Small Business Size Standards; Waiver of the Nonmanufacturer Rule

AGENCY:

U.S. Small Business Administration.

ACTION:

Notice of Retraction of a Class Waiver

SUMMARY:

The U.S. Small Business Administration (SBA) is terminating a waiver of the Nonmanufacturer Rule for Service Code (PSC) 9130, Liquid Propellants—Petroleum Base, under North American Industry Classification System (NAICS) code 324110 (Petroleum Refineries), based on SBA's discovery of small business manufacturers. Terminating this waiver will require recipients of Federal contracts set aside for small businesses, Service-Disabled Veteran-Owned (SDVO) small businesses, Participants in SBA's 8(a) Business Development (BD) Program, or Women-Owned Small Business (WOSB) concerns to provide the products of small business manufacturers or processors on such contracts.

DATES:

This action is effective August 2, 2011.

FOR FURTHER INFORMATION CONTACT:

Ms. Amy Garcia, Procurement Analyst, by telephone at (202) 205-6842; by Fax at (202) 481-1630; or by e-mail at amy.garcia@sba.gov.

SUPPLEMENTARY INFORMATION:

Section 8(a)(17) of the Small Business Act (Act), 15 U.S.C. 637(a)(17), and SBA's implementing regulations require that recipients of Federal supply contracts set aside for small businesses, SDVO small businesses, Participants in the SBA's 8(a) BD Program, or WOSBs, provide the product of a small business manufacturer or processor, if the recipient is other than the actual manufacturer or processor of the product. This requirement is commonly referred to as the Nonmanufacturer Rule. 13 CFR 121.406(b), 125.15(c), 127.505. Section 8(a)(17)(b)(iv) of the Act authorizes SBA to waive the Nonmanufacturer Rule for any “class of products” for which there are no small business manufacturers or processors available to participate in the Federal market.

In order to be considered available to participate in the Federal market for a class of products, a small business manufacturer must have submitted a proposal for a contract solicitation or received a contract from the Federal Government within the last 24 months. 13 CFR 121.1202(c). The SBA defines “class of products” based on the Office of Management and Budget's NAICS. SBA also uses product service codes to further define a class of products with an industry.

On June 8, 2009, SBA granted a class waiver for liquid propellants-petroleum. 74 FR 27202. Liquid propellants-petroleum based are identified in NAICS code 324110 under PSC 9130. Soon after the class waiver was published, SBA was notified by the Defense Logistics Agency, Defense Energy Support Center (DESC), Fort Belvoir, VA, that the agency has awarded prime contracts to, or received offers from, small business refiners. On August 4, 2009, SBA published a proposed Notice of Retraction of a Waiver from the Nonmanufacturer Rule for PSC 9130 (Liquid Propellants—Petroleum Base), under NAICS code 324110 (Petroleum Refineries) seeking comments on the proposed retraction of waiver. 74 FR 18584. A final Notice of Retraction of a Waiver was not published. Consequently, on June 3, 2011, SBA again issued a Federal Register notice of its intent to retract the class waiver (76 FR 13777), seeking comments on the proposed retraction.

SBA received two responses to this notice, one from a Federal agency and one from a small business nonmanufacturer. One nonmanufacturer objected to the proposed termination of the waiver. However, the nonmanufacturer did not provide evidence that small business manufacturers are not available to participate in the Federal marketplace. Instead, the nonmanufacturer indicated termination of the class waiver may hinder its ability to compete for set-asides in certain circumstances. However, the underlying purpose of the Small Business Act's manufacturing requirements is to encourage small business manufacturing. Thus, if small business manufacturers exist that can satisfy a particular requirement, then an offeror must supply the product of a small business manufacturer. If these performance requirements cannot be met, a contracting officer may request an individual waiver in connection with a specific contract. A class waiver is only appropriate if no small business manufacturer is available to participate in the Federal marketplace, and based on available evidence, small business manufacturers are participating in this Federal marketplace for this item. In a letter to SBA dated June 20, 2011, DLA identified seven (7) small business refiners to which DLA has awarded prime contracts to, or received offers from, who participate in the Federal market.

Therefore, SBA is retracting the Nonmanufacturer Rule class waiver previously granted for PSC 9130 (Liquid Propellants—Petroleum Base), under NAICS code 324110 (Petroleum Refineries).