SUPPLEMENTARY INFORMATION:

I. Background Information

This direct final rule adds the U.S. Virgin Islands, American Samoa, Guam, and the Commonwealth of the Northern Mariana Islands (CNMI) to the list of territories from which small businesses are eligible for preferential treatment under two government programs: the surplus property program and the SBA mentor-protégé program for government contracting. These changes are required by NDAA FY21, Public Law 116-283.

Section 866 of NDAA FY21 defined a “covered territory business” as a small business concern that has its principal office located in one of the following: (1) the U.S. Virgin Islands; (2) American Samoa; (3) Guam; or (4) the CNMI.

Under the law, a covered territory business receives priority for surplus property transfers for four years after the enactment of NDAA FY21, which occurred on January 1, 2021. This direct final rule extends the changes that SBA made in a prior rulemaking about the surplus property program (Use of Federal Surplus Property for Veteran-Owned Small Businesses, and Small Businesses in Disaster Areas and Puerto Rico, 85 FR 69120, effective December 2, 2020). SBA is amending part 129 of its regulations to add a covered territory business to the eligibility list for the surplus property program, through January 1, 2025. SBA is treating covered territory businesses similarly to businesses located in Puerto Rico: a covered territory business would have its principal place of business located in its respective covered territory. For example, in order for a small business to be considered located in Guam, the small business should have a physical location in Guam.

Additionally, section 866 created two new incentives for SBA's small business mentor-protégé program for mentor-protégé pairs in which the protégé is a covered territory business. First, the mentor would receive positive consideration in its past-performance evaluations. Second, if the mentor incurs costs training the protégé, the mentor is able to apply those costs as subcontracting expenses and count them toward subcontracting goals contained in the mentor's subcontracting plans. These incentives already exist for mentors with protégés that are Puerto Rico businesses.

II. Section-by-Section Analysis

13 CFR 125.1

SBA adds a definition for “covered territory business.” A covered territory business is a small business with its principal office located in the U.S. Virgin Islands, American Samoa, Guam, or the CNMI.

13 CFR 125.9

SBA adds a covered territory business to paragraph (b)(3)(ii) so that a mentor-protégé relationship with a covered territory business does not count toward the mentor's limit on the number of protégés. Generally, a mentor is only allowed three protégés at a time. A protégé does not count, however, if the protégé has its principal office located in Puerto Rico or qualifies as a covered territory business.

SBA adds a covered territory business to paragraph (d)(6), which currently lists the special incentives for mentors with a protégé that is located in Puerto Rico. Such a mentor is able to receive positive consideration for the mentor's past performance evaluation and applying costs of training the protégé to the subcontracting goals in its subcontracting plan.

13 CFR Part 129

This direct final rule revises the title of part 129 to incorporate the term “covered territory businesses” to align the title with the amendments being made to the part via this rule.

13 CFR 129, Subpart C

This direct final rule changes the title of subpart C, which currently covers Puerto Rico businesses, to incorporate covered territory businesses into the list ( printed page 50926) of small businesses eligible to receive Federal surplus property.

13 CFR 129.301

The direct final rule adds the definition of a covered territory business. Additionally, the direct final rule revises the definition of covered period to specify that, for a covered territory business, the covered period ends on January 1, 2025.

A covered territory business will be able to obtain surplus property from its territory's State Agency for Surplus Property, in accordance with the same regulations that currently apply to Puerto Rico businesses.

III. Compliance With Executive Orders 12866, 12988, 13132, 13175, 13563, the Congressional Review Act (5 U.S.C. 801-808), the Paperwork Reduction Act (44 U.S.C., Ch. 35), the Regulatory Flexibility Act, (5 U.S.C. 601-612), and the Administrative Procedure Act (5 U.S.C. 553)

Executive Order 12866

The Office of Management and Budget (OMB) has determined that this direct final rule is a not a significant regulatory action for the purposes of Executive Order 12866.

Executive Order 12988

This direct final rule meets applicable standards set forth in sections 3(a) and 3(b)(2) of Executive Order 12988, Civil Justice Reform, to minimize litigation, eliminate ambiguity, and reduce burden. The action does not have retroactive or preemptive effect.

Executive Order 13132

For the purposes of Executive Order 13132, Federalism, SBA has determined that this direct final 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 levels of government. Therefore, for the purpose of Executive Order 13132, SBA has determined that this direct final rule has no federalism implications warranting preparation of a federalism assessment.

Executive Order 13175

This direct final rule does not have tribal implications under Executive Order 13175, Consultation and Coordination with Indian Tribal Governments, because it would not have a substantial direct effect on one or more Indian tribes, on the relationship between the Federal Government and Indian tribes, or on the distribution of power and responsibilities between the Federal Government and Indian tribes.

Executive Order 13563

Executive Order 13563 reaffirms the principles of Executive Order 12866 while calling for improvements in the nation's regulatory system to promote predictability, to reduce uncertainty, and to use the best, most innovative, and least burdensome tools for achieving regulatory ends. The executive order directs agencies to consider regulatory approaches that reduce burdens and maintain flexibility and freedom of choice for the public where these approaches are relevant, feasible, and consistent with regulatory objectives. Executive Order 13563 also requires that regulations be based on the open exchange of information and perspectives among state and local officials, affected stakeholders in the private sector, and the public as a whole. SBA has developed this rule in a manner consistent with these requirements. While developing this rule, SBA responded to specific inquiries from government officials and the public regarding the implementation of the statutory required changes.

Congressional Review Act

Subtitle E of the Small Business Regulatory Enforcement Fairness Act of 1996 (codified at 5 U.S.C. 801-808), also known as the Congressional Review Act or CRA, generally provides that before a rule may take effect, the agency promulgating the rule must submit a rule report, which includes a copy of the rule, to each House of the Congress and to the Comptroller General of the United States. SBA will submit a report containing this rule and other required information to the U.S. Senate, the U.S. House of Representatives, and the Comptroller General of the United States. A major rule under the CRA cannot take effect until 60 days after it is published in the Federal Register . OMB's Office of Information and Regulatory Affairs has determined that this rule is not a “major rule” as defined by 5 U.S.C. 804(2).

Paperwork Reduction Act

SBA has determined that this direct final rule does not impose additional reporting or recordkeeping requirements under the Paperwork Reduction Act, 44 U.S.C., Chapter 35.

Regulatory Flexibility Act

The Regulatory Flexibility Act (RFA), 5 U.S.C. 601, requires administrative agencies to consider the effect of their actions on small entities, small nonprofit enterprises, and small local governments. Pursuant to the RFA, when an agency issues a rulemaking, the agency must prepare a regulatory flexibility analysis which describes the impact of the rule on small entities. However, section 605 of the RFA allows an agency to certify a rule, in lieu of preparing an analysis if the rulemaking is not expected to have a significant economic impact on a substantial number of small entities. The RFA defines “small entity” to include “small businesses,” “small organization,” and “small governmental jurisdictions.”

This Direct Final Rule adds the U.S. Virgin Islands, American Samoa, Guam, and the Commonwealth of the Northern Mariana Islands (CNMI) to the list of territories from which small businesses are eligible for preferential treatment under two government programs: the surplus property program and the SBA mentor-protégé program for government contracting. This rule relates to small business concerns but would not affect “small organizations” or “small governmental jurisdictions” because the programs affected generally apply only to “business concerns” as defined by SBA regulations; in other words, to small businesses organized for profit. “Small organizations” or “small governmental jurisdictions” are non-profits or governmental entities and do not generally qualify as “business concerns” within the meaning of SBA's regulations.

SBA identified 219 small business vendors across the covered territories for FY2021 that had sold to the Federal government and therefore would benefit from the changes to SBA's mentor-protégé program. Based on the number of small business vendors across the covered territories affected, SBA believes that the rule will not have an impact on a substantial number of entities nor a significant economic impact.

Accordingly, the Administrator of the SBA hereby certifies that this rule will not have a significant economic impact on a substantial number of small entities. SBA invites comments from members of the public who believe there will be a significant impact on any small entities, including small businesses.

Administrative Procedure Act—Justification for Direct Final Rule

In general, SBA publishes a rule for public comment before issuing a final rule, in accordance with the Administrative Procedure Act. 5 U.S.C. 553. The Administrative Procedure Act provides an exception to this standard rulemaking process, however, where an agency finds good cause to adopt a rule ( printed page 50927) without prior public participation. 5 U.S.C. 553(b)(3)(B). The good cause requirement is satisfied when prior public participation is impracticable, unnecessary, or contrary to the public interest.

SBA is publishing this rule as a direct final rule because public participation is unnecessary. SBA views this as a non-controversial administrative action because it merely implements a change required by the Small Business Act, as amended by section 866 of NDAA FY21. This rule will be effective on the date shown in the DATES section unless SBA receives significant adverse comment on or before the deadline for comments. Significant adverse comments are comments that provide strong justifications why the rule should not be adopted or for changing the rule. SBA does not expect to receive any significant adverse comments because the rule simply mirrors the statutory language contained in section 866 of NDAA FY21, with no extraneous interpretation or other expanded text.

If SBA receives significant adverse comment, SBA will publish a notice in the Federal Register withdrawing this rule before the effective date. If SBA receives no significant adverse comments, the rule will be effective 60 days after publication without further notice.

For the reasons stated in the preamble, SBA amends 13 CFR parts 125 and 129 as follows:

1. The authority citation for part 125 continues to read as follows:

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

2. Amend § 125.1 by adding a definition for “Covered territory business” in alphabetical order to read as follows:

3. Amend § 125.9 by revising the second sentence in paragraph (b)(3)(ii) and revising paragraph (d)(6) introductory text to read as follows:

4. The authority citation for part 129 continues to read as follows:

Authority: 15 U.S.C. 636(j)(13)(F)(ii), (iii), and 644(f).

5. Revise the heading for part 129 to read as set forth above.

6. Revise the heading for subpart C to read as follows:

7. Amend § 129.300 by revising the definition of “Covered period” and by adding a definition for “Covered territory business” in alphabetical order to read as follows:

8. Amend § 129.301 by revising the section heading and paragraphs (a), (b)(1), and (c)(1) introductory text and by redesignating paragraph (f) as paragraph (e).

The revisions read as follows: