Federal Register / Vol. 77, No. 37 / Friday, February 24, 2012 / Proposed Rules 11001 

minimum efficiency level determined 

by linear interpolation of the kVA and 

efficiency values immediately above 

and below that kVA rating. 

Single-phase Three-phase 

BIL* 20–45 kV 46–95 kV ≥96 kV BIL* 20–45 kV 46–95 kV ≥96 kV 

kVA 

Efficiency 

(%) 

Efficiency 

(%) 

Efficiency 

(%) kVA 

Efficiency 

(%) 

Efficiency 

(%) 

Efficiency 

(%) 

15 ................. 98.10 97.86 .......................... 15 97.50 97.18 ..........................

25 ................. 98.33 98.12 .......................... 30 97.90 97.63 ..........................

37.5 .............. 98.49 98.30 .......................... 45 98.10 97.86 ..........................

50 ................. 98.60 98.42 .......................... 75 98.33 98.13 ..........................

75 ................. 98.73 98.57 98.53 112.5 98.52 98.36 ..........................

100 ............... 98.82 98.67 98.63 150 98.65 98.51 ..........................

167 ............... 98.96 98.83 98.80 225 98.82 98.69 98.57 

250 ............... 99.07 98.95 98.91 300 98.93 98.81 98.69 

333 ............... 99.14 99.03 98.99 500 99.09 98.99 98.89 

500 ............... 99.22 99.12 99.09 750 99.21 99.12 99.02 

667 ............... 99.27 99.18 99.15 1000 99.28 99.20 99.11 

833 ............... 99.31 99.23 99.20 1500 99.37 99.30 99.21 

2000 99.43 99.36 99.28 

2500 99.47 99.41 99.33 

* BIL means basic impulse insulation level. 

Note: All efficiency values are at 50 percent of nameplate rated load, determined according to the DOE Test-Procedure. 10 CFR Part 431, 

Subpart K, Appendix A. 

Issued in Washington, DC, on February 15, 

2012. 

Kathleen B. Hogan, 

Deputy Assistant Secretary, Energy Efficiency 

and Renewable Energy. 

[FR Doc. 2012–3987 Filed 2–23–12; 8:45 am] 

BILLING CODE 6450–01–P 

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. 

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 sizestandards@sba.gov. 

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 

sizestandards@sba.gov. 

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 

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11002 Federal Register / Vol. 77, No. 37 / Friday, February 24, 2012 / Proposed Rules 

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 

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Federal Register / Vol. 77, No. 37 / Friday, February 24, 2012 / Proposed Rules 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 

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11004 Federal Register / Vol. 77, No. 37 / Friday, February 24, 2012 / Proposed Rules 

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 fourfirm 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 industrywide 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 

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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 

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11006 Federal Register / Vol. 77, No. 37 / Friday, February 24, 2012 / Proposed Rules 

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, fourfirm 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

Receipts based 

comparison group 

Average firm size 

($ million) Average assets 

size 

($ million) 

Four-firm 

concentration 

ratio (%) 

Average receipts 

of four largest 

firms 

($ million) * 

Gini coefficient 

Simple average Weighted 

average 

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} * 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

If simple average 

receipts size 

($ million) 

Or if weighted average 

receipts size 

($ million) 

Or if average assets 

size 

($ million) 

Or if average receipts 

of largest four firms 

($ million) 

Or if 

Gini coefficient 

Then implied 

size standard 

is 

($ 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 1,014.1 .......... 0.753 to 0.788 ............. 19.0 

3.93 to 4.86 ................... 87.03 to 111.32 ........... 2.49 to 3.07 ................. 1,014.2 to 1,309.0 ....... 0.789 to 0.822 ............. 25.5 

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Federal Register / Vol. 77, No. 37 / Friday, February 24, 2012 / Proposed Rules 11007 

TABLE 2—VALUES OF INDUSTRY FACTORS AND SUPPORTED SIZE STANDARDS—Continued 

If simple average 

receipts size 

($ million) 

Or if weighted average 

receipts size 

($ million) 

Or if average assets 

size 

($ million) 

Or if average receipts 

of largest four firms 

($ million) 

Or if 

Gini coefficient 

Then implied 

size standard 

is 

($ million) 

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

>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. 

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TABLE 3—SIZE

STANDARDS

SUPPORTED BY

EACH

FACTOR FOR

EACH INDUSTRY

[Millions of dollars] 

NAICS code/ 

NAICS industry title 

Simple 

average 

firm size 

($ million) 

Weighted 

average 

firm size 

($ million) 

Average 

assets size 

($ million) 

Four-firm ratio 

(%) 

Four-firm 

average size 

($ million) 

Gini coefficient 

Federal 

contract 

factor 

(%) 

Calculated 

size standard 

($ million) 

Current size 

standard 

($ million) 

(1) (2) (3) (4) (5) (6) (7) (8) (9) (10) 

621111—Offices of Physicians (except Mental Health Specialists) ................................................................................ $1.8 $31.1 $0.3 4.4 $3,660.3 0.697 ¥14.6 $10.0 $10.0 

$10.0 $10.0 $5.0 ........................ ........................ $7.0 $14.0 

621112—Offices of Physicians, Mental Health Specialists .... $0.4 $1.4 $0.1 2.5 $27.0 0.362 ¥8.0 $5.0 $10.0 

$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 (except Physicians) ................................................................................ $0.3 $1.8 $0.1 3.3 $43.0 0.468 ........................ $5.0 $7.0 

$5.0 $5.0 $5.0 ........................ ........................ $5.0 

621340—Offices of Physical, Occupational and Speech 

Therapists and Audiologists ................................................ $0.8 $7.8 $0.2 12.3 $546.0 0.617 ........................ $5.0 $7.0 

$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 Health Practitioners .................................................................................. $0.3 $1.2 $0.1 2.1 $17.6 0.352 ¥23.3 $7.0 $7.0 

$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 Abuse 

Centers ................................................................................ $2.6 $7.8 $1.5 3.7 $111.1 0.651 ¥35.5 $14.0 $10.0 

$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 Emergency 

Centers ................................................................................ $4.4 $14.1 $2.0 13.7 $526.8 0.648 ........................ $14.0 $10.0 

$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 Health Care 

Services ............................................................................... $2.8 $24.0 $1.3 20.4 $370.6 0.805 42.1 $14.0 $10.0 

$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 Hospitals .......... $40.1 $58.3 $25.0 15.2 $653.2 ........................ ........................ $30.0 $34.5 

$35.5 $14.0 $35.5 

622310—Specialty (except Psychiatric and Substance 

Abuse) Hospitals ................................................................. $75.9 $123.8 $49.5 24.0 $1,708.4 ........................ ........................ $35.5 $34.5 

$35.5 $30.0 $35.5 

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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 Facilities ................ $3.1 $18.7 $1.9 8.9 $407.6 0.717 ........................ $14.0 $10.0 

$19.0 $7.0 $19.0 ........................ ........................ $10.0 

623220—Residential Mental Health and Substance Abuse 

Facilities .............................................................................. $2.5 $7.9 $1.7 6.8 $147.1 0.610 ........................ $10.0 $7.0 

$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 with Disabilities ...................................................................................... $1.6 $11.7 $1.0 3.6 $230.2 0.719 ........................ $7.0 $7.0 

$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 

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11010 Federal Register / Vol. 77, No. 37 / Friday, February 24, 2012 / Proposed Rules 

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

Industry sector/group: NAICS codes Industry group title Industries: 6-digit NAICS 

codes 

6211 * ................................................ Offices of Physicians .................................................................................. 621111, 621112 

6213 * ................................................ Offices of Other Health Practitioners ......................................................... 621310, 621320, 621330, 

621340, 621391, 621399 

622 .................................................... Hospitals ..................................................................................................... 622110, 622210, 622310 

6232 .................................................. Residential Mental Retardation, Mental Health and Substance Abuse 

Facilities.

623210, 623220 

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] 

NAICS code/industry title 

Simple 

average 

firm size 

($ million) 

Weighted 

average 

firm size 

($ million) 

Average 

assets size 

($ million) 

Four-firm ratio 

(%) 

Four-firm 

average size 

($ million) 

Gini coefficient 

Federal 

contract 

factor 

(%) 

Calculated 

size standard 

($ 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 substance 

abuse facilities ............... $3.0 $15.2 $1.9 6.3 $425.5 0.701 ........................ $14.0 

$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. 

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Federal Register / Vol. 77, No. 37 / Friday, February 24, 2012 / Proposed Rules 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

NAICS codes NAICS industry title 

Current size 

standard 

($ million) 

Calculated 

industry specific 

size standard 

($ million) 

Calculated 

common size 

standard 

($ million) 

621111 ................................ Offices of Physicians (except Mental Health Specialists).$10.0 $10.0 $10.0 

621112 ................................ Offices of Physicians, Mental Health Specialists ........... 10.0 5.0 10.0 

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 Practitioners (except Physicians).7.0 5.0 7.0 

621340 ................................ Offices of Physical, Occupational and Speech Therapists and Audiologists.7.0 5.0 7.0 

621391 ................................ Offices of Podiatrists ...................................................... 7.0 5.0 7.0 

621399 ................................ Offices of All Other Miscellaneous Health Practitioners 7.0 7.0 7.0 

621410 ................................ Family Planning Centers ................................................ 10.0 7.0 ............................

621420 ................................ Outpatient Mental Health and Substance Abuse Centers.10.0 14.0 ............................

621491 ................................ HMO Medical Centers .................................................... 10.0 30.0 ............................

621492 ................................ Kidney Dialysis Centers ................................................. 34.5 35.5 ............................

621493 ................................ Freestanding Ambulatory Surgical and Emergency 

Centers.

10.0 14.0 ............................

621498 ................................ All Other Outpatient Care Centers ................................. 10.0 19.0 ............................

621511 ................................ Medical Laboratories ...................................................... 13.5 30.0 ............................

621512 ................................ Diagnostic Imaging Centers ........................................... 13.5 14.0 ............................

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 Ambulatory Health Care Services.10.0 14.0 ............................

622110 ................................ General Medical and Surgical Hospitals ........................ 34.5 35.5 35.5 

622210 ................................ Psychiatric and Substance Abuse Hospitals ................. 34.5 30.0 35.5 

622310 ................................ Specialty (except Psychiatric and Substance Abuse) 

Hospitals.

34.5 35.5 35.5 

623110 ................................ Nursing Care Facilities ................................................... 13.5 25.5 ............................

623210 ................................ Residential Mental Retardation Facilities ....................... 10.0 14.0 14.0 

623220 ................................ Residential Mental Health and Substance Abuse Facilities.7.0 10.0 14.0 

623311 ................................ Continuing Care Retirement Communities .................... 13.5 25.5 ............................

623312 ................................ Homes for the Elderly .................................................... 7.0 10.0 ............................

623990 ................................ Other Residential Care Facilities ................................... 7.0 10.0 ............................

624110 ................................ Child and Youth Services ............................................... 7.0 7.0 10.0 

624120 ................................ Services for the Elderly and Persons with Disabilities .. 7.0 7.0 10.0 

624190 ................................ Other Individual and Family Services ............................ 7.0 10.0 10.0 

624210 ................................ Community Food Services ............................................. 7.0 10.0 ............................

624221 ................................ Temporary Shelters ........................................................ 7.0 10.0 ............................

624229 ................................ Other Community Housing Services .............................. 7.0 14.0 ............................

624230 ................................ Emergency and Other Relief Services ........................... 7.0 30.0 ............................

624310 ................................ Vocational Rehabilitation Services ................................. 7.0 10.0 ............................

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 

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11012 Federal Register / Vol. 77, No. 37 / Friday, February 24, 2012 / Proposed Rules 

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

NAICS codes NAICS industry title 

Current size 

standard 

($ million) 

Proposed size 

standard 

($ million) 

621420 .......................................... Outpatient Mental Health and Substance Abuse Centers .................. $10.0 $14.0 

621491 .......................................... HMO Medical Centers ......................................................................... 10.0 30.0 

621492 .......................................... Kidney Dialysis Centers ....................................................................... 34.5 35.5 

621493 .......................................... Freestanding Ambulatory Surgical and Emergency Centers .............. 10.0 14.0 

621498 .......................................... All Other Outpatient Care Centers ...................................................... 10.0 19.0 

621511 .......................................... Medical Laboratories ............................................................................ 13.5 30.0 

621512 .......................................... Diagnostic Imaging Centers ................................................................. 13.5 14.0 

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 Ambulatory Health Care Services ................ 10.0 14.0 

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TABLE 7—SUMMARY OF PROPOSED SIZE STANDARDS REVISIONS—Continued 

NAICS codes NAICS industry title 

Current size 

standard 

($ million) 

Proposed size 

standard 

($ million) 

622110 .......................................... General Medical and Surgical Hospitals ............................................. 34.5 35.5 

622210 .......................................... Psychiatric and Substance Abuse Hospitals ....................................... 34.5 35.5 

622310 .......................................... Specialty (except Psychiatric and Substance Abuse) Hospitals ......... 34.5 35.5 

623110 .......................................... Nursing Care Facilities ......................................................................... 13.5 25.5 

623210 .......................................... Residential Mental Retardation Facilities ............................................ 10.0 14.0 

623220 .......................................... Residential Mental Health and Substance Abuse Facilities ................ 7.0 14.0 

623311 .......................................... Continuing Care Retirement Communities .......................................... 13.5 25.5 

623312 .......................................... Homes for the Elderly .......................................................................... 7.0 10.0 

623990 .......................................... Other Residential Care Facilities ......................................................... 7.0 10.0 

624110 .......................................... Child and Youth Services .................................................................... 7.0 10.0 

624120 .......................................... Services for the Elderly and Persons with Disabilities ........................ 7.0 10.0 

624190 .......................................... Other Individual and Family Services .................................................. 7.0 10.0 

624210 .......................................... Community Food Services ................................................................... 7.0 10.0 

624221 .......................................... Temporary Shelters ............................................................................. 7.0 10.0 

624229 .......................................... Other Community Housing Services ................................................... 7.0 14.0 

624230 .......................................... Emergency and Other Relief Services ................................................ 7.0 30.0 

624310 .......................................... Vocational Rehabilitation Services ...................................................... 7.0 10.0 

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 

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11014 Federal Register / Vol. 77, No. 37 / Friday, February 24, 2012 / Proposed Rules 

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 servicedisabled 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 

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Federal Register / Vol. 77, No. 37 / Friday, February 24, 2012 / Proposed Rules 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 setaside 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 nonprocurement). 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. 

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11016 Federal Register / Vol. 77, No. 37 / Friday, February 24, 2012 / Proposed Rules 

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 § 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 § 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: 

§ 121.201 What size standards has SBA 

identified by North American Industry 

Classification System codes? 

* * * * * 

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Federal Register / Vol. 77, No. 37 / Friday, February 24, 2012 / Proposed Rules 11017 

SMALL BUSINESS SIZE STANDARDS BY NAICS INDUSTRY

NAICS codes NAICS U.S. industry title Size standards in 

millions of dollars 

Size standards in 

number of 

employees 

*******

621420 ........................................ Outpatient Mental Health and Substance Abuse Centers ............. $14.0 ................................

621491 ........................................ HMO Medical Centers .................................................................... 30.0 ................................

621492 ........................................ Kidney Dialysis Centers ................................................................. 35.5 ................................

621493 ........................................ Freestanding Ambulatory Surgical and Emergency Centers ......... 14.0 ................................

621498 ........................................ All Other Outpatient Care Centers ................................................. 19.0 ................................

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 Ambulatory Health Care Services .......... 14.0 ................................

Subsector 622—Hospitals 

*******

622110 ........................................ General Medical and Surgical Hospitals ........................................ 35.5 ................................

622210 ........................................ Psychiatric and Substance Abuse Hospitals ................................. 35.5 ................................

622310 ........................................ Specialty (except Psychiatric and Substance Abuse) Hospitals ... 35.5 ................................

Subsector 623—Nursing and Residential Care Facilities 

623110 ........................................ Nursing Care Facilities ................................................................... 25.5 ................................

623210 ........................................ Residential Mental Retardation Facilities ....................................... 14.0 ................................

623220 ........................................ Residential Mental Health and Substance Abuse Facilities .......... 14.0 ................................

623311 ........................................ Continuing Care Retirement Communities .................................... 25.5 ................................

623312 ........................................ Homes for the Elderly .................................................................... 10.0 ................................

623990 ........................................ Other Residential Care Facilities ................................................... 10.0 ................................

Subsector 624—Social Assistance 

*******

624110 ........................................ Child and Youth Services ............................................................... 10.0 ................................

624120 ........................................ Services for the Elderly and Persons with Disabilities .................. 10.0 ................................

624190 ........................................ Other Individual and Family Services ............................................ 10.0 ................................

624210 ........................................ Community Food Services ............................................................. 10.0 ................................

624221 ........................................ Temporary Shelters ........................................................................ 10.0 ................................

624229 ........................................ Other Community Housing Services .............................................. 14.0 ................................

624230 ........................................ Emergency and Other Relief Services ........................................... 30.0 ................................

624310 ........................................ Vocational Rehabilitation Services ................................................. 10.0 ................................

* * * * * * * 

Dated: December 21, 2011. 

Karen G. Mills, 

Administrator. 

[FR Doc. 2012–4329 Filed 2–23–12; 8:45 am] 

BILLING CODE 8025–01–P 

DEPARTMENT OF TRANSPORTATION 

Federal Aviation Administration 

14 CFR Part 39 

[Docket No. FAA–2010–1095; Directorate 

Identifier 2009–NE–40–AD] 

RIN 2120–AA64 

Airworthiness Directives; Pratt & 

Whitney (PW) Models PW4074 and 

PW4077 Turbofan Engines 

AGENCY: Federal Aviation 

Administration (FAA), DOT. 

ACTION: Notice of proposed rulemaking 

(NPRM). 

SUMMARY: We propose to supersede an 

existing airworthiness directive (AD) 

that applies to all PW PW4074 and 

PW4077 turbofan engines. The existing 

AD currently requires removing the 15th 

stage high pressure compressor (HPC) 

disk within 12,000 cycles since new 

(CSN) or using a drawdown removal 

plan for disks that exceed 12,000 CSN. 

Since we issued that AD, we received a 

request from an operator that we clarify 

our inspection schedule for 15th stage 

HPC disks. This proposed AD would 

clarify that 15th stage HPC disks that 

have accumulated more than 9,685 CSN 

require a borescope inspection (BSI) or 

eddy current inspection (ECI) of the disk 

outer rim front rail for cracks prior to 

accumulating 12,000 CSN. We are 

proposing this AD to prevent cracks 

from propagating into the disk bolt 

holes, which could result in a failure of 

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