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Rules and Regulations Federal Register

10943 

Vol. 77, No. 37 

Friday, February 24, 2012 

SMALL BUSINESS ADMINISTRATION 

13 CFR Part 121 

RIN 3245–AG08 

Small Business Size Standards: 

Transportation and Warehousing 

AGENCY: U.S. Small Business 

Administration. 

ACTION: Final rule. 

SUMMARY: The United States Small 

Business Administration (SBA) is 

increasing the small business size 

standards for 22 industries in North 

American Industry Classification 

System (NAICS) Sector 48–49, 

Transportation and Warehousing, and 

retaining the current standards for the 

remaining 37 industries in that Sector. 

As part of its ongoing comprehensive 

review of all size standards, SBA has 

evaluated all receipts based standards 

for industries in NAICS Sector 48–49 to 

determine whether they should be 

retained or revised. SBA did not review 

the employee based standards for 

industries in NAICS Sector 48–49, but 

will do so at a later date with other 

employee based size standards. 

DATES: This rule is effective March 26, 

2012. 

FOR FURTHER INFORMATION CONTACT: Jon 

Haitsuka, Program Analyst, Size 

Standards Division, (202) 205–6618 or 

sizestandards@sba.gov. 

SUPPLEMENTARY INFORMATION: To 

determine eligibility for Federal small 

business assistance programs, SBA 

establishes small business size 

definitions (referred to as size 

standards) for private sector industries 

in the United States. SBA’s existing size 

standards use two primary measures of 

business size—average annual receipts 

and number of employees. Financial 

assets, electric output and refining 

capacity are used as size measures for a 

few specialized industries. In addition, 

SBA’s Small Business Investment 

Company (SBIC), 7(a), and Certified 

Development Company (CDC or 504) 

Loan Programs determine small 

business eligibility using either the 

industry based size standards or net 

worth and net income size based 

standards. At the start of the current 

comprehensive review of SBA’s small 

business size standards, there were 41 

different size standards levels, covering 

1,141 NAICS industries and 18 subindustry activities. Of these, 31 were 

based on average annual receipts, seven 

based on number of employees, and 

three based on other measures. 

Over the years, SBA has received 

comments that its size standards have 

not kept up with changes in the 

economy, in particular, that they do not 

reflect changes in the Federal 

contracting marketplace and industry 

structure. SBA last conducted a 

comprehensive review of size standards 

during the late 1970s and early 1980s. 

Since then, most reviews of size 

standards have been limited to a few 

specific industries in response to 

requests from the public and Federal 

agencies. SBA also makes periodic 

inflation adjustments to its monetary 

based size standards. The latest inflation 

adjustment to size standards was 

published in the Federal Register on 

July 18, 2008 (73 FR 41237). 

SBA recognizes that changes in 

industry structure and the Federal 

marketplace since the last overall 

review 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 determine whether existing 

size standards have supportable bases 

relative to the current data, and to revise 

them, where necessary. 

In addition, on September 27, 2010, 

the President of the United States signed 

the Small Business Jobs Act of 2010 

(Jobs Act). The Jobs Act directs SBA to 

conduct a detailed review of all size 

standards and to make appropriate 

adjustments to reflect market 

conditions. Specifically, the Jobs Act 

requires SBA to conduct a detailed 

review of at least one-third of all size 

standards during every18-month period 

from the date of its enactment and 

review of all size standards not less 

frequently than once every 5 years 

thereafter. Reviewing existing small 

business size standards and making 

appropriate adjustments based on 

current data is also consistent with 

Executive Order 13563 on improving 

regulation and regulatory review. 

SBA has chosen not to review all size 

standards at one time. Rather, it is 

reviewing groups of related industries 

on a Sector by Sector basis. 

As part of SBA’s comprehensive 

review of size standards, the Agency 

reviewed all receipts based size 

standards in NAICS Sector 48–49, 

Transportation and Warehousing, to 

determine whether the existing size 

standards should be retained or revised. 

On May 13, 2011, SBA published a 

proposed rule in the Federal Register 

(76 FR 27935) seeking public comment 

on its proposal to increase the size 

standards for 22 industries in NAICS 

Sector 48–49. The rule was one of a 

series of proposed rules that examines 

industries grouped by NAICS Sector. 

SBA developed a ‘‘Size Standards 

Methodology’’ for developing, 

reviewing, and modifying size 

standards, when necessary. SBA 

published the document on its Web site 

at www.sba.gov/size for public review 

and comment and also included it as a 

supporting document in the electronic 

docket of the May 13, 2011 proposed 

rule at www.regulations.gov. 

In evaluating an industry’s size 

standard, SBA examines its 

characteristics (such as average firm 

size, startup costs, industry competition 

and distribution of firms by size) and 

the level and small business share of 

Federal contract dollars in that industry. 

SBA also examines the potential impact 

a size standard revision might have on 

its financial assistance programs and 

whether a business concern under a 

revised size standard would be 

dominant in its industry. SBA analyzed 

the characteristics of each industry in 

NAICS Sector 48–49 that has a receipts 

based size standard, mostly using a 

special tabulation obtained from the 

U.S. Bureau of the Census based on its 

2007 Economic Census (the latest 

available). SBA also evaluated the level 

and small business share of Federal 

contracts in each of those industries 

using the data from the Federal 

Procurement Data System—Next 

Generation (FPDS–NG) for fiscal years 

2007 to 2009. To evaluate the impact of 

changes to size standards on its loan 

programs, SBA analyzed internal data 


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on its guaranteed loan programs for 

fiscal years 2008 to 2010. 

SBA’s ‘‘Size Standards Methodology’’ 

provides a detailed description of its 

analyses of various industry and 

program factors and data sources, and 

how the Agency uses the results to 

derive size standards. In the proposed 

rule, SBA detailed how it applied its 

‘‘Size Standards Methodology’’ to 

review and modify, where necessary, 

the existing standards for industries in 

NAICS Sector 48–49. SBA sought 

comments from the public on a number 

of issues about its ‘‘Size Standards 

Methodology,’’ such as whether there 

are alternative methodologies that SBA 

should consider; whether there are 

alternative or additional factors or data 

sources that SBA should evaluate; 

whether SBA’s approach to establishing 

small business size standards makes 

sense in the current economic 

environment; whether SBA’s 

applications of anchor size standards 

are appropriate in the current economy; 

whether there are gaps in SBA’s 

methodology because of the lack of 

comprehensive data; and whether there 

are other facts or issues that SBA should 

consider. 

SBA sought comments on its proposal 

to increase receipts based size standards 

for 22 industries in NAICS Sector 48–49 

(Transportation and Warehousing) and 

retain the existing size standards for 

remaining industries in that Sector. 

Specifically, SBA requested comments 

on whether the size standards should be 

revised as proposed and whether the 

proposed revisions are appropriate. SBA 

also invited comments on whether its 

proposed eight fixed size standard 

levels are appropriate and whether it 

should adopt common size standards for 

several Subsectors and Industry Groups 

in NAICS Sector 48–49. 

SBA’s analyses supported lowering 

existing receipts based standards for 18 

industries. However, as SBA pointed 

out in the proposed rule, lowering size 

standards would reduce the number of 

firms eligible to participate in Federal 

small business assistance programs and 

this is contrary to what the Federal 

government and the Agency are doing to 

help small businesses. Therefore, SBA 

proposed to retain the current size 

standards for those industries and 

requested comments on whether the 

Agency should lower size standards for 

those industries for which its analyses 

might support lowering them. 

In addition, because of lack of 

relevant industry data, SBA proposed 

no changes to current size standards for 

the following: Offshore Marine Air 

Transportation Services (sub-industries 

or ‘‘exceptions’’ to both NAICS Codes 

481211 and NAICS 481212); Offshore 

Marine Water Transportation Services 

(exception to NAICS Subsector 483); 

Non-Vessel Owning Common Carriers 

and Household Goods Forwarders 

(exception to NAICS Code 488510); and 

Postal Services (NAICS Code 491110). 

SBA sought comments on this proposal 

as well as supporting information if 

different size standards appeared more 

appropriate for these industries or subindustries. 

Summary of Comments 

SBA received six comments to the 

proposed rule. However, three of them 

were related to the proposed rule for 

NAICS Sector 54 (Professional, 

Technical, and Scientific Services), 

which was published for comments 

separately about the same time. One of 

those three comments was submitted 

within the comment period for the 

NAICS Sector 54 proposed rule, and 

therefore SBA considered it along with 

the other comments in drafting a final 

rule for that Sector. However, the other 

two comments were submitted after the 

closing date for the comment period for 

Sector 54 (June 15, 2011), and thus were 

not considered for NAICS Sector 54 

(because they were untimely) or for this 

rule (because they were not relevant). 

Therefore, SBA received and considered 

three valid comments to the proposed 

rule on NAICS Sector 48–49. Each of 

these comments is discussed below. 

SBA received one comment on NAICS 

484230 (Specialized Freight (except 

Used Goods) Trucking, Long-Distance). 

For the reasons provided in the 

proposed rule, SBA proposed to retain 

the current $25.5 million size standard 

for that NAICS code, although its 

analyses of industry data related to all 

industries within NAICS Subsector 484 

and to NAICS Code 484230 individually 

supported a lower $19 million size 

standard. The commenter stated that the 

size standard for NAICS Code 484230 

should not be lowered to $19 million 

based on SBA’s analyses, but instead 

should be increased to $30 million from 

the current $25.5 million. However, the 

comment provided no specific data or 

analysis justifying why the $30 million 

size standard is a more appropriate size 

standard than $25.5 million for that 

industry. Rather, the commenter simply 

pointed out SBA’s results on certain 

industry and Federal procurement 

factors to justify the $30 million size 

standard. Although the four-firm 

concentration ratio was only 8 percent 

(i.e., much lower than 40 percent for 

this to factor in the calculated size 

standard), the commenter suggested that 

the size standard be increased to $30 

million based on that factor. Similarly, 

although the Gini coefficient value 

reflecting the size distribution of firms 

in that industry supported the current 

$25.5 million size standard, the 

commenter argued that the size standard 

should be $30 million instead. Finally, 

the commenter contended that the size 

standard for NAICS Code 484230 should 

be $30 million because the Federal 

contracting factor, based on the 2007– 

2009 FPDS–NG data, supported that 

level. As explained in the SBA’s size 

standards methodology as well as in the 

proposed rule, SBA calculates an 

industry’s size standard based on the 

average of size standards supported by 

each of industry and Federal factors, not 

based on one or several factors that 

support a higher size standard. 

Although SBA sought comments on 

whether it should weigh some factors 

more heavily than others for specific 

industries, the commenter provided no 

feedback on this issue. 

In response to the comment, SBA 

analyzed updated 2008–2010 Federal 

procurement data and industry data 

from an updated tabulation of the 2007 

Economic Census. The updated data 

produced a Gini coefficient value that 

supported a higher $30 million size 

standard, and the Federal contracting 

factor based on the updated data 

supported a higher $35.5 million size 

standard than the previous analyses. 

However, SBA’s analysis based on all 

factors continued to support the current 

$25.5 million size standard for NAICS 

Code 484230 because the remaining 

industry factors supported a standard 

much lower than the current $25.5 

million size standard. Because all 

industries within NAICS Subsector 484 

currently share a common size standard, 

SBA also used the updated data to 

recalculate the appropriate common size 

standard for NAICS Subsector 484 and 

found it to be $19 million. Since SBA 

received no comments opposing its 

proposal to retain a common size 

standard for all industries in NAICS 

Subsector 484, the Agency is 

maintaining a common size standard for 

these industries. However, continuing 

its policy of not lowering any size 

standards under the current economic 

environment, SBA is adopting the 

current $25.5 million size standard for 

all industries in NAICS Subsector 484, 

including NAICS Code 484230. In other 

words, SBA has not adopted the 

commenter’s recommendation to 

increase the size standard for NAICS 

Code 484230 to $30 million. 

Additionally, the commenter 

suggested that fuel surcharges should be 

excluded from the calculation of 

receipts when determining if a company 

meets the size standard. SBA’s 


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definition of receipts states the 

following: ‘‘Receipts means ‘total 

income’ (or in the case of a sole 

proprietorship, ‘gross income’) plus 

‘cost of goods sold’ as these terms are 

defined and reported on Internal 

Revenue Service (IRS) tax return forms 

* * *.’’ 13 CFR 121.104. The definition 

of receipts provides for a limited 

number of specific exclusions, none of 

which relates to fuel surcharges or other 

fuel related costs. Fuel surcharges are 

part of the usual and customary costs of 

doing business. In addition, fuel 

surcharges that businesses collect are 

subject to taxation and therefore are part 

of a firm’s revenues. Further, SBA uses 

data from the Economic Census, and the 

revenue data that firms report under law 

to the Economic Census include those 

costs. Accordingly, SBA does not 

exclude fuel surcharges from the 

calculation of receipts for small 

business size determination purposes. 

SBA acknowledges that firms in the 

transportation industries may have 

substantial fuel surcharges or other fuel 

related costs, and, as such, the Agency 

may consider such costs as a secondary 

factor in addition to the primary 

industry and Federal procurement 

factors that SBA evaluates when 

establishing small business size 

standards. 

Another commenter felt that most of 

the revenues generated from the 

commenter’s firm’s contracts are passed 

through to its many subcontractors, 

which were tied to its costs and thus 

should not be included as part of its 

revenues. The commenter pointed out 

that on average the subcontractors are 

paid 82 percent of the total contract 

value, and including these passthroughs overstates the firm’s revenues. 

The commenter stated that the 

requirement to include subcontracting 

costs in revenues had an adverse impact 

on its business’ size determination 

because it caused its total revenues to 

exceed the size standard. The 

commenter suggested that costs of goods 

sold be removed from the definition of 

receipts and that actual profit be the 

determining factor on whether a firm 

qualifies as small. 

This is not a new suggestion, nor is it 

unique to transportation industries. As 

explained above, SBA’s definition of 

receipts states that ‘‘receipts means 

‘total income’ * * * plus ‘cost of goods 

sold’ * * *’’ and provides for a limited 

number of specific exclusions. 13 CFR 

121.104. None of the enumerated 

exclusions relates to subcontracting 

costs. 

Similar to fuel surcharges mentioned 

above, SBA does not allow for the 

exclusion of subcontracting costs 

(commonly known as ‘‘pass-throughs’’) 

from the calculation of revenues 

because they are part of the usual and 

customary costs of doing business. 

Additionally, SBA uses data from the 

U.S. Bureau of the Census’ 2007 

Economic Census, and the revenue data 

that firms report under law to the 

Economic Census include 

subcontracting and other costs of goods 

sold. If the Agency were to exclude the 

value of ‘‘pass-through’’ revenues, SBA 

would also have to establish a lower 

size standard to reflect the size of the 

industry without them. 

SBA has always included all 

revenues, including pass-throughs or 

subcontracting costs, for size standards 

purposes for several reasons. First, as 

stated above, the revenue data SBA 

receives from the Economic Census 

includes those costs. Second, this 

practice is consistent with the Small 

Business Act, which refers to SBA’s 

establishing size standards based on 

‘‘* * * annual average gross receipts of 

the business concern * * *’’ 

§ 3(a)(2)(C)(ii)(II) [emphasis added]. 

Third, SBA’s existing definitions of 

receipts and employees provide a 

consistent approach to establishing 

eligibility for small business programs 

for all industries. Fourth, if SBA were to 

exclude certain costs for one or a few 

industries, other industries could raise 

the same questions, creating a ‘‘slippery 

slope’’ leading toward widespread 

inconsistency in how businesses 

calculate their receipts to determine if 

they qualify as small. 

The third commenter supported the 

increase in the size standard for NAICS 

Code 485113 (Bus and Motor Vehicles 

Transit Systems) from $7.0 million in 

average annual receipts to $14.0 million 

in average annual receipts because the 

higher size standard better reflected 

current operations of the commenter’s 

business, where a large portion of small 

business set-aside contracts had to be 

subcontracted to other businesses. The 

commenter stated that subcontractors 

are paid on average 85 percent of the 

total contract value, while the 

commenter’s business receives the 

remaining 15 percent. 

SBA acknowledges that some 

industries may have substantially higher 

subcontracting costs than others. SBA 

considers subcontracting costs as a 

secondary factor, in addition to the 

primary industry and Federal 

procurement factors, when it reviews 

size standards for those industries. In 

other words, SBA may make further 

adjustments to small business size 

standards, if necessary, for industries for 

which subcontracting costs are 

substantially higher than for other 

industries. 

SBA notes that two of the three 

comments indicated that subcontracting 

costs accounted for more than 80 

percent of the total value of work in 

their industries. It is important to point 

out that SBA’s regulations on 

Government Contracting Programs 

provide that ‘‘[i]n order to be awarded 

a full or partial small business set-aside 

contract, an 8(a) contract, a WOSB or 

EDWOSB contract pursuant to part 127 

of this chapter, * * * a small business 

concern must agree that: (1) In the case 

of a contract for services (except 

construction), the concern will perform 

at least 50 percent of the cost of the 

contract incurred for personnel with its 

own employees. * * *’’ 13 CFR 125.6. 

A firm undertaking such contracts must 

comply with these ‘‘limitations on 

subcontracting,’’ even if it otherwise 

appears to meet the small business size 

standard for a particular procurement. It 

cannot qualify as small for award under 

any of the aforementioned programs if it 

subcontracts more than 50 percent of 

the contract. 

SBA received no comments opposing 

its proposal to retain the current size 

standards where analyses suggested 

lowering them. The Agency also 

received no comments opposing SBA’s 

proposal to retain the current standards 

where relevant data were not available. 

All comments to the proposed rule are 

available for public review at http:// 

www.regulations.gov. 

Conclusion 

Based on SBA’s analyses of relevant 

industry and program data and the 

public comments it received on the 

proposed rule, SBA has decided to 

increase the small business size 

standards for the 22 industries in NAICS 

Sector 48–49 to the levels it proposed. 

Those industries and their revised size 

standards are shown in the following 

Table 1, Summary of Revise Size 

Standards in NAICS Sector 48–49. 


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TABLE 1—SUMMARY OF REVISED SIZE STANDARDS IN NAICS SECTOR 48–49 

NAICS codes NAICS industry title 

Current size 

standard 

(millions) 

New size 

standard 

(millions) 

481219 ............................................. Other Nonscheduled Air Transportation ................................................... $7.0 $14.0 

485111 ............................................. Mixed Mode Transit Systems .................................................................... 7.0 14.0 

485112 ............................................. Commuter Rail Systems ........................................................................... 7.0 14.0 

485113 ............................................. Bus and Other Motor Vehicle Transit Systems ........................................ 7.0 14.0 

485119 ............................................. Other Urban Transit Systems ................................................................... 7.0 14.0 

485210 ............................................. Interurban and Rural Bus Transportation ................................................. 7.0 14.0 

485310 ............................................. Taxi Service ............................................................................................... 7.0 14.0 

485320 ............................................. Limousine Service ..................................................................................... 7.0 14.0 

485410 ............................................. School and Employee Bus Transportation ............................................... 7.0 14.0 

485510 ............................................. Charter Bus Industry ................................................................................. 7.0 14.0 

485991 ............................................. Special Needs Transportation ................................................................... 7.0 14.0 

485999 ............................................. All Other Transit and Ground Passenger Transportation ......................... 7.0 14.0 

486210 ............................................. Pipeline Transportation of Natural Gas ..................................................... 7.0 25.5 

488111 ............................................. Air Traffic Control ...................................................................................... 7.0 30.0 

488119 ............................................. Other Airport Operations ........................................................................... 7.0 30.0 

488190 ............................................. Other Support Activities for Air Transportation ......................................... 7.0 30.0 

488210 ............................................. Support Activities for Rail Transportation ................................................. 7.0 14.0 

488310 ............................................. Port and Harbor Operations ...................................................................... 25.5 35.5 

488320 ............................................. Marine Cargo Handling ............................................................................. 25.5 35.5 

488330 ............................................. Navigational Services to Shipping ............................................................ 7.0 35.5 

488390 ............................................. Other Support Activities for Water Transportation .................................... 7.0 35.5 

488510 ............................................. Freight Transportation Arrangement 10 ..................................................... 10 7.0 14.0 

For the reasons stated above in this 

rule and in the proposed rule, SBA has 

decided to retain the current receipts 

based size standards for 18 industries 

for which analytical results suggested 

lower size standards. Not lowering size 

standards in NAICS Sector 48–49 is 

consistent with SBA’s recent final rules 

on NAICS Sector 44–45, Retail Trade 

(75 FR 61597, October 6, 2010); NAICS 

Sector 72, Accommodation and Food 

Services (75 FR 61604, October 6, 2010); 

and NAICS Sector 81, Other Services 

(75 FR 61591, October 6, 2010). In each 

of those final rules, SBA adopted its 

proposal not to reduce small business 

size standards for the same reasons. 

SBA is also retaining the existing 

receipts based size standards for two 

industries for which the results 

supported them at their current levels. 

Accordingly, SBA has retained the 

existing receipts based size standards 

for all industries in NAICS Subsector 

484 (Truck Transportation), Subsector 

487 (Scenic and Sightseeing 

Transportation), Subsector 492 (Couriers 

and Messengers), and Subsector 493 

(Warehousing and Storage). 

SBA has also retained current receipts 

based size standards for Offshore 

Marine Air Transportation Services 

(exceptions to NAICS Code 481211 and 

NAICS Code 481212), Offshore Marine 

Water Transportation Services 

(exception to NAICS Subsector 483, 

Water Transportation), Non-Vessel 

Owning Common Carriers and 

Household Goods Forwarders 

(exception to NAICS Code 488510), and 

Postal Services (NAICS Code 491110). 

SBA did not review the 15 industries 

in NAICS Sector 48–49 that have 

employee based size standards. 

Therefore, SBA has retained the size 

standards for those industries at their 

current levels until the Agency reviews 

employee based size standards at a later 

date. 

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 final 

rule is a ‘‘significant’’ regulatory action 

for purposes of Executive Order 12866. 

Accordingly, the next section contains 

SBA’s Regulatory Impact Analysis. This 

is not a major rule, however, under the 

Congressional Review Act, 5 U.S.C. 800. 

Regulatory Impact Analysis: 

1. Is there a need for the regulatory 

action? 

SBA believes that the revised changes 

to small business size standards for 22 

industries in NAICS Sector 48–49, 

Transportation and Warehousing, reflect 

changes in economic characteristics of 

small businesses in those industries and 

the Federal procurement market. 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 effectively, SBA 

establishes distinct definitions to 

determine 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 definitions for small 

business. The Act also requires that 

small business definitions vary to reflect 

industry differences. The Jobs Act 

requires the Administrator to review 

one-third of all size standards within 

each 18-month period from the date of 

its enactment and to review all size 

standards at least every five years 

thereafter. The supplementary 

information section of the May 13, 2011 

proposed rule and this rule explained in 

detail 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 as a result of this rule is gaining 

eligibility for Federal small business 

assistance programs, including SBA’s 

financial assistance programs, economic 

injury disaster loans, and Federal 

procurement opportunities intended for 

small businesses. Federal small business 

programs provide targeted opportunities 

for small businesses under SBA’s 

various business development and 

contracting programs. These include the 

8(a) Business Development program and 

programs benefiting small businesses 

located in Historically Underutilized 

Business Zones (HUBZone), women 

owned small businesses (WOSB), and 

service-disabled veteran-owned small 

businesses (SDVOSB). Other Federal 

agencies also may use SBA’s size 


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standards for a variety of regulatory and 

program purposes. These programs help 

small businesses become more 

knowledgeable, stable, and competitive. 

In the 22 industries in NAICS Sector 

48–49 for which SBA has decided to 

increase size standards, SBA estimates 

that about 1,200 additional firms will 

gain small business status and become 

eligible for these programs. That number 

is 0.7 percent of the total number of 

firms in industries in NAICS Sector 48– 

49 that have receipts based size 

standards. SBA estimates that this 

would increase the small business share 

of total industry receipts in those 

industries from 36 percent under the 

current size standards to 39 percent. 

The benefits of increasing size 

standards to a more appropriate level 

will accrue to three groups in the 

following ways: (1) Some businesses 

that are above the current size standards 

will 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 a larger pool of small businesses 

from which to draw for their small 

business procurement programs. 

Based on the data for fiscal years 2007 

to 2009, more than two-thirds of total 

Federal contracting dollars spent in 

industries reviewed in this proposed 

rule were accounted for by the 22 

industries for which SBA is increasing 

size standards. SBA estimates that 

additional firms gaining small business 

status in those industries under the 

revised size standards could potentially 

obtain Federal contracts totaling up to 

$25 million per year through the 8(a), 

HUBZone, WOSB, and SDVOSB 

programs and through other, 

unrestricted procurements. The added 

competition for many of these 

procurements may also result in lower 

prices to the Government for 

procurements reserved for small 

businesses, although SBA cannot 

quantify this benefit. 

Under SBA’s 7(a) Business Loan and 

504 Programs, based on the 2008 to 

2010 data, SBA estimates that 

approximately 10 additional loans 

totaling $4 million to $5 million in new 

Federal loan guarantees could be made 

to the newly defined small businesses 

under the revised size standards. Under 

the Jobs Act, SBA can now guarantee 

substantially larger loans than in the 

past. In addition, the Jobs Act 

established an alternative size standard 

for SBA’s 7(a) and 504 Loan Programs 

for those applicants that do not meet the 

size standards for their industries. That 

is, under the Jobs Act, if a firm applies 

for a 7(a) or 504 loan but does not meet 

the size standard for its industry, it 

might still qualify if, including its 

affiliates, it has a tangible net worth that 

does not exceed $15 million and also 

has an average net income after Federal 

income taxes (excluding any carry-over 

losses) for its preceding two completed 

fiscal years that does not exceed $5.0 

million. Thus, increasing the size 

standards may result in an increase in 

small business guaranteed loans to 

small businesses in these industries, but 

it would be impractical to try to 

estimate the extent of their number and 

the total amount loaned. 

Newly defined small businesses will 

also benefit from SBA’s Economic Injury 

Disaster Loan Program. Since this 

program is contingent on the occurrence 

and severity of a disaster, SBA cannot 

make a meaningful estimate of benefits 

for future disasters. 

To the extent that all 1,200 newly 

defined small firms under the revised 

size standards could become active in 

Federal procurement programs, this may 

entail some additional administrative 

costs to the Federal Government 

associated with additional bidders for 

Federal small business procurement 

opportunities, additional firms seeking 

SBA guaranteed lending programs, 

additional firms eligible for enrollment 

in the Central Contractor Registration’s 

Dynamic Small Business Search 

database and additional firms seeking 

certification as 8(a) or HUBZone firms 

or those qualifying for small business, 

WOSB, SDVOSB, and SDB status. 

Among businesses in this group seeking 

SBA assistance, there could be some 

additional costs associated with 

compliance and verification of small 

business status and protests of small 

business status. These added costs are 

likely to be minimal because 

mechanisms are already in place to 

handle these administrative 

requirements. 

The costs to the Federal Government 

may be higher on some Federal 

contracts under the higher revised size 

standards. 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 set-aside contracting will 

likely 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 additional full and 

open contracts are awarded to HUBZone 

businesses because of a price evaluation 

preference. The additional costs 

associated with fewer bidders, however, 

will likely be minor since, as a matter 

of law, procurements may be set aside 

for small businesses or reserved for the 

8(a), HUBZone, WOSB, or SDVOSB 

Programs only if awards are expected to 

be made at fair and reasonable prices. 

The revised size standards may have 

some distributional effects among large 

and small businesses. Although SBA 

cannot estimate with certainty the 

actual outcome of gains and losses 

among small and large businesses, there 

are several likely impacts. There may be 

a transfer of some Federal contracts 

from large businesses to small 

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 agencies 

may award more Federal contracts to 

HUBZone concerns instead of large 

businesses since HUBZone concerns 

may be eligible for price evaluation 

adjustments when they compete on full 

and open bidding opportunities. 

Similarly, currently defined small 

businesses may obtain fewer Federal 

contracts due to the increased 

competition from more businesses 

defined as small under the revised size 

standards. This transfer may be offset by 

more 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 small businesses 

under the existing size standards. The 

SBA cannot estimate with precision the 

potential distributional impacts of these 

transfers. 

The revisions to the existing size 

standards for Transportation and 

Warehousing industries 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. 


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10948 Federal Register / Vol. 77, No. 37 / Friday, February 24, 2012 / Rules and Regulations 

Executive Order 13563 

A description of the need for this 

regulatory action and benefits and costs 

associated with this action including 

possible distributions impacts that 

relate to Executive Order 13563 is 

included above in the Regulatory Impact 

Analysis under Executive Order 12866. 

In an effort to engage interested 

parties in this action, SBA has presented 

its methodology (discussed above under 

SUPPLEMENTARY INFORMATION) to various 

industry associations and trade groups. 

SBA also met with various industry 

groups to obtain their feedback on its 

methodology and other size standards 

issues. SBA also presented its size 

standards methodology to businesses in 

13 cities in the U.S. and sought their 

input as part of the 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 review. 

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 48–49, Transportation 

and Warehousing, is consistent with EO 

13563 § 6 calling for retrospective 

analyses of existing rules. The last 

overall review of size standards 

occurred during the late 1970s and early 

1980s. Since then, except for periodic 

adjustments for monetary based size 

standards, most reviews of size 

standards 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 all size 

standards to ensure that existing size 

standards have supportable bases and to 

revise them when necessary. In 

addition, the Jobs Act directs SBA to 

conduct a detailed review of all size 

standards and to make appropriate 

adjustments to reflect market 

conditions. Specifically, the Jobs Act 

requires SBA to conduct a detailed 

review of at least one-third of all size 

standards during every 18-month period 

from the date of its enactment and do a 

complete review of all size standards 

not less frequently than once every 5 

years thereafter. 

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 purposes of Executive Order 

13132, SBA has determined that this 

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 rule has 

no federalism implications warranting 

preparation of a federalism assessment. 

Paperwork Reduction Act 

For the purpose of the Paperwork 

Reduction Act, 44 U.S.C. Ch. 35, SBA 

has determined that this rule would not 

impose any new reporting or record 

keeping requirements. 

Final Regulatory Flexibility Analysis 

Under the Regulatory Flexibility Act 

(RFA), this rule may have a significant 

impact on a substantial number of small 

entities in NAICS Sector 48–49, 

Transportation and Warehousing. As 

described above, this rule may affect 

small entities seeking Federal contracts, 

SBA’s 7(a) and 504 Guaranteed Loans, 

SBA’s Economic Injury Disaster Loans, 

and various small business benefits 

under other Federal programs. 

Immediately below, SBA sets forth a 

final regulatory flexibility analysis of 

this final 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 entities to which the rule will 

apply? (3) What are the projected 

reporting, record keeping, and other 

compliance requirements of the rule? (4) 

What are the relevant Federal rules 

which may duplicate, overlap, or 

conflict with the rule? and (5) What 

alternatives will allow the Agency to 

accomplish its regulatory objectives 

while minimizing the impact on small 

entities? 

(1) What are the need for and 

objective of the rule? 

Most of SBA’s size standards for the 

Transportation and Warehousing 

industries had not been reviewed since 

the 1980s. Technological changes, 

productivity growth, international 

competition, mergers and acquisitions 

and updated industry definitions may 

have changed the structure of many 

industries in that Sector. Such changes 

can be sufficient to support a revision to 

size standards for some industries. 

Based on the analysis of the latest 

industry and program data available, 

SBA believes that the revised standards 

in this rule more appropriately reflect 

the size of businesses in those industries 

that need Federal assistance. 

Additionally, the Jobs Act requires SBA 

to review all size standards and make 

appropriate adjustments to reflect 

current data and market conditions. 

(2) What are SBA’s description and 

estimate of the number of small entities 

to which the rule will apply? 

SBA estimates that approximately 

1,200 additional firms will become 

small because of increases in size 

standards in 22 industries in NAICS 

Sector 48–49. That represents 0.7 

percent of total firms in industries in 

that Sector that have receipts based size 

standards. This will result in an 

increase in the small business share of 

total industry receipts in those 

industries from about 36 percent under 

the current size standards to nearly 39 

percent under the proposed standards. 

SBA does not anticipate a significant 

competitive impact on smaller 

businesses in these industries. The 

revised size standards will enable more 

small businesses to retain their small 

business status for a longer period. 

Under current size standards, many 

small businesses may have lost their 

eligibility or found it difficult to 

compete with companies that are 

significantly larger than they are, and 

this final rule attempts to correct that 

impact. SBA believes these changes will 

have a positive impact for existing small 

businesses and for those that have either 

exceeded or are about to exceed current 

size standards. 

(3) What are the projected reporting, 

record keeping, and other compliance 

requirements of the rule and an estimate 

of the classes of small entities which 

will be subject to the requirements? 

Revising size standards does not 

impose any additional reporting or 

record keeping requirements on small 

entities. However, qualifying for Federal 

procurement and a number of other 

Federal programs requires that entities 

register in the Central Contractor 

Registration (CCR) database and certify 


rmajette on DSK2TPTVN1PROD with RULES
Federal Register / Vol. 77, No. 37 / Friday, February 24, 2012 / Rules and Regulations 10949 

at least annually that they are small in 

the Online Representations and 

Certifications Application (ORCA). 

Therefore, businesses opting to 

participate in those programs must 

comply with CCR and ORCA 

requirements. There are no costs 

associated with either CCR registration 

or ORCA certification. Revising size 

standards alters the access to SBA 

programs that are designed to 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. 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 or revising 

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 

existing system of numerical size 

standards. The possible alternative size 

standards considered for the individual 

NAICS Code industries within NAICS 

Sector 48–49 are discussed in the 

supplementary information to the 

proposed rule and this final rule. 

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 reasons set forth in the preamble, 

SBA amends 13 CFR part 121 as 

follows: 

PART 121—SMALL BUSINESS SIZE 

REGULATIONS 

■ 1. The authority citation for part 121 

continues to read as follows: 

Authority: 15 U.S.C. 632, 634(b)(6), 636(b), 

662, 694a(9). 

■ 2. In § 121.201, in the table, revise the 

entries for ‘‘481219’’, ‘‘485111’’, 

‘‘485112’’, ‘‘485113’’, ‘‘485119’’, 

‘‘485210’’, ‘‘485310’’, ‘‘485320’’, 

‘‘485410’’, ‘‘485510’’, ‘‘485991’’, 

‘‘485999’’, ‘‘486210’’, ‘‘488111’’, 

‘‘488119’’, ‘‘488190’’, ‘‘488210’’, 

‘‘488310’’, ‘‘488320’’, ‘‘488330’’, 

‘‘488390’’, and ‘‘488510’’ to read as 

follows: 

§ 121.201 What size standards has SBA 

identified by North American Industry 

Classification System codes? 

* * * * * 

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 

*******

Sector 48–49—Transportation and Warehousing 

* * * * * * * 

481219 ............... Other Nonscheduled Air Transportation ......................................................................... $14.0 ............................

* * * * * * * 

485111 ............... Mixed Mode Transit Systems ......................................................................................... 14.0 ............................

485112 ............... Commuter Rail Systems ................................................................................................. 14.0 ............................

485113 ............... Bus and Other Motor Vehicle Transit Systems .............................................................. 14.0 ............................

485119 ............... Other Urban Transit Systems ......................................................................................... 14.0 ............................

485210 ............... Interurban and Rural Bus Transportation ....................................................................... 14.0 ............................

485310 ............... Taxi Service .................................................................................................................... 14.0 ............................

485320 ............... Limousine Service ........................................................................................................... 14.0 ............................

485410 ............... School and Employee Bus Transportation ..................................................................... 14.0 ............................

485510 ............... Charter Bus Industry ....................................................................................................... 14.0 ............................

485991 ............... Special Needs Transportation ......................................................................................... 14.0 ............................

485999 ............... All Other Transit and Ground Passenger Transportation ............................................... 14.0 ............................

* * * * * * * 

486210 ............... Pipeline Transportation of Natural Gas .......................................................................... 25.5 ............................

* * * * * * * 

488111 ............... Air Traffic Control ............................................................................................................ 30.0 ............................

488119 ............... Other Airport Operations ................................................................................................. 30.0 ............................

488190 ............... Other Support Activities for Air Transportation ............................................................... 30.0 ............................

488210 ............... Support Activities for Rail Transportation ....................................................................... 14.0 ............................

488310 ............... Port and Harbor Operations ............................................................................................ 35.5 ............................

488320 ............... Marine Cargo Handling ................................................................................................... 35.5 ............................

488330 ............... Navigational Services to Shipping .................................................................................. 35.5 ............................

488390 ............... Other Support Activities for Water Transportation .......................................................... 35.5 ............................


rmajette on DSK2TPTVN1PROD with RULES
10950 Federal Register / Vol. 77, No. 37 / Friday, February 24, 2012 / Rules and Regulations 

SMALL BUSINESS SIZE STANDARDS BY NAICS INDUSTRY—Continued 

NAICS 

codes NAICS U.S. industry title Size standards in millions of dollars 

Size standards in 

number of 

employees 

*******

488510 ............... Freight Transportation Arrangement 10 ........................................................................... 10 14.0 ............................

* * * * * * * 

Footnotes 

* * * * * 

10. NAICS codes 488510 (part) 

531210, 541810, 561510, 561520, and 

561920—As measured by total revenues, 

but excluding funds received in trust for 

an unaffiliated third party, such as 

bookings or sales subject to 

commissions. The commissions 

received are included as revenues. 

* * * * * 

Dated: December 21, 2011. 

Karen G. Mills, 

Administrator. 

[FR Doc. 2012–4330 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–2006–25738; Directorate 

Identifier 2006–NE–27–AD; Amendment 39– 

16961; AD 2012–04–05] 

RIN 2120–AA64 

Airworthiness Directives; General 

Electric Company (GE) Turbofan 

Engines 

AGENCY: Federal Aviation 

Administration (FAA), DOT. 

ACTION: Final rule. 

SUMMARY: We are superseding an 

existing airworthiness directive (AD) for 

all GE CF6–80C2B series turbofan 

engines. That AD currently requires 

installing software version 8.2.Q1 to the 

engine electronic control unit (ECU), 

which increases the engine’s margin to 

flameout. This new AD requires the 

removal of the affected ECUs from 

service. This AD was prompted by two 

reports of engine flameout events during 

flight in inclement weather conditions, 

eight reports of engine in-flight 

shutdown (IFSD) events caused by dualchannel central processing unit (CPU) 

faults in the ECU, and four reports of 

engine flameout ground events. We are 

issuing this AD to prevent engine 

flameout or un-commanded engine IFSD 

of one or more engines, leading to an 

emergency or forced landing of the 

airplane. 

DATES: This AD is effective March 30, 

2012. 

ADDRESSES: 

Examining the AD Docket 

You may examine the AD docket on 

the Internet at http:// 

www.regulations.gov; or in person at the 

Docket Management Facility between 

9 a.m. and 5 p.m., Monday through 

Friday, except Federal holidays. The AD 

docket contains this AD, the regulatory 

evaluation, any comments received, and 

other information. The address for the 

Docket Office (phone: 800–647–5527) is 

Document Management Facility, U.S. 

Department of Transportation, Docket 

Operations, M–30, West Building 

Ground Floor, Room W12–140, 1200 

New Jersey Avenue SE., Washington, 

DC 20590. 

FOR FURTHER INFORMATION CONTACT: 

Tomasz Rakowski, Aerospace Engineer, 

Engine Certification Office, FAA, Engine 

& Propeller Directorate, 12 New England 

Executive Park, Burlington, MA 01803; 

phone: 781–238–7735; fax: 781–238– 

7199; email: tomasz.rakowski@faa.gov. 

SUPPLEMENTARY INFORMATION: 

Discussion 

We issued a notice of proposed 

rulemaking (NPRM) to amend 14 CFR 

part 39 to supersede AD 2007–12–07, 

Amendment 39–15085 (72 FR 31174, 

June 6, 2007). That AD applies to the 

specified products. The NPRM was 

published in the Federal Register on 

November 14, 2011 (76 FR 70382). That 

NPRM proposed to remove the affected 

ECUs from service. 

Comments 

We gave the public the opportunity to 

participate in developing this AD. The 

following presents the comments 

received on the proposal and the FAA’s 

response to each comment. 

Request To Change Unsafe Condition 

Commenter GE stated that in all of the 

events of flameout the engines relit and 

in all dual-channel CPU fault in-flight 

shutdowns the engines were capable of 

restarting. GE stated that these events 

should not be considered unsafe 

conditions. 

We do not agree. Although a flameout 

with a consecutive relight or an in-flight 

shutdown with a consecutive restart 

during cruise flight is not in itself an 

unsafe condition, these types of loss of 

thrust can be unsafe conditions during 

takeoff or during approach and landing. 

We did not change the AD. 

Request To Clarify Engine Flight Cycle 

and ECU Cycle Count 

Commenter All Nippon Airways 

(ANA) requested that we clarify the 

relationship between the engine flight 

cycles and ECU cycles of operation in 

the engine, and whether previous ECU 

history affects the flight cycle count. 

We do not agree. The flight cycle 

intervals in paragraph (g) of the AD refer 

to the engine start-stop cycles with the 

affected ECU part numbers (P/Ns) 

installed, rather than ECU operational 

cycles. Engine flight cycles accrued 

before the effective date of the AD are 

not accounted for in the cycle count. We 

did not change the AD. 

Request To Remove Certain Affected 

ECU P/Ns From the AD 

Commenters Atlas Air, ANA, KLM, 

and China Airlines requested that we 

remove from the list of affected ECU 

P/Ns in Table 2 of the AD, ECUs with 

software version 8.2.Q1 and 8.2.R, a 

new front panel assembly (FPA) and an 

old pressure subsystem (PSS), or an old 

FPA and a new PSS generation circuit 

boards. 

We do not agree. Dual-channel CPU 

faults have not been ruled out for the 

new FPA or the new PSS, therefore any 

ECU with either a new FPA or a new 

PSS must be addressed regardless of the 

version of software installed. We did not 

change the AD. 

Request To Add ECU P/Ns to the AD 

Commenter Atlas Air stated that ECUs 

P/Ns 1471M63P41, 1519M89P31, and 

1820M33P14 are not listed in the 

proposed AD, but should be listed. 

We do not agree. Those ECUs have the 

old generation of FPA and PSS circuit 


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