Business Loan Program Temporary Changes; Paycheck Protection Program — Nondiscrimination and Additional Eligibility Criteria

Record facts

Summary

An interim final rule of the U.S. Small Business Administration published in the Federal Register, Vol. 85, No. 90, May 8, 2020, under 13 CFR Parts 113 and 120, Docket Number SBA–2020–0024, RIN 3245–AH40. It supplements earlier Paycheck Protection Program interim final rules with guidance on nondiscrimination obligations and additional eligibility requirements, and requests public comment. It is effective May 8, 2020, applies to PPP applications submitted through June 30, 2020 or until funds are exhausted, and sets a comment deadline of June 8, 2020. Its background section describes the CARES Act (Pub. L. 116–136), whose Section 1102 permits SBA to guarantee 100 percent of 7(a) loans under the PPP and whose Section 1106 provides for loan forgiveness. The rule also discusses exemptions under Title IX, the Fair Housing Act and Title VII, and an exception for federal work study.

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This section of the FEDERAL REGISTER
contains regulatory documents having general
applicability and legal effect, most of which
are keyed to and codified in the Code of
Federal Regulations, which is published under
50 titles pursuant to 44 U.S.C. 1510.
The Code of Federal Regulations is sold by
the Superintendent of Documents.
Rules and Regulations
Federal Register
27287 
Vol. 85, No. 90 
Friday, May 8, 2020 
SMALL BUSINESS ADMINISTRATION 
13 CFR Parts 113 and 120 
[Docket Number SBA–2020–0024] 
RIN 3245–AH40 
Business Loan Program Temporary 
Changes; Paycheck Protection 
Program—Nondiscrimination and 
Additional Eligibility Criteria 
AGENCY: U.S. Small Business 
Administration. 
ACTION: Interim final rule. 
SUMMARY: On April 2, 2020, the U.S. 
Small Business Administration (SBA) 
posted an interim final rule announcing 
the implementation of the Coronavirus 
Aid, Relief, and Economic Security Act 
(CARES Act). The CARES Act 
temporarily adds a new program, titled 
the ‘‘Paycheck Protection Program,’’ to 
the SBA’s 7(a) Loan Program. The 
CARES Act also provides for forgiveness 
of up to the full principal amount of 
qualifying loans guaranteed under the 
Paycheck Protection Program (PPP). The 
PPP is intended to provide economic 
relief to small businesses nationwide 
adversely impacted by the Coronavirus 
Disease 2019 (COVID–19). SBA posted 
additional interim final rules on April 3, 
2020, April 14, 2020, April 24, 2020, 
April 28, 2020, and April 30, 2020 and 
the Department of the Treasury posted 
an additional interim final rule on April 
28, 2020. This interim final rule 
supplements the previously posted 
interim final rules by providing 
guidance on nondiscrimination 
obligations and additional eligibility 
requirements, and requests public 
comment. 
DATES: 
Effective date: This rule is effective 
May 8, 2020. 
Applicability date: This interim final 
rule applies to applications submitted 
under the Paycheck Protection Program 
through June 30, 2020, or until funds 
made available for this purpose are 
exhausted. 
Comment date: Comments must be 
received on or before June 8, 2020. 
ADDRESSES: You may submit comments, 
identified by number SBA–2020–0024 
through the Federal eRulemaking Portal: 
http://www.regulations.gov. Follow the 
instructions for submitting comments. 
SBA will post all comments on 
www.regulations.gov. If you wish to 
submit confidential business 
information (CBI) as defined in the User 
Notice at www.regulations.gov, please 
send an email to ppp-ifr@sba.gov. 
Highlight the information that you 
consider to be CBI and explain why you 
believe SBA should hold this 
information as confidential. SBA will 
review the information and make the 
final determination whether it will 
publish the information. 
FOR FURTHER INFORMATION CONTACT: A 
Call Center Representative at 833–572– 
0502, or the local SBA Field Office; the 
list of offices can be found at https://
www.sba.gov/tools/local-assistance/ 
districtoffices. 
SUPPLEMENTARY INFORMATION: 
I. Background Information 
On March 13, 2020, President Trump 
declared the ongoing Coronavirus 
Disease 2019 (COVID–19) pandemic of 
sufficient severity and magnitude to 
warrant an emergency declaration for all 
States, territories, and the District of 
Columbia. With the COVID–19 
emergency, many small businesses 
nationwide are experiencing economic 
hardship as a direct result of the 
Federal, State, tribal, and local public 
health measures that are being taken to 
minimize the public’s exposure to the 
virus. These measures, some of which 
are government-mandated, are being 
implemented nationwide and include 
the closures of restaurants, bars, and 
gyms. In addition, based on the advice 
of public health officials, other 
measures, such as keeping a safe 
distance from others or even stay-at- 
home orders, are being implemented, 
resulting in a dramatic decrease in 
economic activity as the public avoids 
malls, retail stores, and other 
businesses. 
On March 27, 2020, the President 
signed the Coronavirus Aid, Relief, and 
Economic Security Act (the CARES Act) 
(Pub. L. 116–136) to provide emergency 
assistance and health care response for 
individuals, families, and businesses 
affected by the coronavirus pandemic. 
The Small Business Administration 
(SBA) received funding and authority 
through the CARES Act to modify 
existing loan programs and establish a 
new loan program to assist small 
businesses nationwide adversely 
impacted by the COVID–19 emergency. 
Section 1102 of the CARES Act 
temporarily permits SBA to guarantee 
100 percent of 7(a) loans under a new 
program titled the ‘‘Paycheck Protection 
Program.’’ Section 1106 of the CARES 
Act provides for forgiveness of up to the 
full principal amount of qualifying 
loans guaranteed under the Paycheck 
Protection Program (PPP). On April 24, 
2020, the President signed the Paycheck 
Protection Program and Health Care 
Enhancement Act (Pub. L. 116–139), 
which provided additional funding and 
authority for the PPP. 
Prior to the CARES Act, nonprofit 
organizations were not eligible to 
participate in SBA’s 7(a) Loan Program 
(15 U.S.C. 636(a)). Section 1102 of the 
CARES Act expanded eligibility, limited 
to PPP, to include certain nonprofit 
organizations, among other 
organizations. 
SBA regulations at 13 CFR part 113 
impose regulatory requirements ‘‘to 
reflect to the fullest extent possible the 
nondiscrimination policies of the 
Federal Government as expressed in the 
several statutes, Executive Orders, and 
messages of the President dealing with 
civil rights and equality of 
opportunity.’’ 13 CFR 113.1(a). But 
because SBA’s loan programs previously 
served business entities, these 
regulations did not restate certain 
limitations and exemptions under 
federal law primarily pertinent to 
certain faith-based or nonprofit 
organizations. In particular, Title IX of 
the Education Amendments of 1972 
permits single-sex admissions practices 
by preschools, non-vocational 
elementary or secondary schools, and 
private undergraduate higher education 
institutions. See 20 U.S.C. 1681(a)(1). 
Additionally, the Fair Housing Act of 
1968 allows religious organizations to 
reserve housing for coreligionists, see 42 
U.S.C. 3607, and allows for single-sex 
emergency shelters that provide refuge 
to abused women (or abused men), see 
24 CFR 5.106; see also Johnson v. Dixon, 
786 F. Supp. 1, 4 (D.D.C. 1991) (‘‘It is 
. . . doubtful [that] ‘emergency 
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1 The Department of Education’s Federal Work- 
Study Programs described at 34 CFR part 675 are 
overnight shelter,’ . . . can be 
characterized as a ‘dwelling’ within the 
meaning of the [Fair Housing] Act.’’). 
Finally, the Indian Child Welfare Act of 
1978 requires certain placement 
preferences in the foster care and 
adoptions of Indian children. See 25 
U.S.C. 1915. The broadly worded SBA 
regulations do not articulate these 
limitations on the application of the 
relevant nondiscrimination provisions. 
In addition, there is a technical 
discrepancy between SBA’s religious 
employer exemption at 13 CFR 113.3– 
1(h) and Title VII of the Civil Rights Act, 
which allows religious employers to 
make hiring decisions according to their 
religious beliefs with respect to all 
‘‘activities,’’ not just ‘‘religious 
activities.’’ See An Act to further 
promote equal employment 
opportunities for American workers, 
Public Law 92–261, 86 Stat. 103, 104 
(1972), codified at 42 U.S.C. 2000e–1(a). 
Given these various discrepancies, 
organizations have accordingly faced 
uncertainty about whether their 
participation in the PPP program would 
require them to substantially change 
their operations for a short period of 
months. These types of changes are 
impossible for some organizations, and 
impractical for many. This uncertainty 
risks frustrating the purpose of the 
CARES Act, which was to afford swift 
stopgap relief to Americans who might 
otherwise lose their jobs or businesses 
because of the economic hardships 
wrought by the response to the COVID– 
19 public health emergency. To provide 
certainty to applicants and recipients of 
loans and loan forgiveness under the 
PPP, and to address the large-scale 
burdens that SBA regulations may 
impose on recipients participating only 
on a short-term basis, this interim final 
rule provides guidance that for purposes 
of the PPP, nonprofits must meet their 
nondiscrimination obligations under 
existing Federal laws and Executive 
Orders. This interim final rule also 
provides guidance with respect to the 
religious employer exemption to ensure 
harmony with Section 702 of Title VII. 
In addition, as described below, to 
enable certain eligible small educational 
institutions to participate in PPP, this 
interim final rule provides that 
institutions of higher education shall 
exclude work study students when 
determining the number of employees 
for purposes of PPP loan eligibility. 
II. Comments and Immediate Effective 
Date 
The intent of the Act is that SBA 
provide relief to America’s small 
businesses expeditiously. This intent, 
along with the dramatic decrease in 
economic activity nationwide, provides 
good cause for SBA to dispense with the 
30-day delayed effective date provided 
in the Administrative Procedure Act. 
Specifically, it is critical to meet 
lenders’ and borrowers’ need for clarity 
concerning program requirements as 
rapidly as possible because the last day 
eligible borrowers can apply for and 
receive a loan is June 30, 2020. 
This interim final rule supplements 
previous regulations and guidance on 
certain important, discrete issues. The 
immediate effective date of this interim 
final rule will benefit lenders so that 
they can swiftly close and disburse 
loans to small businesses. This interim 
final rule is effective without advance 
notice and public comment because 
section 1114 of the Act authorizes SBA 
to issue regulations to implement Title 
I of the Act without regard to notice 
requirements. In addition, SBA has 
determined that there is good cause for 
dispensing with advance public notice 
and comment on the ground that it 
would be contrary to the public interest. 
Specifically, SBA has determined that 
advance public notice and comment 
would delay the ability of certain 
organizations to implement their 
nondiscrimination obligations in a 
manner consistent with the limitations 
contained in existing Federal laws, and 
potentially force such organizations to 
change their operations until SBA 
adopted a final or interim final rule. 
Rather than change their operations, the 
affected organizations could elect not to 
apply for PPP loans and lay off 
employees, which would defeat the 
paycheck protection purposes of the 
PPP. This rule is being issued to allow 
for immediate implementation of this 
program. Although this interim final 
rule is effective immediately, comments 
are solicited from interested members of 
the public on all aspects of the interim 
final rule, including section III below. 
These comments must be submitted on 
or before June 8, 2020. SBA will 
consider these comments and the need 
for making any revisions as a result of 
these comments. 
III. Paycheck Protection Program 
Nondiscrimination and Additional 
Eligibility Criteria 
Overview 
The CARES Act was enacted to 
provide immediate assistance to 
individuals, families, and organizations 
affected by the COVID–19 emergency. 
Among the provisions contained in the 
CARES Act are provisions authorizing 
SBA to temporarily guarantee loans 
under the PPP. Loans under the PPP 
will be 100 percent guaranteed by SBA, 
and the full principal amount of the 
loans and any accrued interest may 
qualify for loan forgiveness. Additional 
information about the PPP is available 
in interim final rules published by SBA 
and the Department of the Treasury in 
the Federal Register (85 FR 20811, 85 
FR 20817, 85 FR 21747, 85 FR 23450, 
85 FR 23917, 85 FR 26321 and 85 FR 
26324) (collectively, the PPP Interim 
Final Rules). 
1. Non-Discrimination 
Are recipients of PPP loans entitled to 
exemptions on the grounds provided in 
Federal nondiscrimination laws for sex- 
specific admissions practices, sex- 
specific domestic violence shelters, 
coreligionist housing, or Indian tribal 
preferences in connection with adoption 
or foster care practices? 
Yes. With respect to any loan or loan 
forgiveness under the PPP, the 
nondiscrimination provisions in the 
applicable SBA regulations incorporate 
the limitations and exemptions 
provided in corresponding Federal 
statutory or regulatory 
nondiscrimination provisions for sex- 
specific admissions practices at 
preschools, non-vocational elementary 
or secondary schools, and private 
undergraduate higher education 
institutions under Title IX of the 
Education Amendments of 1972 (20 
U.S.C. 1681 et seq.), for sex-specific 
emergency shelters and coreligionist 
housing under the Fair Housing Act of 
1968 (42 U.S.C. 3601 et seq.), and for 
adoption or foster care practices giving 
child placement preferences to Indian 
tribes under the Indian Child Welfare 
Act of 1978 (25 U.S.C. 1901 et seq.). 
In addition, for purposes of the PPP, 
SBA regulations do not bar a religious 
nonprofit entity from making decisions 
with respect to the membership or the 
employment of individuals of a 
particular religion to perform work 
connected with the carrying on by such 
nonprofit of its activities. 
2. Student Workers and PPP Loan 
Eligibility 
Do student workers count when 
determining the number of employees 
for PPP loan eligibility? 
Yes, student workers generally count 
as employees, unless (a) the applicant is 
an institution of higher education, as 
defined in the Department of 
Education’s Federal Work-Study 
regulations, 34 675.2, and (b) the 
student worker’s services are performed 
as part of a Federal Work-Study Program 
(as defined in those regulations 1) or a 
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(1) the Federal Work-Study Program, (2) the Job 
Location and Development Program, and (3) Work 
Colleges Program. 
2 26 CFR 54.4980H–1(a)(24) (‘‘Hour of service 
. . . (ii) Excluded hours . . . (B) Work-study 
program. The term hour of service does not include 
any hour for services to the extent those services 
are performed as part of a Federal Work-Study 
Program as defined under 34 CFR 675 or a 
substantially similar program of a State or political 
subdivision thereof.’’). 
3 79 FR 8544, 8550 (Feb. 12, 2014). 
4 Internal Revenue Code Section 3121(b)(10) 
excepts from FICA tax ‘‘service performed in the 
employ of—(A) a school, college, university . . . if 
such service is performed by a student who is 
enrolled and regularly attending classes at such 
school, college, university.’’ Student workers, who 
are not full time, are excepted where the services 
are ‘‘incident to and for the purposes of pursuing 
a course of study.’’ 26 CFR 31.3121(b)(10)–2(d)(3)(i). 
substantially similar program of a State 
or political subdivision thereof. 
Institutions of higher education must 
exclude work study students when 
determining the number of employees 
for PPP loan eligibility, and must also 
exclude payroll costs for work study 
students from the calculation of payroll 
costs used to determine their PPP loan 
amount. 
The Administrator, in consultation 
with the Secretary, has determined that 
this is a reasonable interpretation of 
section 1102(a) of the CARES Act’s 
reference to ‘‘individuals employed on a 
full-time, part-time, or other basis.’’ 
Such programs generally provide part- 
time jobs for students with financial 
need, and their services are incident to 
and for the purpose of pursuing a course 
of study. Work study students are 
excluded from the definition of 
employees in other areas of federal law. 
For example, in the regulations 
implementing the Affordable Care Act, 
Treasury defined an employee’s ‘‘hours 
of service’’ to exclude work study 
hours.2 Explaining this exclusion, the 
regulation’s preamble states that ‘‘[t]he 
federal work study program, as a 
federally subsidized financial aid 
program, is distinct from traditional 
employment in that its primary purpose 
is to advance education.’’ 3 Similarly, 
student work is generally exempt from 
Federal Insurance Contribution Act 
(FICA) and Federal Unemployment 
taxes.4 
For similar reasons, the 
Administrator, in consultation with the 
Secretary of the Treasury, has 
determined that a limited exception for 
work study is appropriate here. In 
particular, the Administrator recognizes 
that requiring institutions of higher 
education to count work study students 
towards employee headcount would 
result in an anomalous outcome in two 
respects. First, it would prevent some 
small educational institutions from 
receiving PPP loans due solely to their 
provision of financial aid to students in 
the form of work study. Second, it 
would result in the exclusion of small 
educational institutions whose part-time 
work study headcount dwarfs their full- 
time faculty and staff headcounts. 
Educational institutions that filed loan 
applications prior to the issuance of the 
regulation are not bound by this 
interpretation but may rely on it. 
Lenders may continue to rely on 
borrower certifications as part of their 
good faith review process. 
3. Additional Information
SBA may provide further guidance, if
needed, through SBA notices that will 
be posted on SBA’s website at 
www.sba.gov. Questions on the 
Paycheck Protection Program may be 
directed to the Lender Relations 
Specialist in the local SBA Field Office. 
The local SBA Field Office may be 
found at https://www.sba.gov/tools/ 
local-assistance/districtoffices. 
Compliance With Executive Orders 
12866, 12988, 13132, 13563, and 13771, 
the Paperwork Reduction Act (44 U.S.C. 
Ch. 35), and the Regulatory Flexibility 
Act (5 U.S.C. 601–612). 
Executive Orders 12866, 13563, and 
13771 
This interim final rule is 
economically significant for the 
purposes of Executive Orders 12866 and 
13563, and is considered a major rule 
under the Congressional Review Act. 
SBA, however, is proceeding under the 
emergency provision at Executive Order 
12866 Section 6(a)(3)(D) based on the 
need to move expeditiously to mitigate 
the current economic conditions arising 
from the COVID–19 emergency. This 
rule’s designation under Executive 
Order 13771 will be informed by public 
comment. 
Executive Order 12988 
SBA has drafted this rule, to the 
extent practicable, in accordance with 
the standards set forth in section 3(a) 
and 3(b)(2) of Executive Order 12988, to 
minimize litigation, eliminate 
ambiguity, and reduce burden. The rule 
has no preemptive or retroactive effect. 
Executive Order 13132 
SBA has determined that this rule 
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. Therefore, 
SBA has determined that this rule has 
no federalism implications warranting 
preparation of a federalism assessment. 
Paperwork Reduction Act, 44 U.S.C. 
Chapter 35 
SBA has determined that this rule 
will not impose new or modify existing 
recordkeeping or reporting requirements 
under the Paperwork Reduction Act. 
Regulatory Flexibility Act (RFA) 
The Regulatory Flexibility Act (RFA) 
generally requires that when an agency 
issues a proposed rule, or a final rule 
pursuant to section 553(b) of the APA or 
another law, the agency must prepare a 
regulatory flexibility analysis that meets 
the requirements of the RFA and 
publish such analysis in the Federal 
Register. 5 U.S.C. 603, 604. Specifically, 
the RFA normally requires agencies to 
describe the impact of a rulemaking on 
small entities by providing a regulatory 
impact analysis. Such analysis must 
address the consideration of regulatory 
options that would lessen the economic 
effect of the rule on small entities. The 
RFA defines a ‘‘small entity’’ as (1) a 
proprietary firm meeting the size 
standards of the Small Business 
Administration (SBA); (2) a nonprofit 
organization that is not dominant in its 
field; or (3) a small government 
jurisdiction with a population of less 
than 50,000. 5 U.S.C. 601(3)–(6). Except 
for such small government jurisdictions, 
neither State nor local governments are 
‘‘small entities.’’ Similarly, for purposes 
of the RFA, individual persons are not 
small entities. The requirement to 
conduct a regulatory impact analysis 
does not apply if the head of the agency 
‘‘certifies that the rule will not, if 
promulgated, have a significant 
economic impact on a substantial 
number of small entities.’’ 5 U.S.C. 
605(b). The agency must, however, 
publish the certification in the Federal 
Register at the time of publication of the 
rule, ‘‘along with a statement providing 
the factual basis for such certification.’’ 
If the agency head has not waived the 
requirements for a regulatory flexibility 
analysis in accordance with the RFA’s 
waiver provision, and no other RFA 
exception applies, the agency must 
prepare the regulatory flexibility 
analysis and publish it in the Federal 
Register at the time of promulgation or, 
if the rule is promulgated in response to 
an emergency that makes timely 
compliance impracticable, within 180 
days of publication of the final rule. 5 
U.S.C. 604(a), 608(b). Rules that are 
exempt from notice and comment are 
also exempt from the RFA requirements, 
including conducting a regulatory 
flexibility analysis, when among other 
things the agency for good cause finds 
that notice and public procedure are 
impracticable, unnecessary, or contrary 
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to the public interest. SBA Office of 
Advocacy guide: How to Comply with 
the Regulatory Flexibility Act, Ch.1. p.9. 
Accordingly, SBA is not required to 
conduct a regulatory flexibility analysis. 
Jovita Carranza, 
Administrator. 
[FR Doc. 2020–09963 Filed 5–7–20; 8:45 am] 
BILLING CODE 8026–03–P 
SMALL BUSINESS ADMINISTRATION 
13 CFR Part 124 
RIN 3245–AH13 
Regulatory Reform Initiative: Small 
Disadvantaged Businesses 
AGENCY: U.S. Small Business 
Administration. 
ACTION: Direct final rule. 
SUMMARY: The U.S. Small Business 
Administration (SBA) is removing from 
the Code of Federal Regulations (CFR) 
16 regulations that are no longer 
necessary because they are either 
redundant or obsolete. This action will 
assist the public by simplifying SBA’s 
regulations. 
DATES: This rule is effective on August 
6, 2020 without further action, unless 
significant adverse comment is received 
by July 7, 2020. If significant adverse 
comment is received, SBA will publish 
a timely withdrawal of the rule in the 
Federal Register. 
ADDRESSES: You may submit comments, 
identified by RIN 3245–AH13 by any of 
the following methods: 
• Federal eRulemaking Portal: http:// 
www.regulations.gov. Follow the 
instructions for submitting comments. 
• Mail or Hand Delivery/Courier: 
Brenda Fernandez, U.S. Small Business 
Administration, Office of Policy, 
Planning and Liaison, 409 Third Street 
SW, 8th Floor, Washington, DC 20416. 
SBA will post all comments on http:// 
www.regulations.gov. If you wish to 
submit confidential business 
information (CBI), as defined in the User 
Notice at http://www.regulations.gov, 
please submit the information to Brenda 
Fernandez, U.S. Small Business 
Administration, Office of Policy, 
Planning and Liaison, 409 Third Street 
SW, 8th Floor, Washington, DC 20416, 
or send an email to brenda.fernandez@
sba.gov. Highlight the information that 
you consider to be CBI and explain why 
you believe SBA should hold this 
information as confidential. SBA will 
review the information and make the 
final determination on whether it will 
publish the information. 
FOR FURTHER INFORMATION CONTACT: 
Brenda Fernandez, U.S. Small Business 
Administration, Office of Policy, 
Planning and Liaison, 409 Third Street 
SW, Washington, DC 20416; (202) 205– 
7337; brenda.fernandez@sba.gov. 
SUPPLEMENTARY INFORMATION: 
Small Disadvantaged Business Program 
The government promotes contracting 
and subcontracting with small 
disadvantaged businesses (SDBs) by 
setting government-wide and agency- 
specific goals for the percentage of 
Federal contract and subcontract dollars 
awarded to SDBs each fiscal year. The 
government-wide goal is that not less 
than 5 percent of the total value of all 
prime contract and subcontract awards 
be made to SDBs. At one time, SDBs had 
to be certified by the SBA, or by a 
private certifying entity acting in 
compliance with SBA regulations, to 
qualify for certain Federal programs as 
prime contractors. However, all Federal 
programs for SDB prime contractors 
have been discontinued, with only the 
government-wide and agency-specific 
goals for the percentage of Federal 
contract and/or subcontract dollars 
awarded to SDBs each year remaining. 
Pursuant to the SDB subcontracting 
program, Federal agencies must 
negotiate subcontracting plans with the 
apparent successful bidder or offeror on 
qualifying prime contracts prior to 
awarding the contract. Subcontracting 
plans set goals for the percentage of 
subcontract dollars to be awarded to 
SDBs, among others, and describe 
efforts that will be made to ensure that 
SDBs have an equitable opportunity to 
compete for subcontracts. Federal 
agencies may also consider the extent of 
subcontracting with SDBs in 
determining to whom to award a 
contract or whether to give contractors 
monetary incentives to subcontract with 
SDBs. 
Firms do not need to be certified 
SDBs to qualify for Federal programs for 
subcontractors. Rather, a firm may 
represent that it qualifies as an SDB for 
any Federal subcontracting program if it 
believes in good faith that it is owned 
and controlled by one or more socially 
and economically disadvantaged 
individuals. In addition, 8(a) 
Participants are deemed to be SBDs for 
Federal contracting purposes. As of 
August 8, 2019, the SBA’s Dynamic 
Small Business Search database 
included 125,616 self-certified SDBs. 
Background Information 
On February 24, 2017, President 
Trump issued Executive Order 13777, 
Enforcing the Regulatory Reform 
Agenda, which further emphasized the 
goal of the Administration to alleviate 
the regulatory burdens placed on the 
public. Under Executive Order 13777, 
agencies must evaluate their existing 
regulations to determine which ones 
should be repealed, replaced, or 
modified. In doing so, agencies should 
focus on identifying regulations that, 
among other things: Eliminate jobs or 
inhibit job creation; are outdated, 
unnecessary or ineffective; impose costs 
that exceed benefits; create a serious 
inconsistency or otherwise interfere 
with regulatory reform initiatives and 
policies; or are associated with 
Executive Orders or other Presidential 
directives that have been rescinded or 
substantially modified. 
In response to the President’s 
directive, SBA initiated a review of its 
regulations to determine which might be 
revised or eliminated. Based on this 
analysis, SBA has identified 
unnecessary provisions that can be 
removed from the CFR. First, this rule 
removes 13 CFR 124.516—which states 
that the procuring activity decides all 
contract disputes arising between an 
8(a) Participant and a procuring activity 
contracting officer after the award of an 
8(a) contract—because this provision is 
redundant. 13 CFR 124.512 already 
delegates 8(a) contract administration 
functions to procuring agencies and 
contract dispute resolution is an 
element of contract administration. 
Second, this rule removes 13 CFR 
124.1002 through 124.1016. As 
discussed below, these provisions 
pertain to the Small Disadvantaged 
Business Program, which is no longer a 
viable program. Section 1207 of the 
1987 Defense Authorization Act (Pub. L. 
99–661, codified in 10 U.S.C. 2323) 
established a statutory 5 percent goal for 
all Department of Defense (DOD) 
contracts to be awarded to small 
disadvantaged businesses (SDBs). To 
this end, the statute authorized the 
award of contracts to SDBs using less 
than full and open competitive 
procedures. Specifically, DOD 
implemented regulations requiring a 
contracting officer to set-aside a 
procurement for exclusive competition 
among SDBs whenever market research 
identified two or more SDBs that could 
perform the contract at a fair and 
reasonable price. In addition, SDBs 
would receive a 10 percent price 
evaluation adjustment for offers 
submitted in an unrestricted or full and 
open competition. DOD’s SDB program 
was initially a self-certification program. 
SBA established eligibility criteria, but 
firms self-certified their SDB status for 
particular procurements. However, SBA 
was responsible for processing SDB 
VerDate Sep<11>2014 
15:57 May 07, 2020
Jkt 250001
PO 00000
Frm 00004
Fmt 4700
Sfmt 4700
E:\FR\FM\08MYR1.SGM
08MYR1

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2020-05-08_2020-09963.pdf

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2020-05-08_2020-09963.pdf

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www.federalregister.gov