[Federal Register Volume 65, Number 117 (Friday, June 16, 2000)]
[Rules and Regulations]
[Pages 37689-37694]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 00-15258]



========================================================================
Rules and Regulations
                                                Federal Register
________________________________________________________________________

This section of the FEDERAL REGISTER contains regulatory documents 
having general applicability and legal effect, most of which are keyed 
to and codified in the Code of Federal Regulations, which is published 
under 50 titles pursuant to 44 U.S.C. 1510.

The Code of Federal Regulations is sold by the Superintendent of Documents. 
Prices of new books are listed in the first FEDERAL REGISTER issue of each 
week.

========================================================================


Federal Register / Vol. 65, No. 117 / Friday, June 16, 2000 / Rules 
and Regulations

[[Page 37689]]



SMALL BUSINESS ADMINISTRATION

13 CFR Part 121


Small Business Size Standards; General Building Contractors, 
Heavy Construction, Except Building, Dredging and Surface Cleanup 
Activities, Special Trade Contractors, Garbage and Refuse Collection, 
Without Disposal, and Refuse Systems

AGENCY: Small Business Administration.

ACTION: Final rule.

-----------------------------------------------------------------------

SUMMARY: The Small Business Administration (SBA) is establishing a size 
standard of $27.5 million in average annual receipts for all industries 
in General Building Contractors, Standard Industrial Classification 
(SIC) Major Group 15, and for all industries except Dredging and 
Surface Cleanup Activities in Heavy Construction Other Than Building 
Construction, SIC Major Group 16; $17.0 million for Dredging and 
Surface Cleanup Activities, part of SIC 1629, Heavy Construction, Not 
Elsewhere Classified (NEC); $11.5 million for all industries in Special 
Trade Contractors, SIC Major Group 17; and $10.0 million for Garbage 
and Refuse Collection, Without Disposal, part of SIC 4212, Local 
Trucking Without Storage, and Refuse Systems, SIC 4953. These revisions 
are being made to adjust the Construction and Refuse size standards for 
the effects of inflation from the time they were established in the 
mid-1980s through 1999, and to address unique costs trends in the 
Dredging industry.

DATES: This rule is effective on July 17, 2000.

FOR FURTHER INFORMATION CONTACT: Robert N. Ray, Office of Size 
Standards (202) 205-6618.

SUPPLEMENTARY INFORMATION: On July 26, 1999, SBA proposed increasing 
the size standards for the Construction and Refuse Systems and Related 
Services industries (see 64 FR 40311). We proposed size standards of 
$25 million for all industries in General Building Contractors, SIC 
Major Group 15, (referred to as the General Construction industry) and 
for all industries except Dredging and Surface Cleanup Activities in 
Heavy Construction Other Than Building Construction, SIC Major Group 
16, (referred to as the Heavy Construction industry); $20.0 million for 
Dredging and Surface Cleanup Activities, part of SIC 1629, Heavy 
Construction, NEC (referred to as the Dredging industry ); $10.5 
million for all Special Trade Contractors industries, SIC Major Group 
17 (referred to as the Special Trades industry); and $9.0 million for 
Garbage and Refuse Collection, Without Disposal, part of SIC 4212, 
Local Trucking Without Storage, and Refuse Systems, SIC 4953, (referred 
to as the Refuse industries).
    These proposed increases were designed to adjust the current size 
standards for the effects of inflation that had occurred since 1984, 
when all but one of these size standards became effective. (The one 
exception, the Dredging industry, first became effective on December 9, 
1985.) Inflation had increased 48.2% based on the change in the price 
level for the Implicit Price Deflator for Gross Domestic Product 
between the third quarter of 1982 and the fourth quarter of 1993 (the 
time period that most other receipts-based size standards were last 
adjusted for inflation). By adjusting the Construction and Refuse size 
standards to the same point in time, we attempted to have all receipts-
based size standards adjusted for inflation to a common base year of 
1994.
    In response to the comments received on the proposed rule, this 
final rule adopts different size standards than proposed. For all of 
the Construction industries, except the Dredging industry, and for the 
Refuse industries, the proposed size standards are further increased to 
reflect inflation that has occurred through 1999. For the Dredging 
industry, however, a lower size standard than proposed is adopted to 
more realistically reflect inflationary trends that have occurred since 
the establishment of the current $13.5 million Dredging size standard. 
The remainder of the final rule discusses the comments we received on 
the proposed rule and our reasons for adopting different size 
standards.

Construction and Refuse Size Standards

    We have decided to increase the size standards for all of the 
Construction industries (except for the Dredging industry) and the 
Refuse industries to account for inflation through 1999 rather than 
through 1994 as proposed. This decision is based on several factors. 
First, comments on the proposed rule were nearly unanimous that an 
inflation adjustment to the Construction and Refuse size standards was 
an acceptable basis for changing these size standards. Second, about 
one-fourth of the comments to the proposed Construction and Refuse size 
standards argued for higher size standards than the ones adjusted to 
the 1994 level. Third, SBA is committed to more frequent inflation 
adjustments than has occurred in the past, and five years would seem to 
be sufficient time to wait for an inflationary adjustment. Considering 
these factors together, we conclude that these size standards should be 
adjusted for inflation to 1999.
    By choosing to inflate its Construction and Refuse size standards 
to 1999, SBA is again positioning its receipts-based size standards to 
different base periods. Most receipts-based size standards were changed 
in 1994 using the inflation rate between 1982 and 1993 (see 59 FR 
16513, dated April 7, 1994). This rule, however, changes the 
Construction and Refuse size standards to a 1999 base. This change 
results in an additional 10.5% inflation adjustment to these size 
standards than the inflation rate applied in 1994.
    We generally prefer to have all receipts-based size standards 
adjusted to the same base year. This achieves comparability among 
industry size standards. Since this rule is inflating a number of size 
standards to 1999, we anticipate that we will propose in the near 
future a broad-based inflation adjustment to our receipts-based size 
standards. Since we have already proposed increases to the Construction 
and Refuse size standards and received overwhelming support for the 
concept of increasing these size standards for inflation, we see no 
need to go through a second rulemaking action to make the changes 
associated with this final rule.

[[Page 37690]]

Inflation Adjustment Methodology

    To adjust the Construction and Refuse size standards through 1999, 
we calculated an additional inflation adjustment to the proposed size 
standards of July 26, 1999. The proposed size standards were based on 
inflation up to the fourth quarter of calendar year 1993 (the latest 
available data at the time of the 1994 final rule). Currently, the 
latest available inflation data is for the fourth quarter of 1999. In 
determining the rate of inflation, we continue to use the U.S. 
Department of Commerce's Gross Domestic Product (GDP) Implicit Price 
Deflator. Currently, the latest published data show index values of 
94.98 for the fourth quarter of 1993 and 104.99 for the fourth quarter 
of 1999. This change records inflation of 10.5% between the two periods 
((104.99/94.98)-1)*100)=10.54%, rounded to 10.5%).
    Each of the Construction and Refuse size standards receives an 
inflationary adjustment of 10.5% from the proposed size standards of 
$25.0 million for General and Heavy Construction, $10.5 million for 
Special Trades and $9.0 million for Refuse. The inflated size standards 
are rounded to the nearest half-million dollar increment similar to 
previous inflation adjustments to SBA's size standards. This rounding 
method produces net increases to most industry size standards that are 
slightly above or below the calculated 10.5% inflation rate. This 
method is selected because it results in an increase to each size 
standard that is as close as possible to the calculated 10.5% 
inflationary increase. The following table shows the calculation of the 
Construction and Refuse size standards adjusted to 1999.

----------------------------------------------------------------------------------------------------------------
                                                                                                         Size
                                                                                          New size    standards
                                                                                          standard   in millions
                                                                Proposed                calculation   of dollars
                                                                  size      Inflation   in millions     after
                          Industry                            standard in     index      of dollars  rounding to
                                                              millions of                (Column 2   the nearest
                                                                dollars                    times         $0.5
                                                                                          Column3)     million
                                                                                                      increment
(1)                                                                   (2)          (3)          (4)          (5)
----------------------------------------------------------------------------------------------------------------
General and Heavy Construction..............................        $25.0        1.105      $27.625        $27.5
Special Trades industry.....................................         10.5        1.105       11.603         11.5
Refuse industries...........................................          9.0        1.105        9.945         10.0
----------------------------------------------------------------------------------------------------------------

Discussion of Construction and Refuse Size Standards

Comments

    We received 45 comments to the proposed rule. Twenty-six comments 
addressed the General and Heavy Construction proposed size standard of 
$25 million in average annual receipts. Eleven of these comments also 
addressed the Special Trades size standard that was proposed to be 
$10.5 million. All of the comments to the Special Trades, however, 
discussed all of the Construction size standards rather than narrowly 
focusing on the Special Trade industries. When references were made to 
Special Trades, all of the comments except one recommended the proposed 
$10.5 million size standard. The one comment not recommending this size 
standard, supported a size standard in the $7 to $10 million range. 
Significantly, no comment primarily addressing the Construction size 
standards opposed some increase to the Construction size standards.
    Of the 26 comments addressing the General and Heavy Construction 
size standards, 19 supported the proposed size standard of $25 million 
and the concept of an inflationary adjustment, while six argued for a 
higher size standard between $27 million and $32 million, and one 
comment advocated a size standard of $17 million for both the Dredging 
industry and General and Heavy Construction (This comment appeared to 
be primarily addressing the Dredging industry size standard rather than 
the General Construction size standard). Most of the comments arguing 
for a size standard higher than proposed believed that the current size 
standard should be increased to reflect inflation through 1999. Four of 
these comments also noted that there would likely be a lengthy delay 
before the next inflationary adjustment, and that SBA should set a size 
standard that would consider the amount of time before it would again 
propose an inflation adjustment to the receipts-based size standards. 
Of the three associations commenting on the proposed size standard 
revision, two supported a higher size standard of $30 million to $32 
million in average annual receipts, and one recommended more frequent 
inflation adjustments in the future. The one comment recommending a $17 
million size standard believed that there is sufficient competition 
among small businesses with a $17 million size standard to justify the 
retention of this size standard, however, the comment primarily focused 
on the Dredging industry.
    Of the seven comments addressing the Refuse size standard, three 
supported the proposed size standard of $9 million, three argued for a 
size standard greater than $9 million and one contended that it should 
remain at $6 million. The comments advocating a higher size standard 
than $9 million claimed that businesses had to be larger than $9 
million to be competitive in the industry. According to these comments, 
consolidations and mergers have made it difficult for small businesses 
to compete against the resources of the largest businesses in the 
industry. On the other hand, the comment opposing the proposed size 
standard was concerned that a $9 million size standard would qualify a 
business in the top 100 firms in the industry. Further, small 
businesses are competitive given their lower costs and overhead, as 
evidenced by small businesses receiving more than 40% of Federal refuse 
contracts.
    The comments received on the Construction and Refuse industries 
overwhelmingly support an inflation adjustment to the current size 
standards. In addition, about one-half of the Refuse comments and about 
one-fourth of the Construction comments presented reasons supporting a 
further upward adjustment to the size standards in recognition of the 
additional inflation that has been present in the economy over the 1994 
to 1999 period. Of these latter construction comments, two were from 
important trade associations representing large segments of the 
industry.
    We believe in light of these comments that we should proceed now 
with a further inflation adjustment to 1999 levels and avoid the delay 
that would occur from a second rulemaking action. In the proposed rule, 
we discussed

[[Page 37691]]

adjusting these size standards to the 1999 levels as alternative size 
standards. We chose not to propose that alternative since it would 
result in some size standards being adjusted to 1999 while all other 
receipts-based size standards adjusted to 1994. We would prefer to 
adjust all size standards to the same period of time. However, the 
comments have convinced us that a further inflation adjustment to these 
size standards at this time results in more appropriate size standards 
than what we proposed. We believe that the comments supporting an 
inflationary adjustment through 1994 would not oppose an adjustment 
through 1999. We do not believe, however, that the size standards 
should be raised beyond the 1999 level in anticipation of future 
inflation, which in any case is unpredictable.
    We are concerned about the trends in the Refuse industry that were 
cited by six of the eight comments. Although one comment argued that 
small businesses were very competitive, the industry appears to have 
been consolidating in recent years. Three comments cited concerns of 
vertical integration, consolidation and buyouts of smaller firms by 
larger firms. Three other comments cited a concern over larger Federal 
contracts in recent years--a trend which normally favors larger 
companies. Furthermore, small businesses have been obtaining a smaller 
share of Federal refuse contracts over the past few years. (See the 
Small Business Administration's report to Congress ``The Small Business 
Competitiveness Demonstration Program October 1, 1997-September 30, 
1998,'' dated December 1999, Table A-2b. This report is available on 
SBA's web page at www.sba.gov/opc/pubs/compdemo/.) We plan to examine 
these trends closer to determine the implications on the size standard 
in the future.

Dredging Industry Size Standard

    SBA received 22 comments to the proposed $20 million size standard 
for the Dredging industry. Seven of the comments, or about one-third of 
the Dredging industry comments, supported the proposed inflationary 
adjusted size standard of $20 million. Another seven comments opposed 
any change in the current $13.5 million Dredging industry size 
standard. Three comments supported a size standard that fell between 
the current size standard of $13.5 million and the proposed size 
standard of $20 million. Four comments argued for a size standard 
higher than $20 million. However, three of these comments appeared to 
be from firms primarily engaged in General and Heavy Construction 
rather than the Dredging industry, and they essentially focused their 
comments on the Construction size standards. A comment from a dredging 
association took no position on the proposed Dredging industry size 
standard.
    Partly in response to these comments, we have decided to adopt a 
$17 million size standard for the Dredging industry rather than 
adjusting the size standard by the proposed inflationary increase (to 
$20 million) as applied to the other industry size standards addressed 
in this final rule. The four major issues raised by the comments and 
our reason for adopting a $17 million size standard are discussed 
below.
    (1) One comment pointed out that costs per cubic yard have not 
matched the general rate of inflation used in the proposed rule. This 
view appears to be supported by three other comments that seek a size 
standard that would be less than a full inflationary adjustment. While 
these comments did not directly address the inflationary issue, their 
contention that industry conditions did not merit a full inflationary 
increase suggests a view that cost pressures may not be as great in the 
Dredging industry as in the economy generally. Since the proposed rule 
adjusted for inflation through 1994, dredging costs through 1999, it 
was argued, did not even match the 1994 general inflation level.
    Based on a further review of costs trends in the Dredging industry, 
we agree that a smaller inflation adjustment is more appropriate for 
this industry's size standard. While we usually prefer to apply the 
same inflation adjustment to all industries, the Dredging industry is a 
relatively small industry and unique in the sense that most of this 
industry's revenues are derived from U.S. Army Corps of Engineers 
dredging contracts. As such, we believe relevant data exist for us to 
more precisely assess inflation trends in the Dredging industry.
    The U.S. Corps of Engineers (the Corps) collects data on dredging 
costs. In lieu of price indexes developed by Federal statistical 
agencies, these data provide the best source of information to address 
the impact of inflation in the Dredging industry. Almost all dredging 
work performed by small businesses is for maintenance dredging. For 
this reason, we believe the Corps' costs data on maintenance dredging 
are the most appropriate data to assess the impact of dredging 
inflation trends on small businesses. The following table shows the 
Corps data relating to the costs per cubic yard of maintenance dredging 
from fiscal years 1982 to 1998:

----------------------------------------------------------------------------------------------------------------
                                                               Maintenance
                        Fiscal year                              dollars         Cubic yards     Cost per  cubic
                                                               (millions)        (millions)           yard
----------------------------------------------------------------------------------------------------------------
1982......................................................             $76.0              60.0             $1.27
1983......................................................              64.0              48.0              1.33
1984......................................................              80.0              49.0              1.63
1985......................................................              73.0              65.0              1.12
1986......................................................              80.0              64.0              1.25
1987......................................................              66.0              47.7              1.38
1988......................................................              73.4              58.2              1.26
1989......................................................              68.5              58.7              1.26
1990......................................................              61.8              35.0              1.17
1991......................................................              99.6              62.4              1.60
1992......................................................              89.2              52.4              1.70
1993......................................................              75.0              38.3              1.96
1994......................................................              84.3              52.5              1.61
1995......................................................              88.8              53.8              1.65
1996......................................................              85.4              52.5              1.63
1997......................................................              95.9              67.8              1.41
1998......................................................              76.6              42.4             1.81
----------------------------------------------------------------------------------------------------------------
Source: U.S. Army Corps of Engineers Navigation Data Center for data used in calculating the cost per cubic yard
  of maintenance dredged materials on Corps of Engineers contracts, February 28, 1999 revised data.


[[Page 37692]]

    From FY 1982 to FY 1998, maintenance dredging costs have increased 
42.5%. However, the high cost per cubic yard in FY 1998 appears to be a 
one year outlier due to a very low volume of maintenance work in that 
year as compared to the typical amount of maintenance work in previous 
years. We're reluctant to inflate the Dredging industry size standard 
by an inflation rate that may have been partially influenced by work 
load in a single year. To moderate the influence of work load, we have 
decided to calculate an average cost per cubic yard for the last three 
fiscal years. For fiscal years 1996-98, the average cost per cubic yard 
was $1.617 (($1.63+$1.41+$1.81)/3). Using this figure, maintenance 
dredging costs have increased 27.3% (($1.617/$1.27)-1)*100) since FY 
1982. Applying this increase to the current Dredging industry size 
standard results in a $17 million size standard ($13.5 *1.273=$17.186, 
or $17 million rounded to the nearest $0.5 million increment).
    This figure of $17.0 million would permit a number of businesses 
presently in the $9 million to $13.5 million range to grow without 
losing eligibility for SBA preference programs based on size. We do not 
believe that there are any businesses that are primarily in the 
Dredging industry that presently fall in the $13.5 million to $20.0 
million size range directly affected by the proposed rule or this final 
rule. Consequently, there would be no immediate impact from businesses 
gaining eligibility because of their size in the small business 
category in which the set-aside program restricts bidding. There will, 
however, be some businesses that will gain status as emerging small 
businesses (a business whose size is one-half or less than the size 
standard). This measure will increase from $6.75 million to $8.5 
million. This category is reserved for dredging contracts that are 
$400,000 or less in value. We estimate that only these dredging 
businesses will be directly impacted by this final rule, and this 
impact will be limited because contracts less than $400,000 in size 
constitute only a small percentage of total Federal dredging contracts 
expenditures.
    (2) Seven comments believe a higher size standard would hurt other 
small businesses. They cited the declining importance of small 
businesses in the Dredging industry in recent years. For example, they 
pointed out that 45 small businesses were awarded contracts in FY 1991, 
but only 19 were awarded contracts in FY 1998. Also, only a few small 
businesses received a majority of Federal contract dollars. A number of 
small businesses have gone out of business while other small businesses 
have been bought out by large businesses or consolidated their 
operations in recent years.
    We do not agree that the level of the current size standard has 
played a role in reducing the number of small businesses receiving 
Federal dredging contracts. From year to year, variations will occur in 
which different size businesses will receive contracts. Data for FY 
1997 and FY 1999 present a different picture of small business trends. 
For FY 1997, 40 small businesses received contracts, with 17 of these 
small businesses receiving more than one contract award. For FY 1999, 
34 small businesses won dredging contacts, with 14 receiving more than 
one contract. These two years were more similar to the FY 1991 result 
than the FY 1998 experience.
    Furthermore, a review of the top four small businesses receiving 
awards in FY 1998 and FY 1999 does not suggest that other small 
businesses are being harmed due to the size of these firms. The small 
business that received the largest amount of contract dollars in FY 
1998 won all of its contracts on an unrestricted basis. Two of the 
other three small businesses were emerging small businesses (businesses 
at or below one-half of the size standard). In FY 1999, the top four 
small businesses received 41% of total small businesses contract 
dollars--much less than the 54% amount of total small business 
contracts dollars obtained in FY 1998.
    These trends do not suggest that smaller businesses have been 
harmed by the level of the current Dredging size standard. Based on the 
comments from other small businesses that supported an increase to size 
standard, we believe an increase in the current size standard to 
account for inflation is unlikely to harm smaller dredging businesses.
    Also, we generally view a declining share of contract dollars to 
small businesses in an industry as supporting a higher size standard. 
Higher size standards usually result in more eligible bidders and a 
somewhat higher likelihood that preference programs oriented toward 
small businesses will be utilized. This, in turn, could help the 
remaining small businesses that are active in the industry to survive 
and expand operations. Although cost trends in the industry for small 
firms do not point to the need of a size standard as high as the 
proposed $20 million, they do support a size standard of $17 million.
    (3) Several comments stated that Federal dredging contracts have 
grown larger in size, while total contracting has remained the same in 
dollar terms. These comments argued that larger-sized contracts lessen 
opportunities for small dredging businesses, and thus, support the need 
for a higher size standard.
    We agree that the trend of larger contracts is one factor that may 
justify a higher size standard. To have smaller businesses in an 
industry compete for a greater proportion of larger-sized dredging 
contracts, a higher size standard may be warranted. We believe a $17 
million size standard will assist currently defined small businesses in 
obtaining some additional dredging opportunities in light of a trend 
towards larger-sized contracts.
    (4) Four comments cited the fact that most Federal contracting goes 
to a few large businesses that are awarded the larger contracts as a 
reason for SBA to increase the Dredging size standard. We generally 
agree, noting that small dredging businesses have been receiving about 
20% or less of Federal dredging contracts while the top four businesses 
in the industry received 56% in FY 1999. We believe a higher Dredging 
industry size standard might result in greater use of small business 
preference programs and partially offset a pattern in which a majority 
of Federal contracting consistently has been awarded to a few large 
businesses.

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

    SBA has determined that this rule is a significant regulatory 
action within the meaning of Executive Order 12866 since it is expected 
to have an annual economic effect of over $100 million. For purposes of 
the Regulatory Flexibility Act, this rule has a significant impact on a 
substantial number of small businesses. Immediately below, SBA sets 
forth a regulatory flexibility analysis and economic impact analysis of 
this final rule.

1. Description of Entities to Which the Rule Applies

    SBA estimates that 2,548 additional businesses would be considered 
small as a result of this rule. These businesses would be eligible to 
seek available SBA assistance provided that they meet other program 
requirements. Many of those businesses that were in existence in 1984 
undoubtedly had small business status at the time when the size 
standards were established, but have since lost eligibility because of 
inflationary increases.

[[Page 37693]]

    Of the additional businesses gaining eligibility, 654 operate as 
General Construction, 394 operate in Heavy Construction, 1,363 operate 
in the Special Trades industries, while 137 operate in Refuse.
    Businesses becoming eligible for SBA assistance as a result of this 
rule cumulatively generate $33.7 billion in annual sales, which 
represents 6% of the $564 billion of total sales in these industries. 
Of the $33.7 billion in annual sales for newly eligible businesses, 
$13.1 billion are in General Construction, $7.6 billion are in Heavy 
Construction, $12.0 billion are in Special Trades, and $1.0 billion are 
in Refuse.
    SBA estimates that out of approximately $7.85 billion in total 
initial Federal contracts per year, an additional $471 million worth of 
contracts could be awarded to businesses designated as small businesses 
in the four industry groups affected by this rule. (This estimate 
assumes the newly categorized small businesses will receive 6% of the 
$7.85 billion in total initial Federal contracts per year.) Of these 
contracts, $445 million may be awarded to newly defined small 
businesses and $26 million to currently defined small businesses. These 
contracts could be obtained through awards under the small business 
set-aside Program, the 8(a) Program, the Small Disadvantaged Business 
(SDB) Program, the HUBZone Empowerment Contracting Program, or on an 
unrestricted basis.
    Also, these newly defined small businesses would be eligible for 
SBA's financial assistance programs and could potentially receive an 
estimated $24.8 million in loans under the 7(a) Guaranteed Loan Program 
and $4.6 million in loans under the Certified Development Company (504) 
Program.

2. Description of Potential Benefits of the Rule

    This rule will result in an increase in the number of businesses 
eligible for small business set-aside contracts, the 8(a) Program, and 
SDB and HUBZone price preferences. For Federal contracts set aside for 
small business or competed under the 8(a) and HUBZone Programs, this 
rule will lead to an increase in competition for these contracts and 
lower overall costs to the government.
    When an SDB or a HUBZone business competes for an unrestricted 
contract, the Federal government generally allows them a price 
preference of up to 10%. An increase in the size standard will increase 
the number of businesses competing for these contracts in two ways. 
First, the number of SDB and HUBZone businesses will increase. Second, 
with more small businesses competing on unrestricted contracts, the 
government may decide to set aside more contracts for competition among 
all small businesses where they had previously awarded price 
preferences. Any increase in competition that results in a more 
efficient or competitive business being awarded a contract will result 
in a benefit.

3. Description of Potential Costs of the Rule

    In areas where the rule acts to decrease competition for contracts, 
it may lead to an increase in costs to the Federal government. This may 
occur in areas where small businesses are currently not present or are 
not bidding on Federal contracts. If, after issuance of this rule, 
small businesses bid on these contracts and require the government to 
provide a price preference, or the rule causes a decision to set aside 
a size a contract under one of the procurement preference programs, it 
may increase costs to the Federal government on some contracts. These 
additional costs, however, are likely to be relatively minor since, as 
a matter of policy, procurements may be set aside for small businesses 
or under the 8(a), HUBZone or SDB Programs only if awards are expected 
to be made at fair and reasonable prices

4. Transfers

    The primary effect of this rule will be transfers among the four 
parties--Federal government, large businesses, businesses gaining small 
business status under this rule, and businesses that are currently 
small businesses. SBA estimates that of the $471 million Federal 
contracts expected to be awarded to small businesses and the newly 
defined small businesses, approximately 11.3%, or $53.2 million, may be 
reallocated from large businesses to current small businesses and the 
newly defined small businesses.
    The remaining $417.8 million of contracts will not change hands, 
rather, the businesses holding the contracts will be reclassified as 
small under the rule. In addition, $3.9 billion of initial contracts 
awarded to small businesses, SBA estimates that $52.4 million could be 
transferred from small businesses to larger, more efficient or 
competitive, newly defined small businesses.

5. Description of Reasons Why This Action is Being Taken and Objectives 
of Rule

    SBA has provided in the supplementary information a statement of 
the reasons why these new size standards should be established and a 
statement of the reasons for and the objectives of the rule.
    For the purposes of the Paperwork Reduction Act, 44 U.S.C. 3501 et 
seq., SBA has determined that this rule would not impose new reporting 
or record keeping requirements. 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. For 
purposes of Executive Order 12988, SBA certifies that this rule is 
drafted to the extent practicable, in accordance with the standards set 
forth in that order.

List of Subjects in 13 CFR Part 121

    Government procurement, Government property, Grant programs--
business, Loan Programs--business, Small business.

    For the reasons stated in the preamble, SBA amends 13 CFR part 121 
as follows:

PART 121--SMALL BUSINESS SIZE REGULATIONS

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

    Authority: 15 U.S.C. 632(a), 634(b)(6), 637(a), 644(c), and 
662(5); and Sec. 304, Pub. L. 103--403, 108 Stat. 4175, 4188.


Sec. 121.201  [Amended]

    2. In Sec. 121.201, the table ``SIZE STANDARDS BY SIC INDUSTRY'' is 
amended as follows:
    a. Revise DIVISION C--CONSTRUCTION
    b. Under DIVISION E--TRANSPORTATION, COMMUNICATIONS, ELECTRIC, GAS, 
AND SANITARY SERVICES, MAJOR GROUP 42--MOTOR FREIGHT TRANSPORTATION AND 
WAREHOUSING, revise the entry 4212 (Part):
    c. Under DIVISION E--TRANSPORTATION, COMMUNICATIONS, ELECTRIC, GAS, 
AND SANITARY SERVICES, MAJOR GROUP 49--ELECTRIC, GAS AND SANITARY 
SERVICES, revise the entry 4953 to read as follows:

[[Page 37694]]



                     Size Standards by SIC Industry
------------------------------------------------------------------------
                                                       Size standards in
                                                           number of
               SIC code and description                   employees or
                                                          millions of
                                                            dollars
------------------------------------------------------------------------
 
*                  *                  *                  *
                  *                  *                  *
------------------------------------------------------------------------
                        DIVISION C--CONSTRUCTION
------------------------------------------------------------------------
MAJOR GROUP 15--BUILDING CONSTRUCTION--GENERAL                     $27.5
 CONTRACTORS AND OPERATIVE BUILDERS..................
MAJOR GROUP 16-HEAVY CONSTRUCTION OTHER THAN BUILDING               27.5
 CONSTRUCTION--CONTRACTORS...........................
EXCEPT:
    1629 (Part) Dredging and Surface Cleanup                    \1\ 17.0
     Activities......................................
MAJOR GROUP 17--CONSTRUCTION--SPECIAL TRADE                         11.5
 CONTRACTORS.........................................
 
*                  *                  *                  *
                  *                  *                  *
------------------------------------------------------------------------
 DIVISION E--TRANSPORTATION, COMMUNICATIONS, ELECTRIC, GAS, AND SANITARY
                                SERVICES
------------------------------------------------------------------------
 
*                  *                  *                  *
                  *                  *                  *
4212 (Part) Garbage and Refuse Collection, Without                  10.0
 Disposal............................................
 
*                  *                  *                  *
                  *                  *                  *
4953 Refuse Systems..................................               10.0
 
*                  *                  *                  *
                  *                  *                  *
------------------------------------------------------------------------
\1\ SIC code 1629--Dredging: To be considered small for purposes of
  Government procurement, a firm must perform at least 40 percent of the
  volume dredged with its own equipment or equipment owned by another
  small dredging concern.


    Dated: March 27, 2000.
Aida Alvarez,
Administrator.
[FR Doc. 00-15258 Filed 6-15-00; 8:45 am]
BILLING CODE 8025-01-U