[Federal Register Volume 77, Number 37 (Friday, February 24, 2012)]
[Proposed Rules]
[Pages 11001-11017]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2012-4329]


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SMALL BUSINESS ADMINISTRATION

13 CFR Part 121

RIN 3245-AG30


Small Business Size Standards: Health Care and Social Assistance

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 28 industries in North 
American Industry Classification System (NAICS) Sector 62, Health Care 
and Social Assistance. As part of its ongoing comprehensive review of 
all size standards, SBA has evaluated all size standards in NAICS 
Sector 62 to determine whether the existing size standards should be 
retained or revised. This proposed rule is one of a series of proposed 
rules that will review size standards of industries grouped by NAICS 
Sector. SBA issued a White Paper entitled ``Size Standards 
Methodology'' and published a notice in the October 21, 2009 issue of 
the Federal Register that the ``Size Standards Methodology'' White 
Paper was available on its Web site at www.sba.gov/size for public 
review and comments (74 FR 53940). 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 
April 24, 2012.

ADDRESSES: You may submit comments, identified by RIN 3245-AG30 by one 
of the following methods: (1) Federal eRulemaking Portal: 
www.regulations.gov, following the instructions for submitting 
comments; or (2) Mail/Hand Delivery/Courier: Khem R. Sharma, Ph.D., 
Chief, Size Standards Division, 409 Third Street SW., Mail Code 6530, 
Washington, DC 20416. SBA will not accept comments to this proposed 
rule submitted by email.
    SBA will post all comments to this proposed rule without change on 
www.regulations.gov. If you wish to submit confidential business 
information (CBI) as defined in the User Notice at www.regulations.gov, 
you must submit such information to U.S. Small Business Administration, 
Khem R. Sharma, Ph.D., Chief, Size Standards Division, 409 Third Street 
SW., Mail Code 6530, Washington, DC 20416, or send an email to 
<a href="/cdn-cgi/l/email-protection#76051f0c130502171812170412053605141758111900"><span class="__cf_email__" data-cfemail="daa9b3a0bfa9aebbb4bebba8bea99aa9b8bbf4bdb5ac">[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 your information and determine whether it 
will make the information public or not.

FOR FURTHER INFORMATION CONTACT: Khem R. Sharma, Ph.D., Chief, Size 
Standards Division, (202) 205-6618 or <a href="/cdn-cgi/l/email-protection#bccfd5c6d9cfc8ddd2d8ddced8cffccfdedd92dbd3ca"><span class="__cf_email__" data-cfemail="47342e3d223433262923263523340734252669202831">[email protected]</span></a>.

SUPPLEMENTARY INFORMATION: To determine eligibility for Federal small 
business assistance, SBA establishes small business size definitions 
(referred to as size standards) for private sector industries in the 
United States. SBA uses two primary measures of business size: average 
annual receipts and average number of employees. SBA uses financial 
assets, electric output, and refining capacity to measure the size of a 
few specialized industries. In addition, SBA's Small Business 
Investment Company (SBIC), Certified Development Company (504), and 
7(a) Loan Programs use either the industry based size standards or net 
worth and net income based alternative size standards to determine 
eligibility for those programs. At the beginning of the current 
comprehensive size standards review, there were 41 different size 
standards covering 1,141 NAICS industries and 18 sub-industry 
activities (referred to as ``exceptions'' in SBA's table of size 
standards). Thirty-one of these size levels were based on average 
annual receipts, seven were based on average number of employees, and 
three were based on other measures.
    Over the years, SBA has received comments that its size standards 
have not kept up with changes in the

[[Page 11002]]

economy, in particular the changes in the Federal contracting 
marketplace and industry structure. The last time SBA conducted a 
comprehensive review of all size standards was during the late 1970s 
and early 1980s. Since then, most reviews of size standards were 
limited to a few specific industries in response to requests from the 
public and Federal agencies. SBA also reviews the effect of inflation 
on its size standards and makes necessary adjustments to its monetary 
based size standards at least once every five years. SBA's latest 
inflation adjustment to size standards was published in the Federal 
Register on July 18, 2008 (73 FR 41237).
    SBA proposed new size standards for a number of industries in NAICS 
Sector 62 on May 4, 1999 (64 FR 23798), when the Standard Industrial 
Classification (SIC) System was in use. Subsequently, effective October 
1, 2000, SBA adopted NAICS as the basis for small business size 
standards, thereby replacing the SIC System. Therefore, when SBA issued 
a final rule on November 17, 2000 (65 FR 69432), the adopted size 
standards in the final rule were based on the NAICS. The industries 
that are now in NAICS Subsector 621(Ambulatory Health Care Services), 
NAICS Subsector 622 (Hospitals), and NAICS Subsector 623 (Nursing and 
Residential Care Facilities) were part of SIC Major Industry Group 80, 
Health Services, while industries now in NAICS Subsector 624 (Social 
Assistance) were part of the SIC Major Industry Group 83, Social 
Services.
    Because of changes in the Federal marketplace and industry 
structure since the last comprehensive size standards review, SBA 
recognizes that current data may no longer support some of its existing 
size standards. Accordingly, in 2007, SBA began a comprehensive review 
of all size standards to determine if they are consistent with current 
data, and to adjust 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 (Sec. 1344, Pub. L. 111-240, 124 Stat. 2545). 
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 . In addition, the Jobs Act requires 
that SBA conduct a review of all size standards not less frequently 
than once every five years thereafter. Reviewing existing small 
business size standards and making appropriate adjustments based on 
current data are also consistent with Executive Order 13563 on 
improving regulation and regulatory review.
    Rather than review all size standards at one time, SBA is reviewing 
size standards on a Sector by Sector basis. A NAICS Sector generally 
consists of 25 to 75 industries, except for NAICS Sector 31-33, 
Manufacturing, which has considerably more industries. Once SBA 
completes its review of size standards for industries in a NAICS 
Sector, it issues a proposed rule to revise size standards for those 
industries for which it believes currently available data and other 
relevant factors support doing so.
    Below is a discussion of the size standards methodology for 
establishing receipts based size standards that SBA applied to this 
proposed rule, including analyses of industry structure, Federal 
procurement trends and other factors for industries reviewed in this 
proposed rule, the impact of the proposed revisions to size standards 
on Federal small business assistance, and the evaluation of whether a 
revised size standard would exclude dominant firms from being 
considered small.

Size Standards Methodology

    As stated above, SBA has developed a ``Size Standards Methodology'' 
for developing, reviewing, and modifying size standards when necessary. 
SBA has published the document on its Web site at www.sba.gov/size for 
public review and comments and included it as a supporting document in 
the electronic docket of this proposed rule at www.regulations.gov. SBA 
does not apply all features of its ``Size Standards Methodology'' to 
all industries because not all features are appropriate. For example, 
since all industries in NAICS Sector 62 have receipts based size 
standards, the methodology described in this proposed rule applies to 
establishing receipts based size standards. However, the methodology is 
made 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 
concerning its ``Size Standards Methodology,'' such as whether there 
are other approaches to establishing and modifying size standards; 
whether there are alternative or additional factors that SBA should 
consider; whether SBA's approach to small business size standards makes 
sense in the current economic environment; whether SBA's use of anchor 
size standards is appropriate; whether there are gaps in SBA's 
methodology because the data it uses are not current or sufficiently 
comprehensive; and whether there are other data, facts, and/or issues 
that SBA should consider. Comments on SBA's methodology should be 
submitted via (1) the Federal eRulemaking Portal: www.regulations.gov, 
using docket number SBA-2009-0008 and following the instructions for 
submitting comments; or (2) Mail/Hand Delivery/Courier: Khem R. Sharma, 
Ph.D., Chief, Size Standards Division, 409 Third Street SW., Mail Code 
6530, Washington, DC 20416. As with comments received to this and other 
proposed rules, SBA will post all comments on its methodology on 
www.regulations.gov. As of December 9, 2011, SBA has received 13 
comments to its ``Size Standards Methodology.'' The comments are 
available to the public at www.regulations.gov. SBA continues to 
welcome comments on its methodology from interested parties. SBA will 
not accept comments to its ``Size Standards Methodology'' submitted by 
email.
    Congress granted SBA's Administrator discretion to establish 
detailed small business size standards. 15 U.S.C. 632(a)(2). 
Specifically, Section 3(a)(3) of the Small Business Act requires 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.'' 15 U.S.C. 
632(a)(3). Accordingly, the economic structure of an industry is the 
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 (as 
described below). In addition, SBA considers current economic 
conditions, its mission and program objectives, the Administration's 
current policies, suggestions from industry groups and Federal 
agencies, and public comments on the proposed rule. SBA also examines 
whether a size standard based on industry and other relevant data 
successfully excludes businesses that are dominant in the industry.
    This proposed rule includes information regarding the factors SBA 
evaluated and the criteria it used to propose adjustments to certain 
size standards in NAICS Sector 62. The rule also explains why SBA has 
proposed to adjust some size standards in NAICS Sector 62 but not 
others. This proposed rule affords the public an opportunity to

[[Page 11003]]

review and to comment on SBA's proposals to revise size standards in 
NAICS Sector 62, as well as on the data and methodology it uses to 
evaluate and revise a size standard. The public can also comment on 
those industries for which SBA did not propose changes to their size 
standards.

Industry Analysis

    For the current comprehensive size standards review, SBA has 
established three ``base'' or ``anchor'' size standards: $7 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 manufacturing 
industries at its inception in 1953. Shortly thereafter SBA established 
$1 million in average annual receipts as the anchor size standard for 
nonmanufacturing industries. SBA has periodically increased the 
receipts based anchor size standard for inflation, and today it is $7 
million. Since 1986, the size standard for all industries in the 
Wholesale Trade Sector for SBA financial assistance and for most 
Federal programs has been 100 employees. However, the 100 employee size 
standards do not apply to Federal procurement programs. Rather, for 
Federal procurement the size standard for all industries in Wholesale 
Trade and for all industries in Retail Trade (NAICS Sector 44-45) is 
500 employees under SBA's nonmanufacturer rule. See 13 CFR 121.406(b).
    These long-standing anchor size standards have stood the test of 
time and gained legitimacy through practice and general public 
acceptance. An anchor is neither a minimum nor a maximum size standard. 
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 precise small business size 
standards for each industry. Otherwise, theoretically, the number of 
size standards might be as high as the number of industries for which 
SBA establishes size standards (1,141). Furthermore, the data SBA 
analyzes are static, while the U.S. economy is not. Hence, absolute 
precision is impossible. Therefore, SBA presumes an anchor size 
standard is appropriate for a particular industry unless that industry 
displays economic characteristics that are considerably different from 
others with the same anchor size standard.
    When evaluating a size standard, SBA compares the economic 
characteristics of the industry under review to the average 
characteristics of industries with one of the three anchor size 
standards (referred to as the ``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 generally 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, then 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. To determine a size standard above the anchor 
size standard, SBA analyzes the characteristics of a second comparison 
group. For industries with receipts based size standards, including 
those in NAICS Sector 62 that are the subject of this proposed rule, 
SBA developed a second comparison group consisting of industries that 
have the highest levels of receipts based size standards. To determine 
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 annual receipts; the weighted average size standard for the 
group is $29 million. SBA refers to this comparison group as the 
``higher level receipts based size standard group.''
    The primary industry factors that SBA evaluates include average 
firm size, startup costs and entry barriers, industry competition, and 
distribution of firms by size. SBA evaluates, as an additional primary 
factor, the impact that revising size standards might have on Federal 
contracting assistance to small businesses. These are, generally, the 
five most important factors SBA examines when 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, growth trends, SBA financial 
assistance, other program factors, etc.). SBA also considers the 
possible impacts of size standard revisions on eligibility for Federal 
small business assistance, current economic conditions, the 
Administration's policies, and suggestions from industry groups and 
Federal agencies. Public comments on a proposed rule also provide 
important additional information. SBA thoroughly reviews all public 
comments before making a final decision on its proposed size standards. 
Below are brief descriptions of each of the five primary factors that 
SBA has evaluated for each industry in NAICS Sector 62 being reviewed 
in this proposed rule. A more detailed description of this analysis is 
provided in SBA's ``Size Standards Methodology,'' available at http://www.sba.gov/size.
    1. Average firm size. SBA computes two measures of average firm 
size: simple average and weighted average. For industries with receipts 
based size standards, the simple average is the total receipts of the 
industry divided by the total number of firms in the industry. The 
weighted average firm size is the sum of weighted simple averages in 
different receipts size classes, where weights are the shares of total 
industry receipts for respective size classes. The simple average 
weighs all firms within an industry equally regardless of their size. 
The weighted average overcomes that limitation by giving more weight to 
larger firms.
    If the average firm size of an industry is significantly higher 
than the average firm size of industries 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 new firms entering a particular industry have greater 
capital requirements than firms in industries in the anchor comparison 
group, this can

[[Page 11004]]

be a basis for establishing a size standard higher than the anchor size 
standard. In lieu of actual startup costs data, SBA uses average assets 
as a proxy to measure the capital requirements for new entrants to an 
industry.
    To calculate average assets, SBA begins with the sales to total 
assets ratio for an industry from the Risk Management Association's 
Annual eStatement Studies. SBA then applies these ratios to the average 
receipts of firms in that industry. An industry with average assets 
that are significantly higher than those 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, an industry with 
average assets that are similar to or lower than those of the anchor 
comparison group is likely to have lower startup costs; this will 
support the anchor standard or one lower than the anchor.
    3. Industry competition. Industry competition is generally measured 
by the share of total industry receipts generated by the largest firms 
in an industry. SBA generally evaluates the share of industry receipts 
generated by the four largest firms in each industry. This is referred 
to as the ``four-firm concentration ratio,'' a commonly used economic 
measure of market competition. SBA compares the four-firm concentration 
ratio for an industry 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 companies, all else being equal, SBA will establish a 
size standard higher than the anchor size standard. SBA does not 
consider the four-firm concentration ratio as an important factor in 
assessing a size standard if its value for an industry under review is 
less than 40 percent. For industries in which the four-firm 
concentration ratio is 40 percent or more, 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 total receipts accounted for by firms of different receipts 
and employment size classes in an industry. This is an additional 
factor SBA evaluates in assessing competition within an industry. If 
most of an industry's economic activity is attributable to smaller 
firms, this generally indicates that small businesses are competitive 
in that industry. This can support 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 can support adopting a size standard above the anchor.
    Concentration is a measure of inequality of distribution. To 
determine the degree of inequality of distribution in an industry, SBA 
computes the Gini coefficient by constructing the Lorenz curve. The 
Lorenz curve presents the cumulative percentages of units (firms) along 
the horizontal axis and the cumulative percentages of receipts (or 
other measures of size) along the vertical axis. (For further detail, 
please refer to SBA's ``Size Standards Methodology'' on its Web site at 
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 Gini coefficient value for an industry with that 
for industries in the anchor comparison group. If the Gini coefficient 
value for an industry is higher than it is for industries in the anchor 
comparison industry group, all else being equal, this may warrant a 
higher size standard than the anchor. Conversely, if an industry's Gini 
coefficient is similar to or lower than that for 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 Federal 
small business assistance. This most often focuses on the share of 
Federal contracting dollars awarded to small businesses in the industry 
in question. In general, if the small business share of Federal 
contracting in an industry with significant Federal contracting is 
appreciably less than the small business share of the industry's total 
receipts, there is justification for considering a size standard higher 
than the existing size standard. The disparity between the small 
business Federal market share and industry-wide small business share 
may be due to various factors, such as extensive administrative and 
compliance requirements associated with Federal contracts, the 
different skill set required by Federal contracts as compared to 
typical commercial contracting work, and the size of Federal contracts. 
These, as well as other factors, are likely to influence the type of 
firms within an industry that compete for Federal contracts. By 
comparing the small business Federal contracting share with the 
industry-wide small business share, SBA includes in its size standards 
analysis the latest Federal contracting trends. This analysis may 
support a size standard larger than the current size standard.
    SBA considers Federal contracting trends in the 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 the latest three 
fiscal years. These thresholds reflect significant levels of 
contracting where a revision to a size standard may have an impact on 
contracting opportunities to small businesses.
    Besides the impact on small business Federal contracting, SBA also 
evaluates the impact of a proposed size standard revision on SBA's loan 
programs. For this, SBA examines the volume and number of SBA's 
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 have impeded financial assistance to small 
businesses, higher size standards may be supportable. However, if small 
businesses under current size standards have 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 standards, this factor is not 
considered for determining the size standard.

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 Economic Census (see www.census.gov/econ/census07/) prepared by the U.S. Bureau of the Census (Census 
Bureau) for SBA. The 2007 Economic Census data are the latest 
available. The special tabulation provides SBA with data on the number 
of firms, number of establishments, number of employees, annual 
payroll, and annual receipts of companies by NAICS Sector (2-digit 
level), Subsector (3-digit level), Industry Group (4-digit level), 
Industry (6-digit level). These data are arrayed by various classes of 
firms' size based on the overall number of employees and receipts of 
the entire enterprise (all establishments and affiliated firms) from 
all industries. The

[[Page 11005]]

special tabulation enables SBA to evaluate average firm size, the four-
firm concentration ratio, and distribution of firms by various receipts 
and employment size classes.
    In some cases, where 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's analysis was based only on those factors for 
which data were available or estimates of missing values were possible.
    To calculate average assets, SBA used sales to total assets ratios 
from the Risk Management Association's Annual eStatement Studies (see 
http://www.statementstudies.org/) from 2008 to 2010.
    To evaluate Federal contracting trends, SBA examined data on 
Federal contract awards for fiscal years 2008 to 2010. The data are 
available from the U.S. General Service Administration's Federal 
Procurement Data System--Next Generation (FPDS-NG).
    To assess the impact on financial assistance to small businesses, 
SBA examined data on its own guaranteed loan programs for fiscal years 
2008 to 2010.
    Data sources and estimation procedures SBA uses in its size 
standards analysis are documented in detail in SBA's ``Size Standards 
Methodology'' White Paper, which is available at www.sba.gov/size.

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 can exercise a major controlling 
influence on a national basis in an industry where a significant number 
of business concerns are engaged. If a contemplated size standard 
includes a dominant firm, SBA will consider a lower size standard to 
exclude the dominant firm from being defined as small.

Selection of Size Standards

    To simplify size standards, for the ongoing comprehensive review of 
receipts based size standards, SBA has proposed to select size 
standards 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)). At 
the beginning of the current comprehensive size standards review, there 
were 31 different levels of receipts based size standards. They ranged 
from $0.75 million to $35.5 million, and many of them applied 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. This will also result in greater consistency among 
the size standards for industries that have similar economic 
characteristics.
    SBA proposes, therefore, to apply one of eight ``fixed'' receipts 
based size standards to each industry in NAICS Sector 62. All size 
standards in NAICS Sector 62 are based on average annual receipts. The 
eight ``fixed'' receipts based size standard levels are $5 million, $7 
million, $10 million, $14 million, $19 million, $25.5 million, $30 
million, and $35.5 million. SBA established these eight receipts based 
size standard based on the current minimum, the current maximum, and 
the most commonly used current receipts based size standards. At the 
start of the current comprehensive review, the most commonly used 
receipts based size standards clustered around the following: $2.5 
million to $4.5 million, $7 million, $9 million to $10 million, $12.5 
million to $14 million, $25 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 it is an anchor standard for 
receipts based standards. The lowest or minimum receipts based size 
level will be $5 million. Other than the size standards for agriculture 
and industries with receipts based on commissions (such as real estate 
brokers and travel agents), the $5 million size standard includes those 
industries with the lowest receipts based standards, which ranged from 
$2 million to $4.5 million at the start of comprehensive size standards 
review. Among the higher level size clusters, SBA has set four fixed 
levels: $10 million, $14 million, $25.5 million, and $35.5 million. 
Because of large intervals between some of the fixed levels, SBA 
established two intermediate levels, namely $19 million between $14 
million and $25.5 million, and $30 million between $25.5 million and 
$35.5 million. These two intermediate levels reflect roughly the same 
proportional differences as between the other two successive 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 separate size standard for each industry, SBA 
believes that establishing different size standards for closely related 
industries may not always be appropriate. For example, in cases where 
many of the same businesses operate in the same multiple industries, a 
common size standard for those industries might better reflect the 
Federal marketplace. This might also make size standards among related 
industries more consistent than separate size standards for each of 
those industries. This led SBA to establish a common size standard for 
the information technology (IT) services (NAICS 541511, NAICS 541112, 
NAICS 541513, NAICS 541519, and NAICS 811212), even though the industry 
data might support a distinct size standard for each industry (see 57 
FR 27906 (June 23, 1992)). In NAICS Sector 62, currently all industries 
in NAICS Industry Group 6211 (Offices of Physicians), all industries in 
NAICS Industry Group 6213 (Offices of Other Health Practitioners), and 
all industries in NAICS Industry Group 6215 (Medical and Diagnostic 
Laboratories) have common size standards. Similarly, all industries in 
NAICS Subsector 622 (Hospitals) and all industries in NAICS Subsector 
624 (Social Assistance) have common size standards. In this proposed 
rule, SBA proposes to retain common size standards for NAICS Industry 
Group 6211, NAICS Industry Group 6213, NAICS Subsector 622, and NAICS 
Industry Group 6241 (Individual and Family Services) and proposes a new 
common size standard for NAICS Industry Group 6232 (Residential Mental 
Retardation, Mental Health and Substance Abuse Facilities). Whenever 
SBA proposes a common size standard for closely related industries, it 
will provide its justification.

Evaluation of Industry Structure

    SBA evaluated the structure of the 39 industries in NAICS Sector 
62, Health Care and Social Assistance, to assess the

[[Page 11006]]

appropriateness of the current size standards. As described above, SBA 
compared data on the economic characteristics of each industry to the 
average characteristics of industries in two comparison groups. The 
first comparison group consists of all industries with a size standard 
of $7 million size and is referred to as the ``receipts based anchor 
comparison group.'' Because the goal of SBA's size standards 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 are similar to the average 
characteristics of industries in the anchor comparison group, the 
anchor size standard is generally considered appropriate for that 
industry. If an industry's structure is significantly different from 
industries in the anchor group, a size standard lower or higher than 
the anchor size standard might be appropriate. The level of the new 
size standard is 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 this group is $29 million. SBA refers to this group of 
industries as the ``higher level receipts based size standard 
comparison group.'' SBA determines differences in industry structure 
between an industry under review and the industries in the two 
comparison groups by comparing data on each of the industry factors, 
including average firm size, average assets size, the four-firm 
concentration ratio, and the Gini coefficient of distribution of firms 
by size. Table 1, Average Characteristics of Receipts Based Comparison 
Groups, (below) shows the average firm size (both 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
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                Average firm size  ($ million)                                        Average receipts
                                             ------------------------------------  Average assets       Four-firm      of four largest
      Receipts based  comparison group                              Weighted          size  ($        concentration       firms  ($     Gini coefficient
                                               Simple average        average          million)          ratio (%)        million) *
--------------------------------------------------------------------------------------------------------------------------------------------------------
Anchor Level................................              1.32             19.63              0.84              16.6             196.4             0.693
Higher Level................................              5.07            116.84              3.20              32.1           1,376.0             0.830
--------------------------------------------------------------------------------------------------------------------------------------------------------
* 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 industry factor 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 million 
anchor size standard appropriate for that factor.
    An industry factor significantly above or below the anchor 
comparison group will generally imply a size standard for that industry 
above or below the $7 million anchor. 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 are $3.3 
million, that can support a $19 million size standard. The $3.3 million 
level is 52.8 percent between $1.32 million for the anchor comparison 
group and $5.07 million for the higher level comparison group (($3.30 
million - $1.32 million) / ($5.07 million - $1.32 million) = 0.528 or 
52.8%). This proportional difference is applied to the difference 
between the $7 million anchor size standard and average size standard 
of $29 million for the higher level size standard group and then added 
to $7 million to estimate a size standard of $18.61 million ([{$29.0 
million - $7.0 million{time}  * 0.528] + $7.0 million = $18.61 
million). The final step is to round the estimated $18.61 million size 
standard to the nearest fixed size standard, which in this example is 
$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's ``Size Standards Methodology,'' which is 
available on its Web site at 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. That is because when SBA prepared its 
``Size Standards Methodology,'' the 2007 Economic Census data were not 
yet available). Table 2, Values of Industry Factors Supported Size 
Standards, (below) 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 average
                               Or if weighted   Or if average     receipts of                      Then implied
 If simple average  receipts      average      assets size  ($    largest four      Or if Gini     size standard
      size  ($ million)        receipts size       million)        firms  ($       coefficient        is  ($
                                ($ million)                         million)                         million)
----------------------------------------------------------------------------------------------------------------
<1.15.......................  <15.22.........  <0.73..........  <142.8.........  <0.686.........             5.0
1.15 to 1.57................  15.22 to 26.26.  0.73 to 1.00...  142.8 to 276.9.  0.686 to 0.702.             7.0
1.58 to 2.17................  26.27 to 41.73.  1.01 to 1.37...  277.0 to 464.5.  0.703 to 0.724.            10.0
2.18 to 2.94................  41.74 to 61.61.  1.38 to 1.86...  464.6 to 705.8.  0.725 to 0.752.            14.0
2.95 to 3.92................  61.62 to 87.02.  1.87 to 2.48...  705.9 to         0.753 to 0.788.            19.0
                                                                 1,014.1.
3.93 to 4.86................  87.03 to 111.32  2.49 to 3.07...  1,014.2 to       0.789 to 0.822.            25.5
                                                                 1,309.0.

[[Page 11007]]

 
4.87 to 5.71................  111.33 to        3.08 to 3.61...  1,309.1 to       0.823 to 0.853.            30.0
                               133.41.                           1,577.1.
>5.71.......................  >133.41........  >3.61..........  >1,577.1.......  >0.853.........            35.5
----------------------------------------------------------------------------------------------------------------

Derivation of Size Standard Based on Federal Contracting Factor

    Besides industry structure, SBA also evaluates Federal contracting 
data to assess how successful small businesses are in getting Federal 
contracts under the existing size standards. For industries where the 
small business share of total Federal contracting dollars is 10 to 30 
percent lower than the small business share of total industry receipts, 
SBA has designated a size standard one level higher than their current 
size standard. For industries where the small business share of total 
Federal contracting dollars is more than 30 percent lower than the 
small business share of total industry receipts, SBA has designated a 
size standard two levels higher than the current size standard.
    Because of the complex relationships among several variables 
affecting small business participation in the Federal marketplace, SBA 
has chosen not to designate a size standard for the Federal contracting 
factor alone that is more than two levels above the current size 
standard. SBA believes that a larger adjustment to size standards based 
on Federal contracting activity should be based on 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. This may 
support a different size standard than indicated by this general rule 
and take into consideration significant and unique aspects of small 
business competitiveness in the Federal contract market. SBA welcomes 
comments on its methodology for 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 39 industries in NAICS Sector 62 reviewed in this proposed 
rule, 13 industries averaged $100 million or more annually in Federal 
contracting during fiscal years 2008 to 2010. In five of those 13 
industries, 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 for each of them.

New Size Standards Based on Industry and Federal Contracting Factors

    Table 3, Size Standards Supported by Each Factor for Each Industry 
(millions of dollars), shows the results of analyses of industry and 
Federal contracting factors for each industry covered by this proposed 
rule. Many of the NAICS industries in columns 2, 3, 4, 6, 7, and 8 show 
two numbers. The upper number is the value for the industry or Federal 
contracting factor shown on the top of the column, and the lower number 
is the size standard supported by that factor. For the four-firm 
concentration ratio, SBA estimates a size standard if its value is 40 
percent or more. If the four-firm concentration ratio for an industry 
is less than 40 percent, no size standard is estimated for that factor. 
If the four-firm concentration ratio is more than 40 percent, SBA 
indicates in column 6 the average size of the industry's top four firms 
together with a size standard based on that average. Column 9 shows a 
calculated new size standard for each industry. This is the average of 
the size standards supported by each factor, rounded to the nearest 
fixed size level. Analytical details involved in the averaging 
procedure are described in SBA's ``Size Standard Methodology.'' For 
comparison with the new standards, the current size standards are in 
column 10 of Table 3.

[[Page 11008]]



                                                               Table 3--Size Standards Supported by Each Factor for Each Industry
                                                                                      [Millions of dollars]
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
                                                      Simple         Weighted
                                                   average  firm   average  firm      Average        Four-firm       Four-firm         Gini           Federal       Calculated     Current size
        NAICS code/ NAICS industry title              size ($         size ($     assets size ($     ratio (%)     average size     coefficient      contract      size standard    standard ($
                                                     million)        million)        million)                       ($ million)                     factor (%)      ($ million)      million)
(1)                                                          (2)             (3)             (4)             (5)             (6)             (7)             (8)             (9)            (10)
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
621111--Offices of Physicians (except Mental                $1.8           $31.1            $0.3             4.4        $3,660.3           0.697           -14.6           $10.0           $10.0
 Health Specialists)............................
                                                           $10.0           $10.0            $5.0  ..............  ..............            $7.0           $14.0
621112--Offices of Physicians, Mental Health                $0.4            $1.4            $0.1             2.5           $27.0           0.362            -8.0            $5.0           $10.0
 Specialists....................................
                                                            $5.0            $5.0            $5.0  ..............  ..............            $5.0
621210--Offices of Dentists.....................            $0.8            $3.9            $0.2             1.4          $330.4           0.343           -14.5            $7.0            $7.0
                                                            $5.0            $5.0            $5.0  ..............  ..............            $5.0           $10.0
621310--Offices of Chiropractors................            $0.3            $0.5            $0.1             0.6           $14.1           0.112  ..............            $5.0            $7.0
                                                            $5.0            $5.0            $5.0  ..............  ..............            $5.0
621320--Offices of Optometrists.................            $0.6            $1.4            $0.1             1.7           $42.9           0.317  ..............            $5.0            $7.0
                                                            $5.0            $5.0            $5.0  ..............  ..............            $5.0
621330--Offices of Mental Health Practitioners              $0.3            $1.8            $0.1             3.3           $43.0           0.468  ..............            $5.0            $7.0
 (except Physicians)............................
                                                            $5.0            $5.0            $5.0  ..............  ..............            $5.0
621340--Offices of Physical, Occupational and               $0.8            $7.8            $0.2            12.3          $546.0           0.617  ..............            $5.0            $7.0
 Speech Therapists and Audiologists.............
                                                            $5.0            $5.0            $5.0  ..............  ..............            $5.0
621391--Offices of Podiatrists..................            $0.5            $1.0            $0.1             0.9            $8.5           0.261  ..............            $5.0            $7.0
                                                            $5.0            $5.0            $5.0  ..............  ..............            $5.0
621399--Offices of All Other Miscellaneous                  $0.3            $1.2            $0.1             2.1           $17.6           0.352           -23.3            $7.0            $7.0
 Health Practitioners...........................
                                                            $5.0            $5.0            $5.0  ..............  ..............            $5.0           $10.0
621410--Family Planning Centers.................            $1.3            $7.2            $0.9            17.4           $78.3           0.722  ..............            $7.0           $10.0
                                                            $7.0            $5.0            $7.0  ..............  ..............           $10.0
621420--Outpatient Mental Health and Substance              $2.6            $7.8            $1.5             3.7          $111.1           0.651           -35.5           $14.0           $10.0
 Abuse Centers..................................
                                                           $14.0            $5.0           $14.0  ..............  ..............            $5.0           $19.0
621491--HMO Medical Centers.....................          $153.2          $370.2           $58.9            88.3        $1,184.0  ..............             0.1           $30.0           $10.0
                                                           $35.5           $35.5           $35.5  ..............           $25.5
621492--Kidney Dialysis Centers.................           $25.3          $244.4           $13.1            76.5        $2,365.3           0.860  ..............           $35.5           $34.5
                                                           $35.5           $35.5           $35.5  ..............           $35.5           $35.5
621493--Freestanding Ambulatory Surgical and                $4.4           $14.1            $2.0            13.7          $526.8           0.648  ..............           $14.0           $10.0
 Emergency Centers..............................
                                                           $25.5            $5.0           $19.0  ..............  ..............            $5.0
621498--All Other Outpatient Care Centers.......            $5.4           $28.0            $2.8             9.4          $637.7           0.763  ..............           $19.0           $10.0
                                                           $30.0           $10.0           $25.5  ..............  ..............           $19.0
621511--Medical Laboratories....................            $8.2           $67.5            $3.9            45.3        $2,587.9           0.830            -6.9           $30.0           $13.5
                                                           $35.5           $19.0           $35.5  ..............           $35.5           $30.0
621512--Diagnostic Imaging Centers..............            $3.4           $14.8            $1.7             7.4          $316.7           0.725  ..............           $14.0           $13.5
                                                           $19.0            $5.0           $14.0  ..............  ..............           $14.0
621610--Home Health Care Services...............            $2.9           $23.1            $0.9             7.4          $884.8           0.786  ..............           $14.0           $13.5
                                                           $14.0            $7.0            $7.0  ..............  ..............           $19.0
621910--Ambulance Services......................            $3.2           $25.5            $1.4            23.6          $586.4           0.764  ..............           $14.0            $7.0
                                                           $19.0            $7.0           $14.0  ..............  ..............           $19.0
621991--Blood and Organ Banks...................           $24.4          $147.2           $17.4            34.6          $770.3           0.795  ..............           $30.0           $10.0
                                                           $35.5           $35.5           $35.5  ..............  ..............           $25.5
621999--All Other Miscellaneous Ambulatory                  $2.8           $24.0            $1.3            20.4          $370.6           0.805            42.1           $14.0           $10.0
 Health Care Services...........................
                                                           $14.0            $7.0           $10.0  ..............  ..............           $25.5
622110--General Medical and Surgical Hospitals..          $213.7          $472.3          $183.2             7.8       $12,744.3  ..............            51.8           $35.5           $34.5
                                                           $35.5           $35.5           $35.5
622210--Psychiatric and Substance Abuse                    $40.1           $58.3           $25.0            15.2          $653.2  ..............  ..............           $30.0           $34.5
 Hospitals......................................
                                                           $35.5           $14.0           $35.5
622310--Specialty (except Psychiatric and                  $75.9          $123.8           $49.5            24.0        $1,708.4  ..............  ..............           $35.5           $34.5
 Substance Abuse) Hospitals.....................
                                                           $35.5           $30.0           $35.5

[[Page 11009]]

 
623110--Nursing Care Facilities.................           $10.7           $56.7            $7.7            10.6        $2,462.0           0.691            14.1           $25.5           $13.5
                                                           $35.5           $14.0           $35.5  ..............  ..............            $7.0
623210--Residential Mental Retardation                      $3.1           $18.7            $1.9             8.9          $407.6           0.717  ..............           $14.0           $10.0
 Facilities.....................................
                                                           $19.0            $7.0           $19.0  ..............  ..............           $10.0
623220--Residential Mental Health and Substance             $2.5            $7.9            $1.7             6.8          $147.1           0.610  ..............           $10.0            $7.0
 Abuse Facilities...............................
                                                           $14.0            $5.0           $14.0  ..............  ..............            $5.0
623311--Continuing Care Retirement Communities..            $7.2           $31.7           $12.7            10.9          $709.9           0.720  ..............           $25.5           $13.5
                                                           $35.5           $10.0           $35.5  ..............  ..............           $10.0
623312--Homes for the Elderly...................            $1.3           $18.1            $1.7            18.6          $705.3           0.729  ..............           $10.0            $7.0
                                                            $7.0            $7.0           $14.0  ..............  ..............           $14.0
623990--Other Residential Care Facilities.......            $2.3            $7.9            $1.7             5.4          $113.4           0.663           -20.8           $10.0            $7.0
                                                           $14.0            $5.0           $14.0  ..............  ..............            $5.0           $10.0
624110--Child and Youth Services................            $1.6            $9.0            $1.2  ..............  ..............           0.702  ..............            $7.0            $7.0
                                                           $10.0            $5.0           $10.0  ..............  ..............            $7.0
624120--Services for the Elderly and Persons                $1.6           $11.7            $1.0             3.6          $230.2           0.719  ..............            $7.0            $7.0
 with Disabilities..............................
                                                           $10.0            $5.0            $7.0  ..............  ..............           $10.0
624190--Other Individual and Family Services....            $1.3            $9.9            $0.9  ..............  ..............           0.727            -9.9           $10.0            $7.0
                                                            $7.0            $5.0            $7.0  ..............  ..............           $14.0
624210--Community Food Services.................            $1.8           $12.3             0.8             7.2           $93.7           0.753  ..............           $10.0            $7.0
                                                           $10.0            $5.0            $7.0  ..............  ..............           $19.0
624221--Temporary Shelters......................            $1.2            $2.9             1.6             5.9           $55.4           0.487  ..............           $10.0            $7.0
                                                            $7.0            $5.0           $14.0  ..............  ..............            $5.0
624229--Other Community Housing Services........            $1.8           $14.5            $3.6            21.1          $321.6           0.651  ..............           $14.0            $7.0
                                                           $10.0            $5.0           $30.0            21.1          $321.6            $5.0
624230--Emergency and Other Relief Services.....           $11.3          $265.3  ..............            43.0          $906.6           0.925  ..............           $30.0            $7.0
                                                           $35.5           $35.5  ..............  ..............           $19.0           $35.5
624310--Vocational Rehabilitation Services......            $2.5            $9.3            $1.6             5.6          $160.5           0.644  ..............           $10.0            $7.0
                                                           $14.0            $5.0           $14.0  ..............  ..............            $5.0
624410--Child Day Care Services.................            $0.5            $9.9             0.2            11.4          $842.7           0.538  ..............            $5.0            $7.0
                                                            $5.0            $5.0            $5.0  ..............  ..............            $5.0
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------


[[Page 11010]]

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 suggest 
different size standards. For instance, in past rules, SBA established 
a common size standard for Computer Systems Design and Related Services 
(NAICS 541511, NAICS 541112, NAICS 541513, NAICS 541519 (excluding the 
``exception''), and NAICS 811212). Another example is the common size 
standard for certain Architectural, Engineering (A&E) and Related 
Services. These include NAICS 541310, NAICS 541330 (excluding the 
``exceptions''), Map Drafting (an ``exception'' under NAICS 541340), 
NAICS 541360, and NAICS 541370 (see 64 FR 28275 (May 25, 1999)). More 
recently, SBA established a common size standard for some of the 
industries in NAICS Sector 44-45, Retail Trade (see 75 FR 61597 
(October 6, 2010)). Earlier this year, SBA proposed common size 
standards for several industries in NAICS Sector 54, Professional, 
Scientific and Technical Services (see 76 FR 14323 (March 16, 2011)), 
NAICS Sector 48-49, Transportation and Warehousing (see 76 FR 27935 
(May 13, 2011)), NAICS Sector 56, Administrative and Support, Waste 
Management and Remediation Services (see 76 FR 63510 (October 12, 
2011)), and NAICS Sector 53, Real Estate and Rental and Leasing (see 76 
FR 70680 (November 15, 2011)).
    For NAICS Sector 62, SBA derives, as an alternative to a separate 
size standard for each industry, common size standards for industries 
in four NAICS Industry Groups and one NAICS Subsector, as shown in 
Table 4 Industry Groups for Common Size Standards. The SBA evaluated 
industry and Federal contracting factors and derived a common size 
standard for each Industry Group and Subsector using the same method as 
described above. The results are in Table 5, Size Standards Supported 
by Each Factor for Each Industry Group (millions of dollars) which 
immediately follows Table 4, below.

                               Table 4--Industry Groups for Common Size Standards
----------------------------------------------------------------------------------------------------------------
                                                                                      Industries: 6-digit NAICS
     Industry sector/group: NAICS codes               Industry group title                      codes
----------------------------------------------------------------------------------------------------------------
6211 *......................................  Offices of Physicians...............                621111, 621112
6213 *......................................  Offices of Other Health                    621310, 621320, 621330,
                                               Practitioners.                             621340, 621391, 621399
622.........................................  Hospitals...........................        622110, 622210, 622310
6232........................................  Residential Mental Retardation,                     623210, 623220
                                               Mental Health and Substance Abuse
                                               Facilities.
6241 *......................................  Individual and Family Services......        624110, 624120, 624190
----------------------------------------------------------------------------------------------------------------
* Industries in these Industry Groups currently have the common size standards. SBA proposes to retain common
  size standards for those industries and proposes a common size standard for two industries in NAICS Industry
  Group 6232 that currently have separate size standards.


                                                            Table 5--Size Standards Supported by Each Factor for Each Industry Group
                                                                                      [Millions of dollars]
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                      Simple         Weighted
                                                                   average  firm   average  firm      Average        Four-firm       Four-firm         Gini           Federal       Calculated
                    NAICS code/industry title                        size  ($        size  ($       assets size     ratio  (%)     average size     coefficient      contract      size standard
                                                                     million)        million)       ($ million)                     ($ million)                     factor  (%)     ($ million)
(1)                                                                          (2)             (3)             (4)             (5)             (6)             (7)             (8)             (9)
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
6211--Offices of physicians.....................................            $1.7           $30.5            $0.3             4.4        $3,663.3           0.697           -11.9           $10.0
                                                                           $10.0           $10.0            $5.0  ..............  ..............            $7.0           $14.0
6213--Offices of other health practitioners.....................            $0.4            $3.1            $0.1             4.3          $546.4           0.410           -16.3            $7.0
                                                                            $5.0            $5.0            $5.0  ..............  ..............            $5.0           $10.0
622--Hospitals..................................................          $191.0          $460.6          $160.6             7.4       $12,984.0  ..............            50.2           $35.5
                                                                           $35.5           $35.5           $35.5
6232--Residential mental retardation, mental health and                     $3.0           $15.2            $1.9             6.3          $425.5           0.701  ..............           $14.0
 substance abuse facilities.....................................
                                                                           $19.0            $7.0           $19.0  ..............  ..............            $7.0
6241--Individual and Family Services............................            $1.5           $13.4            $1.0             3.1          $489.7           0.740           -11.9           $10.0
                                                                            $7.0            $5.0            $7.0  ..............  ..............           $14.0           $10.0
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Evaluation of SBA Loan Data

    Before deciding on an industry's size standard, SBA also considers 
the impact of new or revised size standards on SBA's loan programs. 
Accordingly, SBA examined its 7(a) and 504 Loan Program data for fiscal 
years 2008 to 2010 to assess whether the proposed size standards need 
further adjustments to ensure credit opportunities for small businesses 
through those programs. For the industries reviewed in this rule, the 
data show that it is mostly businesses much smaller than the current 
size standards that utilize the SBA's 7(a) and 504 loans.
    Furthermore, the Jobs Act established an alternative size standard 
for SBA's 7(a) and 504 Program applicants. Specifically, an applicant 
exceeding an NAICS industry based size standard may still be eligible 
if its maximum tangible net worth does not exceed $15 million and its 
average net income after Federal income taxes (excluding any carry-over 
losses) for the 2 full fiscal years before the date of the application 
is not more than $5 million.
    Therefore, no size standard in NAICS 62, Health Care and Social 
Assistance, needs an adjustment based on this factor.

[[Page 11011]]

Proposed Changes to Size Standards

    Table 6, Summary of Size Standards Analysis, (below) summarizes the 
results of SBA analyses of industry specific size standards from Table 
3 and the results for common size standards from Table 5. In terms of 
industry specific size standards, the results in Table 3 might support 
increases in size standards for 25 industries, decreases for nine 
industries and no changes for five industries. Based on common size 
standards for certain NAICS Industry Groups and Subsectors, the results 
in Table 5 appear to support increases in size standards for 28 
industries, decreases for two industries, and no changes for nine 
industries.

                                   Table 6--Summary of Size Standards Analysis
----------------------------------------------------------------------------------------------------------------
                                                                                 Calculated
                                                              Current size        industry         Calculated
           NAICS codes              NAICS industry title      standard  ($     specific  size      common size
                                                                million)        standard  ($      standard  ($
                                                                                  million)          million)
----------------------------------------------------------------------------------------------------------------
621111..........................  Offices of Physicians                $10.0             $10.0             $10.0
                                   (except Mental Health
                                   Specialists).
621112..........................  Offices of Physicians,                10.0               5.0              10.0
                                   Mental Health
                                   Specialists.
621210..........................  Offices of Dentists.....               7.0               7.0  ................
621310..........................  Offices of Chiropractors               7.0               5.0               7.0
621320..........................  Offices of Optometrists.               7.0               5.0               7.0
621330..........................  Offices of Mental Health               7.0               5.0               7.0
                                   Practitioners (except
                                   Physicians).
621340..........................  Offices of Physical,                   7.0               5.0               7.0
                                   Occupational and Speech
                                   Therapists and
                                   Audiologists.
621391..........................  Offices of Podiatrists..               7.0               5.0               7.0
621399..........................  Offices of All Other                   7.0               7.0               7.0
                                   Miscellaneous Health
                                   Practitioners.
621410..........................  Family Planning Centers.              10.0               7.0  ................
621420..........................  Outpatient Mental Health              10.0              14.0  ................
                                   and Substance Abuse
                                   Centers.
621491..........................  HMO Medical Centers.....              10.0              30.0  ................
621492..........................  Kidney Dialysis Centers.              34.5              35.5  ................
621493..........................  Freestanding Ambulatory               10.0              14.0  ................
                                   Surgical and Emergency
                                   Centers.
621498..........................  All Other Outpatient                  10.0              19.0  ................
                                   Care Centers.
621511..........................  Medical Laboratories....              13.5              30.0  ................
621512..........................  Diagnostic Imaging                    13.5              14.0  ................
                                   Centers.
621610..........................  Home Health Care                      13.5              14.0  ................
                                   Services.
621910..........................  Ambulance Services......               7.0              14.0  ................
621991..........................  Blood and Organ Banks...              10.0              30.0  ................
621999..........................  All Other Miscellaneous               10.0              14.0  ................
                                   Ambulatory Health Care
                                   Services.
622110..........................  General Medical and                   34.5              35.5              35.5
                                   Surgical Hospitals.
622210..........................  Psychiatric and                       34.5              30.0              35.5
                                   Substance Abuse
                                   Hospitals.
622310..........................  Specialty (except                     34.5              35.5              35.5
                                   Psychiatric and
                                   Substance Abuse)
                                   Hospitals.
623110..........................  Nursing Care Facilities.              13.5              25.5  ................
623210..........................  Residential Mental                    10.0              14.0              14.0
                                   Retardation Facilities.
623220..........................  Residential Mental                     7.0              10.0              14.0
                                   Health and Substance
                                   Abuse Facilities.
623311..........................  Continuing Care                       13.5              25.5  ................
                                   Retirement Communities.
623312..........................  Homes for the Elderly...               7.0              10.0  ................
623990..........................  Other Residential Care                 7.0              10.0  ................
                                   Facilities.
624110..........................  Child and Youth Services               7.0               7.0              10.0
624120..........................  Services for the Elderly               7.0               7.0              10.0
                                   and Persons with
                                   Disabilities.
624190..........................  Other Individual and                   7.0              10.0              10.0
                                   Family Services.
624210..........................  Community Food Services.               7.0              10.0  ................
624221..........................  Temporary Shelters......               7.0              10.0  ................
624229..........................  Other Community Housing                7.0              14.0  ................
                                   Services.
624230..........................  Emergency and Other                    7.0              30.0  ................
                                   Relief Services.
624310..........................  Vocational                             7.0              10.0  ................
                                   Rehabilitation Services.
624410..........................  Child Day Care Services.               7.0               5.0  ................
----------------------------------------------------------------------------------------------------------------

    Despite the results depicted in Table 6, SBA believes that lowering 
small business size standards is not in the best interest of small 
businesses in the current economic environment. 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 more than eight 
million non-farm jobs during 2008 to 2009. In response, Congress passed 
and the President signed into law 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 was 9.4 percent or higher 
from May 2009 to December 2010. It has moderated somewhat to 8.6 
percent in November 2011, but has been 9.0 percent or higher for eight 
of the previous 10 months. The unemployment rate is forecast to remain 
around this elevated level for a while. More recently, Congress passed 
and the President signed the Jobs Act to promote small business job 
creation. The Jobs Act puts more capital into the hands of 
entrepreneurs and small business

[[Page 11012]]

owners; strengthens small businesses' ability to compete for contracts; 
includes recommendations from the President's Task Force on Federal 
Contracting Opportunities for Small Business; creates a more even 
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.
    Lowering size standards can decrease the number of firms that 
participate in Federal financial and procurement assistance programs 
for small businesses. It can also affect small businesses that are now 
exempt from or that receive some form of relief from the myriad other 
Federal regulations that use SBA's size standards. That impact could 
take the form of increased fees, paperwork, or other compliance 
requirements for small businesses. Furthermore, size standards based 
solely on analytical results without any other considerations can cut 
off currently eligible small firms from those programs and benefits. In 
NAICS Sector 62, more than 500 businesses would lose their small 
business eligibility if size standards were lowered based solely on 
results from industry specific analysis, and more than 240 small firms 
would lose their eligibility if the size standards were lowered based 
solely on common size standards analysis. That would run counter to 
what SBA and the Federal Government are doing to help 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, 
in this proposed rule, SBA does not intend to reduce size standards for 
any industries. For industries where analyses might seem to support 
lowering size standards, SBA proposes to retain the current size 
standards. As stated previously, the Small Business Act requires the 
Administrator to ``* * * consider other factors deemed to be relevant * 
* *'' to establishing small business size standards. The current 
economic conditions and the impact on job creation are quite relevant 
to establishing small business size standards. SBA nevertheless 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.
    Based on comparisons between industry specific size standards and 
common size standards within each Industry Group or Subsector, SBA 
finds that for some industries, common size standards are more 
appropriate for several reasons. First, analyzing industries at the 
more aggregated Industry Group or Subsector level simplifies size 
standards analysis and will produce more consistent results among 
related industries. Second, in most cases, industries within each 
Industry Group or Subsector currently have the same size standards and 
SBA believes it is better to keep the revised size standards also the 
same unless industries are significantly different. Third, within each 
Industry Group or Subsector many of the same businesses tend to operate 
in the same multiple industries. SBA believes that common size 
standards reflect the Federal marketplace in those industries better 
than do 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 calculated, for the above reasons, SBA 
proposes to apply common size standards. For industries where SBA has 
not estimated common size standards, it proposes to apply industry 
specific size standards. As discussed above, SBA has decided that 
lowering small business size standards is inconsistent with what the 
Federal Government is doing to stimulate the economy and encourage job 
growth through the Recovery Act and the Jobs Act. Therefore, for those 
industries for which its analyses suggested decreasing their size 
standards, SBA proposes to retain the current size standards. Thus, of 
the 39 industries in NAICS Sector 62, SBA proposes to increase size 
standards for 28 industries and retain the current size standards for 
11 industries. The industries for which SBA has proposed to increase 
their size standards and their proposed size standards appear in Table 
7, Summary of Proposed Size Standards Revisions (below).
    SBA's decision to not lower size standards in NAICS Sector 62 is 
consistent with SBA's prior actions for NAICS Sector 44-45 (Retail 
Trade), NAICS Sector 72 (Accommodation and Food Services), and NAICS 
Sector 81 (Other Services), which the Agency proposed (74 FR 53924, 74 
FR 53913, and 74 FR 53941 (October 21, 2009)) and adopted in its final 
rules (75 FR 61597, 75 FR 61604, and 75 FR 61591 (October 6, 2010)). It 
is also consistent with the Agency's recently proposed rules for NAICS 
Sector 54, Professional, Technical, and Scientific Services (76 FR 
14323 (March 16, 2011)), NAICS Sector 48-49, Transportation and 
Warehousing (76 FR 27935 (May 13, 2011)), NAICS Sector 51, Information 
(76 FR 63216 (October 12, 2011)), and NAICS Sector 56, Administrative 
and Support, Waste Management and Remediation Services (76 FR 63510 
(October 12, 2011)), NAICS Sector 61, Educational Services (76 FR 70667 
(November 15, 2011)), and NAICS Sector 53, Real Estate and Rental and 
Leasing (76 FR 70680 (November 15, 2011)). In each of those final and 
proposed rules, SBA opted not to reduce small business size standards, 
for the same reasons it has provided above in this proposed rule.

                              Table 7--Summary of Proposed Size Standards Revisions
----------------------------------------------------------------------------------------------------------------
                                                                Current size      Proposed size
           NAICS codes                NAICS industry title      standard  ($      standard  ($
                                                                  million)          million)
------------------------------------------------------------------------------------------------
621420...........................  Outpatient Mental Health              $10.0             $14.0
                                    and Substance Abuse
                                    Centers.
621491...........................  HMO Medical Centers......              10.0              30.0
621492...........................  Kidney Dialysis Centers..              34.5              35.5
621493...........................  Freestanding Ambulatory                10.0              14.0
                                    Surgical and Emergency
                                    Centers.
621498...........................  All Other Outpatient Care              10.0              19.0
                                    Centers.
621511...........................  Medical Laboratories.....              13.5              30.0
621512...........................  Diagnostic Imaging                     13.5              14.0
                                    Centers.
621610...........................  Home Health Care Services              13.5              14.0
621910...........................  Ambulance Services.......               7.0              14.0
621991...........................  Blood and Organ Banks....              10.0              30.0
621999...........................  All Other Miscellaneous                10.0              14.0
                                    Ambulatory Health Care
                                    Services.

[[Page 11013]]

 
622110...........................  General Medical and                    34.5              35.5
                                    Surgical Hospitals.
622210...........................  Psychiatric and Substance              34.5              35.5
                                    Abuse Hospitals.
622310...........................  Specialty (except                      34.5              35.5
                                    Psychiatric and
                                    Substance Abuse)
                                    Hospitals.
623110...........................  Nursing Care Facilities..              13.5              25.5
623210...........................  Residential Mental                     10.0              14.0
                                    Retardation Facilities.
623220...........................  Residential Mental Health               7.0              14.0
                                    and Substance Abuse
                                    Facilities.
623311...........................  Continuing Care                        13.5              25.5
                                    Retirement Communities.
623312...........................  Homes for the Elderly....               7.0              10.0
623990...........................  Other Residential Care                  7.0              10.0
                                    Facilities.
624110...........................  Child and Youth Services.               7.0              10.0
624120...........................  Services for the Elderly                7.0              10.0
                                    and Persons with
                                    Disabilities.
624190...........................  Other Individual and                    7.0              10.0
                                    Family Services.
624210...........................  Community Food Services..               7.0              10.0
624221...........................  Temporary Shelters.......               7.0              10.0
624229...........................  Other Community Housing                 7.0              14.0
                                    Services.
624230...........................  Emergency and Other                     7.0              30.0
                                    Relief Services.
624310...........................  Vocational Rehabilitation               7.0              10.0
                                    Services.
----------------------------------------------------------------------------------------------------------------

Evaluation of Dominance in Field of Operation

    SBA has determined that for the industries in NAICS Sector 62 for 
which it has proposed to increase size standards, no individual firm at 
or below the proposed size standard will be large enough to dominate 
its field of operation. At the proposed individual size standards, if 
adopted, small business shares of total industry receipts among those 
industries vary from less than 0.01 percent to 0.6 percent, with an 
average of 0.1 percent. These levels of market share effectively 
preclude a firm at or below the proposed size standards from exerting 
control on any of the industries.

Request for Comments

    SBA invites public comments on this proposed rule, especially on 
the following issues:
    1. To simplify size standards, SBA proposes eight fixed levels for 
receipts based size standards: $5 million, $7 million, $10 million, $14 
million, $19 million, $25.5 million, $30 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. SBA welcomes suggestions on alternative approaches to 
simplifying small business size standards.
    2. SBA seeks feedback on whether the proposed size standards for 
NAICS Sector 62 are appropriate given the economic characteristics of 
each industry reviewed in this proposed rule. SBA also seeks feedback 
and suggestions on alternative standards, if they would be more 
appropriate, including whether the number of employees is a more 
suitable measure of size for certain industries and what that employee 
level should be.
    3. SBA proposes common size standards for industries within certain 
NAICS Industry Groups, namely NAICS 6211, NAICS 6213, NAICS 6232, NAICS 
6241, and NAICS 622. SBA invites comments or suggestions along with 
supporting information with respect to the following:
    a. Whether SBA should adopt common size standards 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, and
    c. Based on SBA's analysis of the industry data, too much variation 
exists among the industries to retain the current common size standards 
or propose different common size standards for several other industries 
that currently have common size standards. SBA welcomes comments on 
whether it should adopt common size standards for other industries in 
NAICS Sector 62, and if so, how those industries are related so that a 
common size standard would be appropriate.
    4. 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 of other factors that it should consider for 
assessing industry characteristics when evaluating or revising size 
standards. SBA also seeks information on relevant data sources, other 
than those used by the Agency, if available.
    5. 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 the 
specific weight for each factor for those industries along with 
supporting information.
    6. For some industries, based on its analysis of industry and 
program data alone, SBA proposes to increase the existing size 
standards by a large amount (such as NAICS 621511, NAICS 621991, NAICS 
623110, and NAICS 624230), while for others the proposed increases are 
modest. SBA seeks feedback on whether, as a policy, it should limit the 
increase to a size standard or 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.
    7. 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, as 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 size standards 
revisions in this proposed rule. This will help SBA to move forward 
with its review of size

[[Page 11014]]

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, 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, 13563, 12988, and 13132, 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. 801, et seq.

Regulatory Impact Analysis

1. Is there a need for the regulatory action?
    SBA believes that the proposed size standards revisions for a 
number of industries in NAICS Sector 62, Health Care and Social 
Assistance, 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 size definitions. The 
Act also requires that small business size definitions vary to reflect 
industry differences. The recently enacted Jobs Act also requires SBA 
to review all size standards and make necessary adjustments to reflect 
market conditions. 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 programs 
provide 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). Federal agencies may also use SBA size standards for a 
variety of other regulatory and program purposes. These programs assist 
small businesses to become more knowledgeable, stable, and competitive. 
In the 28 industries in NAICS Sector 62 for which SBA has proposed 
increasing size standards, SBA estimates that more than 4,100 
additional firms will obtain small business status and become eligible 
for these programs. That number is about 0.7 percent of the total 
number of firms that are classified as small under the current 
standards in all industries within NAICS Sector 62. If adopted as 
proposed, this will increase the small business share of total industry 
receipts in all industries within NAICS Sector 62 from about 30 percent 
under the current size standards to nearly 32 percent.
    Three groups will benefit from the proposed size standards 
revisions in this rule, if they are adopted as proposed: (1) Some 
businesses that are above the current size standards may gain small 
business status under the higher size standards, thereby enabling them 
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 enabling them to continue their 
participation in the programs; and (3) Federal agencies will have 
larger pools of small businesses from which to draw for their small 
business procurement programs.
    During fiscal years 2008 to 2010, about 66 percent of Federal 
contracting dollars spent in industries in NAICS Sector 62 were 
accounted for by the 28 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 $25 
million to $30 million annually under SBA's small business, 8(a), SDB, 
HUBZone, WOSB, and SDVO SBC Programs, and other unrestricted 
procurements. The added competition for many of these procurements can 
also result in lower prices to the Government for procurements reserved 
for small businesses, but SBA cannot quantify this benefit.
    Under SBA's 7(a) Business Loan and 504 Programs, based on the 2008 
to 2010 data, SBA estimates about 35 to 45 additional loans totaling 
about $11 million to $15 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 more 
small business guaranteed loans to businesses in these industries, but 
it would be impractical to try to estimate exactly the number and total 
amount of loans. Under the Jobs Act, SBA can now guarantee 
substantially larger loans than in the past. In addition, as described 
above, the Jobs Act established an alternative size standard ($15 
million in tangible net worth and $5 million in net income after income 
taxes) for business concerns that do not meet the size standards for 
their industry. Therefore, SBA finds it similarly difficult to quantify 
the impact of these proposed standards on its 7(a) and 504 Loan 
Programs.
    Newly defined small businesses will also benefit from SBA's 
Economic Injury Disaster Loan (EIDL) Program. Since this program is 
contingent on the occurrence and severity of one or more disasters, SBA 
cannot make a meaningful estimate of this impact.
    To the extent that about 4,100 newly defined additional small firms 
could become active in Federal procurement programs, the proposed 
changes, if adopted, may entail some additional administrative costs to 
the Federal Government associated with additional bidders for Federal 
small business procurement opportunities. In addition, there will be 
more firms seeking SBA's guaranteed loans, more firms eligible for 
enrollment in the Central Contractor Registration's Dynamic Small 
Business Search database, and more firms seeking certification as 8(a) 
or HUBZone firms or qualifying for small business, WOSB, SDVO SBC, and 
SDB status. Among those newly defined small businesses seeking SBA 
assistance, there could be some additional costs associated with

[[Page 11015]]

compliance and verification of small business status and protests of 
small business status. SBA believes that these added costs will be 
minimal because mechanisms are already in place to handle these 
administrative requirements.
    Additionally, 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 businesses that receive price evaluation 
preferences. However, the additional costs associated with fewer 
bidders are expected to be minor since, as by 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 (15 U.S.C. 637(a)(1)(D)(i)(I), 644(a), 657a(b)(2)(b), 
and 657f(b)). The proposed size standards revisions, if adopted, may 
have distributional effects among large and small businesses. Although 
SBA cannot estimate with certainty the actual outcome of the gains and 
losses among small and large businesses, it can identify several 
probable impacts. There may 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 concerns instead of large 
businesses since these firms may be eligible for a price evaluation 
preference 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 businesses'' 
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 
Industries in NAICS Sector 62 are 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 distributional 
impacts that relate to Executive Order 13563 are 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. SBA 
also met with various industry groups to get their feedback on its 
methodology and other size standards issues. In addition, SBA presented 
its size standards methodology to businesses in 13 cities in the U.S. 
and sought their input as part of Jobs Act tours. The presentation also 
included information on the latest status of the comprehensive size 
standards review and on how interested parties can provide SBA with 
input and feedback on size standards.
    Additionally, SBA sent letters to the Directors of the Offices of 
Small and Disadvantaged Business Utilization (OSDBU) at 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 size standards in NAICS Sector 62, Health Care and 
Social Assistance, is consistent with Executive Order 13563, Section 6, 
calling for retrospective analyses of existing rules. The last 
comprehensive 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 were 
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, in 2007, SBA began a comprehensive review of its 
size standards to ensure that existing size standards have supportable 
bases and it will revise them when necessary. In addition, the Jobs Act 
requires 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.

Executive Order 12988

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

Executive Order 13132

    For the purposes of Executive Order 13132, SBA has determined that 
this proposed rule will not have substantial, direct effects on the 
States, on the relationship between the national government and the 
States, or on the distribution of power and responsibilities among the 
various levels of government. Therefore, SBA has determined that this 
proposed rule has no federalism implications warranting preparation of 
a federalism assessment.

Paperwork Reduction Act

    For the purposes of the Paperwork Reduction Act, 44 U.S.C. Ch. 35, 
SBA has determined that this rule will not impose any new reporting or 
record keeping requirements.

[[Page 11016]]

Initial Regulatory Flexibility Analysis

    Under the Regulatory Flexibility Act (RFA), this proposed rule, if 
finalized, may have a significant impact on a substantial number of 
small businesses in NAICS Sector 62, Health Care and Social Assistance. 
As described above, this rule may affect small businesses seeking 
Federal contracts, loans under SBA's 7(a), 504 Guaranteed Loan and 
Economic Injury Disaster Loan Programs, and assistance under 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 are the need for and objective of the rule? (2) 
What are SBA's description and estimate of the number of small 
businesses 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 that 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 businesses?
1. What are the need for and objective of the rule?
    Although size standards for three Subsectors of NAICS 62 (NAICS 
Subsector 621, Ambulatory Health Care Services; NAICS Subsector 622, 
Hospitals; and NAICS Subsector 623, Nursing and Residential Care 
Facilities) were reviewed during 1999-2000, size standards for NAICS 
Subsector 624, Social Assistance, which includes nine industries, have 
not been reviewed since the early 1980s. Changes in industry structure, 
technological changes, productivity growth, mergers and acquisitions, 
and updated industry definitions may have changed the structure of many 
industries within NAICS Sector 62. Such changes can be sufficient to 
support revisions to current size standards for some industries. Based 
on the analysis of the latest data available, SBA believes that the 
revised standards in this proposed rule more appropriately reflect the 
size of businesses in those industries that need Federal assistance. 
The recently enacted Jobs Act also requires SBA to review all size 
standards and make necessary adjustments to reflect market conditions.
2. What are SBA's description and estimate of the number of small 
businesses to which the rule will apply?
    If the proposed rule is adopted in its present form, SBA estimates 
that more than 4,100 additional firms will become small because of 
increases in size standards in 28 industries in NAICS Sector 62. That 
represents 0.7 percent of total firms that are small under current size 
standards in all industries within that Sector. This will result in an 
increase in the small business share of total industry receipts for the 
Sector from about 30 percent under the current size standard to nearly 
32 percent under the proposed 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 current size standards 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, recordkeeping and other compliance 
requirements of the rule?
    The proposed size standards changes do not impose any additional 
reporting or recordkeeping requirements on small businesses. However, 
qualifying for Federal procurement and a number of other programs 
requires that businesses register in the CCR database and certify at 
least once 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 to do 
otherwise. 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:

PART 121--SMALL BUSINESS SIZE REGULATIONS

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

    Authority: 15 U.S.C. 632, 634(b)(6), 636(b), 662, and 694a(9).

    2. In Sec.  121.201, in the table, revise the entries for 
``621420'', ``621491'', ``621492'', ``621493'', ``621498'', ``621511'', 
``621512'', ``621610'', ``621910'', ``621991'', ``621999'', ``622110'', 
``622210'', ``622310'', ``623110'', ``623210'', ``623220'', ``623311'', 
``623312'', ``623990'', ``624110'', ``624120'', ``624190'', ``624210'', 
``624221'', ``624229'', ``624230'', and ``624310'' to read as follows:


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

* * * * *

[[Page 11017]]



                                 Small Business Size Standards by NAICS Industry
----------------------------------------------------------------------------------------------------------------
                                                                           Size standards in   Size standards in
              NAICS codes                   NAICS U.S. industry title         millions of          number of
                                                                                dollars            employees
----------------------------------------------------------------------------------------------------------------
 
                                                  * * * * * * *
621420.................................  Outpatient Mental Health and                  $14.0  ..................
                                          Substance Abuse Centers.
621491.................................  HMO Medical Centers............                30.0  ..................
621492.................................  Kidney Dialysis Centers........                35.5  ..................
621493.................................  Freestanding Ambulatory                        14.0  ..................
                                          Surgical and Emergency Centers.
621498.................................  All Other Outpatient Care                      19.0  ..................
                                          Centers.
621511.................................  Medical Laboratories...........                30.0  ..................
621512.................................  Diagnostic Imaging Centers.....                14.0  ..................
621610.................................  Home Health Care Services......                14.0  ..................
621910.................................  Ambulance Services.............                14.0  ..................
621991.................................  Blood and Organ Banks..........                30.0  ..................
621999.................................  All Other Miscellaneous                        14.0  ..................
                                          Ambulatory Health Care
                                          Services.
----------------------------------------------------------------------------------------------------------------
                                            Subsector 622--Hospitals
----------------------------------------------------------------------------------------------------------------
 
                                                  * * * * * * *
622110.................................  General Medical and Surgical                   35.5  ..................
                                          Hospitals.
622210.................................  Psychiatric and Substance Abuse                35.5  ..................
                                          Hospitals.
622310.................................  Specialty (except Psychiatric                  35.5  ..................
                                          and Substance Abuse) Hospitals.
----------------------------------------------------------------------------------------------------------------
                             Subsector 623--Nursing and Residential Care Facilities
----------------------------------------------------------------------------------------------------------------
623110.................................  Nursing Care Facilities........                25.5  ..................
623210.................................  Residential Mental Retardation                 14.0  ..................
                                          Facilities.
623220.................................  Residential Mental Health and                  14.0  ..................
                                          Substance Abuse Facilities.
623311.................................  Continuing Care Retirement                     25.5  ..................
                                          Communities.
623312.................................  Homes for the Elderly..........                10.0  ..................
623990.................................  Other Residential Care                         10.0  ..................
                                          Facilities.
----------------------------------------------------------------------------------------------------------------
                                        Subsector 624--Social Assistance
----------------------------------------------------------------------------------------------------------------
 
                                                  * * * * * * *
624110.................................  Child and Youth Services.......                10.0  ..................
624120.................................  Services for the Elderly and                   10.0  ..................
                                          Persons with Disabilities.
624190.................................  Other Individual and Family                    10.0  ..................
                                          Services.
624210.................................  Community Food Services........                10.0  ..................
624221.................................  Temporary Shelters.............                10.0  ..................
624229.................................  Other Community Housing                        14.0  ..................
                                          Services.
624230.................................  Emergency and Other Relief                     30.0  ..................
                                          Services.
624310.................................  Vocational Rehabilitation                      10.0  ..................
                                          Services.
 
                                                  * * * * * * *
----------------------------------------------------------------------------------------------------------------


    Dated: December 21, 2011.
Karen G. Mills,
Administrator.
[FR Doc. 2012-4329 Filed 2-23-12; 8:45 am]
BILLING CODE 8025-01-P


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