[Federal Register Volume 76, Number 51 (Wednesday, March 16, 2011)]
[Proposed Rules]
[Pages 14323-14341]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2011-5876]


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SMALL BUSINESS ADMINISTRATION

13 CFR Part 121

RIN 3245-AG07


Small Business Size Standards: Professional, Scientific and 
Technical Services

AGENCY: U.S. Small Business Administration.

ACTION: Proposed rule.

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SUMMARY: The U.S. Small Business Administration (SBA) proposes to 
increase small business size standards for 35 industries and one sub-
industry in North American Industry Classification System (NAICS) 
Sector 54, Professional, Scientific and Technical Services and one 
industry in NAICS Sector 81, Other Services. As part of its ongoing 
comprehensive review of all size standards, SBA has evaluated 45 
industries and three sub-industries in NAICS Sector 54 and one industry 
in NAICS Sector 81 to determine whether the existing size standards 
should be retained or revised. This proposed rule is one of a series of 
proposals that will examine size standards of industries grouped by an 
NAICS Sector. SBA has issued a White Paper entitled ``Size Standards 
Methodology'' and published in the October 21, 2009 issue of the 
Federal Register a notice that ``Size Standards Methodology'' is 
available on its Web site at http://www.sba.gov/size for public review 
and comments. The ``Size Standards Methodology'' White Paper explains 
how SBA establishes, reviews and modifies its receipts based and 
employee based small business size standards. In this proposed rule, 
SBA has applied its methodology that pertains to establishing, 
reviewing and modifying a receipts based size standard.

DATES: SBA must receive comments to this proposed rule on or before May 
16, 2011.

ADDRESSES: You may submit comments, identified by RIN 3245-AG07 by one 
of the following methods:
    <bullet> Federal eRulemaking Portal: http://www.regulations.gov. 
Follow the instructions for submitting comments; or
    <bullet> Mail/Hand Delivery/Courier: Khem R. Sharma, PhD, Chief, 
Size Standards Division, 409 Third Street, SW., Mail Code 6530, 
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,

[[Page 14324]]

please submit the information by mail to U.S. Small Business 
Administration, Khem R. Sharma, PhD, Chief, Size Standards Division, 
409 Third Street, SW., Mail Code 6530, Washington, DC 20416, or by e-
mail to <a href="/cdn-cgi/l/email-protection#b0c3d9cad5c3c4d1ded4d1c2d4c3f0c3d2d19ed7dfc6"><span class="__cf_email__" data-cfemail="7c0f1506190f081d12181d0e180f3c0f1e1d521b130a">[email protected]</span></a>. 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 of whether it will publish the information or 
not.

FOR FURTHER INFORMATION CONTACT: Khem R. Sharma, PhD, Chief, Size 
Standards Division, (202) 205-6618 or <a href="/cdn-cgi/l/email-protection#bdced4c7d8cec9dcd3d9dccfd9cefdcedfdc93dad2cb"><span class="__cf_email__" data-cfemail="80f3e9fae5f3f4e1eee4e1f2e4f3c0f3e2e1aee7eff6">[email protected]</span></a>.

SUPPLEMENTARY INFORMATION: To determine eligibility for Federal 
government small business assistance programs, SBA establishes small 
business size definitions (referred to as size standards) for most 
private sector industries in the U.S. SBA's existing size standards use 
two primary measures of business size--receipts and number of 
employees. Financial assets, electric output and refining capacity are 
used as size measures for a few specialized industries. In addition, 
SBA's Small Business Investment Company (SBIC) and the Certified 
Development Company (CDC) Programs determine small business eligibility 
using either the industry based size standards or net worth and net 
income based size standards. Currently, SBA's size standards consist of 
42 different levels, covering 1,141 NAICS industries and 18 sub-
industry activities. Thirty-one of these size levels are based on 
average annual receipts, eight are based on number of employees and 
three are based on other measures. In addition, SBA has established 11 
other size standards for its financial and procurement programs.
    Over the years, SBA has received comments that its size standards 
have not kept up with changes in the economy and, in particular, that 
they do not reflect the changes in the Federal contracting marketplace. 
The last overall review of size standards occurred during the late 
1970s and early 1980s. Since then, most reviews of size standards have 
been limited to a few specific industries in response to requests from 
the public and Federal agencies. SBA also makes periodic inflation 
adjustments to its monetary based size standards. The latest inflation 
adjustment to size standards was published in the Federal Register on 
July 18, 2008 (73 FR 41237).
    SBA recognizes that changes in industry structure and the Federal 
marketplace over time have rendered existing size standards for some 
industries no longer supportable by current data. Accordingly, SBA has 
begun a comprehensive review of its size standards to ensure that 
existing size standards have supportable bases and to revise them when 
necessary.
    In addition, on September 27, 2010 the President of the United 
States signed the Small Business Jobs Act of 2010 (Jobs Act). The Jobs 
Act directs SBA to conduct a detailed review of all size standards and 
to make appropriate adjustments to reflect market conditions. 
Specifically, the Jobs Act requires SBA to conduct a detailed review of 
at least one-third of all size standards during every 18-month period 
from the date of its enactment and do a complete review of all size 
standards not less frequently than once every 5 years thereafter. 
Reviewing existing small business size standards and making appropriate 
adjustments based on current data is also consistent with Executive 
Order 13563 on improving regulation and regulatory review.
    Rather than review all size standards at one time, SBA has adopted 
a more manageable approach to reviewing a group of related industries 
within an NAICS Sector. Except for manufacturing, an NAICS Sector 
generally consists of 25 to 75 industries. Once SBA completes its 
review of size standards for industries in an NAICS Sector, it will 
issue a proposed rule to revise the size standards for industries whose 
data support doing so.
    Below is a discussion of SBA's size standards methodology for 
establishing receipts based size standards that was applied to this 
proposed rule, including analyses of industry structure, Federal 
procurement trends and other factors for industries reviewed in this 
proposed rule and the impact of the proposed revisions to size 
standards on Federal small business assistance.

Size Standards Methodology

    SBA has recently developed a ``Size Standards Methodology'' that it 
uses for developing, reviewing and modifying size standards when 
necessary. SBA has published the document on its Web site at http://www.sba.gov/size. SBA does not apply all features of its ``Size 
Standards Methodology'' to all industries because not all are 
appropriate. For example, since this proposed rule covers all 
industries with receipts based standards in NAICS Sector 54, the 
methodology described here mostly applies to establishing receipts 
based standards. However, SBA makes the methodology available in its 
entirety for parties who have an interest in SBA's overall approach to 
establishing, evaluating and modifying small business size standards. 
SBA always explains its analysis in individual proposed and final rules 
relating to size standards for specific industries.
    SBA welcomes comments from the public on a number of issues 
regarding its ``Size Standards Methodology,'' such as suggestions on 
alternative approaches to establishing, reviewing and modifying size 
standards; whether there are alternative or additional factors or data 
sources that SBA should consider; whether SBA's approach to small 
business size standards makes sense in the current economic 
environment; whether SBA's using anchor size standards is appropriate 
in the current economy; whether there are gaps in SBA's methodology 
because of the lack of comprehensive data; and whether there are other 
facts or issues that SBA should consider in its methodology. Comments 
on the ``Size Standards Methodology'' should be submitted via (1) the 
Federal eRulemaking Portal: http://www.regulations.gov; the docket 
number is SBA-2009-0008. Follow the instructions for submitting 
comments; or (2) Mail/Hand Delivery/Courier: Khem R. Sharma, PhD, 
Chief, Size Standards Division, 409 Third Street, SW., Mail Code 6530, 
Washington, DC 20416. As with comments received to this proposed rule, 
SBA will post all comments on ``Size Standards Methodology'' on http://www.regulations.gov. As of March 16, 2011, SBA has received two 
comments on ``Size Standards Methodology.'' The comments have been 
published and are available to the public at http://www.regulations.gov. SBA continues to welcome comments on its 
methodology from interested parties.
    Congress has authorized SBA's Administrator to establish small 
business size standards. 15 U.S.C. 632(a)(2). Section 3(a)(3) of the 
Small Business Act (15 U.S.C. 632(a)(3)) states that ``* * * the [SBA] 
Administrator shall ensure that the size standard varies from industry 
to industry to the extent necessary to reflect the differing 
characteristics of the various industries and consider other factors 
deemed to be relevant by the Administrator.'' Accordingly, the economic 
structure of an industry serves as the underlying basis for developing 
and modifying small business size standards. SBA identifies the small 
business segment of an industry by examining data on the economic 
characteristics defining the industry structure itself (as described 
below). In addition to analyzing an industry's structure, SBA considers

[[Page 14325]]

current economic conditions, together with its own mission, program 
objectives, the Administration's current policies, suggestions from 
industry groups and Federal Agencies, and public comments on the 
proposed rule when it establishes small business size standards. SBA 
also examines whether a size standard based on industry and other 
relevant data successfully excludes businesses that are dominant in the 
industry. Below is a discussion on SBA's analysis of the economic 
characteristics of each industry reviewed in this proposed rule, the 
impact of proposed size standards revisions on SBA programs and on 
Federal procurement programs and whether a revised size standard 
excludes dominant firms in the industry from being considered small. 
This proposed rule affords the public an opportunity to review and 
comment on the data and methodology SBA uses to evaluate and revise a 
size standard.

Industry Analysis

    For the ongoing comprehensive size standards review, SBA has 
established three ``base'' or ``anchor'' size standards that apply to 
most industries--$7.0 million in average annual receipts for industries 
that have receipts based size standards, 500 employees for 
manufacturing and other industries that have employee based size 
standards (except for Wholesale Trade) and 100 employees for industries 
in the Wholesale Trade Sector. SBA established 500 employees as the 
anchor size standard for the manufacturing industries at its inception 
in 1953. Shortly thereafter SBA established $1 million in average 
annual receipts as the anchor size standard for the nonmanufacturing 
industries. The receipts based anchor size standard has been adjusted 
periodically for inflation. Over the years, SBA has increased the 
anchor for inflation, which stands at $7.0 million today. Since 1986, 
all industries in the Wholesale Trade Sector have had the 100 employee 
size standard for non-procurement SBA programs. For Federal procurement 
purposes, the size standard for all industries in both the Wholesale 
Trade (NAICS Sector 42) and the Retail Trade (NAICS Sector 44-45) is 
500 employees under the SBA's nonmanufacturer rule. 13 CFR 121.406(b).
    These long standing anchor size standards have gained legitimacy 
through practice and general public acceptance. An anchor size standard 
is neither a minimum nor a maximum. It is a common size standard for a 
large number of industries that have similar economic characteristics 
and serves as a reference point in evaluating size standards for 
individual industries. SBA uses the anchor in lieu of trying to 
establish a unique small business size standard for each industry. 
Otherwise, theoretically, the number of size standards might be as high 
as the number of industries at the 6-digit NAICS level (1,141) for 
which SBA establishes size standards. The data SBA analyzes are 
generally static, but the U.S. economy is not. Hence, absolute 
precision is impossible. Based on historical but static data, 
therefore, SBA presumes an anchor size standard is appropriate for a 
particular industry unless that industry displays economic 
characteristics that are considerably different from those of others 
with the same anchor size standard.
    When evaluating a size standard, SBA compares the economic 
characteristics of the specific industry under review to the average 
characteristics of industries with one of the three anchor size 
standards (referred to as ``anchor comparison group''). This allows SBA 
to assess the industry structure and to determine whether the industry 
is appreciably different from the other industries in the anchor 
comparison group. If the characteristics of a specific industry under 
review are similar to the average characteristics of the anchor 
comparison group, the anchor size standard is considered appropriate 
for that industry. SBA may consider adopting a size standard below the 
anchor when (1) all or most of the industry characteristics are 
significantly smaller than the average characteristics of the anchor 
comparison group, or (2) other industry considerations strongly suggest 
that the anchor size standard would be an unreasonably high size 
standard for the industry.
    If the specific industry's characteristics are significantly higher 
than those of the anchor comparison group, a size standard higher than 
the anchor size standard may be appropriate. The larger the differences 
are between the characteristics of the industry under review and those 
in the anchor comparison group, the larger will be the difference 
between the appropriate industry size standard and the anchor size 
standard. For industries with receipts based size standards, including 
those in NAICS Sector 54 that are reviewed in this proposed rule, SBA 
has developed a second comparison group consisting of industries with 
the highest levels of receipts based size standards. To determine the 
level of a size standard above the anchor size standard, SBA analyzes 
the characteristics of this second comparison group. The size standards 
for this group of industries range from $23 million to $35.5 million in 
average receipts, with the weighted average size standard for the group 
being $29 million. SBA refers to this comparison group as the ``higher 
level receipts based size standard group.''
    The primary factors that SBA evaluates when analyzing the 
structural characteristics of an industry include average firm size, 
startup costs and entry barriers, industry competition and distribution 
of firms by size. 13 CFR 121.102(a) and (b). As an additional factor, 
SBA evaluates the possible impact that revising size standards might 
have on Federal contracting assistance to small businesses. These five 
factors are generally the most important ones for establishing or 
revising a size standard for an industry. However, SBA will also 
consider and evaluate other information that it believes is relevant to 
a particular industry (such as technological changes, industry growth 
trends, SBA financial assistance and other program objectives, etc.). 
SBA also considers possible impacts of size standard revisions on 
eligibility for Federal small business assistance, current economic 
conditions and the Administration's policies. Public comments on a 
proposed size standard rule also provide important additional 
information. SBA thoroughly reviews all public comments on proposed 
rules and makes adjustments to proposed size standards if necessary 
before making a final decision on a revised size standard. Below is a 
brief description of each of the five primary factors that SBA has 
evaluated in each industry in NAICS Sector 54 being reviewed in this 
proposed rule. A more detailed description of this analysis is provided 
in the ``SBA Size Standard Methodology'' White Paper, available on its 
Web site at http://www.sba.gov/size.
    1. Average firm size. SBA computes two measures of average firm 
size: Simple average firm size and weighted average firm size. For 
industries with receipts based size standards the simple average firm 
size is the total receipts of an industry divided by the total number 
of firms in that industry. The weighted average firm size is the sum of 
weighted simple average firm sizes in different receipts size classes, 
where weights are the shares of total industry receipts for respective 
size classes. The simple average firm size weighs all firms within an 
industry equally regardless of their size. The weighted average 
overcomes that limitation by giving more weights to larger firms.
    If the average firm size of an industry under review is 
significantly higher than the average firm size of industries

[[Page 14326]]

in the anchor comparison industry group, this will generally support a 
size standard higher than the anchor size standard. Conversely, if the 
industry's average firm size is similar to or significantly lower than 
that of the anchor comparison industry group, it will be a basis to 
adopt the anchor size standard or, in rare cases, a standard lower than 
the anchor.
    2. Startup costs and entry barriers. Startup costs reflect a firm's 
initial size in an industry. New entrants to an industry must have 
sufficient capital and other assets to start and maintain a viable 
business. If firms entering a particular industry have greater capital 
requirements than firms in industries in the anchor comparison group, 
this is a basis for establishing a size standard higher than the anchor 
standard. In lieu of data on actual startup costs, SBA uses average 
assets size as a proxy measure to assess the levels of capital 
requirements for new entrants to an industry.
    SBA begins with the sales to total assets ratios from the Risk 
Management Association's Annual Statement Studies, 2007-2009. SBA then 
applies these ratios to the average receipts size of firms in that 
industry. An industry with a significantly higher level of average 
assets than that of the anchor comparison group is likely to have 
higher startup costs; this in turn will support a size standard higher 
than the anchor. Conversely, if the industry has a significantly 
smaller average assets size compared to the anchor comparison group, 
the anchor size standard, or in rare cases one lower than the anchor, 
may be appropriate.
    3. Industry competition. Industry competition is generally measured 
by the share of total industry receipts obtained by firms that are 
among the largest in an industry. In this proposed rule, SBA evaluates 
the share of industry receipts generated by the four largest firms in 
the industry. This is referred to as the ``four-firm concentration 
ratio.'' SBA compares the four-firm concentration ratio for an industry 
under review to the average four-firm concentration ratio for 
industries in the anchor comparison group. If a significant share of 
economic activity within the industry is concentrated among a few 
relatively large firms, SBA will establish a size standard relatively 
higher than the anchor size standard. The four-firm concentration ratio 
is not an important factor if its value for an industry under review is 
less than 40 percent. For industries in which the four largest firms 
account for 40 percent or more of an industry's total receipts, SBA 
examines the average size of the four largest firms in determining a 
size standard.
    4. Distribution of firms by size. SBA examines the shares of 
industry receipts accounted for by firms of different receipts and 
employment size classes in the industry. SBA evaluates this factor in 
assessing competition within an industry. If most of an industry's 
economic activity is attributable to smaller firms, this indicates that 
small businesses are competitive in that industry. This supports 
adopting the anchor size standard. If most of an industry's economic 
activity is attributable to larger firms, this indicates that small 
businesses are not competitive in that industry. This supports adopting 
a size standard above the anchor.
    Concentration among firms is a measure of inequality of 
distribution. To evaluate the degree of inequality of distribution 
within an industry, SBA computes the Gini coefficient by constructing 
the Lorenz curve. The Lorenz curve presents the cumulative percentages 
of units (firms) in the horizontal axis and cumulative percentages of 
receipts (or other measures of size) in the vertical axis. (For further 
detail, please refer to SBA's ``Size Standards Methodology'' White 
Paper on the SBA Web site at http://www.sba.gov/size.) Gini coefficient 
values vary from zero to one. If receipts are distributed equally among 
all the firms in an industry, the value of the Gini coefficient will 
equal zero. If an industry's total receipts are attributed to a single 
firm, the Gini coefficient will equal one.
    SBA compares the degree of inequality of distribution for an 
industry under review with that for industries in the anchor comparison 
group. If an industry shows a higher degree of inequality of 
distribution (i.e., higher Gini coefficient) compared to industries in 
the anchor comparison industry group this will, all else being equal, 
warrant a higher size standard than the anchor. Conversely, for 
industries with similar or more equal distribution (i.e., similar or 
lower Gini coefficient values) than the anchor group, the anchor 
standard, or in some cases a standard lower than the anchor, may be 
adopted.
    5. Impact on Federal contracting and SBA loan programs. SBA 
examines the possible impact a size standard change may have on the 
level of Federal small business assistance. This assessment primarily 
focuses on the share of Federal contracting dollars awarded to small 
businesses in the industry in question. In general, if the share of 
Federal contracting dollars awarded to small businesses in an industry 
that receives a significant amount of Federal contracting dollars is 
significantly less than the small business share of the industry's 
total receipts, this will be justification to consider a size standard 
higher than the existing size standard. The disparity between the small 
business Federal market share and industry-wide share may have a 
variety of causes, such as extensive administrative and compliance 
requirements associated with Federal contracts, the different skill set 
required on Federal contracts as compared to typical commercial 
contracting work and the size of contracting requirements of Federal 
customers. These, as well as other factors, are likely to influence the 
type of firms within an industry that compete for Federal contracts 
and, hence, the firms receiving such contracts are expected to possess 
different characteristics than the average characteristics for all 
firms in that industry. To compare the small business Federal 
contracting share with the industry-wide small business share, SBA 
analyzes the latest Federal contracting trends. This analysis may 
indicate a size standard larger than the current standard.
    SBA considers Federal procurement trends in its size standards 
analysis only if (1) the small business share of Federal contracting 
dollars is at least 10 percent lower than the small business share of 
total industry receipts and (2) the amount of total Federal contracting 
averages $100 million or more during fiscal years 2007-2009 (the latest 
years for which complete Federal procurement data are available). SBA 
selected these thresholds because they reflect a significant level of 
contracting in which a revision to a size standard may have an impact 
on expanding small business opportunities.
    Besides the impact on small business Federal contracting, SBA also 
evaluates the impact of a size standard revision on SBA's loan 
programs. For this SBA examines the volume of SBA guaranteed loans 
within an industry and the size of firms obtaining those loans. This 
allows SBA to assess whether the existing or the proposed size standard 
for a particular industry may restrict the level of financial 
assistance to small firms. If the analysis shows that the current size 
standards reduce financial assistance to small businesses, a higher 
size standard would be supportable. However, if small businesses have 
already been receiving significant amounts of financial assistance 
through SBA's loan programs, or if the financial assistance has been 
provided mainly to businesses that are much smaller than the existing 
size

[[Page 14327]]

standard, consideration of this factor for determining the size 
standard may not be necessary.

Sources of Industry and Program Data

    SBA's primary source of industry data used in this proposed rule is 
a special tabulation of the 2007 County Business Patterns (see http://www.census.gov/econ/cbp/) and data from 2007 Economic Census (see 
http://www.census.gov/econ/census07/) prepared by the U.S. Bureau of 
the Census (Census Bureau) for SBA. The Census tabulation provided SBA 
with industry-specific data on the number of firms, number of 
establishments and number of employees for companies by the size of 
firm based on the 2007 County Business Patterns and estimated annual 
payroll and estimated annual receipts of companies by the size of firm 
based on the 2007 Census. That is, the data are by the size class of 
the total company; however, the data itself, within a particular size 
class, represents the company's total data for a specific industry 
only. The special tabulation enables SBA to evaluate average firm size, 
the four-firm concentration ratio and distribution of firms by receipts 
and employment size.
    In some cases, where industry data were not available due to 
disclosure prohibitions in the Census Bureau's tabulation, SBA either 
estimated missing values using available relevant data or examined data 
at a higher level of industry aggregation, such as at the NAICS 2-digit 
(Sector), 3-digit (Subsector), or 4-digit (Industry Group) level. In 
some instances, SBA had to base its analysis only on those factors for 
which data were available or estimates of missing values were possible.
    The data from the Census Bureau's tabulation are limited down only 
to the 6-digit NAICS industry level and hence do not provide economic 
characteristics at the sub-industry level. Thus, when establishing, 
reviewing, or modifying size standards at the sub-industry level (that 
is, one of the ``exceptions'' in SBA's table of size standards), SBA 
evaluates the data from the U.S. General Service Administration's 
Federal Procurement Data System--Next Generation (FPDS-NG) and Central 
Contractor Registration (CCR) following a two-step procedure. First, 
using FPDS-NG SBA identifies product service codes (PSCs) that 
correspond to specific sub-industry activities or ``exceptions'' and 
then identifies firms that are active in Federal contracting involving 
those PSCs. Then, SBA obtains those firms' revenue and employment data 
from the CCR database. SBA uses that data to evaluate the actual size 
of businesses that FPDS-NG identifies for those procurements. In this 
proposed rule, SBA applied this approach to determine industry and 
Federal contracting factors for ``exceptions'' under NAICS 541330, 
Engineering Services.
    To calculate average assets size, SBA used sales to total assets 
ratios from the Risk Management Association's Annual Statement Studies, 
2007-2009.
    To evaluate Federal contracting trends, SBA examined Federal 
contract award data for fiscal years 2007-2009 from FPDS-NG.
    Data sources and estimation procedures SBA uses in its size 
standards analysis are documented in detail in the ``SBA Size Standards 
Methodology'' White Paper, which is available on its Web site at http://www.sba.gov/size.
    To assess the impact on financial assistance to small businesses 
SBA examined data on its own guaranteed loan programs for fiscal years 
2007-2009.

Dominance in Field of Operation

    Section 3(a) of the Small Business Act (15 U.S.C. 632(a)) defines a 
small business concern as one that is (1) independently owned and 
operated, (2) not dominant in its field of operation and (3) within a 
specific small business definition or size standard established by the 
SBA Administrator. SBA considers as part of its evaluation whether a 
business concern at a proposed size standard would be dominant in its 
field of operation. For this, SBA generally examines the industry's 
market share of firms at the proposed standard. Market share and other 
factors may indicate whether a firm would or could exercise a major 
controlling influence at the national level in an industry that 
includes a significant number of business concerns. If a contemplated 
size standard would include a dominant firm, SBA would consider a lower 
size standard to exclude the dominant firm from the definition of 
small.

Selection of Size Standards

    To simplify size standards, for the ongoing comprehensive size 
standards review of receipts based size standards, SBA proposes to 
select size standards for industries from a limited number of levels. 
For many years, SBA has been concerned about the complexity of 
determining small business status caused by a large number of varying 
receipts based size standards (see 69 FR 13130 (March 4, 2004) and 57 
FR 62515 (December 31, 1992)). Currently, there are 31 different levels 
of receipts based size standards. They range from $0.75 million to 
$35.5 million and many of them apply to one or only a few industries. 
SBA believes that size standards with such a large number of small 
variations among them are both unnecessary and difficult to justify 
analytically. To simplify managing and using size standards SBA 
proposes that there be fewer size standard levels. This will produce 
more common size standards for businesses operating in related 
industries. There will also be greater consistency among the size 
standards for industries that have similar economic characteristics.
    The SBA proposes, therefore, to apply one of eight receipts based 
size standards to each industry in NAICS Sector 54 that has a receipts 
based standard. In this proposed rule, SBA has not reviewed the six 
employee based size standards in NAICS Sector 54. Those employee based 
size standards will remain on effect until SBA reviews industries that 
have employee based size standards. The eight ``fixed'' receipts based 
size standard levels are $5 million, $7 million, $10 million, $14 
million, $19 million, $25.5 million, $30.0 million and $35.5 million. 
To establish these eight receipts based size standard levels SBA 
considered the current minimum, the current maximum and most commonly 
used current receipts based size standards. Currently, the most 
commonly used receipts based size standards cluster around the 
following--$2.5 million to $4.5 million, $7 million, $9.0 million to 
$10 million, $12.5 million to $14.0 million, $25.0 million to $25.5 
million, and $33.5 million to $35.5 million. SBA selected $7 million as 
one of eight fixed levels of receipts based size standards because this 
is an anchor standard for receipts based standards. The lowest or 
minimum receipts based size level that SBA is proposing will be $5 
million. Other than the size standards for agriculture and those based 
on commissions (such as real estate brokers and travel agents), $5 
million will include those industries with the currently lowest 
receipts based standards, which range from $2.0 million to $4.5 
million. Among the higher levels size clusters, SBA has selected $10 
million, $14 million, $25.5 million, and $35.5 million as the other 
four levels of fixed size standards. Because of a large gap between two 
of the size standard intervals, SBA established intermediate levels of 
$19 million between $14 million and $25.5 million and $30 million 
between $25.5 million and $35.5 million. These two intermediate size 
levels reflect roughly

[[Page 14328]]

similar proportional differences between the two successive size 
standard levels.
    To simplify size standards further, SBA may propose a common size 
standard for closely related industries. Although the size standard 
analysis may support a specific size standard level for each industry, 
SBA believes that establishing different size standards for closely 
related industries may not be appropriate. For example, in cases where 
many of the same businesses operate in the multiple industries, 
establishing a common size standard might better reflect the Federal 
marketplace. This might also make size standards among related 
industries more consistent than establishing separate size standards 
for each of those industries. This led SBA to establish a common size 
standard for the Computer Systems Design and Related Services 
industries (NAICS 541511, NAICS 541112, NAICS 541513, NAICS 541519 and 
NAICS 811212), even though the industry data might have supported a 
distinct size standard for each industry. 57 FR 27906 (June 23, 1992). 
Businesses engaged in computer related services typically perform 
activities in two or more other related industries. SBA has also 
established a common size standard for certain architectural and 
engineering (A&E) services industries (NAICS 541310, NAICS 541330 
(excluding the ``exceptions''), NAICS 541360, NAICS 541370 and Map 
Drafting which is an ``exception'' under NAICS 541340). As described 
below in this proposed rule SBA has considered additional common size 
standards for several related industries within NAICS Sector 54, as 
alternatives to industry specific separate size standards. Whenever SBA 
proposes a common size standard for closely related industries it will 
provide its justification in the proposed rule.

Evaluation of Industry Structure

    SBA has evaluated the structure of 45 industries and three sub-
industries in NAICS Sector 54, Professional, Scientific and Technical 
Services and one industry in NAICS Sector 81, Other Services, to assess 
the appropriateness of the current size standards. As described above, 
SBA compared data on the economic characteristics of each industry or 
sub-industry to the average characteristics of industries in two 
comparison groups. The first comparison group consists of all 
industries with $7.0 million size standards and is referred to as the 
``receipts based anchor comparison group.'' Because the goal of SBA's 
size review is to assess whether a specific industry's size standard 
should be the same as or different from the anchor size standard, this 
is the most logical group of industries to analyze. In addition, this 
group includes a sufficient number of firms to provide a meaningful 
assessment and comparison of industry characteristics.
    If the characteristics of an industry under review are similar to 
the average characteristics of industries in the anchor comparison 
group, the anchor size standard is generally appropriate for that 
industry. If an industry's structure is significantly different from 
the others in the anchor group, a size standard lower or higher than 
the anchor size standard might be selected. The level of the new size 
standard is determined based on the difference between the 
characteristics of the anchor comparison group and a second industry 
comparison group. As described above, the second comparison group for 
receipts based standards consists of industries with the highest 
receipts based size standards, ranging from $23 million to $35.5 
million. The average size standard for the group is $29 million. SBA 
refers to this group of industries as the ``higher level receipts based 
size standard comparison group.'' Differences in industry structure 
between an industry under review and the industries in the two 
comparison groups are determined by comparing data on each of the 
industry factors, including average firm size, average assets size, 
four-firm concentration ratio and the Gini coefficient of distribution 
of firms by size. Table 1 shows two measures of the average firm size 
(simple and weighted), average assets size, four-firm concentration 
ratio, average receipts of the four largest firms and the Gini 
coefficient for both anchor level and higher level comparison groups 
for receipts based size standards.

                                          Table 1--Average Characteristics of Receipts Based Comparison Groups
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                            Avg. firm size ($ million)                                     Avg. receipts
                                                         --------------------------------   Avg. assets   Avg. four-firm      of four
             Receipts based comparison group                                                  size ($      concentration   largest firms       Gini
                                                              Simple         Weighted        million)        ratio (%)      ($ million)     coefficient
                                                              average         average                                           \a\
--------------------------------------------------------------------------------------------------------------------------------------------------------
Anchor Level............................................            1.55           28.91            0.94            18.4           249.3           0.740
Higher Level............................................            6.22           97.10            2.85            27.0         1,773.5          0.826
--------------------------------------------------------------------------------------------------------------------------------------------------------
\a\ To be used for industries with a four-firm concentration ratio of 40% or greater.

Derivation of Size Standards Based on Industry Factors

    For each of the industry factors in Table 1, SBA derives a separate 
size standard based on the differences between the values for an 
industry under review and the values for the two comparison groups. If 
the industry value for a particular factor is near the corresponding 
factor for the anchor comparison group, SBA will consider the $7.0 
million anchor size standard appropriate for that factor.
    An industry factor with a value significantly above or below the 
anchor comparison group will generally warrant a size standard above or 
below the $7.0 million anchor. The level of the new size standard in 
these cases is based on the proportional difference between the 
industry value and the values for the two comparison groups.
    For example, if an industry's simple average receipts is $4.0 
million, that would support a $19 million size standard. The $4.0 
million level is 52.5 percent between the average firm size of $1.55 
million for the anchor comparison group and $6.22 million for the 
higher level comparison group (($4.00 million - $1.55 million) / ($6.22 
million - $1.55 million) = 0.525 or 52.5%). This proportional 
difference is applied to the difference between the $7.0 million anchor 
size standard and average size standard of $29 million for the higher 
level size standard group and then added to $7.0 million to estimate a 
size standard of $18.54 million ([{$29.0 million - $7.0 million{time}  
* 0.525] + $7.0 million = $18.54 million). The final step is to round 
the estimated $18.54 million size standard to the nearest fixed size 
standard level, in this example to $19 million.
    SBA applies the above calculation to derive a size standard for 
each industry factor. Detailed formulas involved in these calculations 
are presented in ``SBA Size Standards Methodology'' which is available 
on its Web site at http://

[[Page 14329]]

www.sba.gov/size. (However, it should be noted that figures in the 
``Size Standards Methodology'' White Paper are based on 2002 Economic 
Census data and are different from those presented in this proposed 
rule). Table 2 shows ranges of values for each industry factor and the 
levels of size standards supported by those values.

                        Table 2--Values of Industry Factors and Supported Size Standards
----------------------------------------------------------------------------------------------------------------
                                                                   Or if avg.
                               Or if weighted     Or if avg.      receipts of                        Then size
If simple avg. receipts size   avg. receipts    assets size ($    largest four      Or if gini    standard is ($
         ($ million)              size ($          million)         firms ($       coefficient       million)
                                  million)                          million)
----------------------------------------------------------------------------------------------------------------
<1.34.......................  <25.81.........  <0.85..........  <180.0.........  <0.736.........             5.0
1.34 to 1.87................  25.81 to 33.56.  0.85 to 1.07...  180.0 to 353.2.  0.736 to 0.746.             7.0
1.88 to 2.61................  33.57 to 44.41.  1.08 to 1.37...  353.3 to 595.7.  0.747 to 0.759.            10.0
2.62 to 3.57................  44.42 to 58.35.  1.38 to 1.76...  595.8 to 907.5.  0.760 to 0.777.            14.0
3.58 to 4.79................  58.36 to 76.18.  1.77 to 2.26...  907.6 to         0.778 to 0.799.            19.0
                                                                 1,305.8.
4.80 to 5.96................  76.19 to 93.22.  2.27 to 2.74...  1,305.9 to       0.800 to 0.821.            25.5
                                                                 1,686.9.
5.97 to 7.02................  93.23 to 108.72  2.75 to 3.17...  1,687.0 to       0.822 to 0.840.            30.0
                                                                 2,033.2.
>7.02.......................  >108.72........  >3.17..........  >2,033.2.......  >0.840.........            35.5
----------------------------------------------------------------------------------------------------------------

Derivation of Size Standards Based on Federal Contracting Factor

    Besides industry structure, SBA also evaluates Federal contracting 
data to assess the extent to which small businesses are successful in 
getting Federal contracts under the existing size standards. However, 
the available data on Federal contracting are limited to identifying 
businesses as small or other than small, with no information on exact 
size of businesses receiving Federal contracts in order to conduct a 
more precise analysis.
    Given the above limitation of Federal contracting data, for the 
current comprehensive size standards review, SBA has decided to 
designate a size standard at one level higher than their current size 
standard for industries where the small business share of total Federal 
contracting dollars is between 10 and 30 percentage points lower than 
their shares in total industry receipts and at two levels higher than 
the current size standard if the difference is more than 30 percentage 
points.
    SBA has chosen not to designate a size standard for the Federal 
contracting factor alone that is higher than two levels above the 
current size standard. The FPDS-NG data have a number of limitations 
and there are also complex relationships among a number of variables 
affecting small business participation in the Federal marketplace. SBA 
believes, therefore, that a larger adjustment to size standards based 
on Federal contracting activity requires a more detailed analysis of 
the impact of any subsequent revision to the current size standard. In 
limited situations, however, SBA may conduct a more extensive 
examination of Federal contracting experience to support a different 
size standard than indicated by this general rule. That would involve 
SBA's taking into consideration significant and unique aspects of small 
business competitiveness in the Federal contract market. SBA welcomes 
comment on its methodology of incorporating the Federal contracting 
factor in the size standard analysis and suggestions for alternative 
methods and other relevant information on small business experience in 
the Federal contract market.
    Of the 46 industries reviewed in this proposed rule (including 45 
industries in NAICS Sector 54 and one industry in NAICS Sector 81), 26 
industries received an average of $100 million or more annually in 
Federal contracting dollars during fiscal years 2007-2009. The Federal 
contracting factor was significant (i.e., the difference between the 
small business share of total industry receipts and small business 
share of Federal contracting dollars was 10 percentage points or more) 
and a separate size standard was derived for that factor in 15 of those 
26 industries.

New Size Standards Based on Industry and Federal Contracting Factors

    Table 3 shows the results of analyses of industry and Federal 
contracting factors for each of the industries covered by this proposed 
rule. Each NAICS Industry in columns 2, 3, 4, 6, 7 and 8 shows two 
numbers. The upper number is the value for the industry or Federal 
contracting factor shown on the top of the column; the lower number is 
the size standard supported by that factor. For the four-firm 
concentration ratio, a size standard is estimated based on the average 
receipts of the top four firms if its value is 40 percent or more. If 
the four-firm concentration ratio for an industry (column 5) is less 
than 40 percent, no size standard is estimated for that factor. Column 
9 shows the new size standard for each industry, calculated as the 
average of size standards supported by each factor and rounded to the 
nearest fixed size level. Analytical details involved in the averaging 
procedure are described in the SBA ``Size Standard Methodology'' White 
Paper which is available on its Web site at http://www.sba.gov/size. 
For comparison, the current size standards are also shown in column 10 
of Table 3.

                                           Table 3--Size Standards Supported by Each Factor for Each Industry
                                                                  [millions of dollars]
--------------------------------------------------------------------------------------------------------------------------------------------------------
             (1)                  (2)          (3)          (4)          (5)          (6)          (7)          (8)          (9)             (10)
NAICS code/                        Simple     Weighted      Average    Four-firm    Four-firm         Gini      Federal   Calculated  Current size
NAICS industry title              average      average  assets size    ratio (%)      average  coefficient     contract         size   standard
                                firm size    firm size                                   size                factor (%)     standard
--------------------------------------------------------------------------------------------------------------------------------------------------------
541110                               $1.4       $105.8         $0.3          2.5     $1,423.1        0.758  ...........        $10.0  $7.0
Offices of Lawyers..........          7.0         30.0          5.0  ...........  ...........        $10.0
541191                                1.0         24.2          0.4  ...........  ...........        0.700  ...........          5.0  7.0
Title Abstract and                    5.0          5.0          5.0  ...........  ...........         $5.0
 Settlement Offices.
541199                                0.9         18.3  ...........         29.0        176.3        0.730        -21.5          7.0  7.0

[[Page 14330]]

 
All Other Legal Services....          5.0          5.0  ...........  ...........  ...........         $5.0        $10.0
541211                                1.2        116.1          0.4         32.8      5,227.3        0.747        -11.7         14.0  8.5
Offices of Certified Public           5.0         35.5          5.0  ...........  ...........        $10.0        $14.0
 Accountants.
541213                                0.5        131.5  ...........  ...........  ...........        0.681  ...........         14.0  7.0
Tax Preparation Services....          5.0         35.5  ...........  ...........  ...........         $5.0
541214                                7.7        113.9          6.6  ...........  ...........        0.886  ...........         35.5  8.5
Payroll Services............         35.5         35.5         35.5  ...........  ...........        $35.5
541219                                0.5          6.1          0.2  ...........  ...........        0.618        -22.4          7.0  8.5
Other Accounting Services...          5.0          5.0          5.0  ...........  ...........         $5.0        $14.0
541310                                1.6         25.1          0.6          5.2        489.3        0.727        -13.3          7.0  4.5
Architectural Services......          7.0          5.0          5.0  ...........  ...........         $5.0         $7.0
541320                                0.8          6.3          0.3          6.1         80.6        0.586  ...........          5.0  7.0
Landscape Architectural               5.0          5.0          5.0  ...........  ...........         $5.0
 Services.
541330                                4.0        112.0          1.5  ...........  ...........        0.868         -0.1         25.5  4.5
Engineering Services........         19.0         35.5         14.0  ...........  ...........        $35.5
Except Military and               3,086.3      9,073.4      1,187.1         36.0    149,375.0        0.660  ...........         25.5  27.0
 Aerospace Equipment and             35.5         35.5         35.5                                   $5.0
 Military Weapons.
Except Contracts and                   NA           NA           NA           NA           NA           NA           NA           NA  27.0
 Subcontracts for                      NA           NA           NA           NA           NA           NA           NA           NA
 Engineering Services
 Awarded Under the National
 Energy Policy Act of 1992.
Except Marine Engineering         4,088.8     12,295.3      1,572.6         38.5     64,100.0        0.668  ...........         25.5  18.5
 and Naval Architecture.             35.5         35.5         35.5                                  $25.0
541340                                0.8         68.0  ...........  ...........  ...........        0.752  ...........         14.0  7.0
Drafting Services...........          5.0         19.0  ...........  ...........  ...........        $10.0
Except Map Drafting.........           NA           NA           NA           NA           NA           NA           NA           NA  4.5
                                       NA           NA           NA           NA           NA           NA           NA           NA
541350                                0.4          6.4  ...........         13.7         72.8        0.569        -31.1          7.0  7.0
Building Inspection Services          5.0          5.0  ...........  ...........  ...........         $5.0        $14.0
541360                                2.7         60.4  ...........         37.4        256.1        0.853  ...........         25.5  4.5
Geophysical Surveying and            14.0         19.0  ...........  ...........  ...........        $35.5
 Mapping Services.
541370                                0.7          6.5          0.3          7.6        120.9        0.554        -25.4          5.0  4.5
Surveying and Mapping                 5.0          5.0          5.0  ...........  ...........         $5.0         $7.0
 (except Geophysical)
 Services.
541380                                2.6         19.2          1.2  ...........  ...........        0.759          1.0         10.0  12.0
Testing Laboratories........         10.0          5.0        $10.0  ...........  ...........        $10.0
541410                                0.8          5.1          0.2  ...........  ...........        0.557  ...........          5.0  7.0
Interior Design Services....          5.0          5.0          5.0  ...........  ...........         $5.0
541420                                1.3          9.5  ...........  ...........  ...........        0.714  ...........          5.0  7.0
Industrial Design Services..          5.0          5.0  ...........  ...........  ...........         $5.0
541430                                0.6          4.1          0.2          3.3         79.7        0.560  ...........          5.0  7.0
 Graphic Design Services....          5.0          5.0          5.0  ...........  ...........         $5.0
541490                                0.8          6.0  ...........         11.1         45.7        0.623  ...........          5.0  7.0
 Other Specialized Design             5.0          5.0  ...........  ...........  ...........         $5.0
 Services.
541511                                2.0         51.0          0.7          7.4      1,862.3        0.839         -5.2         14.0  25.0
Custom Computer Programming          10.0         14.0          5.0  ...........  ...........        $30.0
 Services.
541512                                2.9        145.9          1.0         20.0      6,243.2        0.885         -7.3         25.5  25.0
Computer Systems Design              14.0         35.5          7.0  ...........  ...........        $35.5
 Services.
541513                                7.2        150.6  ...........  ...........  ...........        0.918         23.0         35.5  25.0
Computer Facilities                  35.5         35.5  ...........  ...........  ...........        $35.5
 Management Services.
541519                                2.6        100.0          0.9         28.6      1,912.1        0.893         15.2         19.0  25.0
Other Computer Related               14.0         30.0          7.0  ...........  ...........        $35.5
 Services.
Except Information                     NA           NA           NA           NA           NA           NA           NA           NA  150 employees
 Technology Value Added                NA           NA           NA           NA           NA           NA           NA           NA
 Resellers.
541611                                1.4         59.9          0.5         17.2      3,482.1        0.817        -12.8         14.0  7.0
Administrative Management             7.0         19.0          5.0  ...........  ...........        $25.5        $10.0
 and General Management
 Consulting Services.
541612                                1.7         56.3          0.4         23.6      1,365.4        0.803         -5.3         14.0  7.0
Human Resources Consulting            7.0         14.0          5.0  ...........  ...........        $25.5
 Services.

[[Page 14331]]

 
541613                                1.1         20.6          0.4          7.3        489.1        0.753        -26.1          7.0  7.0
Marketing Consulting                  5.0          5.0          5.0  ...........  ...........        $10.0        $10.0
 Services.
541614                                3.4         86.6          0.9  ...........  ...........        0.886         -0.5         19.0  7.0
Process, Physical                    14.0         25.5          7.0  ...........  ...........        $35.5
 Distribution and Logistics
 Consulting Services.
541618                                0.8         19.5          0.3         17.5        226.2        0.698        -39.3          7.0  7.0
Other Management Consulting           5.0          5.0          5.0  ...........  ...........         $5.0        $14.0
 Services.
541620                                1.3         16.5          0.5          6.1        160.6        0.727         -8.9          5.0  7.0
Environmental Consulting              5.0          5.0          5.0  ...........  ...........         $5.0
 Services.
541690                                1.1         54.3          0.4  ...........  ...........        0.775        -13.6         10.0  7.0
 Other Scientific and                 5.0         14.0          5.0  ...........  ...........        $14.0        $10.0
 Technical Consulting
 Services.
541720                                2.9         24.5          1.8         26.6        451.3        0.811          1.5         19.0  7.0
Research and Development in          14.0          5.0         14.0  ...........  ...........        $25.5
 the Social Sciences and
 Humanities.
541810                                2.5         53.0          0.7         26.5      2,156.7        0.812        -13.4         14.0  7.0
Advertising Agencies........         10.0         14.0          5.0  ...........  ...........        $25.5        $10.0
541820                                1.2         13.7          0.4         19.3        403.7        0.698        -21.6          7.0  7.0
Public Relations Agencies...          5.0          5.0          5.0  ...........  ...........         $5.0        $10.0
541830                                4.3         65.3  ...........         36.0        320.1        0.834  ...........         25.5  7.0
Media Buying Agencies.......         19.0         19.0  ...........  ...........  ...........        $30.0
541840                                1.9         18.2          0.8  ...........  ...........        0.758  ...........          7.0  7.0
Media Representatives.......         10.0          5.0          5.0  ...........  ...........        $10.0
541850                                3.9        134.2          2.2         44.9        928.8        0.881  ...........         25.5  7.0
Display Advertising.........         19.0         35.5         19.0  ...........         19.0        $35.5
541860                                4.0         45.7          1.4  ...........  ...........        0.799  ...........         19.0  7.0
Direct Mail Advertising.....         19.0         14.0         14.0  ...........  ...........        $19.0
541870                                3.2         52.4          1.3         32.7        201.1        0.849  ...........         19.0  7.0
Advertising Material                 14.0         14.0         10.0  ...........  ...........        $35.5
 Distribution Services.
541890                                1.6         26.2          0.5         12.5        383.0        0.746  ...........          7.0  7.0
 Other Services Related to            7.0          7.0          5.0  ...........  ...........        $10.0
 Advertising.
541910                                3.2         51.7          1.1  ...........  ...........        0.832          5.4         19.0  7.0
Marketing Research and               14.0         14.0          7.0  ...........  ...........        $30.0
 Public Opinion Polling.
541921                                0.5         50.9          0.2  ...........  ...........        0.563  ...........          7.0  7.0
Photography Studios,                  5.0         14.0          5.0  ...........  ...........         $5.0
 Portrait.
541922                                0.5          3.3          0.2          6.5         31.8        0.494  ...........          5.0  7.0
Commercial Photography......          5.0          5.0          5.0  ...........  ...........         $5.0
541930                                1.0         23.8  ...........         26.9        123.8        0.752          1.6          7.0  7.0
Translation and                       5.0          5.0  ...........  ...........  ...........        $10.0
 Interpretation Services.
541940                                0.9         17.4          0.2  ...........  ...........        0.431  ...........          5.0  7.0
Veterinary Services.........          5.0          5.0          5.0  ...........  ...........         $5.0
541990                                0.9         24.1          0.3         16.7        696.2        0.740        -34.7         $7.0  $7.0
All Other Professional,               5.0          5.0          5.0  ...........  ...........         $7.0        $14.0
 Scientific and Technical
 Services.
811212                                1.7         49.0          0.5  ...........  ...........        0.832        -11.2        $19.0  $25.0
Computer and Office Repair            7.0         14.0          5.0  ...........  ...........        $30.0        $30.0
 and Maintenance.
--------------------------------------------------------------------------------------------------------------------------------------------------------

Common Size Standards

    When many of the same businesses operate in multiple industries, 
SBA believes that a common size standard can be appropriate for these 
industries even if the industry and relevant program data support 
different size standards. SBA has established a common size standard 
for Computer Systems Design and Related Services industries (NAICS 
541511, NAICS 541112, NAICS 541513, NAICS 541519 (excluding the 
``exception''), and NAICS 811212.
    In response to public comments to its 1998 proposed rule (63 FR 
5480), SBA also established a common size standard for certain 
Architectural, Engineering (A&E) and Related Services industries (NAICS 
541310, NAICS 541330 (excluding the ``exceptions''), Map Drafting which 
is identified as ``exception'' under NAICS 541340, NAICS 541360 and 
NAICS 541370). It is very likely that firms that have expertise in 
architectural, engineering and surveying activities are also likely to 
be capable of performing drafting work. Similarly, general 
architectural firms are very likely to have expertise in

[[Page 14332]]

landscape architectural services. Industry data also show a lot of 
similarities among architectural, landscape architectural, engineering, 
drafting and surveying industries. Therefore, in this proposed rule, 
SBA applies the A&E common size standard to the rest of the industries 
in the A&E Industry Group (NAICS 5413), including NAICS 541320, NAICS 
541340, NAICS 541350 and NAICS 541380.
    In addition to Computer Systems Design and Related Services and A&E 
and Related Services, in this proposed rule, SBA considers, as an 
alternative to a separate size standard for each industry, common size 
standards for industries under several other NAICS Industry Groups as 
shown in Table 4. SBA evaluated industry and Federal contracting 
factors and derived a common size standard for each Industry Group 
using the same method as described above. These results are provided in 
Table 5.

           Table 4--Industry Groups for Common Size Standards
------------------------------------------------------------------------
                                                     Industries: 6-digit
 Industry group: NAICS codes  Industry group title       NAICS codes
------------------------------------------------------------------------
5411........................  Legal Services......  541110, 451191,
                                                     541199.
5412........................  Accounting, Tax       541211, 541213,
                               Preparation,          541214, 541219.
                               Bookkeeping and
                               Payroll Services.
5413........................  Architectural,        541310, 541320,
                               Engineering and       541330 (excluding
                               Related Services.     ``exceptions''),
                                                     541340, 541350,
                                                     541360, 541370,
                                                     541380.
5414........................  Specialized Design    541410, 541420,
                               Services.             541430, 541490.
5415, 811212................  Computer Systems      541511, 541512,
                               Design and Related    541513, 541519
                               Services + Computer   (excluding
                               and Office Machine    ``exception''),
                               Repair and            811212.
                               Maintenance.
5416........................  Management,           541611, 541612,
                               Scientific and        541613, 541614,
                               Technical             541618, 541620,
                               Consulting Services.  541690.
5418........................  Advertising and       541810, 541820,
                               Related Services.     541830, 541840,
                                                     541850, 541860,
                                                     541870, 541890.
5419........................  Other Professional,   541910, 541921,
                               Scientific, and       541922, 541930,
                               Technical Services.   541940, 541990.
------------------------------------------------------------------------


                             Table 5--Size Standards Supported by Each Factor for Each Industry Group (millions of dollars)
--------------------------------------------------------------------------------------------------------------------------------------------------------
                       (1)                            (2)          (3)          (4)          (5)          (6)          (7)          (8)          (9)
NAICS code/Industry title                              Simple     Weighted      Average    Four-firm    Four-firm         Gini      Federal   Calculated
                                                      average      average  assets size        ratio      average  coefficient     contract         size
                                                    firm size    firm size                       (%)         size                    factor     standard
                                                                                                                                        (%)
--------------------------------------------------------------------------------------------------------------------------------------------------------
5411............................................         $1.3        $90.0         $0.3         2.4%     $1,423.1        0.755       -14.6%         10.0
Legal Services..................................          5.0         25.5          5.0  ...........  ...........        $10.0        $10.0  ...........
5412............................................          1.1         66.1          0.5        20.3%      6,033.6        0.781        -1.6%         14.0
Accounting, Tax Preparation, Bookkeeping and              5.0         19.0          5.0  ...........  ...........        $19.0  ...........  ...........
 Payroll Services...............................
5413............................................          2.5         84.3          1.0  ...........  ...........        0.837        -6.0%         19.0
Architectural, Engineering and Related Services.         10.0         25.5          7.0  ...........  ...........        $30.0  ...........  ...........
5414............................................          0.7          5.0          0.2         2.2%        130.0        0.583       -40.3%          7.0
Specialized Design Services.....................          5.0          5.0          5.0  ...........  ...........         $5.0        $14.0  ...........
5415 + 811212...................................          2.6        122.3          0.9  ...........  ...........        0.876         1.3%         25.5
Computer Systems Design and Related Services +           10.0         35.5          7.0  ...........  ...........        $35.5  ...........  ...........
 Computer and Office Machine Repair and
 Maintenance....................................
5416............................................          1.4         57.1          0.4  ...........  ...........        0.805       -14.8%         14.0
Management, Scientific and Technical Consulting           7.0         14.0          5.0  ...........  ...........        $25.5        $10.0  ...........
 Services.......................................
5418............................................          2.3         51.5          0.7        13.7%      2,854.1        0.806        -5.3%         14.0
Advertising and Related Services................         10.0         14.0          5.0  ...........  ...........        $25.5  ...........  ...........
5419............................................          1.0         25.1          0.3         6.7%      1,085.4        0.650       -44.9%          7.0
Other Professional, Scientific, and Technical             5.0          5.0          5.0  ...........  ...........         $5.0        $14.0  ...........
 Services.......................................
--------------------------------------------------------------------------------------------------------------------------------------------------------

Special Considerations

1. Three Sub-Industry Categories (or ``exceptions'') under NAICS 
541330, Engineering Services

    Currently, NAICS 541330 has four size standards that apply to 
Federal contracts for different types of engineering services. The $4.5 
million size standard is for general engineering services, while the 
other three (i.e., ``exceptions'') apply to specialized types of 
engineering services that the Federal government procures. They apply 
only to Federal contracts for those services. The lack of relevant data 
at the sub-industry level is a challenge to determine whether these 
size standards (``exceptions'') should be revised or left unchanged. 
Because of that, SBA did not review those exceptions in the February 3, 
1998 proposed rule (63 FR 5480) and SBA did not change these size 
standards in the May 14, 1999 final rule (64 FR 26275). However, SBA 
has increased these size standards over the years for inflation. The 
latest inflation adjustment was effective August 18, 2008 (73 FR 41237 
(July 18, 2008)).
    As noted previously, the data from the Economic Census special 
tabulation are limited down to the 6-digit NAICS industry level and 
hence do not provide data to assess economic characteristics at the 
sub-industry level. For example, the Economic Census data for NAICS 
541330 are aggregates of both general engineering services and 
specialized engineering services under the three

[[Page 14333]]

``exceptions.'' Thus, the results based on the Economic Census data may 
not accurately reflect the characteristics of businesses providing 
specialized services included under those ``exceptions.''
    To determine whether the Agency should propose revising the three 
exceptions under NAICS 541330, SBA evaluated the data from FPDS-NG and 
CCR. From FPDS-NG, SBA first identified PSCs that correspond to each 
specific sub-industry activity or ``exception'' under that NAICS code 
and then identified firms that are active in Federal contracting 
involving those PSCs. The data for fiscal year 2008 (the latest year 
for which the detailed CCR data are available) showed numerous firms 
doing contracts under Military and Aerospace Equipment and Military 
Weapons and Marine Engineering and Naval Architecture. SBA analyzed 
those firms' revenue and employment data from CCR and contract dollars 
from FPDS-NG to evaluate industry and Federal procurement factors. 
These results in Table 3 support a size standard of $25.5 million for 
both Military and Aerospace Equipment and Military Weapons and Marine 
Engineering and Naval Architecture. However, SBA proposes to retain the 
current standard of $27.0 million for Military and Aerospace Equipment 
and Military Weapons as SBA is not proposing to lower any size 
standards in view of the current economic conditions. The FPDS-NG 
showed very few actions involving Contracts and Subcontracts for 
Engineering Services Awarded Under the National Energy Policy Act of 
1992. This made it difficult to evaluate industry and Federal 
contracting factors and to derive a separate size standard for that 
sub-industry category. Currently, both Contracts and Subcontracts for 
Engineering Services Awarded Under the National Energy Policy Act of 
1992 and contracts for Military and Aerospace Equipment and Military 
Weapons both have the same $27.0 million size standard. Thus, SBA 
proposes to retain the current $27.0 million size standard for 
Contracts and Subcontracts for Engineering Services Awarded Under the 
National Energy Policy Act of 1992. SBA proposes to increase the size 
standard for Marine Engineering and Naval Architecture to $25.5 million 
as supported by the data. SBA invites comments along with supporting 
information on this proposal.

2. Map Drafting Services

    Map Drafting Services is currently identified as an ``exception'' 
under NAICS 541340, Drafting Services. Prior to adopting NAICS for its 
size standards, SBA had established separate but common size standards 
for Map Drafting Services, Mapmaking (Including Aerial) and 
Photogrammetric Mapping Services as exceptions under Standard 
Industrial Classification (SIC) code 7389, Business Services, N.E.C. 
(Not Elsewhere Classified). Size standards at the sub-industry levels 
(``exceptions'') are primarily intended for Federal government 
procurement purposes. However, for NAICS 541340 (which includes Map 
Drafting Services), there were less than $10 million total contracting 
dollars annually during fiscal years 2007-2009, as compared to more 
than $2 billion in total revenue for the industry. Therefore, SBA feels 
that there is no need for a separate size standard for Map Drafting 
Services for Federal procurement and proposes to remove it as an 
exception to NAICS 541340. The proposed $14.0 million common A&E size 
standard will apply to Drafting Services, including Map Drafting 
Services. SBA invites comments along with supporting information on 
this proposal.

3. Information Technology Value Added Resellers

    On July 24, 2002 SBA proposed establishing a 500 employee size 
standard for Information Technology Value Added Resellers (ITVAR) as a 
new sub-industry (``exception'') under NAICS 541519 (67 FR 48419). This 
was to better reflect the Federal government's acquisition of computer 
hardware and software services. In response to public comments and the 
results from further analyses of relevant industry data, on December 
29, 2003, SBA published the final rule adopting 150 employee size 
standard for ITVAR (68 FR 74833). In this proposed rule, SBA proposes 
to retain the current 150 employee size standard for ITVAR. SBA invites 
comments along with supporting information on this proposal.

4. Computer and Office Machine Repair and Maintenance (NAICS 811212)

    The Computer and Office Machine Repair and Maintenance industry 
(NAICS 811212) currently has the same size standard as the Computer 
Design and Related Services Industry Group (NAICS 5415). Therefore, in 
its October 21, 2009 proposed rule for Other Services Sector (74 FR 
53941), SBA did not review the size standard for NAICS 811212 and 
proposed to retain the current $25 million size standard until it 
reviews the Computer Design and Related Services Industries in NAICS 
Sector 54. The history of the Computer and Office Machine Repair 
industry supports this decision. Under the SIC System, SBA had 
established a common size standard for all industries in SIC Industry 
Group 737, ``Computer Programming, Data Processing and Other Computer 
Related Services'' (56 FR 38364 (August 13, 1991) and 57 FR 27907 (June 
23, 1992)). In 1997, SBA replaced the SIC System with the NAICS and 
moved most of the industries in SIC Sector 737 to NAICS Sector 54, 
Professional, Scientific and Technical Services. However, the Computer 
Maintenance and Repair activity was moved to NAICS Sector 81, Other 
Services, and was combined with Computer and Office Machine Repair 
Maintenance services to form NAICS 811212. Because Computer Maintenance 
and Repair was the largest component of the new industry, SBA continued 
to apply the size standard for computer services (64 FR 57188 (October 
22, 1999) and 65 FR 30836 (May 15, 2000)). SBA continues to believe 
that a common size standard should apply to all of the computer 
services related industries, including NAICS 811212. SBA welcomes 
comments on whether it should continue to apply the same size standard 
for computer services to the Computer and Office Machine Repair 
Maintenance industry or consider a different size standard based on its 
industry characteristics.

5. Research and Development (R&D) in Biotechnology (NAICS 541711) and 
R&D in the Physical, Engineering and Life Sciences (Except 
Biotechnology) (NAICS 541712)

    The current size standards for NAICS 541711 and NAICS 541712 
(including three sub-industry groups or ``exceptions'') are based on 
number of employees. Moreover, footnote <greek-i>11 to SBA's Table of 
Size Standards states that for R&D contracts requiring the delivery of 
a manufactured product, the appropriate size standard is that of the 
manufacturing industry. For example, the size standard for aircraft 
related R&D contracts under NAICS 541712 is 1,500 employees, the same 
as that for Aircraft Manufacturing (NAICS 336411). Therefore, SBA plans 
to review the size standards for NAICS 541711 and NAICS 541712 when it 
reviews the size standards for the Manufacturing Sector (NAICS Sector 
31-33). SBA proposes, therefore, to leave the size standards for those 
two industries at their current levels until it reviews NAICS Sector 
31-33.

Evaluation of SBA Loan Data

    Before deciding on an industry's size standard, SBA also considers 
the impact

[[Page 14334]]

of new or revised standards on SBA's loan programs. SBA examined 7(a) 
Business Loan Program data for fiscal years 2007-2009 to assess whether 
the existing or proposed size standards need further adjustments to 
ensure credit opportunities for small businesses through that program. 
For the industries reviewed in this proposed rule, users of SBA's 7(a) 
Business Loan Program are mostly much smaller than the current size 
standards. Based on that analysis, none of the size standards for these 
industries needs an adjustment based on this factor.

Proposed Changes to Size Standards

    The results of SBA analyses of industry specific size standards 
from Table 3 and results for common size standards from Table 5 are 
summarized in Table 6. In terms of industry specific size standards, 
the results support increases in size standards in 22 industries and 
one sub-industry, decreases in 14 industries and one sub-industry and 
no changes in 10 industries. Similarly based on common size standards, 
the results would support increases in 36 industries and one sub-
industry, decreases in two sub-industries and no changes in 10 
industries.
    SBA believes that lowering small business size standards is not in 
the best interests of small businesses under current economic 
conditions. The U.S. economy was in recession from December 2007 to 
June 2009, the longest and deepest of any recessions since World War 
II. The economy lost a total of nearly 8.5 million non-farm jobs during 
2008-2009. In response, Congress passed and the President signed the 
American Recovery and Reinvestment Act of 2009 (Recovery Act) to 
promote economic recovery and to preserve and create jobs. Although the 
recession officially ended in June 2009, the unemployment rate has been 
9.4 percent or higher since May 2009 and is forecast to remain above 9 
percent through the end of 2011. More recently, Congress passed and the 
President signed the Small Business Jobs Act of 2010 (Jobs Act) to 
promote small business job creation. The Jobs Act puts more capital 
into the hands of entrepreneurs and small business owners; strengthens 
small businesses' ability to compete for contracts, including 
recommendations from the President's Task Force on Federal Contracting 
Opportunities for Small Business; creates a better playing field for 
small businesses; promotes small business exporting, building on the 
President's National Export Initiative; expands training and 
counseling; and provides $12 billion in tax relief to help small 
businesses invest in their firms and create jobs.

                                   Table 6--Summary of Size Standards Analysis
----------------------------------------------------------------------------------------------------------------
                                                       Calculated
                                                        industry        Calculated
       NAICS codes           NAICS industry title     specific size     common size    Current size standard  ($
                                                       standard ($     standard  ($            million)
                                                        million)         million)
----------------------------------------------------------------------------------------------------------------
541110...................  Offices of Lawyers.....             $10.0           $10.0  $7.0
541191...................  Title Abstract and                    5.0            10.0  7.0
                            Settlement Offices.
541199...................  All Other Legal                       7.0            10.0  7.0
                            Services.
541211...................  Offices of Certified                 14.0            14.0  8.5
                            Public Accountants.
541213...................  Tax Preparation                      14.0            14.0  7.0
                            Services.
541214...................  Payroll Services.......              35.5            14.0  8.5
541219...................  Other Accounting                      7.0            14.0  8.5
                            Services.
541310...................  Architectural Services.               7.0            19.0  4.5
541320...................  Landscape Architectural               5.0            19.0  7.0
                            Services.
541330...................  Engineering Services...              25.5            19.0  4.5
Except...................  Military and Aerospace               25.5  ..............  27.0
                            Equipment and Military
                            Weapons.
Except...................  Contracts and                          NA  ..............  27.0
                            Subcontracts for
                            Engineering Services
                            Awarded Under the
                            National Energy Policy
                            Act of 1992.
Except...................  Marine Engineering and               25.5  ..............  18.5
                            Naval Architecture.
541340...................  Drafting Services......              14.0            19.0  7.0
Except...................  Map Drafting...........                NA  ..............  4.5
541350...................  Building Inspection                   7.0            19.0  7.0
                            Services.
541360...................  Geophysical Surveying                25.5            19.0  4.5
                            and Mapping Services.
541370...................  Surveying and Mapping                 5.0            19.0  4.5
                            (except Geophysical)
                            Services.
541380...................  Testing Laboratories...              10.0            19.0  12.0
541410...................  Interior Design                       5.0             7.0  7.0
                            Services.
541420...................  Industrial Design                     5.0             7.0  7.0
                            Services.
541430...................  Graphic Design Services               5.0             7.0  7.0
541490...................  Other Specialized                     5.0             7.0  7.0
                            Design Services.
541511...................  Custom Computer                      14.0            25.5  25.0
                            Programming Services.
541512...................  Computer Systems Design              25.5            25.5  25.0
                            Services.
541513...................  Computer Facilities                  35.5            25.5  25.0
                            Management Services.
541519...................  Other Computer Related               19.0            25.5  25.0
                            Services.
Except...................  Information Technology                 NA  ..............  150 employees
                            Value Added Resellers.
541611...................  Administrative                       14.0            14.0  7.0
                            Management and General
                            Management Consulting
                            Services.
541612...................  Human Resources                      14.0            14.0  7.0
                            Consulting Services.
541613...................  Marketing Consulting                  7.0            14.0  7.0
                            Services.
541614...................  Process, Physical                    19.0            14.0  7.0
                            Distribution and
                            Logistics Consulting
                            Services.
541618...................  Other Management                      7.0            14.0  7.0
                            Consulting Services.
541620...................  Environmental                         5.0            14.0  7.0
                            Consulting Services.
541690...................  Other Scientific and                 10.0            14.0  7.0
                            Technical Consulting
                            Services.
541720...................  Research and                         19.0  ..............  7.0
                            Development in the
                            Social Sciences and
                            Humanities.
541810...................  Advertising Agencies...              14.0            14.0  7.0
541820...................  Public Relations                      7.0            14.0  7.0
                            Agencies.
541830...................  Media Buying Agencies..              25.5            14.0  7.0
541840...................  Media Representatives..               7.0            14.0  7.0

[[Page 14335]]

 
541850...................  Display Advertising....              25.5            14.0  7.0
541860...................  Direct Mail Advertising              19.0            14.0  7.0
541870...................  Advertising Material                 19.0            14.0  7.0
                            Distribution Services.
541890...................  Other Services Related                7.0            14.0  7.0
                            to Advertising.
541910...................  Marketing Research and               19.0             7.0  7.0
                            Public Opinion Polling.
541921...................  Photography Studios,                  7.0             7.0  7.0
                            Portrait.
541922...................  Commercial Photography.               5.0             7.0  7.0
541930...................  Translation and                       7.0             7.0  7.0
                            Interpretation
                            Services.
541940...................  Veterinary Services....               5.0             7.0  7.0
541990...................  All Other Professional,               7.0             7.0  7.0
                            Scientific and
                            Technical Services.
811212...................  Computer and Office                  19.0            25.5  25.0
                            Repair and Maintenance.
----------------------------------------------------------------------------------------------------------------

    Reducing size standards would decrease the number of firms that can 
participate in Federal financial and procurement assistance. 
Furthermore, lowering size standards for those 14 industries would cut 
off nearly 1,200 currently eligible small business firms from those 
very programs, which would run counter to what the Federal government 
is trying to do for small businesses. Reducing size eligibility for 
Federal procurement opportunities, especially under current economic 
conditions, would not preserve or create more jobs; rather, it would 
have the opposite effect. Therefore, SBA has decided not to propose to 
reduce the size standards for those industries. SBA has decided to 
retain the current size standards in this proposed rule. SBA invites 
comments and suggestions on whether it should lower size standards as 
suggested by analyses of industry and program data or retain the 
current standards for those industries in view of current economic 
conditions. SBA intends for the proposed size standards, if adopted, to 
remain in effect unless and until it receives information or data that 
suggests a change is needed.
    Based on comparisons between industry specific size standards and 
common size standards within each Industry Group, SBA finds that common 
size standards are more appropriate for several reasons. First, 
analyzing industries at a more aggregated Industry Group level 
simplifies size standards analysis and the results are more consistent 
among related industries. Second, in most cases, industries within each 
Industry Group currently have the same size standards and it is better 
to keep the revised size standards also the same. Third, within each 
Industry Group many of the same businesses tend to operate in the same 
multiple industries. Establishing the common size standard would, 
therefore, better reflect the Federal marketplace in those industries 
than establishing different size standards for each industry. Fourth, 
industry specific size standards and common size standards are mostly 
within a reasonably close range.
    For industries where both industry specific size standards and 
common size standards have been derived, SBA, for the above reasons, 
proposes to apply common size standards. For industries (including sub-
industries) where common size standards have not been estimated, SBA 
proposes to apply industry specific size standards.
    As discussed above, SBA has decided that lowering small business 
size standards would be inconsistent with what the Federal government 
is doing to stimulate the economy and encourage job growth through the 
Recovery Act and Jobs Act. Therefore, SBA proposes to retain the 
current size standards for those industries for which its analyses 
suggested decreasing their size standards. Thus, of the 45 industries 
and three sub-industries in NAICS Sector 54 and one industry in NAICS 
Sector 81 that were reviewed in this proposed rule, SBA proposes to 
increase size standards for 36 industries and one sub-industry and 
retain current standards for 10 industries and two sub-industries. As 
discussed above, SBA also proposes to eliminate Map Drafting Services 
as an ``exception'' to NAICS 541340, Drafting Services. Industries and 
their proposed size standards are shown in Table 7.

        Table 7--Summary of Proposed Revisions to Size Standards
------------------------------------------------------------------------
                                           Proposed size   Current size
     NAICS codes        NAICS industry     standard  ($    standard  ($
                             title           million)        million)
------------------------------------------------------------------------
541110..............  Offices of Lawyers           $10.0            $7.0
541191..............  Title Abstract and            10.0             7.0
                       Settlement
                       Offices.
541199..............  All Other Legal               10.0             7.0
                       Services.
541211..............  Offices of                    14.0             8.5
                       Certified Public
                       Accountants.
541213..............  Tax Preparation               14.0             7.0
                       Services.
541214..............  Payroll Services..            14.0             8.5
541219..............  Other Accounting              14.0             8.5
                       Services.
541310..............  Architectural                 19.0             4.5
                       Services.
541320..............  Landscape                     19.0             7.0
                       Architectural
                       Services.
541330..............  Engineering                   19.0             4.5
                       Services.
Except..............  Marine Engineering            25.5            18.5
                       and Naval
                       Architecture.
541340..............  Drafting Services.            19.0             7.0
541350..............  Building                      19.0             7.0
                       Inspection
                       Services.
541360..............  Geophysical                   19.0             4.5
                       Surveying and
                       Mapping Services.
541370..............  Surveying and                 19.0             4.5
                       Mapping (except
                       Geophysical)
                       Services.

[[Page 14336]]

 
541380..............  Testing                       19.0            12.0
                       Laboratories.
541511..............  Custom Computer               25.5            25.0
                       Programming
                       Services.
541512..............  Computer Systems              25.5            25.0
                       Design Services.
541513..............  Computer                      25.5            25.0
                       Facilities
                       Management
                       Services.
541519..............  Other Computer                25.5            25.0
                       Related Services.
541611..............  Administrative                14.0             7.0
                       Management and
                       General
                       Management
                       Consulting
                       Services.
541612..............  Human Resources               14.0             7.0
                       Consulting
                       Services.
541613..............  Marketing                     14.0             7.0
                       Consulting
                       Services.
541614..............  Process, Physical             14.0             7.0
                       Distribution and
                       Logistics
                       Consulting
                       Services.
541618..............  Other Management              14.0             7.0
                       Consulting
                       Services.
541620..............  Environmental                 14.0             7.0
                       Consulting
                       Services.
541690..............  Other Scientific              14.0             7.0
                       and Technical
                       Consulting
                       Services.
541720..............  Research and                  19.0             7.0
                       Development in
                       the Social
                       Sciences and
                       Humanities.
541810..............  Advertising                   14.0             7.0
                       Agencies.
541820..............  Public Relations              14.0             7.0
                       Agencies.
541830..............  Media Buying                  14.0             7.0
                       Agencies.
541840..............  Media                         14.0             7.0
                       Representatives.
541850..............  Display                       14.0             7.0
                       Advertising.
541860..............  Direct Mail                   14.0             7.0
                       Advertising.
541870..............  Advertising                   14.0             7.0
                       Material
                       Distribution
                       Services.
541890..............  Other Services                14.0             7.0
                       Related to
                       Advertising.
811212..............  Computer and                  25.5            25.0
                       Office Repair and
                       Maintenance.
------------------------------------------------------------------------

Evaluation of Dominance in Field of Operation

    In the industries and sub-industries for which SBA proposes to 
revise size standards, there are no individual firms at or below the 
proposed size standard large enough to dominate their field of 
operation. A firm at the proposed size standard in each of these 
industries generates less than two percent of total industry receipts. 
This level of market share effectively precludes a firm at or below the 
proposed size standard from exerting a controlling effect on the 
industry.

Request for Comments

    SBA invites public comments on the proposed rule, especially on the 
following areas.
    1. To simplify size standards, SBA proposes eight fixed size levels 
for receipts based size standards: $5.0 million, $7.0 million, $10.0 
million, $14.0 million, $19.0 million, $25.5 million, $30.0 million and 
$35.5 million. SBA invites comments on whether simplification of size 
standards in this way is necessary and if these proposed fixed size 
levels are appropriate, or suggestions on alternative approaches to 
simplifying small business size standards.
    2. SBA seeks feedback on whether the proposed levels of size 
standards are appropriate given the economic characteristics of each 
industry or sub-industry. SBA also seeks feedback and suggestions on 
alternative standards, if they would be more appropriate, including 
whether an employee based standard for certain industries or sub-
industries is a more suitable measure of size and what that employee 
level should be.
    3. For industries within several Industry Groups, including Legal 
Services (NAICS 5411), Accounting and Related Services (NAICS 5412), 
A&E and Related Services (NAICS 5413, except for the exceptions), 
Specialized Design Services (NAICS 5414), Computer Related Services 
(NAICS 5415 and NAICS 811212), Consulting Services (NAICS 5416), 
Advertising and Related Services (NAICS 5418) and Other Professional, 
Scientific, and Technical Services (NAICS 5419), SBA proposes a common 
size standard. SBA invites comments or suggestions along with 
supporting information with respect to the following:
    a. Whether SBA should adopt a common size standard for those 
industries or establish a separate size standard for each industry.
    b. Whether the proposed common size standards for those industries 
are at the correct levels or what are more appropriate size standards 
if the proposed standards are not suitable.
    4. SBA proposes to increase the size standard for Marine 
Engineering and Naval Architecture, one of the three exceptions under 
NAICS 541330, to $25.5 million from $18.5 million. For the other two 
exceptions under NAICS 541330, namely Military and Aerospace Equipment 
and Military Weapons and the Contracts and Subcontracts for Engineering 
Services Awarded Under the National Energy Policy Act of 1992, SBA 
proposes to retain the current $27.0 million size standard. SBA 
requests comments, along with supporting information, on whether the 
proposed size standards are appropriate or suggestions on alternative 
size standards if the proposed standards are inappropriate.
    5. SBA feels that there is no need for a separate size standard for 
Map Drafting Services for Federal procurement and proposes to remove it 
as an exception to NAICS 541340. As stated above, there were less than 
$10 million in total contracting dollars annually during fiscal years 
2007-2009, as compared to more than $2 billion in total revenue for the 
industry in this NAICS code. Given this relatively insignificant level 
of Federal contracting for Map Drafting Services (an ``exception'' 
under NAICS 541340, Drafting Services), SBA proposes to eliminate this 
exception. SBA invites comments on whether SBA should remove or retain 
the Map Drafting Services as an exception under NAICS 541340.
    6. SBA's proposed size standards are based on its evaluation of 
five primary factors--average firm size, average assets size (as a 
proxy of startup costs and entry barriers), four-firm concentration 
ratio, distribution of firms by size and the level and small business 
share of Federal contracting dollars. SBA welcomes comments on these 
factors and/or suggestions on other factors that it should consider for 
assessing industry characteristics when evaluating or revising size 
standards.

[[Page 14337]]

SBA also seeks information on relevant data sources, if available.
    7. SBA gives equal weight to each of the five primary factors in 
all industries. SBA seeks feedback on whether it should continue giving 
equal weight to each factor or whether it should give more weight to 
one or more factors for certain industries. Recommendations to weigh 
some factors more than others should include suggestions on specific 
weights for each factor for those industries along with supporting 
information.
    8. For some industries, SBA proposes to increase the existing size 
standards by a large amount (e.g., for certain A&E industries, proposed 
size standards are more than three times the current size standards) 
while for others the proposed increases are modest. SBA seeks feedback 
on whether it should, as a policy, limit the increase to a size 
standard and/or whether it should, as a policy, establish minimum or 
maximum values for its size standards. SBA seeks suggestions on 
appropriate levels of changes to size standards and on their minimum or 
maximum levels.
    9. SBA requests comments on whether it should lower size standards. 
SBA has proposed not to reduce small business size standards where 
applying its ``Size Standards Methodology,'' might suggest lowering 
them. Rather, SBA opted to retain the current standards for those 
industries. SBA explained its reasons for this in the Supplementary 
Information above. SBA seeks comments, as it does in its ``Size 
Standards Methodology'' (see Policy Issue i on page 47) on whether it 
should reduce size standards at all. Because this is a policy issue, 
please provide documentation to reinforce your comments either in 
support of or opposition to this issue.
    10. For analytical simplicity and efficiency, in this proposed 
rule, SBA has refined its size standard methodology to obtain a single 
value as a proposed size standard instead of a range of values in its 
past size regulations. SBA welcomes any comments on this procedure and 
suggestions on alternative methods.
    Public comments on the above issues are very valuable to SBA for 
validating its size standard methodology and proposed revisions to size 
standards in this proposed rule. This will help SBA to move forward 
with its review of size standards for other NAICS Sectors. Commenters 
addressing size standards for a specific industry or a group of 
industries should include relevant data and/or other information 
supporting their comments. If comments relate to using size standards 
for Federal procurement programs, SBA suggests that commenters provide 
information on the size of contracts awarded, the size of businesses 
that can undertake the contracts, start-up costs, equipment and other 
asset requirements, the amount of subcontracting, other direct and 
indirect costs associated with the contracts, the use of mandatory 
sources of supply for products and services and the degree to which 
contractors can mark up those costs.

Compliance With Executive Orders 12866, 12988, 13132 and 13563, the 
Paperwork Reduction Act (44 U.S.C. Ch. 35) and the Regulatory 
Flexibility Act (5 U.S.C. 601-612). Executive Order 12866

    The Office of Management and Budget (OMB) has determined that this 
proposed rule is a ``significant'' regulatory action for purposes of 
Executive Order 12866. Accordingly, the next section contains SBA's 
Regulatory Impact Analysis. This is not a major rule, however, under 
the Congressional Review Act, 5 U.S.C. 800.

Regulatory Impact Analysis

1. Is there a need for the regulatory action?

    SBA believes that proposed size standards for a number of 
industries in NAICS Sector 54, Professional, Scientific and Technical 
Services, will better reflect the economic characteristics of small 
businesses and the Federal government marketplace. SBA's mission is to 
aid and assist small businesses through a variety of financial, 
procurement, business development and advocacy programs. To assist the 
intended beneficiaries of these programs, SBA must establish distinct 
definitions of which businesses are deemed small businesses. The Small 
Business Act (15 U.S.C. 632(a)) delegates to SBA's Administrator the 
responsibility for establishing small business definitions. The Act 
also requires that small business definitions vary to reflect industry 
differences. The supplementary information section of this proposed 
rule explains SBA's methodology for analyzing a size standard for a 
particular industry.

2. What are the potential benefits and costs of this regulatory action?

    The most significant benefit to businesses obtaining small business 
status because of this rule is gaining eligibility for Federal small 
business assistance programs. These include SBA's financial assistance 
programs, economic injury disaster loans and Federal procurement 
programs intended for small businesses. Federal procurement provides 
targeted opportunities for small businesses under SBA's business 
development programs, such as 8(a), Small Disadvantaged Businesses 
(SDB), small businesses located in Historically Underutilized Business 
Zones (HUBZone), women-owned small businesses (WOSB), and service-
disabled veteran-owned small business concerns (SDVO SBC). Other 
Federal agencies also may use SBA size standards for a variety of 
regulatory and program purposes. Through the assistance of these 
programs, small businesses become more knowledgeable, stable and 
competitive. In 36 industries and one sub-industry for which SBA has 
proposed increasing size standards, SBA estimates that about 9,450 
additional firms will obtain small business status and become eligible 
for these programs. That number is 1.2 percent of the total number of 
firms in those industries defined as small under the current standards. 
If adopted as proposed, this would increase the small business share of 
total industry receipts in those industries from about 35.0 percent 
under the current size standards to 41.0 percent.
    The benefits of SBA's proposed increased size standards will accrue 
to three groups: (1) Businesses that are above the current size 
standards will gain small business status under the higher size 
standards, thereby being able to participate in Federal small business 
assistance programs; (2) growing small businesses that are close to 
exceeding the current size standards will be able to retain their small 
business status under the higher size standards, thereby being able to 
continue their participation in the programs; and (3) Federal agencies 
will have a larger pool of small businesses from which to draw for 
their small business procurement programs.
    During fiscal years 2007-2009, nearly 90 percent of Federal 
contracting dollars spent in industries reviewed in this proposed rule 
were accounted for by the 36 industries for which SBA has proposed to 
increase size standards. SBA estimates that additional firms gaining 
small business status in those industries under the proposed size 
standards could potentially obtain Federal contracts totaling up to 
$650 million per year under SBA's small business, 8(a), HUBZone, WOSB, 
and SDVO SBC Programs and other unrestricted procurements. The added 
competition for many of these procurements also could result in lower 
prices to the Government for procurements reserved for small

[[Page 14338]]

businesses, but SBA cannot quantify this benefit.
    Under SBA's 7(a) Business Loan and 504 Programs, SBA estimates 75-
100 additional loans totaling $15 million to $20 million in Federal 
loan guarantees could be made to these newly defined small businesses 
under the proposed standards. Increasing the size standards will likely 
result in an increase in small business guaranteed loans to businesses 
in these industries, but it would be impractical to try to estimate 
exactly the extent of their number and the total amount loaned.
    The newly defined small businesses would also benefit from SBA's 
Economic Injury Disaster Loan (EIDL) Program. Since this program is 
contingent upon the occurrence and severity of a disaster, no 
meaningful estimate of benefits can be projected for future disasters.
    To the extent that 9,450 additional firms could become active in 
Federal procurement programs, this may entail some additional 
administrative costs to the Federal Government associated with 
additional bidders for Federal small business procurement 
opportunities, additional firms seeking SBA guaranteed lending 
programs, additional firms eligible for enrollment in the Central 
Contractor Registration's Dynamic Small Business Search database and 
additional firms seeking certification as 8(a) or HUBZone firms or 
those qualifying for small business, WOSB, SDVO SBC, and SDB status. 
Among businesses in this group seeking SBA assistance, there could be 
some additional costs associated with compliance and verification of 
small business status and protests of small business status. These 
added costs are likely to be minimal because mechanisms are already in 
place to handle these administrative requirements.
    The costs to the Federal Government may be higher on some Federal 
contracts. With a greater number of businesses defined as small, 
Federal agencies may choose to set aside more contracts for competition 
among small businesses rather than using full and open competition. The 
movement from unrestricted to small business set-aside contracting 
might result in competition among fewer total bidders, although there 
will be more small businesses eligible to submit offers. In addition, 
higher costs may result when more full and open contracts are awarded 
to HUBZone and SDB businesses that receive price evaluation 
preferences. The additional costs associated with fewer bidders, 
however, are likely to be minor since, as a matter of law, procurements 
may be set aside for small businesses or reserved for the 8(a), 
HUBZone, WOSB, or SDVO SBC Programs only if awards are expected to be 
made at fair and reasonable prices.
    The proposed size standards may have distributional effects among 
large and small businesses. Although SBA cannot estimate the actual 
outcome of the gains and losses among small and large businesses with 
certainty, it can identify several likely impacts. There will likely be 
a transfer of some Federal contracts to small businesses from large 
businesses. Large businesses may have fewer Federal contract 
opportunities as Federal agencies decide to set aside more Federal 
contracts for small businesses. In addition, some Federal contracts may 
be awarded to HUBZone or SDB concerns instead of large businesses since 
those two categories of small businesses may be eligible for an 
evaluation adjustment for contracts when they compete on a full and 
open basis. Similarly, currently defined small businesses may obtain 
fewer Federal contracts due to the increased competition from more 
businesses defined as small. This transfer may be offset by a greater 
number of Federal procurements set aside for all small businesses. The 
number of newly defined and expanding small businesses that are willing 
and able to sell to the Federal Government will limit the potential 
transfer of contracts away from large and currently defined small 
businesses. SBA cannot estimate the potential distributional impacts of 
these transfers with any degree of precision because FPDS-NG data only 
identify the size of businesses receiving Federal contracts as small 
business or other than small businesses; FPDS-NG does not provide the 
exact size of the business.
    The proposed revisions to the existing size standards for 
Professional, Scientific and Technical Services industries is 
consistent with SBA's statutory mandate to assist small business. This 
regulatory action promotes the Administration's objectives. One of 
SBA's goals in support of the Administration's objectives is to help 
individual small businesses succeed through fair and equitable access 
to capital and credit, Government contracts and management and 
technical assistance. Reviewing and modifying size standards, when 
appropriate, ensures that intended beneficiaries have access to small 
business programs designed to assist them.

Executive Order 13563

    A description of the need for this regulatory action and benefits 
and costs associated with this action including possible distributions 
impacts that relate to Executive Order 13563 is included above in the 
Regulatory Impact Analysis under Executive Order 12866.
    In an effort to engage interested parties in this action, SBA has 
presented its methodology (discussed above under Supplementary 
Information) to various industry associations and trade groups, 
representing various industry Sectors including Professional Scientific 
and Technical Services. SBA also met with various industry groups to 
get their feedback on its methodology and other size standards issues. 
Several of these groups expressed concerns and suggestions for size 
standards for a number of industries in NAICS Sector 54.
    Also, SBA sent letters to the Directors of the Offices of Small and 
Disadvantaged Business Utilization (OSDBU) and a several Federal 
agencies with considerable procurement responsibilities requesting 
their feedback on how the agencies use SBA size standards and whether 
current standards meet their programmatic needs (both procurement and 
non-procurement). SBA gave appropriate consideration to all input, 
suggestions, recommendations, and relevant information obtained from 
industry groups, individual businesses, and Federal agencies in 
preparing this proposed rule.
    The review of NAICS Sector 54, Professional, Scientific and 
Technical Services, is consistent with Sector 6 of EO 13653, 6. calling 
for retrospective analyses of existing rules. The last overall review 
of size standards occurred during the late 1970s and early 1980s. Since 
then, except for periodic adjustments for monetary based size 
standards, most reviews of size standards have been limited to a few 
specific industries in response to requests from the public and Federal 
agencies. SBA recognizes that changes in industry structure and the 
Federal marketplace over time have rendered existing size standards for 
some industries no longer supportable by current data. Accordingly, SBA 
has begun a comprehensive review of its size standards to ensure that 
existing size standards have supportable bases and to revise them when 
necessary. In addition, on September 27, 2010 the President of the 
United States signed the Small Business Jobs Act of 2010 (Jobs Act). 
The Jobs Act directs SBA to conduct a detailed review of all size 
standards and to make appropriate adjustments to reflect market 
conditions. Specifically, the Jobs Act requires SBA to conduct a 
detailed

[[Page 14339]]

review of at least one-third of all size standards during every 18-
month period from the date of its enactment and do a complete review of 
all size standards not less frequently than once every 5 years 
thereafter.

Executive Order 12988

    For purposes of Executive Order 12988, SBA has determined that this 
rule is drafted, to the extent practicable, in accordance with the 
standards set forth in that Order.

Executive Order 13132

    For purposes of Executive Order 13132, SBA has determined that this 
rule does not have any Federalism implications warranting the 
preparation of a federalism assessment.

Paperwork Reduction Act

    For the purpose of the Paperwork Reduction Act, 44 U.S.C. Ch. 35, 
SBA has determined that this rule would not impose new reporting or 
record keeping requirements, other than those required of SBA.

Initial Regulatory Flexibility Analysis

    Under the Regulatory Flexibility Act (RFA), this rule, if 
finalized, may have a significant impact on a substantial number of 
small entities in NAICS Sector 54, Professional, Scientific and 
Technical Services. As described above, this rule may affect small 
entities seeking Federal contracts, SBA (7a) and 504 Guaranteed Loan 
Programs, SBA Economic Injury Disaster Loans and other Federal small 
business programs.
    Immediately below, SBA sets forth an initial regulatory flexibility 
analysis (IRFA) of this proposed rule addressing the following 
questions: (1) What is the need for and objective of the rule? (2) what 
is SBA's description and estimate of the number of small entities to 
which the rule will apply? (3) what are the projected reporting, record 
keeping and other compliance requirements of the rule? (4) what are the 
relevant Federal rules which may duplicate, overlap or conflict with 
the rule? and (5) what alternatives will allow the Agency to accomplish 
its regulatory objectives while minimizing the impact on small 
entities?

(1) What is the need for and objective of the rule?

    As described above in the supplementary section, SBA reviewed and 
modified size standards for NAICS 541310, NAICS 541330, NAICS 541340, 
NAICS 541360 and NAICS 541370 in 1998 and 1999. Most of the remaining 
size standards in NAICS Sector 54, Professional, Scientific and 
Technical Services, have not been reviewed since the early 1980s. 
Technology, productivity growth, international competition, mergers and 
acquisitions and updated industry definitions may have changed the 
structure of many industries in that Sector. Such changes can be 
sufficient to support a revision to size standards for some industries. 
Based on the analysis of the latest data available to the Agency, SBA 
believes that the revised standards in this proposed rule more 
appropriately reflect the size of businesses in those industries that 
need Federal assistance.

(2) What is SBA's description and estimate of the number of small 
entities to which the rule will apply?

    If the proposed rule is adopted in its present form, SBA estimates 
that about 9,450 additional firms will become small because of 
increases in size standards in 36 industries and one sub-industry. That 
represents 1.2 percent of total firms in those industries and sub-
industries. This will result in an increase in the small business share 
of total industry receipts for this Sector from about 35.0 percent 
under the current size standard to 41.0 percent under the proposed 
standards. SBA does not anticipate a significant competitive impact on 
smaller businesses in these industries because businesses in this 
Sector have been requesting SBA to increase these standards. The 
proposed standards, if adopted, will enable more small businesses to 
retain their small business status for a longer period. Many have lost 
their eligibility and find it difficult to compete at such low levels 
with companies that are significantly larger than they are. SBA 
believes the competitive impact will be positive for existing small 
businesses and for those that exceed the size standards but are on the 
very low end of those that are not small. They might otherwise be 
called or referred to as mid-sized businesses, although SBA only 
defines what is small; other entities are other than small.

(3) What are the projected reporting, record keeping and other 
compliance requirements of the rule and an estimate of the classes of 
small entities, which will be subject to the requirements?

    Proposed size standards changes do not impose any additional 
reporting or record keeping requirements on small entities. However, 
qualifying for Federal procurement and a number of other programs 
requires that entities register in the CCR database and certify at 
least annually that they are small in the Online Representations and 
Certifications Application (ORCA). Therefore, businesses opting to 
participate in those programs must comply with CCR and ORCA 
requirements. There are no costs associated with either CCR 
registration or ORCA certification. Changing size standards alters the 
access to SBA programs that assist small businesses, but does not 
impose a regulatory burden as they neither regulate nor control 
business behavior.

(4) What are the relevant Federal rules, which may duplicate, overlap 
or conflict with the rule?

    Under Sec.  3(a)(2)(C) of the Small Business Act, 15 U.S.C. 
632(a)(2)(c), Federal agencies must use SBA's size standards to define 
a small business, unless specifically authorized by statute. In 1995, 
SBA published in the Federal Register a list of statutory and 
regulatory size standards that identified the application of SBA's size 
standards as well as other size standards used by Federal agencies (60 
FR 57988 (November 24, 1995)). SBA is not aware of any Federal rule 
that would duplicate or conflict with establishing size standards.
    However, the Small Business Act and SBA's regulations allow Federal 
agencies to develop different size standards if they believe that SBA's 
size standards are not appropriate for their programs, with the 
approval of SBA's Administrator (13 CFR 121.903). The Regulatory 
Flexibility Act authorizes an Agency to establish an alternative small 
business definition, after consultation with the Office of Advocacy of 
the U.S. Small Business Administration (5 U.S.C. 601(3)).

(5) What alternatives will allow the Agency to accomplish its 
regulatory objectives while minimizing the impact on small entities?

    By law, SBA is required to develop numerical size standards for 
establishing eligibility for Federal small business assistance 
programs. Other than varying size standards by industry and changing 
the size measures, no practical alternative exists to the systems of 
numerical size standards.

List of Subjects in 13 CFR Part 121

    Administrative practice and procedure, Government procurement, 
Government property, Grant programs--business, Individuals with 
disabilities, Loan programs--business, Reporting and recordkeeping 
requirements, Small businesses.

    For the reasons set forth in the preamble, SBA proposes to amend 
part 13 CFR Part 121 as follows.

[[Page 14340]]

PART 121--SMALL BUSINESS SIZE REGULATIONS

    1. The authority citation for part 121 continues to read as 
follows:

    Authority:  15 U.S.C. 632, 634(b)(6), 636(b), 637(a), 644 and 
662(5); and Pub. L. 105-135, sec. 401 et seq., 111 Stat. 2592.

    2. In Sec.  121.201, in the table, revise the entries for 
``541110'', ``541191'', ``541199'', ``541211'', ``541213'', ``541214'', 
``541219'', ``541310'', ``541320'', ``541330 introductory entry and 
third sub-entry'', ``541340'', ``541350'', ``541360'', ``541370'', 
``541380'', ``541511'', ``541512'', ``541513'', ``541519 introductory 
entry'', ``541611'', ``541612'', ``541613'', ``541614'', ``541618'', 
``541620'', ``541690'', ``541720'', ``541810'', ``541820'', ``541830'', 
``541840'', ``541850'', ``541860'', ``541870'', ``541890'', and 
``811212'' to read as follows:


Sec.  121.201  What size standards has SBA identified by North American 
Industry Classification System codes?

* * * * *

------------------------------------------------------------------------
                                          Size standards  Size standards
     NAICS codes          NAICS U.S.      in millions of   in number of
                        industry title        dollars        employees
------------------------------------------------------------------------
 
                              * * * * * * *
541110..............  Offices of Lawyers           $10.0  ..............
541191..............  Title Abstract and            10.0  ..............
                       Settlement
                       Offices.
541199..............  All Other Legal               10.0  ..............
                       Services.
541211..............  Offices of                    14.0  ..............
                       Certified Public
                       Accountants.
541213..............  Tax Preparation               14.0  ..............
                       Services.
541214..............  Payroll Services..            14.0  ..............
541219..............  Other Accounting              14.0  ..............
                       Services.
541310..............  Architectural                 19.0  ..............
                       Services.
541320..............  Landscape                     19.0  ..............
                       Architectural
                       Services.
541330..............  Engineering                   19.0  ..............
                       Services.
 
                              * * * * * * *
Except,.............  Marine Engineering            25.5  ..............
                       and Naval
                       Architecture.
541340..............  Drafting Services.            19.0  ..............
541350..............  Building                      19.0  ..............
                       Inspection
                       Services.
541360..............  Geophysical                   19.0  ..............
                       Surveying and
                       Mapping Services.
541370..............  Surveying and                 19.0  ..............
                       Mapping (except
                       Geophysical)
                       Services.
541380..............  Testing                       19.0  ..............
                       Laboratories.
 
                              * * * * * * *
541511..............  Custom Computer               25.5  ..............
                       Programming
                       Services.
541512..............  Computer Systems              25.5  ..............
                       Design Services.
541513..............  Computer                      25.5  ..............
                       Facilities
                       Management
                       Services.
541519..............  Other Computer                25.5  ..............
                       Related Services.
 
                              * * * * * * *
541611..............  Administrative                14.0  ..............
                       Management and
                       General
                       Management
                       Consulting
                       Services.
541612..............  Human Resources               14.0  ..............
                       Consulting
                       Services.
541613..............  Marketing                     14.0  ..............
                       Consulting
                       Services.
541614..............  Process, Physical             14.0  ..............
                       Distribution and
                       Logistics
                       Consulting
                       Services.
541618..............  Other Management              14.0  ..............
                       Consulting
                       Services.
541620..............  Environmental                 14.0  ..............
                       Consulting
                       Services.
541690..............  Other Scientific              14.0  ..............
                       and Technical
                       Consulting
                       Services.
 
                              * * * * * * *
541720..............  Research and                  19.0  ..............
                       Development in
                       the Social
                       Sciences and
                       Humanities.
541810..............  Advertising              \10\ 14.0  ..............
                       Agencies \10\.
541820..............  Public Relations              14.0  ..............
                       Agencies.
541830..............  Media Buying                  14.0  ..............
                       Agencies.
541840..............  Media                         14.0  ..............
                       Representatives.
541850..............  Display                       14.0  ..............
                       Advertising.
541860..............  Direct Mail                   14.0  ..............
                       Advertising.
541870..............  Advertising                   14.0  ..............
                       Material
                       Distribution
                       Services.
541890..............  Other Services                14.0  ..............
                       Related to
                       Advertising.
 
                              * * * * * * *
811212..............  Computer and                  25.5  ..............
                       Office Repair and
                       Maintenance.
 
                              * * * * * * *
------------------------------------------------------------------------



[[Page 14341]]

    Dated: March 9, 2011.
Karen G. Mills,
Administrator.
[FR Doc. 2011-5876 Filed 3-15-11; 8:45 am]
BILLING CODE 8025-01-P


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