[Federal Register Volume 59, Number 186 (Tuesday, September 27, 1994)]
[Unknown Section]
[Page 0]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 94-23831]
[[Page Unknown]]
[Federal Register: September 27, 1994]
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SMALL BUSINESS ADMINISTRATION
13 CFR Part 121
Small Business Size Standards; Waiver of Nonmanufacturer Rule
AGENCY: Small Business Administration.
ACTION: Final rule.
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SUMMARY: The Small Business Administration (SBA) amends its regulations
governing waivers to its nonmanufacturer rule. In essence, this rule
reflects more accurately the statutory language set forth in section
8(a)(17)(B)(iv) of the Small Business Act to ensure that SBA's size
regulations are consistent with the statute.
EFFECTIVE DATE: This rule is effective September 27, 1994.
ADDRESSES: Written comments should be addressed to David R. Kohler,
Associate General Counsel for General Law, U.S. Small Business
Administration, 409 3rd Street, S.W., Washington, D.C. 20416.
FOR FURTHER INFORMATION CONTACT:
John W. Klein, Chief Counsel for Special Programs, (202) 205-6645.
SUPPLEMENTARY INFORMATION: Section 210 of the Small Business
Administration Reauthorization and Amendments Act of 1990, Public Law
101-574, 104 Stat. 2814, 2821, revised section 8(a)(17)(B)(iv) of the
Small Business Act (the Act), 15 U.S.C. 637(a)(17)(B)(iv), by providing
for the possibility of a contract-specific waiver to SBA's
nonmanufacturer rule (the requirement that, for a supply contract, a
small business concern that is not itself the manufacturer must provide
the product of a domestic small business manufacturer in order to be
considered a small business). An earlier statute, the Business
Opportunity Development Reform Act of 1988 (Pub. L. 100-656, 102 Stat.
3853) provided for the possibility of waivers to the nonmanufacturer
rule for classes of products for which there were no small business
manufacturers in the federal market.
In a final rule (the ``Rule'') published in the Federal Register on
September 21, 1993, 58 FR 48956, SBA defined the nonmanufacturer rule
as ``the requirement set forth in 13 CFR 121.906 and 121.1106 that a
contractor * * * provide its own product or that of another domestic
small business * * *'' (Emphasis added). 13 CFR 121.2102(e). The final
rule defined the term ``Federal market'' as acquisitions by the Federal
government from ``offerors located in the entire geographic United
States'' or a more restricted market area. 13 CFR 121.2102(d). The
final rule also set forth procedures for waiver of the nonmanufacturer
rule as to classes of products. On March 18, 1994, SBA published a
final rule amending 13 CFR 121.906 and 121.1106 to provide for a
contract-specific waiver. 59 FR 12811. These regulations permit waivers
of the nonmanufacturer rule for either classes of products or specific
procurements after a determination ``that no small business
manufacturer or processor is available to participate in the Federal
procurement market.'' 13 CFR 121.906(b)(3) and 121.1106(b)(3). As
further background, the prior wording of 13 CFR 121.906(b)(3) and
121.1106(b)(3) also referred to waivers for classes of products for
which there were no small business manufacturers or processors ``in the
Federal market''. Thus, SBA has consistently regarded the
nonmanufacturer rule and its waivers of that rule as involving a
single, non-severable requirement for domestic small business
suppliers.
On August 30, 1994, the SBA published a proposed rule that would
make various revisions to its section 8(a) program. 59 FR 44652.
Included within this rule was a proposal to clarify the nonmanufacturer
rule by specifically authorizing a small business nonmanufacturer to
supply other than a product made in the United States for a small
business set aside or section 8(a) contract where the procuring agency
makes a non-availability determination under the Buy American Act and
section 25.102(a)(4) of the Federal Acquisition Regulation (FAR), Title
48 of the Code of Federal Regulations. Id. at 44653-54, 44659-60. This
reference was designed to take note expressly of the separate domestic
business requirement imposed by the Buy American Act. The proposed rule
allowed a thirty-day comment period, or until September 29, 1994.
After a careful legal review of Section 210 of Pub. L. 101-574 (the
statutory provision authorizing a waiver to SBA's nonmanufacturer
rule), its accompanying legislative history, and a written comment
received prior to the publication of the August 30, 1994 proposed rule
that pertains to the ``domestic'' portion of the nonmanufacturing rule,
SBA has concluded that the correct interpretation of the Act is that a
waiver of the nonmanufacturer rule under section 8(a)(17)(B)(iv) is a
waiver of the entire requirement that a nonmanufacturer must supply the
product of a domestic small business. In this regard, section
8(a)(17)(B)(iv) of the Act states that a nonmanufacturer must ``supply
the product of a domestic small business manufacturer or processor,
unless [the Administrator grants] a waiver of such requirement.'' SBA
believes that the statutory reference to ``such requirement'' relates
to the entire requirement that, absent a waiver, a nonmanufacturer must
supply the product of a domestic small business. A waiver issued
pursuant to this statutory authority therefore serves to authorize a
nonmanufacturer to supply other than the product of a domestic small
business while still qualifying as a small business under the Act. It
should be noted, however, that SBA's waiver of its nonmanufacturer rule
does not waive other government-wide requirements applicable to
government procurement, such as the Buy American Act, and any
statements of SBA to the effect that the domestic requirement could not
be waived by SBA were intended only to make this point.
SBA recognizes that its current regulations may still cause some
confusion on this point. Currently, 13 CFR 121.906(b)(1), for small
business set asides, and 13 CFR 121.1106(b)(1), for 8(a) procurement,
each contain a separate paragraph (iv) ostensibly suggesting that a
nonmanufacturer must supply a product that was manufactured or produced
in the United States regardless of whether a waiver has been granted.
As indicated above, SBA believes that the waiver of any domestic
manufacture requirement is statutorily contained within any waiver of
the nonmanufacturer rule granted. These paragraphs are also
inconsistent with the other regulatory provisions described above which
have dealt with definitions relevant to the nonmanufacturer rule and
its waiver.
SBA believes clarification to its regulations is advisable to
eliminate any such inconsistency or confusion. This final rule
incorporates, without substantive change, the statutory language of
section 8(a)(17)(B)(iv) of the Act into SBA's size regulations at 13
CFR 121.906(b)(1)(iii) for small business set aside procurements and at
13 CFR 121.1106(b)(1)(iii) for section 8(a) procurements, and
eliminates any inconsistency in the regulations. It also adds
clarifying language by adding new paragraphs 121.906(b)(4) and
121.1106(b)(4) to explain that an SBA waiver of the nonmanufacturer
rule has no effect on other laws and regulations dealing with domestic
or foreign sources for government acquisitions which may exist outside
the Act.
Because the statutory requirement regarding waivers to the
nonmanufacturer rule of section 8(a)(17)(B)(iv) of the Act is being
implemented in this final rule, SBA believes that the portion of the
August 30, 1994 proposed rule regarding such waivers has been
superseded. The remainder of that proposed rule has not been affected
by this final rule, and will be completed upon publication of a further
final rule on revisions to the section 8(a) program.
Compliance With Executive Orders 12612, 12778, and 12866, the
Regulatory Flexibility Act (5 U.S.C. 601, et seq.), and the Paperwork
Reduction Act (44 U.S.C. Ch. 35)
This rule was not reviewed under Executive Order 12866.
SBA certifies that this final rule will not 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 is necessary to resolve a possible discrepancy between the Small
Business Act and SBA's size regulations concerning the size eligibility
of certain nonmanufacturers for small business set aside and section
8(a) contracts. It will have no significant effect, however, on the
amount or dollar value of any contract requirement or the number of
requirements set aside for small business or the 8(a) program. As such,
it is not likely to have an annual economic effect of $100 million or
more, result in a major increase in costs or prices, or have a
significant adverse effect on competition or the United States economy.
For purposes of the Paperwork Reduction Act, 44 U.S.C. Ch. 35, SBA
certifies that this final rule contains no new reporting or record
keeping requirements.
For purposes of Executive Order 12612, SBA certifies that this rule
does not have any federalism implications warranting the preparation of
a Federalism Assessment.
For purposes of Executive Order 12778, SBA certifies that this rule
is drafted, to the extent practicable, in accordance with the standards
set forth in Section 2 of that Order.
List of Subjects in 13 CFR Part 121
Government procurement; Government property; Grant programs--
business; Loan programs--business; Small businesses.
For the reasons set forth above, part 121 of Title 13, Code of
Federal Regulations, is amended as follows:
PART 121--[AMENDED]
1. The authority citation for 13 CFR Part 121 continues to read as
follows:
Authority: 15 U.S.C. Secs. 632(a), 634(b)(6), 637(a) and 644(c);
and Pub. L. 102-486, 106 Stat. 2776, 3133.
2. Section 121.906(b)(1) is revised and (b)(4) is added to read as
follows:
Sec. 121.906 Manufactured products under small business set-aside
procurements.
* * * * *
(b) * * * (1) In order to qualify as a small business, a concern
need not be the manufacturer of the item(s) being acquired under a
manufacturing contract, provided that the concern:
(i) Is a small business concern under this part under a 500
employee size standard;
(ii) Is primarily engaged in the wholesale or retail trade; and
(iii) Represents that it will supply the end product (as defined in
paragraph (b)(2) of this section) of a domestic small business
manufacturer or processor, or obtains a waiver of such requirement
pursuant to paragraph (b)(3) of this section.
* * * * *
(4) Any waiver of the nonmanufacturer rule granted by the
Administrator pursuant to paragraph (b)(3) of this section has no
effect on requirements external to the Small Business Act which involve
domestic sources of supply, such as the Buy American Act.
* * * * *
3. Section 121.906(b)(3) is amended by adding the word ``domestic''
after the words ``manufactured by a'' and before the phrase ``small
business manufacturer.''
4. and 5. Section 121.1106(b)(1) is revised and (b)(4) is added to
read as follows:
Sec. 121.1106 Manufactured products under section 8(a) contracts.
* * * * *
(b) * * * (1) In order to qualify as a small business, a concern
need not be the manufacturer of the item(s) being acquired under a
manufacturing contract, provided that the concern:
(i) Is a small business concern under this part under a 500
employee size standard;
(ii) Is primarily engaged in the wholesale or retail trade; and
(iii) Represents that it will supply the end product (as defined in
paragraph (b)(2) of this section) of a domestic small business
manufacturer or processor, or obtains a waiver of such requirement
pursuant to paragraph (b)(3) of this section.
* * * * *
(4) Any waiver of the nonmanufacturer rule granted by the
Administrator pursuant to paragraph (b)(3) of this section has no
effect on requirements external to the Small Business Act which involve
domestic sources of supply, such as the Buy American Act.
* * * * *
6. Section 121.1106(b)(3) is amended by adding the word
``domestic'' after the words ``manufactured by a'' and before the
phrase ``small business manufacturer.''
Dated: September 20, 1994.
Erskine B. Bowles,
Administrator.
[FR Doc. 94-23831 Filed 9-26-94; 8:45 am]
BILLING CODE 8025-01-M
