

In a Subchapter V case a standing trustee is automatically appointed to "facilitate the development of a consensual plan of reorganization." The standing trustee has certain duties including being accountable for all property received, examining proofs of claim and objecting as required, opposing discharge if advisable, furnishing information about the estate and its administration and preparing and filing a final report. One very important role for the standing trustee is to collect and retain plan payments until confirmation of a plan and to make sure that the debtor makes timely payments as required under a confirmed plan.

Plan, Disclosure Statement, Property of the Estate and Confirmation

There are two ways in which a Subchapter V plan can be confirmed—consensually or through cramdown. A consensual plan is accepted by all classes of claims. A cramdown plan does not have an impaired accepting class of claims, but can be confirmed if the plan does not discriminate unfairly and is fair and equitable. The term fair and equitable has special meaning in a Subchapter V case. For example, as to each class of secured creditors the plan must satisfy the requirements of §11229(b)((2)(A) and as to other classes of creditors the plan as of the effective date must provide that (1) all of the projected disposable income of the debtor to be received will be applied to make payments under the plan, or (2) the value of property to be distributed under the plan is no less that the projected disposable income of the debtor.

No competing plans are allowed. The debtor can modify a plan before confirmation, after confirmation or even after substantial consummation if circumstances warrant such modification. The absolute priority rule does not apply and therefore equity owners can retain their interests in the debtor.

The SBRA generally eliminates the requirement of a disclosure statement. Instead, the plan must contain a brief history of the debtor's business, operations during the case, feasibility projections and a liquidation analysis.

Treatment of Claims

In a non-consensual plan, a debtor can pay administrative claims over the three- to five-year life of the plan but under a consensual plan such claims must be paid at confirmation.

Modification of a claim secured by the debtor's principal residence is permitted under Subchapter V so long as the mortgage was not used to purchase the residence and the new value received in connection with granting the security interest was used primarily in connection with the debtor's business.

By way of example, In re Ventura, 2020 WL 1867898 (E.D. N.Y. April 10, 2020) presents some novel issues as to whether a debtor can amend a prior petition to elect Subchapter V treatment and can strip down mortgage on her principal residence which was also used as a bed and breakfast. The court found in favor of the debtor with respect to amendment and further indicated that the debtor would have the opportunity to make a case for modification. These favorable rulings suggest that bankruptcy courts are inclined to not only apply the statute but also to follow the spirit of the statute to allow small business a reasonable chance to reorganize in Chapter 11.

Conclusion

Over time the benefits of Subchapter V should provide small business with a realistic chance to restructure debt and reorganize their business, thereby preserving enterprise value, maintaining business relationships and savings jobs.

Robert W. Dremluk (rdremluk@cm.law) is a partner with the New York offices of Culhane Meadows PLLC. His practice includes bankruptcy, restructuring, and real estate transactions.

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