[Federal Register Volume 87, Number 80 (Tuesday, April 26, 2022)]
[Proposed Rules]
[Pages 24752-24833]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2022-08091]



[[Page 24751]]

Vol. 87

Tuesday,

No. 80

April 26, 2022

Part III





Small Business Administration





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13 CFR Part 121





Small Business Size Standards: Manufacturing and Industries With 
Employee-Based Size Standards in Other Sectors Except Wholesale Trade 
and Retail Trade; Proposed Rule

Federal Register / Vol. 87 , No. 80 / Tuesday, April 26, 2022 / 
Proposed Rules

[[Page 24752]]


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SMALL BUSINESS ADMINISTRATION

13 CFR Part 121

RIN 3245-AH09


Small Business Size Standards: Manufacturing and Industries With 
Employee-Based Size Standards in Other Sectors Except Wholesale Trade 
and Retail Trade

AGENCY: U.S. Small Business Administration.

ACTION: Proposed rule.

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SUMMARY: The U.S. Small Business Administration (SBA or the Agency) has 
reviewed its employee-based small business size definitions (commonly 
referred to as ``size standards'') for North American Industry 
Classification System (NAICS) sectors related to Mining, Quarrying, and 
Oil and Gas Extraction (Sector 21); Utilities (Sector 22); 
Manufacturing (Sector 31-33); Transportation and Warehousing (Sector 
48-49); Information (Section 51); Finance and Insurance (Sector 52); 
Professional, Scientific and Technical Services (Sector 54); and 
Administrative and Support, Waste Management and Remediation Services 
(Sector 56) and proposes several changes. Specifically, SBA proposes to 
increase 150 and retain 282 employee-based size standards in those 
sectors. SBA also proposes to retain the current 500-employee size 
standard for Federal procurement of supplies under the nonmanufacturer 
rule. SBA's proposed revisions relied on its ``Size Standards 
Methodology'' (Methodology). SBA seeks comments on its proposed changes 
to size standards in the above sectors and the data sources it 
evaluated to develop the proposed size standards.

DATES: SBA must receive comments to this proposed rule on or before 
June 27, 2022.

ADDRESSES: Identify your comments by RIN 3245-AH09 and submit them by 
one of the following methods: (1) Federal eRulemaking Portal: 
www.regulations.gov. Follow the instructions for submitting comments; 
or (2) Mail/Hand Delivery/Courier: Khem R. Sharma, Ph.D., Chief, Office 
of Size Standards, 409 Third Street SW, Mail Code 6530, Washington, DC 
20416.
    SBA will post all comments to this proposed rule 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, Office of Size Standards, 409 Third 
Street SW, Mail Code 6530, Washington, DC 20416, or send an email to 
<a href="/cdn-cgi/l/email-protection#a2d1cbd8c7d1d6c3ccc6c3d0c6d1e2d1c0c38cc5cdd4"><span class="__cf_email__" data-cfemail="790a10031c0a0d18171d180b1d0a390a1b18571e160f">[email protected]</span></a>. Highlight the information that you consider to 
be CBI and explain why you believe SBA should hold this information as 
confidential. SBA will review your information and determine whether it 
will make the information public.

FOR FURTHER INFORMATION CONTACT: Samuel Castilla, Economist, Office of 
Size Standards, (202) 205-6618 or <a href="/cdn-cgi/l/email-protection#06756f7c637572676862677462754675646728616970"><span class="__cf_email__" data-cfemail="87f4eefde2f4f3e6e9e3e6f5e3f4c7f4e5e6a9e0e8f1">[email protected]</span></a>.

SUPPLEMENTARY INFORMATION:

Discussion of Size Standards

    To determine eligibility for Federal small business assistance, SBA 
establishes small business size definitions (usually referred to as 
``size standards'') for private sector industries in the United States. 
SBA uses two primary measures of business size for size standards 
purposes: Average annual receipts and average number of employees. SBA 
uses financial assets for certain financial industries and refining 
capacity, in addition to employees, for the petroleum refining industry 
to measure business size. In addition, SBA's Small Business Investment 
Company (SBIC), Certified Development Company (CDC/504), and 7(a) Loan 
Programs use either the industry-based size standards or tangible net 
worth and net income-based alternative size standards to determine 
eligibility for those programs.
    In September 2010, Congress passed the Small Business Jobs Act of 
2010 (Pub. L. 111-240, 124 Stat. 2504, September 27, 2010) (``Jobs 
Act''), requiring SBA to review all size standards every five years and 
make necessary adjustments to reflect current industry and market 
conditions. In accordance with the Jobs Act, in early 2016, SBA 
completed the first five-year review of all size standards--except 
those for agricultural enterprises for which size standards were 
previously set by Congress--and made appropriate adjustments to size 
standards for a number of industries to reflect current industry and 
Federal market conditions.
    During the first five-year comprehensive size standards review, SBA 
reviewed the employee-based size standards for 25 industries within 
NAICS Sector 21 (Mining, Quarrying, and Oil and Gas Extraction), 364 
industries within NAICS Sector 31-33 (Manufacturing), 15 industries 
within Sector 48-49 (Transportation and Warehousing), 12 industries 
within NAICS Sector 51 (Information), 2 industries and 4 subindustries 
(or ``exceptions'') within NAICS Sector 54 (Professional, Scientific 
and Technical Services), and 4 industries or subindustries 
(``exceptions'') with employee-based size standards in other sectors 
covered by this proposed rule. These reviews of employee-based size 
standards occurred during September 2014 to January 2016. Based on 
analyses of the relevant industry and Federal contracting data 
available at that time, SBA increased 15 and decreased 3 employee-based 
size standards in Sector 21, increased 4 in Sector 48-49, 8 in Sector 
51, 3 in Sector 54, and 2 in other sectors (81 FR 4435 (January 26, 
2016)). SBA also increased 209 size standards in Sector 31-33 (81 FR 
4469 (January 26, 2016)). Table 1, Size Standards Revisions During the 
First 5-Year Review, provides a summary of these revisions by NAICS 
sector.

                        Table 1--Size Standards Revisions During the First 5-Year Review
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                                           Number of size    Number of size    Number of size    Number of size
        Sector            Sector name         standards         standards         standards         standards
                                              reviewed          increased         decreased        maintained
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21...................  Mining,                          25                15                 3                 7
                        Quarrying, and
                        Oil and Gas
                        Extraction.
31-33................  Manufacturing....               364               209                 0               155
48-49................  Transportation                   15                 4                 0                11
                        and Warehousing.
51...................  Information......                12                 8                 0                 4
54...................  Professional,                     6                 5                 0                 1
                        Scientific and
                        Technical
                        Services.

[[Page 24753]]

 
Others...............  Agriculture,                      4                 2                 0                 2
                        Forestry,
                        Fishing and
                        Hunting (Sector
                        11); Utilities
                        (Sector 22);
                        Finance and
                        Insurance
                        (Sector 52);
                        Administrative
                        and Support,
                        Waste Management
                        and Remediation
                        Services (Sector
                        56).
                                         -----------------------------------------------------------------------
    Total............  .................               426               243                 3               180
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    Currently, there are 27 different size standards levels covering 
1,023 NAICS industries and 14 subindustry activities (commonly known as 
``exceptions'' in SBA's Table of Size Standards). Of these 27 size 
levels, 16 are based on average annual receipts, 9 are based on average 
number of employees, and 2 are based on other measures.
    SBA also adjusts its monetary-based size standards for inflation at 
least once every 5 years. An interim final rule on SBA's latest 
inflation adjustment to size standards, effective August 19, 2019, was 
published in the Federal Register on July 18, 2019 (84 FR 34261). SBA 
also updates its size standards every five years to adopt the Office of 
Management and Budget's (OMB) latest NAICS revisions to its Table of 
Size Standards. Effective October 1, 2017, SBA adopted OMB's 2017 NAICS 
revisions to its size standards (82 FR 44886, September 27, 2017).\1\
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    \1\ On December 21, 2021, OMB published its ``Notice of NAICS 
2022 Final Decisions . . .'' (86 FR 72277), accepting the Economic 
Classification Policy Committee (ECPC) recommendations, as outlined 
in the July 2, 2021, Federal Register notice (86 FR 35350), for the 
2022 revisions to the North American Industry Classification System 
(NAICS), . . . .'' In the near future, SBA will issue a proposed 
rule to adopt the OMB NAICS 2022 revisions for its table of size 
standards. SBA anticipates updating its size standards with the 
NAICS 2022 revisions, effective October 1, 2022.
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    This proposed rule is the last of a series of proposed rules that 
is reviewing size standards of industries grouped by various NAICS 
sectors. Rather than review all size standards at one time, SBA 
reviewed size standards by grouping industries within various NAICS 
sectors that use the same size measure (i.e., employees or receipts). 
In the current review, SBA reviewed size standards in six groups of 
NAICS sectors. (In the prior review, SBA reviewed size standards mostly 
on a sector-by-sector basis.) Once SBA completed its review of size 
standards for a group of sectors, it issued for public comments a 
proposed rule to revise size standards for those industries based on 
the latest available data and other factors deemed relevant by the SBA 
Administrator.
    Below is a discussion of SBA's ``Size Standards Methodology'' 
(Methodology), issued on April 11, 2019, and available at www.sba.gov/size, for establishing, reviewing, or modifying employee-based size 
standards that SBA has applied to this proposed rule. SBA examines the 
structural characteristics of an industry as a basis to assess industry 
differences and the overall degree of competitiveness of an industry 
and of firms within the industry. Industry structure is typically 
examined by analyzing four primary factors--average firm size, degree 
of competition within an industry, start-up costs and entry barriers, 
and distribution of firms by size. To assess the ability of small 
businesses to compete for Federal contracting opportunities under the 
current size standards, as the fifth primary factor, SBA also examines, 
for each industry averaging $20 million or more in average annual 
Federal contract dollars, the small business share in Federal contract 
dollars relative to the small business share in total industry's 
receipts. When necessary, SBA also considers other secondary factors 
that are relevant to the industries and the interests of small 
businesses, including impacts of size standards changes on small 
businesses.

Size Standards Methodology

    SBA has revised its Methodology for establishing, reviewing, or 
modifying size standards on April 11, 2019 (84 FR 14587). The 
Methodology is available on SBA's size standards web page at 
www.sba.gov/size. Prior to finalizing the revised Methodology, SBA 
issued a notification in the April 27, 2018, edition of the Federal 
Register (83 FR 18468) to solicit comments from the public and notify 
stakeholders of the proposed changes to the Methodology. SBA considered 
all public comments in finalizing the Methodology. For a summary of 
comments and SBA's responses, refer to the SBA's April 11, 2019, 
Federal Register notification cited above.
    The Methodology represents a major change from the previous 
Methodology issued on October 21, 2009 (74 FR 53940). Specifically, SBA 
is replacing the ``anchor'' approach applied in the previous 
methodology with a ``percentile'' approach for evaluating differences 
in characteristics among various industries. Under the ``anchor'' 
approach, SBA generally evaluated the characteristics of individual 
industries relative to the average characteristics of industries with 
the anchor size standard to determine whether they should have a higher 
or a lower size standard than the anchor. In the ``percentile'' 
approach used in 2019's methodology, SBA ranks industries with the same 
measure of size standards (such as receipts or employees) in terms of 
four primary industry factors, discussed in the Industry Analysis 
subsection below. The ``percentile'' approach is explained more fully 
elsewhere in this proposed rule. For a more detailed explanation, 
please see the revised Methodology at www.sba.gov/size.
    Additionally, as the fifth factor, SBA evaluates the difference 
between the small business share in Federal contract dollars and the 
small business share in total industry's receipts to compute the size 
standard for the Federal contracting factor. The overall size standard 
for an industry is then obtained by averaging all size standards 
supported by each primary factor. The evaluation of the Federal 
contracting factor is explained more fully in the Industry Analysis 
section, below, in this proposed rule.
    SBA does not apply all aspects of its Methodology to all proposed 
rules because not all features are relevant for every industry covered 
by each proposed rule. For example, since all industries covered by 
this proposed rule have employee-based size standards, the methodology 
described in this proposed rule applies only to establishing, 
reviewing, or modifying employee-based size standards.

Industry Analysis

    Congress granted the SBA Administrator discretion to establish

[[Page 24754]]

detailed small business size standards. 15 U.S.C. 632(a)(2). 
Specifically, section 3(a)(3) of the Small Business Act (15 U.S.C. 
632(a)(3)) 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.'' Accordingly, the economic structure of an industry is 
the basis for establishing, reviewing, or modifying small business size 
standards. In addition, SBA considers current economic conditions, its 
mission and program objectives, the Administration's current policies, 
impacts on small businesses under current size and proposed or revised 
size standards, 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.
    The goal of SBA's size standards review is to determine whether its 
existing small business size standards reflect the current industry 
structure and Federal market conditions and revise them when the latest 
available data suggests that revisions are warranted. In the past, SBA 
compared the characteristics of each industry with the average 
characteristics of a group of industries associated with the ``anchor'' 
size standard. For example, in the first five-year comprehensive review 
of size standards under the Jobs Act, $7 million (now $8.0 million due 
to the inflation adjustment in 2019; see 84 FR 34261 (July 18, 2019)) 
was considered the ``anchor'' for receipts-based size standards and 500 
employees was the ``anchor'' for employee-based size standards. If the 
characteristics of a specific industry under review were similar to the 
average characteristics of industries in the anchor group, SBA 
generally adopted the anchor size standard for that industry. If the 
specific industry's characteristics were significantly different from 
those in the anchor group, SBA assigned a size standard that was higher 
or lower than the anchor. To determine a size standard above or below 
the anchor size standard, SBA evaluated the characteristics of a second 
comparison group of industries with higher size standards. For 
industries with receipts-based standards, the second comparison group 
consisted of industries with size standards between $23 million and 
$35.5 million, with the weighted average size standard for the group 
equaling $29 million. For manufacturing and other industries with 
employee-based size standards (except for Wholesale Trade and Retail 
Trade), the second comparison group included industries with a size 
standard of 1,000 employees or 1,500 employees, with the weighted 
average size standard of 1,323 employees. Using the anchor size 
standard and average size standard for the second comparison group, SBA 
computed a size standard for an industry's characteristic (factor) 
based on the industry's position for that factor relative to the 
average values of the same factor for industries in the anchor and 
second comparison groups.
    Under the ``percentile'' approach, for each industry factor, an 
industry is ranked and compared with the 20th percentile and 80th 
percentile values of that factor among the industries sharing the same 
measure of size standards (i.e., receipts or employees). Combining that 
result with the 20th percentile and 80th percentile values of size 
standards among the industries with the same measure of size standards, 
SBA computes a size standard supported by each industry factor for each 
industry. In the previous methodology, comparison industry groups were 
predetermined independent of the data, while in the revised Methodology 
they are established using the actual industry data from the Economic 
Census tabulation.
    The primary factors that SBA evaluates to examine industry 
structure include average firm size, startup costs and entry barriers, 
industry competition, and distribution of firms by size. SBA also 
evaluates, as an additional primary factor, small business success in 
receiving Federal contracts under the current size standards. 
Specifically, for the Federal contracting factor, SBA examines the 
small business share of Federal contract dollars relative to small 
business share of total receipts within an industry. These are, 
generally, five important factors (listed below) that SBA examines when 
establishing, reviewing, or revising a size standard for an industry. 
However, SBA will also consider and evaluate other secondary factors 
that it believes are relevant to a particular industry (such as 
technological changes, growth trends, SBA financial assistance, and 
other program factors). SBA also considers possible impacts of size 
standard revisions on eligibility for Federal small business assistance 
(including access to small business set-aside contracts and SBA's 
financial assistance), current economic conditions, the 
Administration's policies, and suggestions from industry groups and 
Federal agencies. Public comments on proposed rules also provide 
important additional information. SBA thoroughly reviews all public 
comments before making a final decision on its proposed revisions to 
size standards. Below are brief descriptions of each of the five 
primary factors that SBA has evaluated for each industry being reviewed 
in this proposed rule. A more detailed description of this analysis is 
provided in the SBA's Methodology, available at www.sba.gov/size.
1. Average Firm Size
    SBA computes two measures of average firm size: Simple average and 
weighted average. For industries with employee-based size standards, 
the simple average is the total employees of the industry divided by 
the total number of firms in the industry. The weighted average firm 
size is the summation of all the employees of the firms in an industry 
multiplied by their share of employees in the industry. 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. The size standard supported by average firm 
size is obtained by averaging size standards supported by simple 
average firm size and weighted average firm size.
    If the average firm size of an industry is higher than the average 
firm size for most other industries, this would generally support a 
size standard higher than the size standards for other industries. 
Conversely, if the industry's average firm size is lower than that of 
most other industries, it would provide a basis to assign a lower size 
standard as compared to size standards for most other industries.
2. Startup Costs and Entry Barriers
    Startup costs reflect a firm's initial size in an industry. New 
entrants to an industry must have sufficient capital and other assets 
to start and maintain a viable business. If firms entering an industry 
under review have greater capital requirements than firms in most other 
industries, all other factors remaining the same, this would be a basis 
for a higher size standard. Conversely, if the industry has smaller 
capital needs compared to most other industries, a lower size standard 
would be considered appropriate.
    Given the lack of actual data on startup costs and entry barriers 
by industry, SBA uses average assets as a proxy for startup costs and 
entry barriers. To calculate average assets,

[[Page 24755]]

SBA begins with the sales to total assets ratio for an industry from 
the Risk Management Association's Annual Statement Studies, available 
at https://rmau.org. SBA then applies these ratios to the average 
receipts of firms in that industry obtained from the Economic Census 
tabulation. An industry with average assets that are significantly 
higher than most other industries is likely to have higher startup 
costs; this in turn will support a higher size standard. Conversely, an 
industry with average assets that are similar to or lower than most 
other industries is likely to have lower startup costs; this will 
support either lowering or maintaining the size standard.
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. Using the four-firm concentration ratio, SBA compares the 
degree of concentration within an industry to the degree of 
concentration of the other industries with the same measure of size 
standards. If a significantly higher share of economic activity within 
an industry is concentrated among the four largest firms compared to 
most other industries, all else being equal, SBA would set a size 
standard that is relatively higher than for most other industries. 
Conversely, if the market share of the four largest firms in an 
industry is appreciably lower than the similar share for most other 
industries, the industry will be assigned a size standard that is lower 
than those for most other industries.
4. Distribution of Firms by Size
    SBA examines the shares of industry total receipts accounted for by 
firms of different receipts and employment sizes in an industry. This 
is an additional factor SBA considers in assessing competition within 
an industry besides the four-firm concentration ratio. If the 
preponderance of an industry's economic activity is attributable to 
smaller firms, this generally indicates that small businesses are 
competitive in that industry, which would support adopting a smaller 
size standard. A higher size standard would be supported for an 
industry in which the distribution of firms indicates that most of the 
economic activity is concentrated among the larger firms.
    Concentration is a measure of inequality of distribution. To 
determine the degree of inequality of distribution in an industry, SBA 
computes the Gini coefficient, using 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, see 
SBA's Methodology on its website 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 degree of inequality of distribution for an 
industry under review with other industries with the same type of size 
standards. If an industry shows a higher degree of inequality of 
distribution (hence a higher Gini coefficient value) compared to most 
other industries in the group this would, all else being equal, warrant 
a size standard that is higher than the size standards assigned to most 
other industries. Conversely, an industry with lower degree of 
inequality (i.e., a lower Gini coefficient value) than most others will 
be assigned a lower size standard relative to others.
5. Federal Contracting
    As the fifth factor, SBA examines the success small businesses are 
having in winning Federal contracts under the current size standard as 
well as the possible impact a size standard change may have on Federal 
small business contracting opportunities. The Small Business Act 
requires the Federal Government to ensure that small businesses receive 
a ``fair proportion'' of Federal contracts. The legislative history 
also discusses the importance of size standards in Federal contracting. 
To incorporate the Federal contracting factor in the size standards 
analysis, SBA evaluates small business participation in Federal 
contracting in terms of the share of total Federal contract dollars 
awarded to small businesses relative to the small business share of 
industry's total receipts. In general, if the share of Federal contract 
dollars awarded to small businesses in an industry is significantly 
smaller than the small business share of total industry's receipts, all 
else remaining the same, a justification would exist for considering a 
size standard higher than the current size standard. In cases where 
small business share of the Federal market is already appreciably high 
relative to the small business share of the overall market, SBA 
generally assumes that the existing size standard is adequate with 
respect to the Federal contracting factor.
    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 to perform Federal 
contracts as compared to typical commercial contracting work, and the 
size of Federal contracts. These, as well as other factors, are likely 
to influence the type of firms within an industry that compete for 
Federal contracts. By comparing the small business Federal contracting 
share with the industry-wide small business share, SBA includes in its 
size standards analysis the latest Federal market conditions. Besides 
the impact on Federal contracting, SBA also examines impacts on SBA's 
loan programs both under the current and revised size standards.

Sources of Industry and Program Data

    SBA's primary source of industry data used in this proposed rule 
for evaluating industry characteristics and developing size standards 
is a special tabulation of the Economic Census from the U.S. Census 
Bureau (www.census.gov/econ/census). The tabulation based on the 2012 
Economic Census was the latest available when this proposed rule was 
developed. The special tabulation provides industry data on the number 
of firms, number of establishments, number of employees, annual 
payroll, and annual receipts of companies by Industry (6-digit level), 
Industry Group (4-digit level), Subsector (3-digit level), and Sector 
(2-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 special tabulation also contains information for 
different levels of NAICS categories on average and median firm size in 
terms of both receipts and employment, total receipts generated by the 
four and eight largest firms, the Herfindahl-Hirschman Index (HHI), the 
Gini coefficient, and size distributions of firms by various receipts 
and employment size groupings.
    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 two-digit 
(Sector),

[[Page 24756]]

three-digit (Subsector), or four-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 evaluate some industries that are not covered by the Economic 
Census, SBA used a similar special tabulation of the latest County 
Business Patterns (CBP) published by the U.S. Census Bureau 
(www.census.gov/programs-surveys/cbp.html). Similarly, to evaluate 
industries in NAICS Sector 11 that are also not covered by the Economic 
Census and CBP, SBA evaluated a similar special tabulation based on the 
2012 Census of Agriculture (www.nass.usda.gov) from the National 
Agricultural Statistics Service (NASS). Besides the Economic Census, 
Agricultural Census and CBP tabulations, SBA also evaluates relevant 
industry data from other sources when necessary, especially for 
industries that are not covered by the Economic Census or CBP. These 
include the Quarterly Census of Employment and Wages (QCEW, also known 
as ES-202 data) (www.bls.gov/cew/) and Business Employment Dynamics 
(BED) data (www.bls.gov/bdm/) from the U.S. Bureau of Labor Statistics. 
Similarly, to evaluate certain financial industries that have asset-
based size standards, SBA examines the data from the Statistics on 
Depository Institutions (SDI) database (www5.fdic.gov/sdi/main.asp) of 
the Federal Depository Insurance Corporation (FDIC) data. Finally, to 
evaluate the capacity component of the Petroleum Refiners (NAICS 
324110) size standard, SBA evaluates the petroleum production data from 
the Energy Information Administration (www.eia.gov).
    To calculate average assets, SBA used sales to total assets ratios 
from the Risk Management Association's Annual eStatement Studies, 2016-
2018 (https://rmau.org). To evaluate the Federal contracting factor, 
SBA examined the data on Federal prime contract awards from the Federal 
Procurement Data System--Next Generation (FPDS-NG) (www.fpds.gov) for 
fiscal years 2016-2018. To assess the impact on financial assistance to 
small businesses, SBA examined its internal data on 7(a) and 504 loan 
programs for fiscal years 2018-2020. For some portion of impact 
analysis, SBA also evaluated data from FPDS-NG for fiscal years 2018-
2020 and the System for Award Management (SAM) (www.sam.gov).
    Data sources and estimation procedures SBA uses in its size 
standards analysis are documented in detail in SBA's Methodology, 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 or revised 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 or revised size 
standard as well as the distribution of firms by size. Market share and 
size distribution 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

    In the 2009 Methodology, SBA applied to the first five-year 
comprehensive review of size standards, SBA adopted a fixed number of 
size standards levels as part of its effort to simplify size standards. 
In response to public comments to the 2009 Methodology white paper, and 
the 2013 amendment to the Small Business Act (section 3(a)(8)) under 
section 1661 of the National Defense Authorization Act for Fiscal Year 
2013 (``NDAA 2013'') (Pub. L. 112-239, January 2, 2013), in the 2019 
Methodology, SBA has relaxed the limitation on the number of small 
business size standards. Specifically, section 1661 of NDAA 2013 states 
``SBA cannot limit the number of size standards, and shall assign the 
appropriate size standard to each industry identified by NAICS.''
    In the revised Methodology, SBA calculates a separate size standard 
for each NAICS industry. However, to account for errors and limitations 
associated with various data SBA evaluates in the size standards 
analysis, SBA rounds the calculated size standard value for a receipts-
based size standard to the nearest $500,000, except for agricultural 
industries in Subsectors 111 and 112 for which the calculated size 
standards will be rounded to the nearest $250,000. Similarly, the 
calculated value for an employee-based size standard is rounded to the 
nearest 50 employees for industries in manufacturing and other sectors 
(except Wholesale Trade and Retail Trade) and to the nearest 25 
employees for industries in Wholesale Trade and Retail Trade. This 
rounding procedure is applied both in calculating a size standard for 
each of the five primary factors and in calculating the overall size 
standard for the industry.
    As a policy decision, SBA continues to maintain the minimum and 
maximum levels for both receipts and employee-based size standards. 
Accordingly, SBA will not generally propose or adopt a size standard 
that is either below the minimum level or above the maximum, even 
though the calculations may yield values below the minimum or above the 
maximum. The minimum size standard reflects the size an established 
small business should be to have adequate capabilities and resources to 
be able to compete for and perform Federal contracts (but does not 
account for small businesses that are newly formed or just starting 
operations). On the other hand, the maximum size standard represents 
the level above which businesses, if qualified as small, would 
outcompete much smaller businesses when accessing Federal assistance.
    With respect to employee-based size standards, SBA has established 
250 employees and 1,500 employees, respectively, as the minimum and 
maximum size standard levels for Manufacturing and other industries 
(excluding Wholesale and Retail Trade). SBA has established 50 
employees and 250 employees, respectively, as the minimum and maximum 
employee-based size standard levels for Wholesale and Retail Trade. 
These levels reflect the current minimum of 100 employees and the 
current maximum of 1,500 employees in SBA's existing size standards. 
The industry data suggests that a 250-employee minimum and 1,500-
employee maximum size standards would be too high for Wholesale and 
Retail Trade industries. Accordingly, SBA has established 50 employees 
as the minimum size standard and 250 employees as the maximum size 
standard for Wholesale and Retail Trade industries.

Evaluation of Industry Factors

    As mentioned in the previous section, to assess the appropriateness 
of the current size standards, SBA evaluates the structure of each 
industry in terms of four economic characteristics or factors: average 
firm size, average assets size as a proxy for startup costs and entry 
barriers, the four-firm concentration ratio as a measure of industry 
competition, and size

[[Page 24757]]

distribution of firms using the Gini coefficient. For each size 
standard type (i.e., receipts-based, or employee-based), SBA ranks 
industries both in terms of each of the four industry factors and in 
terms of the existing size standard and computes the 20th percentile 
and 80th percentile values for both. SBA then evaluates each industry 
by comparing its value for each industry factor to the 20th percentile 
and 80th percentile values for the corresponding factor for industries 
under a particular type of size standard.
    If the characteristics of an industry under review within a 
particular size standard type are similar to the average 
characteristics of industries within the same size standard type in the 
20th percentile, SBA will consider adopting as an appropriate size 
standard for that industry the 20th percentile value of size standards 
for those industries. For each size standard type, if the industry's 
characteristics are similar to the average characteristics of 
industries in the 80th percentile, SBA will assign a size standard that 
corresponds to the 80th percentile in the size standard rankings of 
industries. A separate size standard is established for each factor 
based on the amount of differences between the factor value for an 
industry under a particular size standard type and 20th percentile and 
80th percentile values for the corresponding factor for all industries 
in the same type. Specifically, the actual level of the new size 
standard for each industry factor is derived by a linear interpolation 
using the 20th percentile and 80th percentile values of that factor and 
corresponding percentiles of size standards. Each calculated size 
standard is bounded between the minimum and maximum size standards 
levels, as discussed before. As noted earlier, the calculated value for 
an employee-based size standard is rounded to the nearest 50 employees 
for industries in Manufacturing and other sectors (except Wholesale 
Trade and Retail Trade) and to the nearest 25 employees for industries 
in Wholesale Trade and Retail Trade.
    Table 2, 20th and 80th Percentiles of Industry Factors for 
Employee-Based Size Standards, shows the 20th percentile and 80th 
percentile values for average firm size (simple and weighted), average 
assets size, four-firm concentration ratio, and Gini coefficient for 
industries with employee-based size standards.

                                Table 2--20th and 80th Percentiles of Industry Factors for Employee-Based Size Standards
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                             Simple average    Weighted average                         Four-firm
                  Industries/percentiles                   firm size (number  firm size (number    Average assets     concentration     Gini coefficient
                                                             of employees)      of employees)     size ($ million)      ratio (%)
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                           Manufacturing and other industries, excluding Sectors 42 and 44-45
--------------------------------------------------------------------------------------------------------------------------------------------------------
20th percentile..........................................               29.5              250.7               4.14               24.7              0.760
80th percentile..........................................              118.3            1,629.0              40.54               61.3              0.853
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                           Industries in Sectors 42 and 44-45
--------------------------------------------------------------------------------------------------------------------------------------------------------
20th percentile..........................................               12.6              199.8               3.19               16.1              0.794
80th percentile..........................................               27.9            1,693.8              11.53               38.9              0.865
--------------------------------------------------------------------------------------------------------------------------------------------------------

Estimation of Size Standards Based on Industry Factors

    An estimated size standard supported by each industry factor is 
derived by comparing its value for a specific industry to the 20th 
percentile and 80th percentile values for that factor. If an industry's 
value for a particular factor is near the 20th percentile value in the 
distribution, the supported size standard will be one that is close to 
the 20th percentile value of size standards for industries in the size 
standards group (i.e., industries with employee-based size standards 
covered by this proposed rule), which is 500 employees. If a factor for 
an industry is close to the 80th percentile value of that factor, it 
would support a size standard that is close to the 80th percentile 
value in the distribution of size standards, which is 1,250 employees. 
For a factor that is within, above, or below the 20th-80th percentile 
range, the size standard is calculated using linear interpolation based 
on the 20th percentile and 80th percentile values for that factor and 
the 20th percentile and 80th percentile values of size standards.
    For example, if an industry's simple average firm size in number of 
employees is 50 employees, that would support a size standard of 650 
employees. According to Table 2, the 20th percentile and 80th 
percentile values of average number of employees are 29.5 and 118.3 
employees, respectively. The 50-employee average firm size is 23.1% 
between the 20th percentile value (29.5 employees) and the 80th 
percentile value (118.3 employees) of simple average firm size in 
number of employees ((50 employees-29.5 employees) / (118.3 employees-
29.5 employees) = 0.2308 or 23.1%)). Applying this percentage to the 
difference between the 20th percentile value (500 employees) and 80th 
percentile (1,250 employees) value of size standards and then adding 
the result to the 20th percentile size standard value (500 employees) 
yields a calculated size standard value of 673 employees ([{1,250 
employees-500 employees{time}  * 0.231] + 500 employees = 673 
employees). The final step is to round the calculated 673 employee size 
standard to the nearest 50 employees, which in this example yields 650 
employees. This procedure is applied to calculate size standards 
supported by other industry factors. Detailed formulas involved in 
these calculations are presented in SBA's Methodology, which is 
available on its website at www.sba.gov/size.

Derivation of Size Standards Based on Federal Contracting Factor

    Besides industry structure, SBA also evaluates Federal contracting 
data to assess the success of small businesses in getting Federal 
contracts under the existing size standards. For each industry with $20 
million or more in annual Federal contract dollars, SBA evaluates the 
small business share of total Federal contract dollars relative to the 
small business share of total industry receipts. All other factors 
being equal, if the share of Federal contracting dollars awarded to 
small businesses in an industry is significantly less than the small 
business share of that industry's total receipts, a justification would 
exist for considering a size standard higher than the current size 
standard.

[[Page 24758]]

Conversely, if the small business share of Federal contracting activity 
is near or above the small business share in total industry receipts, 
this will support the current size standard.
    SBA increases the existing size standards by certain percentages 
when the small business share of total industry receipts exceeds the 
small business share of total Federal contract dollars by ten or more 
percentage points. Proposed percentage increases generally reflect 
employee levels needed to bring the small business share of Federal 
contracts on par with the small business share of industry receipts. 
These proposed percentage increases for employee-based size standards 
are given in Table 3, Proposed Adjustments to Size Standards Based on 
Federal Contracting Factor.

               Table 3--Proposed Adjustments to Size Standards Based on Federal Contracting Factor
----------------------------------------------------------------------------------------------------------------
                                     Percentage difference between the small business shares of total Federal
                                          contract dollars in an industry and of total industry receipts
         Size standards         --------------------------------------------------------------------------------
                                           >-10%                   -10% to -30%                  <-30%
----------------------------------------------------------------------------------------------------------------
Employee-based standards:
    <500 employees.............  No change................  Increase 30%.............  Increase 60%.
    500 to <1,000 employees....  No change................  Increase 20%.............  Increase 40%.
    1,000 to <1,500 employees..  No change................  Increase 15%.............  Increase 25%.
----------------------------------------------------------------------------------------------------------------

    For example, if an industry with the current size standard of 750 
employees had an average of $50 million in Federal contracting dollars, 
of which 15% went to small businesses, and if small businesses 
accounted for 40% of total receipts of that industry, the small 
business share of total Federal contract dollars would be 25% less than 
the small business share of total industry receipts (40%-15%). 
According to the adjustments shown in Table 3 (above), the new size 
standard for the Federal contracting factor for that industry would be 
set by multiplying the current 750 employee standard by 1.2 (i.e., 20% 
increase) and then by rounding the result to the nearest 50 employees, 
yielding a size standard of 900 employees.
    SBA evaluated the small business share of total Federal contract 
dollars for the 210 industries covered by this proposed rule that had 
$20 million or more in average annual Federal contract dollars during 
fiscal years 2016-2018. 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 ten percentage points or more) in 64 of these industries, 
prompting an upward adjustment of their existing size standards based 
on that factor. For the remaining 146 industries that averaged $20 
million or more in average annual contract dollars, the Federal 
contracting factor was not significant, and the existing size standard 
was applied for that factor. For industries with less than $20 million 
in average annual contract dollars, no size standard was calculated for 
the Federal contracting factor.

Derivation of Overall Industry Size Standard

    The SBA's methodology presented above results in five separate size 
standards based on evaluation of the five primary factors (i.e., four 
industry factors and one Federal contracting factor). SBA typically 
derives an industry's overall size standard by assigning equal weights 
to size standards supported by each of these five factors. However, if 
necessary, SBA's methodology would allow assigning different weights to 
some of these factors in response to its policy decisions and other 
considerations. For detailed calculations, see SBA's methodology, 
available on its website at www.sba.gov/size.

Calculated Size Standards Based on Industry and Federal Contracting 
Factors

    Table 4, Size Standards Supported by Each Factor for Each Industry 
(Employees), below, shows the results of analyses of industry and 
Federal contracting factors for each industry and subindustry 
(``exception'') covered by this proposed rule. NAICS industries in 
columns 2, 3, 4, 5, 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. Column 9 shows a calculated new size standard for each 
industry. This is the average of the size standards supported by each 
factor (the size standard for average firm size is an average of size 
standards supported by simple average firm size and weighted average 
firm size), rounded to the nearest 50 employees for industries in 
Manufacturing and other sectors (except Wholesale Trade and Retail 
Trade) and to the nearest 25 employees for industries in Wholesale 
Trade and Retail Trade. Analytical details involved in the averaging 
procedure are described in SBA's methodology, which is available on its 
website at www.sba.gov/size. For comparison with the calculated new 
size standards, the current size standards are in column 10 of Table 4.
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BILLING CODE 8026-03-C

Evaluation of Size Standards for Select NAICS Industries and 
Subindustry Categories or ``Exceptions''

    In accordance with the SBA's approach to evaluating size standards 
for industries or subindustries (or ``exceptions'') as described in the 
SBA's size standards Methodology, in the following subsections, SBA 
evaluates the size standards for three NAICS industries and five 
exceptions that are not covered by the Economic Census tabulation. The 
three NAICS industries are NAICS 482211 (Line Haul Railroads), NAICS 
482212 (Short Line Railroads), and NAICS 324110 (Petroleum Refineries), 
for which the refining capacity component of the size standard is not 
covered by the Economic Census tabulation. The five exceptions are the 
three Research and Development (R&D) exceptions to NAICS 541715, the 
Information Technology Value Added Resellers (ITVAR) exception to NAICS 
541519, and the Environmental Remediation Services (ERS) exception to 
NAICS 562910.
NAICS 324110--Petroleum Refineries
    Among all industries for which SBA establishes size standards, only 
NAICS 324110 (Petroleum Refineries) comprises two size measures in its 
size standard--number of employees and total daily refining capacity. 
As explained in Footnote 4 of the SBA's Table of Size Standards (13 CFR 
121.201), to qualify as small for purposes of Government procurement, 
the petroleum refiner, including its affiliates, must be a concern that 
has either no more than 1,500 employees or no more than 200,000 barrels 
per calendar day total Operable Atmospheric Crude Oil Distillation 
capacity. Capacity includes all domestic and foreign affiliates, all 
owned or leased facilities, and all facilities under a processing 
agreement or an arrangement such as an exchange agreement or a 
throughput. To qualify under the capacity size standard, the firm, 
together with its affiliates, must be primarily engaged in refining 
crude petroleum into refined petroleum products. A firm's ``primary 
industry'' is determined in accordance with 13 CFR 121.107.
    During the first five-year review of size standards, SBA proposed 
to increase the capacity component of the Petroleum Refiners industry 
(NAICS 324110) size standard from 125,000 barrels per calendar day 
(BPCD) total Operable Atmospheric Crude Oil Distillation capacity to 
200,000 BPCD total capacity and retain the employee component at the 
1,500-employee level (79 FR 54145 (November 10, 2014)). SBA also 
proposed to allow business concerns to qualify as small either under 
the 1,500-employee size standard or under the 200,000 BPCD capacity 
size standard, if they, together with affiliates, are primarily engaged 
in petroleum refining. Finally, SBA proposed to eliminate the 
requirement that, for purposes of Federal contracting, ``[t]he total 
product to be delivered under the contract must be at least 90% refined 
by the successful bidder from either crude oil or bona fide 
feedstocks.'' SBA determined that the 90% requirement was overly 
restrictive for small refiners to compete for government contracts. SBA 
adopted these proposed changes without amendments in a 2016 final rule 
(81 FR 4469 (January 26, 2016)).
    To evaluate the refining capacity component of the size standard 
for NAICS 324110 in the current review of size standards, SBA 
coordinated with the Defense Logistics Agency (DLA) to obtain a special 
tabulation of refinery production data, maintained by the Energy 
Information Administration (EIA). This tabulation included data on 
employees and various measures of production capacity. SBA also 
obtained the data from SAM, FPDS-NG, and other publicly available 
information such as corporate 10-K filings and annual reports to 
evaluate the economic characteristics of NAICS 324110 in terms of 
production capacity.
    To determine if the current size standard for Petroleum Refineries 
is still appropriate, SBA used the above data to analyze both total and 
aviation fuel capacity, as well as the number of employees of all 
refiners operating in the United States. SBA also examined industry 
trends and the Federal Government's petroleum procurement needs.
    SBA's analysis of the above data showed that the production 
capacity of the petroleum refineries industry is concentrated among the 
largest 30% of firms, as measured by BPCD total capacity. Specifically, 
the largest 30% of firms account for over 83% of the total industry 
production capacity. The average size of firms exceeding 200,000 BPCD 
total production capacity is 40,178 employees.
    Currently, about 60% of firms, representing 26% of employees, are 
classified as small under the 200,000 BPCD total capacity size 
standard. The average size of these firms is 11,064 employees. SBA's 
analysis showed that increasing the total capacity size standard beyond 
the current 200,000 BPCD level, even by 150% increase from the current 
level, would only marginally increase the number of small firms in this 
industry, and would include firms with characteristics similar to the 
dominant firms at the top of the size distribution. Based on this 
analysis, SBA proposes to maintain the refining capacity component of 
the size standard for Petroleum Refineries at 200,000 BPCD total 
Operable Atmospheric Crude Oil Distillation capacity. As presented in 
Table 4 (above), based on the data from the 2012 Economic Census, SBA 
also proposes to maintain the employee component of the size standard 
for Petroleum Refineries at the current 1,500-employee level.
NAICS 482111--Line Haul Railroads and NAICS 482112--Short Line 
Railroads
    SBA's primary source of industry data used in this proposed rule is 
a special tabulation of the 2012 Economic Census prepared by the U.S. 
Bureau of the Census for SBA. The 2012 Economic Census data are the 
latest Economic Census data available at the time of drafting this 
proposed rule.
    In some cases, certain industries are not covered by the Economic 
Census; thus, they are not represented in the Census Bureau's special 
tabulation. For those industries, SBA first identifies companies that 
are registered in SAM under those industry NAICS codes and then 
evaluates their employment and revenue data obtained from their SAM 
profiles. SBA supplements the SAM data with revenue and employment data 
from FPDS-NG and, in some cases, the data from other Federal agencies 
and industry trade groups to establish the industry characteristics 
necessary to evaluate the size standard for the industry. In some 
instances, SBA's analysis is based only on those factors for which data 
are available or estimates of missing values are possible. SBA applied 
this approach to the evaluation of industry factors for two industries 
in NAICS Sector 48-49 that are not covered by the Economic Census, 
namely Line Haul Railroads (NAICS 482111) and Short Line Railroads 
(NAICS 482112).
    During the first five-year review of size standards, based on the 
data from SAM, SBA proposed to maintain the 1,500-employee size 
standard for Line Haul Railroads and increase the size standard for 
Short Line Railroads from 500 employees to 1,500 employees (79 FR 53646 
(September 10, 2014)). In the final rule, SBA adopted this proposal 
without change (81 FR 4435 (January 26, 2016)).
    To evaluate the size standard for these industries during the 
ongoing second

[[Page 24803]]

five-year size standards review, SBA relied on data from SAM, industry 
trade groups, and other Federal agencies. SBA sought data external to 
SAM because of a lack of adequate representation of firms in those 
industries in the SAM database. For example, the Railroad Facts 2019 
Edition statistical publication of the American Association of 
Railroads (AAR) estimates that there were 613 railroads in the U.S. in 
2017; however, the number of firms registered under NAICS 482111 or 
482112 as their primary NAICS code was only 37 based on the 2019 SAM 
data. The data for these industries in FPDS-NG was also equally 
inadequate for purposes of evaluating size standards for those 
industries. Thus, SBA was not able to rely on the SAM and FPDS-NG data 
alone to determine the economic characteristics of those industries. 
SBA also evaluated its internal data from its 7(a), 504, and disaster 
loan programs for purposes of determining economic characteristics of 
NAICS 482111 and 482112; however, SBA found that there was very limited 
loan activity in those industries.
    To determine the economic characteristics of NAICS 482111 and 
482112 and calculate the industry factors for evaluation of their size 
standards, SBA relied on the 2018 data from the Railroad Retirement 
Board (RRB), which publishes employment data for railroad employers. 
SBA used this data to calculate the simple and weighted average firm 
size in terms of employees. SBA used the data from AAR and the American 
Short Line and Regional Railroad Association (ASLRRA) to calculate 
average assets and the four-firm concentration ratio. SBA was not able 
to obtain suitable data on receipts to calculate the Gini coefficient 
values for these industries. SBA requests suggestions on sources of 
data for the railroad industry that include an estimate of the receipts 
per firm similar to the employee data provided by the RRB.
    Based on the data from the RRB, SBA was unable to reliably 
determine the number of railroads primarily engaged in either the Line 
Haul Railroad or Short Line Railroad industry. For statistical and 
regulatory purposes, most Federal agencies and trade associations do 
not classify railroads in terms of line haul or short line railroads. 
Instead, railroads are classified based on other characteristics, such 
as class, revenue, or track mileage owned/operated. For example, the 
Surface Transportation Board (STB), the Federal agency responsible for 
regulating railroad rates and service, categorizes rail carriers into 
three classes: Class I, Class II, and Class III. These classes are 
based on the carrier's annual operating revenues. For 2019, Class I 
carriers were defined as those earning above $504.80 million in 
revenue; Class II carriers as those earning $40.38 million or more in 
revenue and less than the Class I threshold; and Class III carriers as 
those earning less than the Class II minimum. The AAR identifies two 
groups of non-Class I railroads based on revenue and track mileage 
covered: Regional railroads and Local railroads. Regional railroads are 
line haul railroads below the Class I revenue threshold, operating at 
least 350 miles of railroad track and earning at least $20 million in 
revenue, or earning revenue between $40 million and the Class I revenue 
threshold, regardless of track mileage operated. Local railroads are 
line haul railroads below the Regional criteria, plus switching and 
terminal railroads. The RRB classifies railroads by Class I and non-
Class I operator. Based on the available data, SBA was not able to 
reliably determine the composition of the railroad industry at the 6-
digit NAICS industry level. Thus, for purposes of analysis, SBA 
combines the operators in NAICS industries 482111 and 482112 to 
determine a size standard for those industries.
    The results from SBA's analysis are presented in Table 4 (above) of 
this proposed rule. The analysis supports maintaining the current size 
standard of 1,500 employees for both the Line Haul Railroad (NAICS 
482111) and Short Line Railroad industries (NAICS 482112). SBA invites 
comments, along with supporting information, on this proposal as well 
as sources of data that more clearly define the economic 
characteristics of these industries.
Exception to NAICS 541519--Information Technology Value Added Resellers
    Information Technology Value Added Resellers (ITVAR) is a 
subindustry (or ``exception'') under NAICS 541519 (Other Computer 
Related Services). SBA first proposed to establish this subindustry 
category in 2002 in order to better apply small business eligibility 
requirements under Federal contracts that combine substantial services 
with the acquisition of computer hardware and software (67 FR 48419 
(July 24, 2002)). The following year, SBA adopted the ITVAR industry 
category, as proposed, with a size standard of 150 employees (68 FR 
74833 (December 28, 2003)). As stated in Footnote 18 to the SBA's Table 
of Size Standards, for a Federal contract to be classified under the 
ITVAR subindustry or ``exception'' and its 150-employee size standard, 
it must consist of at least 15% but not more than 50% of value added 
services, as measured by the total price less cost of computer hardware 
and software, and profit. If the contract consists of less than 15% of 
value-added services, it must be classified under the appropriate 
manufacturing NAICS industry. If the contract consists of more than 50% 
of value-added services, it must be classified under the NAICS industry 
that best describes the principal nature of services being procured.
    In 2014, as part of the first 5-year review of size standards, SBA 
proposed to eliminate the ITVAR exception due to inconsistencies and 
misuse (79 FR 53646 (September 10, 2014)). For example, SBA's 
evaluation of FPDS-NG data and solicitations at that time revealed many 
cases of misuse where Federal agencies applied the 150-employee size 
standard, instead of the receipts-based size standard, for contracts 
that were predominantly for services. Moreover, SBA found the use of 
the ITVAR exception was discretionary and inconsistent with other SBA's 
regulations. Under the terms of the exception as stated in Footnote 18 
in the SBA's Table of Size Standards, it is clear that the majority of 
the cost of the contracts that qualify under the ITVAR exception and 
its 150-employee size standard will be incurred for supplies. Thus, 
instead of using the ITVAR 150-employee size standard under NAICS 
541519, a contracting officer could alternatively use a manufacturing 
NAICS code, such as NAICS 334111 (Electronic Computer Manufacturing) 
with a 1,000-employee size standard, to which the 500-employee 
nonmanufacturer size standard would also apply. Thus, firms may or may 
not be eligible or be able to compete as a small business for the exact 
same contract simply based on the contracting officer's selection of 
the NAICS code and size standard. SBA found that this was inconsistent 
with SBA's regulations that require contracting officers to select the 
NAICS code that best describes the principal purpose of the acquisition 
(see 13 CFR 121.402(b)). Many commenters to the 2014 SBA's proposed 
rule agreed with these findings but were strongly against the SBA's 
proposal to eliminate the ITVAR exception and its 150-employee size 
standard. Commenters viewed that the SBA's proposal would force small 
ITVARs with fewer than 150 employees to compete for Federal 
opportunities with large companies with up to 500 employees under the 
500-employee nonmanufacturer size standard. To address these concerns, 
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[[Page 24804]]

rule, SBA amended Footnote 18 by retaining the ITVAR exception and its 
150-employee size standard and adding the requirement that the offeror 
on small business set-aside ITVAR contracts must comply with the 
manufacturing performance requirements or the nonmanufacturer rule (81 
FR 4436 (January 26, 2016)).
    In this proposed rule, to review the 150-employee size standard for 
the ITVAR exception to NAICS 541519, SBA evaluated the data from FPDS-
NG and SAM using a two-step procedure. First, using FPDS-NG, SBA 
identified Product Service Codes (PSCs) that correspond to contracts 
under the ITVAR exception. SBA then identified firms that have received 
Federal contracts under those PSCs and evaluated their receipts and 
employees' data from SAM and FPDS-NG to derive the values of industry 
and Federal contracting factors. SBA uses this approach because the 
data that SBA receives from the Census Bureau's Economic Census 
tabulation are limited to the 6-digit NAICS industry level and 
therefore do not provide information on economic characteristics of 
firms at the subindustry level.
    SBA found that contracting activity for the ITVAR exception is 
distributed over roughly 36 different PSCs. Each of these PSCs describe 
the activity of procuring either an IT product, or an IT service, but 
not both. Generally, the code structure of the PSC classification 
system is such that PSCs for products start with a number whereas PSCs 
for services begin with an alphabet. Table 5, Top 5 ITVAR Related PSCs 
by Average Total Dollars Obligated, below, identifies the top 5 PSCs 
for ITVAR related products and services. The table also displays 
average total dollars obligated under each PSC for fiscal years 2016-
2018, and the product or services identifier for each PSC.

                      Table 5--Top 5 ITVAR Related PSCs by Average Total Dollars Obligated
----------------------------------------------------------------------------------------------------------------
                                                                 Average total
                                                               dollars obligated
              PSC                       PSC description         in FY 2016-2018              PSC type
                                                                  ($ million)
----------------------------------------------------------------------------------------------------------------
D399...........................  IT and telecom--other IT and         $2,419,341  Service.
                                  telecommunications.
7030...........................  Information technology                1,824,017  Product.
                                  software.
D319...........................  IT and telecom--annual                  761,227  Service.
                                  software maintenance
                                  service plans.
7050...........................  Information technology                  673,647  Product.
                                  components.
D318...........................  IT and telecom--integrated              664,801  Service.
                                  hardware/software/services
                                  solutions, predominantly
                                  services.
----------------------------------------------------------------------------------------------------------------

    Due to the involvement of numerous PSCs discussed above, SBA was 
unable to reliably determine a singular PSC that would adequately 
represent the level of activity corresponding uniquely to the ITVAR 
exception, which by definition includes both product and service-
related activities. For purposes of analysis, and in an effort to 
differentiate economic activity under the ITVAR exception and determine 
the economic characteristics of the firms comprising this subindustry, 
SBA analyzed the FPDS-NG and SAM data. For this, SBA analysts first 
queried the FPDS-NG data for fiscal years 2016-2018 to match firms with 
a primary NAICS of 541519 and at least one contract with an ITVAR PSC 
for products to firms with a primary NAICS of 541519 and at least one 
contract with an ITVAR PSC for services; that is, SBA identified firms 
with a primary NAICS of 541519 with at least one contract under both a 
product and service-related PSC. This query resulted in a total of 
1,210 firms. Further analysis showed that, for many of these 1,210 
firms, the percentage of total revenues from ITVAR services and 
products PSCs was very low, which SBA used as an indication that the 
revenue structure of such firms was not representative of a typical 
ITVAR firm. Therefore, using a similar procedure that SBA applied in 
the analysis of the Dredging and Surface Cleanup Activities exception 
to NAICS 237990 (Other Heavy and Civil Engineering Construction) (85 FR 
62239 (December 1, 2020)), SBA excluded firms from the analysis whose 
combined dollars obligated to both ITVAR services and products PSCs did 
not exceed 2.5% of their total receipts. SBA further refined the 
analysis by excluding firms with an average revenue below $1,000. After 
these exclusions, SBA was left with 485 firms for purposes of 
analysis.\2\ Together, those 485 firms represented 55% of the dollars 
obligated to original 1,210 firms under the top 5 ITVAR-related PSCs 
identified in Table 5. SBA analyzed those 485 firms to obtain the four 
industry factors (average firm size, average assets size, four-firm 
ratio, and Gini coefficient) and the Federal contracting factor for the 
ITVAR subindustry or exception.
---------------------------------------------------------------------------

    \2\ SBA analysts found that increasing the percentage of ITVAR 
services and products PSCs in total receipts to 5% to exclude firms 
for which those PSCs contributions to their receipts is very 
limited, and applying other refinements to the list of 1,210 firms--
such as excluding firms with a majority focus on services and 
excluding firms having less than 1% of total receipts coming from 
products--ultimately produced a similar calculated size standard.
---------------------------------------------------------------------------

    In its 2003 final rule (68 FR 74833 (December 29, 2003)), SBA used 
a hybrid approach to create and evaluate the ITVAR exception. 
Specifically, based on the assumption that ITVARs operate in NAICS 
Industry Group 5415 (Computer System Design and Related Services) and 
in NAICS 423430 (Computer and Computer Peripheral Equipment and 
Software Merchant Wholesalers), SBA combined part of NAICS Industry 
Group 5415 with part of NAICS 423430 using the 1997 Economic Census 
data and defined the result as the ITVAR subindustry and used it as the 
basis to establish the characteristics of ITVAR firms. As discussed in 
the 2016 final rule (81 FR 4436 (January 26, 2016)), SBA now finds 
several problems with that approach. First, there is no need to create 
the ITVAR industry in that manner because, based on their primary 
activity of selling computer hardware and software, ITVARs are included 
in NAICS 423430. Accordingly, SBA now believes the industry data for 
NAICS 423430 alone would provide a more accurate description of ITVAR 
firms than the hybrid approach, especially given significant 
differences in economic structure between firms in NAICS Industry Group 
5415 and ITVAR firms, as suggested by the Economic Census data and also 
confirmed by many commenters at that time. Similar to the 2016 final 
rule, SBA's analysis in this proposed rule is based on the premise that 
ITVARs are most closely related to wholesalers, supplying computer 
hardware and software as nonmanufacturers. Thus, any size standard 
exception to the ITVARs should be addressed within the context of the 
nonmanufacturer rule. As such, in this proposed rule, SBA uses the 20th 
and 80th percentile values of industry

[[Page 24805]]

factors for employee-based size standards for Wholesale Trade and 
Retail Trade shown in Table 2 (above), along with the 20th and 80th 
percentile values of employee-based size standards in those sectors, as 
a basis for reviewing the size standard for the ITVAR exception.
    Table 6, Size Standards Supported by Each Factor for the ITVAR 
Exception to NAICS 541519 (Employees), below, shows the results of 
analyses of industry and Federal contracting factors for the ITVAR 
exception, along with size standards supported by each industry and 
Federal contracting factors. The analysis supports maintaining the 
current size standard of 150 employees. As such, SBA proposes to retain 
the 150-employee size standard for the ITVAR exception with no 
additional changes to the terms of this industry exception SBA invites 
comments, along with supporting information, on this proposal as well 
as suggestions for alternative sources of data that more clearly define 
the economic characteristics of ITVARs.

                          Table 6--Size Standards Supported by Each Factor for the ITVAR Exception to NAICS 541519 (Employees)
                                        [Upper value = calculated factor, lower value = size standard supported]
--------------------------------------------------------------------------------------------------------------------------------------------------------
              (1)                      (2)            (3)          (4)          (5)          (6)          (7)          (8)          (9)          (10)
NAICS code NAICS industry title  Type...........       Simple     Weighted      Average    Four-firm         Gini      Federal   Calculated      Current
                                                      average      average  assets size        ratio  coefficient     contract         size         size
                                                    firm size    firm size  ($ million)          (%)                    factor     standard     standard
                                                   (number of   (number of                                                 (%)   (number of   (number of
                                                   employees)   employees)                                                       employees)   employees)
--------------------------------------------------------------------------------------------------------------------------------------------------------
541519 (ITVAR Exception).......  Factor.........        136.5      3,594.9        $13.6         19.7        0.743         25.5  ...........  ...........
                                 Size Std.......          250          250          250           75           50          150          150          150
--------------------------------------------------------------------------------------------------------------------------------------------------------

Exceptions to NAICS 541715--Aircraft, Aircraft Engine and Engine Parts; 
Other Aircraft Parts and Auxiliary Equipment; and Guided Missiles and 
Space Vehicles, Their Propulsion Units and Propulsion Parts
    Currently, NAICS 541715 (Research and Development in the Physical, 
Engineering, and Life Sciences (except Biotechnology)) has three 
subindustries or ``exceptions.'' As stated in Footnote 11 to the SBA's 
Table of Size Standards, for Research and Development (R&D) contracts 
requiring the delivery of a manufactured product, the appropriate size 
standard is that of the corresponding manufacturing industry. The three 
exceptions under NAICS 541715 and their corresponding manufacturing 
industry counterparts and their size standards are shown in Table 7, 
NAICS 541715 Exceptions and Corresponding Manufacturing Size Standards 
(Employees), below. This table also displays the proposed size 
standards for each of the three exceptions and corresponding 
manufacturing industries.
    To better match size standards for the exceptions to the 
corresponding employee-based industry size standards in manufacturing, 
SBA proposes to increase the size standard of the third exception 
(Guided Missiles and Space Vehicles, Their Propulsion Units and 
Propulsion Parts) from 1,250 employees to 1,300 employees by adopting 
the highest size standard of that exception's corresponding 
manufacturing industry counterparts. As shown in Table 7 (below), SBA 
retains the current size standards for the other two exceptions.

                               Table 7--NAICS 541715 Exceptions and Corresponding Manufacturing Size Standards (Employees)
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                                     Current     Calculated    Proposed    Proposed size   Current size
                   Exception                       Manufacturing NAICS code and        size         size         size      standard for    standard for
                                                          industry title             standard     standard     standard    the exception   the exception
--------------------------------------------------------------------------------------------------------------------------------------------------------
Aircraft, Aircraft Engine and Engine Parts....  336411--Aircraft Manufacturing...        1,500        1,500        1,500           1,500           1,500
                                                336412--Aircraft Engine and              1,500        1,500        1,500
                                                 Engine Parts Manufacturing.
Other Aircraft Parts and Auxiliary Equipment..  336413--Other Aircraft Part and          1,250        1,200        1,250           1,250           1,250
                                                 Auxiliary Equipment
                                                 Manufacturing.
Guided Missiles and Space Vehicles, Their       336414--Guided Missile and Space         1,250        1,300        1,300           1,300           1,250
 Propulsion Units and Propulsion Parts.          Vehicle Manufacturing.                  1,250        1,200        1,250
                                                336415--Guided Missile and Space
                                                 Vehicle Propulsion Unit and
                                                 Propulsion Unit Parts
                                                 Manufacturing.
                                                336419--Other Guided Missile and         1,000        1,050        1,050  ..............  ..............
                                                 Space Vehicle Parts and
                                                 Auxiliary Equipment
                                                 Manufacturing.
--------------------------------------------------------------------------------------------------------------------------------------------------------

Exception to NAICS 562910--Environmental Remediation Services
    In 2016, SBA increased the size standard for Environmental 
Remediation Services (ERS) exception to NAICS 562910 (Remediation 
Services) from 500 employees to 750 employees (81 FR 4436 (January 26, 
2016)). The requirements that apply to the ERS exception and its 750-
employee size standard for Federal procurement and SBA's financial 
assistance are defined in Footnote 14 to the SBA's Table of Size 
Standards (13 CFR 121.201). SBA requires that for a Government contract 
to be classified under the ERS exception, it should cover activities in 
three or more separate industries that each could be categorized in 
separate NAICS codes. If any activity in the procurement can be 
identified with a separate NAICS code, or component of a code with a 
distinct size standard, and that industry accounts for 50% or more of 
the value of the entire procurement, then the proper size standard is 
the one for that industry, and not the ERS exception size standard.
    In 1994, SBA established the 500-employee based size standard for 
the ERS exception for Federal procurements and for SBA assistance (59 
FR 47236 (September 15, 1994)). The Agency determined that ERS was an 
emergent industry in which firms perform tasks that depart from 
traditional activities in any one industry defined (at the time)

[[Page 24806]]

in the Standard Industrial Classification (SIC) system, and the types 
of activities were requiring larger firms to be able to perform them. 
When the North American Industry Classification System (NAICS) was 
adopted by the Federal Government in 1997, one of the new industries 
identified with a six-digit code was NAICS 562910 (Remediation 
Services), and one of the activities on the scope of NAICS 562910 was 
the environmental remediation services.
    SBA believes that the justification for the creation of an 
environmental remediation services subindustry within NAICS 562910 with 
a special size standard in 1994 is still valid today. NAICS 562910 
includes some remediation activities (e.g., collection and disposal of 
garbage, ashes, rubbish and sweeping services), which are usually 
performed by smaller firms relative to the size of firms performing 
activities that fall under environmental remediation services.
    As explained previously in the Sources of Industry and Program Data 
section, the data from the Census Bureau's Economic Census tabulation 
are limited to the 6-digit NAICS industry level and hence do not 
provide all the economic characteristics for the ERS subindustry. Thus, 
similar to the evaluation of other exceptions, in accordance with the 
SBA's size standards methodology, in this proposed rule, SBA analyzed 
the data coming from FPDS-NG and SAM to evaluate the size standard for 
the ERS exception.
    First, using FPDS-NG data for fiscal years 2016-2018, SBA 
identified firms that participated in Federal contracts using the 
Product Service Codes (PSCs) F108 (Environmental Systems Protection--
Environmental Remediation) and F999 (Other Environmental Services) 
within NAICS 562910. Then, SBA obtained those firms' revenue and 
employment data from the information related to the ERS awards in FPDS-
NG, and the data from SAM was used to complement the information 
available in FPDS-NG.
    SBA identified 1,151 firms receiving Federal contracts under NAICS 
562910 and PSCs F108 and F999. Initially, the number of firms was 
obtained by counting the DUNS numbers, but because the DUNS numbers 
refer to a location, multi-establishments firms will have more than one 
DUNS number. So, SBA decided to identify those firms using Global DUNS 
numbers, reducing the number of firms to 1,033. After deleting firms 
with null values for number of employees or revenue, the number of 
firms was reduced to 979. SBA also deleted entities that could be 
identified as government agencies or as manufacturers, further reducing 
the number of ERS firms to 962.
    As discussed in the SBA's size standards methodology white paper, 
when reviewing size standards for subindustries or ``exceptions'' using 
the SAM and FPDS-NG data, to reduce the impact of the differences 
between the industry data from the Economic Census and the data 
obtained from FPDS-NG and SAM, SBA may (i) identify and remove firms 
whose primary activity is not the subindustry or exception under review 
(in this case ERS), (ii) trim the data to prevent extreme observations 
from distorting the results, or (iii) apply a combination of these two 
approaches.
    The dollars awarded by firms' employment size indicate a large 
concentration of the ERS activity among the largest firms. Small firms 
with less than or equal to 750 employees received about 37% of the 
total ERS dollar awards during fiscal years 2016-2018, while firms with 
more than 5,000 employees accounted for about 60% of the total ERS 
contract awards. Moreover, just two firms with more than 5,000 
employees accounted for almost 40% of the total awards under ERS 
activities. The rest of the ERS contract dollars (3.5%) went to firms 
between 750 employees and 5,000 employees.
    Since fiscal year 2016, the share of total ERS contract dollars 
awarded to small businesses decreased significantly, from an average of 
50.0% in fiscal years 2013-2015 to an average of 37.0% in fiscal years 
2016-2018. SBA believes that the large skewness in the distribution of 
ERS firms by the number of employees, the large percentage of ERS 
contracting dollars being concentrated among very large firms, and a 
decrease in the small business share of total ERS awards (especially 
after the adoption of the higher 750-employee size standard in 2016) 
are all indications that an additional increase to the ERS size 
standard is warranted. The large concentration of ERS awards among very 
large and diversified firms suggests that trimming the data is 
warranted to obtain a more representative picture of the ERS industry. 
Thus, to avoid the results being distorted by very large, diversified 
firms, SBA excluded from analysis 2.5% of the largest firms by the 
number of employees. That leaves the number of ERS firms at 937, which 
were used to calculate the industry and Federal contracting factors for 
the ERS exception. Table 8, Size Standards Supported by Each Factor for 
the Exception to NAICS 562910 (Employees), below, summarizes the 
results.

                             Table 8--Size Standards Supported by Each Factor for the Exception to NAICS 562910 (Employees)
                                        [Upper value = calculated factor, lower value = size standard supported]
--------------------------------------------------------------------------------------------------------------------------------------------------------
              (1)                      (2)            (3)          (4)          (5)          (6)          (7)          (8)          (9)          (10)
NAICS code NAICS industry title  Type...........       Simple     Weighted      Average    Four-firm         Gini      Federal   Calculated      Current
                                                      average      average       assets        ratio  coefficient     contract         size         size
                                                    firm size    firm size         size            %                    factor     standard     standard
                                                   (number of   (number of  ($ million)                                    (%)   (number of   (Number of
                                                   employees)   employees)                                                       employees)   employees)
--------------------------------------------------------------------------------------------------------------------------------------------------------
562910 (Exception).............  Factor.........        174.9      3,249.0        $22.8         35.1        0.851         64.2  ...........  ...........
                                 Size Std.......        1,500        1,500          850          700        1,250          750        1,000          750
--------------------------------------------------------------------------------------------------------------------------------------------------------

    Based on the above rationale and the analysis of industry and 
Federal contracting factors, SBA proposes to increase the ERS size 
standard to 1,000 employees, which would cause a very minimal impact on 
currently small firms in the ERS Federal procurement market while 
allowing a few larger small firms an expanded runway to grow and remain 
competitive. SBA repeated this analysis without trimming the data, 
which yielded a calculated size standard of 1,200 employees; however, 
SBA does not believe that this method most accurately reflects the 
economic characteristics of firms primarily engaged in the business 
activities related to the ERS exception since the untrimmed data 
includes firms whose primary activity is unrelated to ERS. Of the 25 
firms excluded from the analysis due to trimming, 12 firms had less 
than $1 million in ERS contracts. The share of ERS dollars obligated to 
these firms

[[Page 24807]]

was less than 0.1% in terms of both their total receipts and total 
dollars obligated (across all NAICS codes), indicating that the ERS 
exception is clearly not the primary activity for these firms. Also, 
among the remaining 13 excluded firms that received more contract 
dollars under the ERS exception, these firms' share of ERS dollars in 
their total receipts was, on average, only 1.2%, varying from 0.0% to 
5.7%. SBA found that the vast majority of these excluded firms operated 
in numerous, diverse NAICS codes and none of them reported the ERS 
exception as being their primary activity relative to their overall 
operations.
    As such, SBA is proposing to increase the ERS size standard to 
1,000 employees in accordance with SBA's size standards methodology and 
the trimming approach described above. As discussed previously in this 
subsection, in February 2016, SBA increased the size standard for the 
ERS exception from 500 employees to 750 employees. In fiscal years 
2018-2019, still the largest number of small ERS firms were below 500 
employees, receiving the largest percentage of ERS small business 
contract awards. By increasing the size standard to 1,000 employees, 
only about 2 additional firms will gain small business status. SBA 
believes that this will not have a significant impact on small 
businesses below the current 750-employee size standard.

Summary of Calculated Size Standards

    Of the 427 industries and 5 subindustries (i.e., ``exceptions'') 
reviewed in this proposed rule, the results from analyses of the latest 
available data on the five primary factors discussed above would 
support increasing employee-based size standards for 157 industries and 
2 subindustries (``exceptions''), decreasing size standards for 216 
industries, and maintaining size standards for 54 industries and 3 
subindustries (``exceptions''). Table 9, Summary of Calculated Size 
Standards, below, summarizes these results by NAICS sector.

                                                      Table 9--Summary of Calculated Size Standards
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                                   Number of size    Number of size    Number of size    Number of size
              NAICS sector                          NAICS sector title                standards         standards         standards         standards
                                                                                      reviewed          increased         decreased        maintained
--------------------------------------------------------------------------------------------------------------------------------------------------------
21......................................  Mining, Quarrying, and Oil and Gas                    24                15                 9                 0
                                           Extraction.
22......................................  Utilities.............................                11                11                 0                 0
31-33...................................  Manufacturing.........................               360               123               187                50
48-49...................................  Transportation and Warehousing........                15                 5                 8                 2
51......................................  Information...........................                12                 3                 7                 2
54......................................  Professional, Scientific and Technical                 7                 1                 3                 3
                                           Services.
Other...................................  Agriculture, Forestry, Fishing and                     3                 1                 2                 0
                                           Hunting (Sector 11); Finance and
                                           Insurance (Sector 52); Administrative
                                           and Support, Waste Management and
                                           Remediation Services (Sector 56).
                                                                                 -----------------------------------------------------------------------
    Total...............................                                                       432               159               216                57
--------------------------------------------------------------------------------------------------------------------------------------------------------

Evaluation of SBA Loan Data

    Before proposing or deciding on size standard revisions, SBA also 
considers the impact of size standards revisions on its loan programs. 
Accordingly, SBA examined its internal 7(a) and 504 loan data for 
fiscal years 2018-2020 to assess whether the calculated size standards 
in Table 4 (above) need further adjustments to ensure credit 
opportunities for small businesses through those programs. For the 
industries reviewed in this proposed rule, the data shows that it is 
mostly businesses much smaller than the current or calculated size 
standards that receive SBA's 7(a) and 504 loans. For example, for 
industries covered by this rule, more than 99.0% of SBA's 7(a) and 504 
loans in fiscal years 2018-2020 went to businesses below the calculated 
size standards.

Evaluation of Calculated Size Standards for Dominance in Field of 
Operation

    The Small Business Act provides that a small business concern must 
not be dominant in its field of operation. Accordingly, to ensure that 
neither an existing nor a calculated or proposed size standard includes 
the dominant or potentially dominant firms in any industry, besides the 
calculation of the Gini coefficient, SBA further assessed the 
distribution of firms in each industry by employee size and a firm's 
share of total industry's receipts at the existing or calculated size 
standard. Generally, SBA believes shares below 40% would preclude 
dominant firms from qualifying as small and exerting control on any 
industry. Accordingly, based on the results, SBA is proposing to retain 
the size standards for nine industries at their current levels, even 
though the analytical results suggested that an increase is warranted. 
These industries include NAICS 212222, 212291, 311213, 221116, 212113, 
212392, 311512, 316992, and 212324, for which a firm's share of total 
industry's receipts or employees at the calculated size standard was 
more than 40%. SBA proposes to adopt a smaller increase to the size 
standard for NAICS 221114 to ensure that the industry's dominant firms 
are not included in the definition of small business for the industry. 
SBA estimates that at the calculated size standard of 700 employees for 
NAICS 221114, based on the 2012 Economic Census data, a firm's share of 
total industry receipts would be 41.1% and the share of employees 
44.2%. Thus, SBA is proposing a smaller increase to the size standard 
for NAICS 221114 from the current 250 employees to 500 employees to 
ensure that a firm's share of total industry receipts or employees at 
the proposed size standard is not greater than 40%. These adjustments 
would affect only the one or two largest firms in each of those 
industries. Similarly, based on the results from dominance analysis 
using

[[Page 24808]]

the 2012 Economic Census data, SBA considered proposing to reduce the 
size standard for NAICS 221118 from 250 employees to 100 employees, 
even though the analytical results supported a higher size standard of 
650 employees. The results showed that the share of total receipts for 
a firm at the 250-employee current size standard or at the 650-employee 
calculated size standard would be much higher than the 40% threshold. 
However, after considering the level of Federal contracting activity 
and the Federal contracting factor for this industry as presented in 
Table 4 above, SBA proposes to adopt the calculated size standard of 
650 employees for NAICS 221118 as there are a number of large firms 
participating in Federal contracting in this industry that are not 
classified under NAICS 221118 in the Economic Census data. Based on the 
FPDS-NG data for fiscal years 2018-2020, on an annual basis, SBA 
identified 131 firms receiving 443 contracts under NAICS 221118. The 
average annual total dollars obligated to these firms was about $216.0 
million. Together, these firms had total employees of 1.5 million, 
averaging 11,771 employees. These figures are much greater than the 
total of 224 employees and average of 14 employees for NAICS 221118 
based on the 2012 Economic Census data. Using the data from FPDS-NG for 
fiscal years 2018-2020 for NAICS 221118, SBA estimates the share of 
receipts of a firm at the calculated size standard of 650 employees to 
be 0.07%, which effectively precludes a firm of this size from exerting 
control over the industry. Thus, these results demonstrate that the 
Economic Census Economic Census data for this industry do not correlate 
well with the Federal market data from FPDS-NG that supports a higher 
size standard.
    As explained elsewhere in this proposed rule, in industries where 
small business share of the Federal market is already appreciably high 
relative to the small business share of the overall market, SBA 
generally assumes that the existing size standard is adequate with 
respect to the Federal contracting factor. Regarding NAICS 221118 
specifically, using the Federal market data for fiscal years 2016-2018, 
SBA estimated a Federal contracting factor of -64.4% (i.e., the 
difference between the small business share of Federal market and the 
small business share of industry receipts) that supports increasing the 
size standard to 400 employees (see Table 4 above). Using the FPDS-NG 
data from fiscal years 2018-2020, SBA estimates the small business 
share of dollars obligated to NAICS 221118 to be 4.4% and the small 
business share of industry receipts, based on the 2012 Economic Census 
data, to be 71.6%, thereby yielding a Federal contracting factor of -
67.2%.
    Therefore, based on the reasons presented above, SBA is proposing 
to adopt the 650-employee calculated size standard for NAICS 221118 to 
further promote competition among all firms and create additional 
opportunities for small firms. Table 10, Proposed Adjustments to 
Calculated Size Standards Based on Dominance Analysis, below, 
summarizes adjustments to calculated size standards based on SBA's 
evaluation of dominance in field of operation.

             Table 10--Proposed Adjustments of Calculated Size Standards Based on Dominance Analysis
----------------------------------------------------------------------------------------------------------------
                                                                                                     Adjusted/
                                                                   Current size     Calculated     proposed size
            NAICS code                  NAICS industry title         standard      size standard     standard
                                                                    (employees)     (employees)     (employees)
----------------------------------------------------------------------------------------------------------------
212113............................  Anthracite Mining...........             250             600             250
212222............................  Silver Ore Mining...........             250           1,100             250
212291............................  Uranium-Radium-Vanadium Ore              250             900             250
                                     Mining.
212324............................  Kaolin and Ball Clay Mining.             750           1,050             750
212392............................  Phosphate Rock Mining.......           1,000           1,350           1,000
221114............................  Solar Electric Power                     250             700             500
                                     Generation.
221116............................  Geothermal Electric Power                250           1,050             250
                                     Generation.
221118............................  Other Electric Power                     250             650             650
                                     Generation.
311213............................  Malt Manufacturing..........             500             900             500
311512............................  Creamery Butter                          750           1,000             750
                                     Manufacturing.
316992............................  Women's Handbag and Purse                750             850             750
                                     Manufacturing.
----------------------------------------------------------------------------------------------------------------

Special Considerations
    On March 13, 2020, the ongoing Coronavirus Disease 2019 (COVID-19) 
was declared a pandemic of enough severity and magnitude to warrant an 
emergency declaration for all U.S. states, territories, and the 
District of Columbia. With the COVID-19 emergency, many small 
businesses nationwide experienced economic hardship as a direct result 
of the Federal, State, and local public health measures that were being 
taken to minimize the public's exposure to the virus. In addition, 
based on the advice of public health officials, other measures, such as 
keeping a safe distance from others or even stay-at-home orders, were 
implemented, resulting in a dramatic decrease in economic activity as 
the public avoided malls, retail stores, and other businesses.
    The Coronavirus Aid, Relief, and Economic Security Act (the CARES 
Act or the Act) (Pub. L. 116-136) was signed on March 27, 2020, to 
provide emergency assistance and health care response for individuals, 
families, and businesses affected by the coronavirus pandemic. Section 
1102 of the Act temporarily permitted SBA to guarantee 100% of 7(a) 
loans under a new program titled the Paycheck Protection Program (PPP). 
Section 1106 of the Act provides for forgiveness of up to the full 
principal amount of qualifying loans guaranteed under the PPP. The PPP 
and loan forgiveness are intended to provide economic relief to small 
businesses nationwide adversely impacted by COVID-19. On April 24, 
2020, additional funding for the CARES Act, including for the PPP, was 
provided (see The Paycheck Protection Program and Health Care 
Enhancement Act, Pub. L. 116-139). On December 27, 2020, Congress 
passed the Economic Aid to Hard-Hit Small Businesses, Nonprofits, and 
Venues Act as part of the Consolidation Appropriations Act, approving 
additional funding for the PPP loan program and allowing the hardest-
hit small businesses to receive a second draw PPP loan (Pub. L. 116-
260). Additionally, the law approved grants for shuttered-venue 
operators. On March 11, 2021, the American Rescue Plan Act of 2021 
(Pub. L. 117-2) was

[[Page 24809]]

signed into law. This act provided additional relief for the Nation's 
small businesses and hard-hit industries by adding new support to the 
recovery effort, including additional funding for the PPP and the 
Shuttered Venue Operators Grant programs. The act also provided 
additional funding for targeted Economic Injury Disaster Loan (EIDL) 
Advance payments.
    The Agency is following closely the development of the pandemic and 
the economic situation. A variety of economic indicators such as the 
Gross Domestic Product (GDP) and the unemployment rate show that the 
economic recession from the COVID-19 pandemic was significantly worse 
than any other recession since World War II. According to the Bureau of 
Economic Analysis (BEA), the real GDP decreased 5.1%, and the real 
personal consumption in goods and services decreased 6.9% in the first 
quarter of 2020. In the second quarter, the real GDP decreased 31.2% 
and the real personal consumption in goods and services decreased 
33.4%. In the third quarter, the real GDP increased 33.8%, and the real 
personal consumption in goods and services increased 41.4%. The real 
GDP showed a more moderate increase of 4.5% and the real personal 
consumption expenditures increased 3.4% in the fourth quarter of 2020. 
The real GDP decreased 3.4% in 2020 from 2019 (from the 2019 annual 
level to the 2020 annual level), compared with an increase of 2.3% in 
2019 from 2018. The real GDP increased 6.3% in the first quarter of 
2021 and 6.7% in the second quarter. The real personal consumption in 
goods and services grew 11.4% in the first quarter of 2021 and 12.0% in 
the second quarter. The growth rates of both the real GDP and real 
personal consumption expenditures slowed significantly in the third 
quarter, increasing just 2.3% and 2.0%, respectively. Economic growth 
accelerated in the fourth quarter, with real GDP and real personal 
consumption expenditures increasing 6.9% and 2.5%, respectively. The 
real GDP increased 5.7% in 2021 from 2020 (from the 2020 annual level 
to the 2021 annual level), compared with an decrease of 3.4% in 2020 
from 2019.\3\
---------------------------------------------------------------------------

    \3\ Source: gdp4q21_3rd.pdf (bea.gov), March 30, 2022. This 
report represents the BEA's March 30, 2022, full News Release on the 
U.S. Economic data for the fourth quarter of 2021 and year 2021, and 
associated figures and tables. Specifically included in the report 
are, among other things, GDP (third estimate), personal consumption 
expenditures (PCE), Corporate Profits, and GDP by industry for the 
fourth of 2021 and year 2021. Provided in the report are levels of 
various economic measures and percentage changes from preceding 
period. The report provides annual data for years 2019, 2020 and 
2021, and quarterly data from the first quarter of 2018 to the 
fourth quarter of 2021.
---------------------------------------------------------------------------

    In March 2022, the unemployment rate fell to 3.6%, and the number 
of unemployed persons to 6.0 million. Although both measures are 
significantly lower than their April 2020 highs (14.8% and 23.1 
million, respectively), they are still higher than their pre-pandemic 
levels in February 2020 (3.5% and 5.7 million, respectively). 
Specifically, for the sectors evaluated in this proposed rule, in March 
2022, the average unemployment rate was 3.4%. In February 2020, the 
average unemployment rate for these sectors was 3.8%.
    SBA believes that lowering size standards under the current 
economic environment could stifle the momentum of the ongoing economic 
recovery by causing a large number of currently small firms to become 
ineligible for SBA's financial assistance and Federal contracting 
programs at a time when these programs could be particularly helpful to 
businesses in need of Federal assistance the most to survive the 
economic impacts of the ongoing COVID-19 pandemic. SBA is meeting the 
need for increased support by not lowering size standards even though 
analytical results suggest that some size standards might be lowered. 
Moreover, reducing the number of small businesses in the economy may 
also lead to fewer set-aside opportunities overall as it would reduce 
the pool of eligible firms that the Federal Government could select 
from when setting aside procurement opportunities for small businesses. 
Thus, SBA believes that lowering size standards at this time would be 
counter to its mission to aid, counsel, assist and protect the 
interests of small business concerns, preserve free competitive 
enterprise, and maintain and strengthen the overall economy of our 
Nation.

Proposed Changes to Size Standards

    Based on the analytical results and SBA's policy of not lowering 
size standards in response to the ongoing economic impacts of the 
COVID-19 pandemic and Government response to mitigate the impacts 
discussed above, SBA proposes to increase size standards for 150 
industries or subindustries (or ``exceptions'') and retain the current 
size standards for 282 industries. The proposed size standards are 
presented in Table 11, Proposed Size Standards Revisions. Also 
presented in Table 11 are current and calculated size standards for 
comparison.

                                   Table 11--Proposed Size Standards Revisions
----------------------------------------------------------------------------------------------------------------
                                                                   Current size     Calculated     Proposed size
               NAICS code                  NAICS industry title      standard      size standard     standard
                                                                    (employees)     (employees)     (employees)
----------------------------------------------------------------------------------------------------------------
212113.................................  Anthracite Mining......             250             600             250
212210.................................  Iron Ore Mining........             750           1,400           1,400
212222.................................  Silver Ore Mining......             250           1,100             250
212230.................................  Copper, Nickel, Lead,               750           1,400           1,400
                                          and Zinc Mining.
212291.................................  Uranium-Radium-Vanadium             250             900             250
                                          Ore Mining.
212299.................................  All Other Metal Ore                 750           1,250           1,250
                                          Mining.
212313.................................  Crushed and Broken                  750             850             850
                                          Granite Mining and
                                          Quarrying.
212319.................................  Other Crushed and                   500             550             550
                                          Broken Stone Mining
                                          and Quarrying.
212322.................................  Industrial Sand Mining.             500             750             750
212324.................................  Kaolin and Ball Clay                750           1,050             750
                                          Mining.
212325.................................  Clay and Ceramic and                500             650             650
                                          Refractory Minerals
                                          Mining.
212391.................................  Potash, Soda, and                   750           1,050           1,050
                                          Borate Mineral Mining.
212392.................................  Phosphate Rock Mining..           1,000           1,350           1,000
212393.................................  Other Chemical and                  500             600             600
                                          Fertilizer Mineral
                                          Mining.
212399.................................  All Other Nonmetallic               500             600             600
                                          Mineral Mining.
221111.................................  Hydroelectric Power                 500             750             750
                                          Generation.
221112.................................  Fossil Fuel Electric                750             950             950
                                          Power Generation.
221113.................................  Nuclear Electric Power              750           1,150           1,150
                                          Generation.

[[Page 24810]]

 
221114.................................  Solar Electric Power                250             700             500
                                          Generation.
221115.................................  Wind Electric Power                 250           1,150           1,150
                                          Generation.
221116.................................  Geothermal Electric                 250           1,050             250
                                          Power Generation.
221117.................................  Biomass Electric Power              250             550             550
                                          Generation.
221118.................................  Other Electric Power                250             650             650
                                          Generation.
221121.................................  Electric Bulk Power                 500             950             950
                                          Transmission and
                                          Control.
221122.................................  Electric Power                    1,000           1,100           1,100
                                          Distribution.
221210.................................  Natural Gas                       1,000           1,150           1,150
                                          Distribution.
311111.................................  Dog and Cat Food                  1,000           1,250           1,250
                                          Manufacturing.
311119.................................  Other Animal Food                   500             650             650
                                          Manufacturing.
311211.................................  Flour Milling..........           1,000           1,050           1,050
311212.................................  Rice Milling...........             500             750             750
311213.................................  Malt Manufacturing.....             500             900             500
311221.................................  Wet Corn Milling.......           1,250           1,300           1,300
311224.................................  Soybean and Other                 1,000           1,250           1,250
                                          Oilseed Processing.
311225.................................  Fats and Oils Refining            1,000           1,100           1,100
                                          and Blending.
311230.................................  Breakfast Cereal                  1,000           1,300           1,300
                                          Manufacturing.
311313.................................  Beet Sugar                          750           1,150           1,150
                                          Manufacturing.
311314.................................  Cane Sugar                        1,000           1,050           1,050
                                          Manufacturing.
311411.................................  Frozen Fruit, Juice,              1,000           1,100           1,100
                                          and Vegetable
                                          Manufacturing.
311422.................................  Specialty Canning......           1,250           1,400           1,400
311511.................................  Fluid Milk                        1,000           1,150           1,150
                                          Manufacturing.
311512.................................  Creamery Butter                     750           1,000             750
                                          Manufacturing.
311514.................................  Dry, Condensed, and                 750           1,000           1,000
                                          Evaporated Dairy
                                          Product Manufacturing.
311611.................................  Animal (except Poultry)           1,000           1,150           1,150
                                          Slaughtering.
311824.................................  Dry Pasta, Dough, and               750             850             850
                                          Flour Mixes
                                          Manufacturing from
                                          Purchased Flour.
311920.................................  Coffee and Tea                      750           1,000           1,000
                                          Manufacturing.
311930.................................  Flavoring Syrup and               1,000           1,100           1,100
                                          Concentrate
                                          Manufacturing.
311941.................................  Mayonnaise, Dressing,               750             850             850
                                          and Other Prepared
                                          Sauce Manufacturing.
311942.................................  Spice and Extract                   500             650             650
                                          Manufacturing.
311991.................................  Perishable Prepared                 500             700             700
                                          Food Manufacturing.
311999.................................  All Other Miscellaneous             500             700             700
                                          Food Manufacturing.
312111.................................  Soft Drink                        1,250           1,400           1,400
                                          Manufacturing.
312112.................................  Bottled Water                     1,000           1,100           1,100
                                          Manufacturing.
312140.................................  Distilleries...........           1,000           1,100           1,100
313220.................................  Narrow Fabric Mills and             500             550             550
                                          Schiffli Machine
                                          Embroidery.
313230.................................  Nonwoven Fabric Mills..             750             850             850
314999.................................  All Other Miscellaneous             500             550             550
                                          Textile Product Mills.
315190.................................  Other Apparel Knitting              750             850             850
                                          Mills.
315990.................................  Apparel Accessories and             500             600             600
                                          Other Apparel
                                          Manufacturing.
316110.................................  Leather and Hide                    500             800             800
                                          Tanning and Finishing.
316992.................................  Women's Handbag and                 750             850             750
                                          Purse Manufacturing.
321113.................................  Sawmills...............             500             550             550
321114.................................  Wood Preservation......             500             550             550
321211.................................  Hardwood Veneer and                 500             600             600
                                          Plywood Manufacturing.
322110.................................  Pulp Mills.............             750           1,050           1,050
322122.................................  Newsprint Mills........             750           1,050           1,050
323111.................................  Commercial Printing                 500             650             650
                                          (except Screen and
                                          Books).
323120.................................  Support Activities for              500             550             550
                                          Printing.
324122.................................  Asphalt Shingle and                 750           1,100           1,100
                                          Coating Materials
                                          Manufacturing.
324191.................................  Petroleum Lubricating               750             900             900
                                          Oil and Grease
                                          Manufacturing.
324199.................................  All Other Petroleum and             500             950             950
                                          Coal Products
                                          Manufacturing.
325110.................................  Petrochemical                     1,000           1,300           1,300
                                          Manufacturing.
325120.................................  Industrial Gas                    1,000           1,200           1,200
                                          Manufacturing.
325130.................................  Synthetic Dye and                 1,000           1,050           1,050
                                          Pigment Manufacturing.
325220.................................  Artificial and                    1,000           1,050           1,050
                                          Synthetic Fibers and
                                          Filaments
                                          Manufacturing.
325311.................................  Nitrogenous Fertilizer            1,000           1,050           1,050
                                          Manufacturing.
325312.................................  Phosphatic Fertilizer               750           1,350           1,350
                                          Manufacturing.
325314.................................  Fertilizer (Mixing                  500             550             550
                                          Only) Manufacturing.
325320.................................  Pesticide and Other               1,000           1,150           1,150
                                          Agricultural Chemical
                                          Manufacturing.
325412.................................  Pharmaceutical                    1,250           1,300           1,300
                                          Preparation
                                          Manufacturing.
325520.................................  Adhesive Manufacturing.             500             550             550
325611.................................  Soap and Other                    1,000           1,100           1,100
                                          Detergent
                                          Manufacturing.
325612.................................  Polish and Other                    750             900             900
                                          Sanitation Good
                                          Manufacturing.
325613.................................  Surface Active Agent                750           1,100           1,100
                                          Manufacturing.
325910.................................  Printing Ink                        500             750             750
                                          Manufacturing.
325991.................................  Custom Compounding of               500             600             600
                                          Purchased Resins.
325998.................................  All Other Miscellaneous             500             650             650
                                          Chemical Product and
                                          Preparation
                                          Manufacturing.

[[Page 24811]]

 
326121.................................  Unlaminated Plastics                500             600             600
                                          Profile Shape
                                          Manufacturing.
326130.................................  Laminated Plastics                  500             650             650
                                          Plate, Sheet (except
                                          Packaging), and Shape
                                          Manufacturing.
326220.................................  Rubber and Plastics                 750             800             800
                                          Hoses and Belting
                                          Manufacturing.
326299.................................  All Other Rubber                    500             650             650
                                          Product Manufacturing.
327211.................................  Flat Glass                        1,000           1,100           1,100
                                          Manufacturing.
327410.................................  Lime Manufacturing.....             750           1,050           1,050
327910.................................  Abrasive Product                    750             900             900
                                          Manufacturing.
327992.................................  Ground or Treated                   500             600             600
                                          Mineral and Earth
                                          Manufacturing.
327999.................................  All Other Miscellaneous             500             750             750
                                          Nonmetallic Mineral
                                          Product Manufacturing.
331313.................................  Alumina Refining and              1,000           1,300           1,300
                                          Primary Aluminum
                                          Production.
331315.................................  Aluminum Sheet, Plate,            1,250           1,400           1,400
                                          and Foil Manufacturing.
331420.................................  Copper Rolling,                   1,000           1,050           1,050
                                          Drawing, Extruding,
                                          and Alloying.
331491.................................  Nonferrous Metal                    750             900             900
                                          (except Copper and
                                          Aluminum) Rolling,
                                          Drawing, and Extruding.
331492.................................  Secondary Smelting,                 750             850             850
                                          Refining, and Alloying
                                          of Nonferrous Metal
                                          (except Copper and
                                          Aluminum).
331512.................................  Steel Investment                  1,000           1,050           1,050
                                          Foundries.
331513.................................  Steel Foundries (except             500             700             700
                                          Investment).
331523.................................  Nonferrous Metal Die-               500             700             700
                                          Casting Foundries.
331524.................................  Aluminum Foundries                  500             550             550
                                          (except Die-Casting).
332112.................................  Nonferrous Forging.....             750             950             950
332114.................................  Custom Roll Forming....             500             600             600
332117.................................  Powder Metallurgy Part              500             550             550
                                          Manufacturing.
332215.................................  Metal Kitchen Cookware,             750           1,000           1,000
                                          Utensil, Cutlery, and
                                          Flatware (except
                                          Precious)
                                          Manufacturing.
332439.................................  Other Metal Container               500             600             600
                                          Manufacturing.
332613.................................  Spring Manufacturing...             500             600             600
332722.................................  Bolt, Nut, Screw,                   500             600             600
                                          Rivet, and Washer
                                          Manufacturing.
332812.................................  Metal Coating,                      500             600             600
                                          Engraving (except
                                          Jewelry and
                                          Silverware), and
                                          Allied Services to
                                          Manufacturers.
332992.................................  Small Arms Ammunition             1,250           1,300           1,300
                                          Manufacturing.
332996.................................  Fabricated Pipe and                 500             550             550
                                          Pipe Fitting
                                          Manufacturing.
333131.................................  Mining Machinery and                500             900             900
                                          Equipment
                                          Manufacturing.
333243.................................  Sawmill, Woodworking,               500             550             550
                                          and Paper Machinery
                                          Manufacturing.
333314.................................  Optical Instrument and              500             600             600
                                          Lens Manufacturing.
333924.................................  Industrial Truck,                   750             900             900
                                          Tractor, Trailer, and
                                          Stacker Machinery
                                          Manufacturing.
333991.................................  Power-Driven Hand Tool              500             950             950
                                          Manufacturing.
333993.................................  Packaging Machinery                 500             600             600
                                          Manufacturing.
333995.................................  Fluid Power Cylinder                750             800             800
                                          and Actuator
                                          Manufacturing.
333997.................................  Scale and Balance                   500             700             700
                                          Manufacturing.
334290.................................  Other Communications                750             800             800
                                          Equipment
                                          Manufacturing.
334416.................................  Capacitor, Resistor,                500             550             550
                                          Coil, Transformer, and
                                          Other Inductor
                                          Manufacturing.
334511.................................  Search, Detection,                1,250           1,350           1,350
                                          Navigation, Guidance,
                                          Aeronautical, and
                                          Nautical System and
                                          Instrument
                                          Manufacturing.
334512.................................  Automatic Environmental             500             650             650
                                          Control Manufacturing
                                          for Residential,
                                          Commercial, and
                                          Appliance Use.
334514.................................  Totalizing Fluid Meter              750             850             850
                                          and Counting Device
                                          Manufacturing.
334517.................................  Irradiation Apparatus             1,000           1,200           1,200
                                          Manufacturing.
334519.................................  Other Measuring and                 500             600             600
                                          Controlling Device
                                          Manufacturing.
335122.................................  Commercial, Industrial,             500             600             600
                                          and Institutional
                                          Electric Lighting
                                          Fixture Manufacturing.
335129.................................  Other Lighting                      500             550             550
                                          Equipment
                                          Manufacturing.
335311.................................  Power, Distribution,                750             800             800
                                          and Specialty
                                          Transformer
                                          Manufacturing.
335912.................................  Primary Battery                   1,000           1,300           1,300
                                          Manufacturing.
335931.................................  Current-Carrying Wiring             500             600             600
                                          Device Manufacturing.
335991.................................  Carbon and Graphite                 750             900             900
                                          Product Manufacturing.
335999.................................  All Other Miscellaneous             500             600             600
                                          Electrical Equipment
                                          and Component
                                          Manufacturing.
336310.................................  Motor Vehicle Gasoline            1,000           1,050           1,050
                                          Engine and Engine
                                          Parts Manufacturing.
336414.................................  Guided Missile and                1,250           1,300           1,300
                                          Space Vehicle
                                          Manufacturing.
336419.................................  Other Guided Missile              1,000           1,050           1,050
                                          and Space Vehicle
                                          Parts and Auxiliary
                                          Equipment
                                          Manufacturing.
336611.................................  Ship Building and                 1,250           1,300           1,300
                                          Repairing.
336991.................................  Motorcycle, Bicycle,              1,000           1,050           1,050
                                          and Parts
                                          Manufacturing.
337125.................................  Household Furniture                 750             950             950
                                          (except Wood and
                                          Metal) Manufacturing.
337214.................................  Office Furniture                  1,000           1,100           1,100
                                          (except Wood)
                                          Manufacturing.

[[Page 24812]]

 
339113.................................  Surgical Appliance and              750             800             800
                                          Supplies Manufacturing.
339910.................................  Jewelry and Silverware              500             700             700
                                          Manufacturing.
339930.................................  Doll, Toy, and Game                 500             700             700
                                          Manufacturing.
339991.................................  Gasket, Packing, and                500             600             600
                                          Sealing Device
                                          Manufacturing.
339994.................................  Broom, Brush, and Mop               500             750             750
                                          Manufacturing.
339999.................................  All Other Miscellaneous             500             550             550
                                          Manufacturing.
483111.................................  Deep Sea Freight                    500           1,050           1,050
                                          Transportation.
483113.................................  Coastal and Great Lakes             750             800             800
                                          Freight Transportation.
483114.................................  Coastal and Great Lakes             500             550             550
                                          Passenger
                                          Transportation.
483211.................................  Inland Water Freight                750           1,050           1,050
                                          Transportation.
483212.................................  Inland Water Passenger              500             550             550
                                          Transportation.
511199.................................  All Other Publishers...             500             550             550
512230.................................  Music Publishers.......             750             900             900
512250.................................  Record Production and               250             900             900
                                          Distribution.
541715 (Exception 3)...................  Guided Missiles and               1,250           1,300           1,300
                                          Space Vehicles, Their
                                          Propulsion Units and
                                          Propulsion Parts.
562910 (Exception).....................  Environmental                       750           1,000           1,000
                                          Remediation Services.
----------------------------------------------------------------------------------------------------------------

    As shown in the above table, SBA proposes to increase size 
standards for 150 industries or subindustries (``exceptions'') in those 
sectors, including 10 industries in NAICS Sector 21 (Mining, Quarrying, 
and Oil and Gas Extraction), 10 industries in NAICS Sector 22 
(Utilities), 120 industries in NAICS Sector 31-33 (Manufacturing), 5 
industries in Sector 48-49 (Transportation and Warehousing), 3 
industries in NAICS Sector 51 (Information), and 1 subindustry (or 
``exception'') each in NAICS Sector 54 (Professional, Scientific and 
Technical Services) and in NAICS Sector 56 (Administrative and Support, 
Waste Management and Remediation Services). Table 12, Summary of 
Proposed Size Standards Revisions by Sector, below, summarizes the 
proposed changes to size standards by NAICS sector.

                        Table 12--Summary of Proposed Size Standards Revisions by Sector
----------------------------------------------------------------------------------------------------------------
                                                  Number of size  Number of size  Number of size  Number of size
            Sector                 Sector name       standards       standards       standards       standards
                                                     reviewed        increased       decreased      maintained
----------------------------------------------------------------------------------------------------------------
21............................  Mining,                       24              10               0              14
                                 Quarrying, and
                                 Oil and Gas
                                 Extraction.
22............................  Utilities.......              11              10               0               1
31-33.........................  Manufacturing...             360             120               0             240
48-49.........................  Transportation                15               5               0              10
                                 and Warehousing.
51............................  Information.....              12               3               0               9
54............................  Professional,                  7               1               0               6
                                 Scientific and
                                 Technical
                                 Services.
Other Sectors.................  Agriculture,                   3               1               0               2
                                 Forestry,
                                 Fishing and
                                 Hunting;
                                 Finance and
                                 Insurance;
                                 Administrative
                                 and Support,
                                 Waste
                                 Management and
                                 Remediation
                                 Services.
                                                 ---------------------------------------------------------------
    Total.....................  ................             432             150               0             282
----------------------------------------------------------------------------------------------------------------

Evaluation of Proposed Size Standards for Dominance in Field of 
Operation

    For the vast majority of industries with proposed changes to size 
standards, the share of receipts of a firm at the proposed size 
standard levels in Table 11 (above) is, on average, 8.9%, varying from 
0.2% to 38.9%. Generally, SBA believes shares below 40% would preclude 
dominant firms from qualifying as small and exerting control on any 
industry. Based on the results from the 2012 Economic Census data, only 
two industries had those shares above 40% at their proposed size 
standards levels, namely NAICS 221118 (Other Electric Power Generation) 
and NAICS 311213 (Malt Manufacturing). SBA proposes to increase the 
size standard for NAICS 221118 from 250 employees to 650 employees and 
to retain the current 500-employee size standard for NAICS 311213 
although the industry data supported a higher 900-employee size 
standard.
    Regarding NAICS 221118, as discussed in the Evaluation of 
Calculated Size Standards for Dominance in Field of Operation section 
above, after considering the level of Federal contracting activity and 
the Federal contracting factor for this industry, SBA is proposing to 
adopt the calculated size standard of 650 employees. Based on the 
Economic Census data, SBA estimated the share of industry receipts of a 
firm with 650 employees to be above 40%, suggesting that a dominant 
firm may qualify as small at the proposed size standard level. However, 
considering the limitation of the Economic Census data in 
characterizing the firms that participate in the Federal market in 
NAICS 221118, SBA estimates, using the data from FPDS-NG for fiscal 
years 2018-2020, the share of receipts of a firm at the proposed size 
standard of 650 employees to be 0.07%, which would effectively preclude 
a firm of this size from being dominant and exerting control over the 
industry.
    Regarding NAICS 311213, SBA evaluated the industry's distribution 
of firms by employee size to determine whether any potentially dominant 
firms

[[Page 24813]]

existed near the proposed size standard level. SBA identified only 1 
firm close to or around the proposed 500-employee size standard and 
determined that this firm is not dominant in its field of operation 
because its share of total industry receipts is only 26.5%, well below 
the 40% threshold that SBA considers for adjusting calculated or 
proposed size standards to exclude dominant firms. Thus, SBA determined 
that the market shares under the proposed size standards revisions for 
all industries effectively preclude a firm at or below the proposed 
size standards from exerting control on any of the industries. In the 
Request for Comments section below, SBA seeks comments on its proposed 
revisions to size standards, including its proposal to, based on the 
results from dominance analysis, retain the current size standards in 
certain industries for which analytical results supported higher size 
standards.

Alternatives Considered

    By law, SBA is required to develop numerical size standards for 
establishing eligibility for Federal small business assistance programs 
and to review every five years all size standards and make necessary 
adjustments to reflect the current industry structure and Federal 
market conditions. Other than varying the levels of size standards by 
industry and changing the measures of size standards (e.g., using 
annual receipts vs. the number of employees), no practical alternatives 
exist to the systems of numerical size standards.
    In response to the unprecedented economic impacts of the ongoing 
COVID-19 pandemic on small businesses and Government response, SBA is 
proposing to increase size standards where the data suggested increases 
are warranted, and to retain, in response to the COVID-19 pandemic and 
resultant economic impacts on small businesses, all current size 
standards where the data suggested lowering is appropriate. SBA is also 
retaining all current size standards where the data suggested no 
changes to the current size standards.
    Nonetheless, SBA considered two other alternatives. Alternative 
Option One was to propose changes exactly as suggested by the 
analytical results, including the evaluation of dominance in field of 
operation. In other words, Alternative Option One would entail 
increasing size standards for 150 industries or subindustries 
(``exceptions''), decreasing for 216 industries, and retaining at their 
current levels for 66 industries. Alternative Option Two was to retain 
all current size standards, even though the analytical results 
suggested that changes are warranted.
    SBA did not propose Alternative Option One, because it would cause, 
if adopted, a substantial number of currently small businesses to lose 
their small business status and hence to lose their eligibility for 
Federal small business assistance, especially small business set-aside 
contracts and SBA's financial assistance in some cases. Lowering size 
standards in the current environment would also run counter to various 
measures the Federal Government has implemented to help small 
businesses and the overall economy recover from the ongoing COVID-19 
pandemic. Considering the impacts of the Great Recession and Government 
actions that followed to support small businesses and the overall 
economy, SBA also adopted a general policy of not decreasing size 
standards during the first five-year review of size standards, even 
though the data supported decreases.
    As part of Alternative Option One, SBA also considered increasing 
150 size standards as suggested by the analytical results and 
mitigating the impact of decreases to 216 size standards by adjusting 
the calculated size standards to minimize the impact on small business 
access to Federal contracts and SBA's loans. However, considering the 
impact of the ongoing COVID-19 pandemic on businesses and the overall 
economy, in the Regulatory Impact Analysis section (below), SBA 
presents the impacts of adopting the analytical results without 
adjustment to Alternative Option One and proposes to retain all size 
standards for which the evaluation of principal industry and Federal 
contracting factors suggested reductions, and to adopt only the 
increases based on the analytical results.
    Under Alternative Option Two, given the current COVID-19 pandemic 
and resultant uncertainty, SBA considered retaining all size standards 
at their current levels even though the analytical results supported 
changes. Under this option, as the current situation evolves, SBA would 
be able to assess new data available on economic indicators, Federal 
procurement, and SBA loans before adopting changes to size standards. 
However, SBA is not adopting Alternative Option Two because the results 
discussed in the Regulatory Impact Analysis section show that retaining 
all size standards at their current levels would cause the otherwise 
qualified small businesses to forgo various small business benefits 
becoming available to them under the SBA's proposal of increasing 150 
and retaining 282 size standards. Such benefits would include access to 
Federal contracts set aside for small businesses and capital through 
SBA's loan and SBIC programs, and exemptions from paperwork and other 
compliance requirements.

Federal Procurement Size Standard for Nonmanufacturers

    Small business concerns must meet certain requirements when they 
offer to the Government an end item they did not manufacture, process, 
or produce. These requirements are known as the nonmanufacturer rule. 
The nonmanufacturer rule is codified in SBA's small business size 
regulations at 13 CFR 121.406.
    To qualify for a Federal Government supply contract set aside for 
small business, a nonmanufacturer must have an average of 500 or fewer 
employees over the past 12 months, be primarily engaged in the 
wholesale or retail trade activities, and supply the product of a U.S. 
small manufacturer.\4\ Under SBA's regulation, NAICS codes in Wholesale 
Trade (Sector 42) and Retail Trade (Sector 44-45) sectors cannot be 
used for classifying Federal Government acquisitions of supplies or 
products. Instead, the applicable manufacturing NAICS code associated 
with manufacturing, production, or processing of the product being 
procured must be used. For other purposes, such as SBA's financial 
assistance programs, SBA uses industry-based size standards in Sectors 
42 and 44-45 to determine eligibility of applicants in those sectors. 
In effect, the nonmanufacturer rule has resulted in two sets of size 
standards for industries in NAICS Sectors 42 and 44-45--industry-based 
size standards for SBA's financial assistance and other Federal non-
procurement programs and 500-employee size standard for Federal 
procurement programs under the nonmanufacturer rule.
---------------------------------------------------------------------------

    \4\ On November 2, 2021, SBA issued a proposed rule implementing 
section 863 of the National Defense Authorization Act for Fiscal 
Year 2021, Public Law 116-283, which changed the averaging period 
for calculating employees for SBA's employee-based size standards 
from 12 months to 24 months (86 FR 60396 (November 2, 2021)).
---------------------------------------------------------------------------

    SBA believes that, for purposes of determining eligibility for 
Federal set-aside procurement opportunities, using a single size 
standard is more appropriate than separate industry-based size 
standards for Wholesale or Retail Trade firms because firms in these 
sectors generally offer multiple products from different industries, 
and therefore identify themselves with multiple NAICS codes across a 
wide

[[Page 24814]]

spectrum of products and supplies. Thus, different size standards for 
individual industries in Wholesale Trade and Retail Trade under the 
nonmanufacturer rule would further complicate the contracting process, 
which already entails the decision to establish an applicable 
manufacturing NAICS code, along with its size standard, associated with 
manufacturing, production, or processing of the product being procured. 
Businesses and contracting officers would likely find it confusing if 
the principal NAICS code for a solicitation could vary based on factors 
other than the requirements prescribed at 13 CFR 121.402(b), which 
requires contracting officers to categorize solicitations by selecting 
the single NAICS code that best describes the principal purpose of the 
product being acquired.
    While the nonmanufacturer rule applies to firms primarily engaged 
in business activities within Sectors 42 and 44-45, SBA did not review 
the 500-employee nonmanufacturer size standard in a recently published 
proposed rule, which reviewed industry-based size standards in Sectors 
42 and 44-45 (86 FR 28012 (May 5, 2021)). In that proposed rule, SBA 
proposed to retain the nonmanufacturer size standard at 500 employees. 
Accordingly, in this proposed rule, SBA is examining whether the 
current 500-employee size standard for nonmanufacturers is appropriate. 
SBA received a total of nine comments to its May 5, 2021, proposed 
rule, one of which was submitted by Members of the U.S. House of 
Representatives Subcommittee on Contracting and Infrastructure 
requesting that SBA evaluate the current 500-employee size standard 
under the nonmanufacturer rule. Specifically, they expressed concern 
that because the level of revenues is immaterial to the determination 
of size under the 500-employee nonmanufacturer size standard, the 
current rule may allow a firm with billions of dollars in revenues to 
qualify as a small business. They suggested that SBA conduct an 
assessment of the nonmanufacturing industry based on revenue and/or 
other factors to determine what may be considered small for the size of 
a business qualifying as a nonmanufacturer.
    In response to the Congressional comment, SBA analyzed the size 
standard applicable to nonmanufacturers under the nonmanufacturer rule 
by comparing the employee-based average industry factors (i.e., average 
firm size, average assets, industry concentration, and distribution of 
firms by size) of all Wholesale Trade and Retail Trade industries 
combined with those of the manufacturing industries using the SBA's 
``Size Standards Methodology'' for employee-based size standards. SBA 
believes this approach is logical because Wholesale Trade and Retail 
Trade firms have to compete with manufacturers for supply or product 
contracts set aside for small businesses. Since NAICS codes in the 
Wholesale Trade and Retail Trade sectors cannot be used to classify 
Government acquisitions for supplies, and only the applicable 
manufacturing code can be applied (13 CFR 121.402(b)(2)), the Federal 
contracting factor is not considered in evaluating industry-based size 
standards in these sectors.
    The analytical results, presented in Table 13, Size Standards 
Supported by Each Factor for Nonmanufacturers (Employees), below, 
support raising the size standard for nonmanufacturers from 500 
employees to 550 employees. However, to maintain continuity with 
general public familiarity with and long acceptability of the 500-
employee size standard, SBA is proposing to maintain the current 500-
employee size standard which, in practice, continues to work well for 
the majority of firms to which it applies. Moreover, the 500-employee 
size standard is also the most common size standard among the 
manufacturing industries. It is a common practice for manufacturers to 
bid on supply contracts where they do not propose to produce the 
particular product to be supplied with their own labor force, 
notwithstanding that they are capable of doing so. Such manufacturers 
must qualify as small businesses under the nonmanufacturer rule. 
Therefore, in an effort to minimize the adverse consequences upon such 
concerns and promote fair competition among manufacturers and 
nonmanufacturers, SBA is proposing to adopt the predominant 500-
employee size standard for manufacturers as the size standard for 
nonmanufacturers who desire to bid on Federal supply contracts.

                                   Table 13--Size Standards Supported by Each Factor for Nonmanufacturers (Employees)
                                        [Upper value = calculated factor, lower value = size standard supported]
--------------------------------------------------------------------------------------------------------------------------------------------------------
              (1)                      (2)            (3)          (4)          (5)          (6)          (7)          (8)          (9)          (10)
NAICS code/NAICS sector title    Type...........       Simple     Weighted      Average    Four-firm         Gini      Federal   Calculated     Proposed
                                                      average      average  assets size        ratio  coefficient     contract         size         size
                                                         firm         firm  ($ million)          (%)                    factor     standard     standard
                                                         size         size                                                 (%)
                                                  (employees)  (employees)
--------------------------------------------------------------------------------------------------------------------------------------------------------
Wholesale Trade (Sector 42) &    Factor.........         21.1         63.3         $4.1          4.2        0.828  ...........  ...........  ...........
 Retail Trade (Sector 44-45).    Size Std.......          450          400          400          250        1,050  ...........          550          500
--------------------------------------------------------------------------------------------------------------------------------------------------------

    SBA also evaluated the size standard for nonmanufacturers by 
comparing the average receipts-based industry factors of all Wholesale 
Trade and Retail Trade industries combined with those of receipts-based 
industries to calculate a receipt-based size standard for 
nonmanufacturers. SBA calculated a receipts-based size standard for all 
industries in Wholesale Trade and Retail Trade combined to be $27.0 
million. Although SBA has evaluated a receipt-based size standard for 
nonmanufacturers, SBA believes that adopting a receipts-based size 
standard instead of an employee-based size standard would be 
inappropriate for several reasons. Specifically, the Small Business Act 
provides that the size of manufacturing firms be based on the number of 
employees and that the size of services firms be based on average 
annual receipts. Adopting a receipts-based size standard under the 
nonmanufacturer rule, which currently applies only to Government 
acquisitions for supplies, would cause many manufacturing concerns 
supplying products to the Government as nonmanufacturers under the 
nonmanufacturer rule to be evaluated under a receipts-based size 
standard. This would be contrary to the requirements of the Small 
Business Act.
    Moreover, based on data from the 2012 Economic Census, SBA 
determined that under the calculated $27.0 million receipt-based size 
standard, a significant number of firms would lose their small business 
status that they currently have under the 500-employee nonmanufacturer 
size

[[Page 24815]]

standard. SBA estimates that only 95.3% of the 975,625 firms in the 
Wholesale Trade and Retail Trade sectors would qualify as small under 
the $27.0 million receipts-based size standard whereas 99.1% of firms 
qualify as small under the current 500-employee nonmanufacturer size 
standard. Even if SBA were to adopt the maximum receipts-based size 
standard of $41.5 million as the size standard for nonmanufacturers, 
only 96.6% of firms in the Wholesale Trade and Retail Trade sectors 
would qualify as small. Thus, SBA believes that adopting a receipts-
based size standard could cause thousands of firms to lose their small 
business status and may likely lead to fewer set-aside opportunities 
for all small businesses since it would reduce the pool of eligible 
small firms that the Federal Government could select from when setting 
aside procurement of supplies for small businesses.
    Regarding the concern that firms with large revenues are eligible 
to receive small business set-aside contracts under the nonmanufacturer 
rule, SBA notes that revenues are not germane to the calculation of 
size for firms subject to SBA's employee-based size standards. 
Likewise, the number of employees is not germane to the calculation of 
size for firms subject to SBA's receipts-based size standards. Thus, 
firms under any size standard may argue that the size threshold for 
their industry is unfair because it may allow large firms under the 
non-germane measure of size to compete as a small business. However, 
SBA's selection of size measure is not discretionary for most 
industries. As stated previously, the Small Business Act provides that 
the size of manufacturing firms be based on the number of employees and 
that the size of services firms be based on average annual receipts. 
The choice of a size measure for an industry also depends on which 
measure that best represents the magnitude of operations of a business 
concern. That is, the measure should account for the level of real 
business activity generated by firms in the industry. Generally, SBA 
prefers employees as a measure of size in industries that are highly 
capital intensive, horizontally structured, or have low operational 
costs relative to receipts. When applied to the subset of firms 
participating in the Federal contracting market as nonmanufacturers, 
these considerations, when taken together, support an employee-based 
size standard for nonmanufacturers. However, although SBA proposes to 
retain the current 500-employee size standard for nonmanufacturers 
participating in the Federal contracting market, in the Request for 
Comments section below, SBA requests comments on the appropriateness of 
the current 500-employee size standard and suggestions for alternative 
measures to an employee-based size standard that would be more 
appropriate for size determination of nonmanufacturers.

Request for Comments

    SBA invites public comments on proposed size standards in this 
proposed rule, especially focusing on the following issues:
    1. SBA seeks feedback on whether SBA's proposal to increase 150 
employee-based size standards and retain 282 employee-based size 
standards is appropriate given the results from the latest available 
industry and Federal contracting data of each industry and subindustry 
(``exception'') reviewed in this proposed rule, along with ongoing 
uncertainty and impact on the economic activity due to the COVID-19 
pandemic. SBA also seeks suggestions, along with supporting facts and 
analysis, for alternative size standards, if they would be more 
appropriate than the proposed size standards in this rule.
    2. SBA seeks comments on whether SBA should retain size standards 
in view of the COVID-19 pandemic and its adverse impacts on small 
businesses as well as on the overall economy when the analytical 
results suggest they could be lowered. SBA believes that lowering size 
standards under the current economic environment would run counter to 
what Congress and the Federal Government are doing to aid and provide 
relief to the Nation's small businesses impacted by the COVID-19 
pandemic.
    3. SBA seeks feedback on whether SBA's proposal to maintain the 
current 500-employee size standard under the nonmanufacturer rule is 
appropriate given the results from the latest available industry data. 
SBA also seeks suggestions, along with supporting facts and analysis, 
on alternative size standards, such as annual receipts or a different 
level of employees, if they would be more appropriate than the current 
and proposed 500-employee size standard for nonmanufacturers. SBA also 
invites input on whether the Agency should allow the use of industry-
based size standards in Wholesale Trade and Retail Trade sectors to 
define whether a wholesaler or retailer is a small business concern for 
the acquisition of supplies.
    4. In calculating the overall industry size standard, SBA has 
assigned equal weight to each of the five primary factors in all 
industries and subindustries covered by this proposed rule. SBA seeks 
feedback on whether it should assign equal weight to each factor or on 
whether it should give more weight to one or more factors for certain 
industries or subindustries. Recommendations to weigh some factors 
differently than others should include suggested weights for each 
factor along with supporting facts and analysis.
    5. SBA seeks comments on the appropriateness of its proposal to, 
based on the results from dominance analysis, retain current size 
standards in certain industries for which analytical results supported 
increases. For those industries, based on the data from the 2012 
Economic Census, the share of industry receipts of a firm at the 
calculated size standard level was above the 40% threshold that SBA 
generally uses in determining whether the proposed or calculated size 
standard for the industry would include a dominant or potentially 
dominant firm qualifying as small. SBA invites industry analyses or 
suggestions for sources of more recent data that would show changes in 
industry structure, including a firm's share of industry receipts at 
various size thresholds.
    6. Line Haul Railroads (NAICS 482111) and Short Line Railroads 
(NAICS 482112) are not covered by the Economic Census. Based on the 
evaluation of economic characteristics of these industries using the 
data from the Railroad Retirement Board (RRB) and American Short Line 
and Regional Railroad Association (ASLRRA), SBA is proposing to retain 
the current 1.500-employee size standard for both NAICS 482111 and 
482112. SBA invites comments, along with supporting information, on 
this proposal as well as sources of data that more clearly define the 
economic characteristics of these industries.
    7. The Economic Census tabulation does not provide the data to 
evaluate the size standard for the Information Technology Value Added 
Resellers (ITVAR) exception to NAICS 541519 (Other Computer Related 
Services). Based on the analysis of the FPDS-NG and SAM data, SBA is 
proposing to retain the current 150-employee size standard for the 
ITVAR exception. SBA invites comments, along with supporting 
information, on this proposal as well as suggestions for alternative 
sources of data that more clearly define the economic characteristics 
of ITVARs.
    8. Finally, SBA seeks comments on data sources it used to examine 
industry

[[Page 24816]]

and Federal market conditions, as well as suggestions on relevant 
alternative data sources that the Agency should evaluate in reviewing 
or modifying size standards for industries or subindustries covered by 
this proposed rule.
    Public comments on the above issues are very valuable to SBA for 
validating its proposed size standards revisions in this proposed rule. 
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 the application of 
size standards for Federal procurement programs, SBA suggests that 
commenters provide information on the size of contracts in their 
industries, 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 Order 12866, the Congressional Review Act (5 
U.S.C. 801-808), the Regulatory Flexibility Act (5 U.S.C. 601-612), 
Executive Orders 13563, 12988, and 13132, and the Paperwork Reduction 
Act (44 U.S.C. Ch. 35)

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, in the next section SBA provides a 
Regulatory Impact Analysis of this proposed rule, including: (1) A 
statement of the need for the proposed action, (2) An examination of 
alternative approaches, and (3) An evaluation of the benefits and 
costs--both quantitative and qualitative--of the proposed action and 
the alternatives considered.

Regulatory Impact Analysis

1. What is the need for this regulatory action?
    SBA's mission is to aid and assist small businesses through a 
variety of financial, procurement, business development and counseling, 
and disaster assistance programs. To determine the actual intended 
beneficiaries of these programs, SBA establishes numerical size 
standards by industry to identify businesses that are deemed small. 
Under the Small Business Act (Act) (15 U.S.C. 632(a)), SBA's 
Administrator is responsible for establishing small business size 
definitions (or ``size standards'') and ensuring that such definitions 
vary from industry to industry to reflect differences among various 
industries. The Jobs Act requires SBA to review every five years all 
size standards and make necessary adjustments to reflect current 
industry and Federal market conditions. This proposed rule is part of 
the second five-year review of size standards in accordance with the 
Jobs Act. The first five-year review of size standards was completed in 
early 2016. Such periodic reviews of size standards provide SBA with an 
opportunity to incorporate ongoing changes to industry structure and 
Federal market environment into size standards and to evaluate the 
impacts of prior revisions to size standards on small businesses. This 
also provides SBA with an opportunity to seek and incorporate public 
input to the size standards review and analysis. SBA believes that 
proposed size standards revisions for industries being reviewed in this 
rule will make size standards more reflective of the current economic 
characteristics of businesses in those industries and the latest trends 
in Federal marketplace.
    The proposed revisions to the existing employee-based size 
standards for 150 industries or subindustries (or ``exceptions''), 
including 120 industries in Sector 31-33 and 30 industries and 
subindustries in other sectors are consistent with SBA's statutory 
mandates to help small businesses grow and create jobs and to review 
and adjust size standards every five years. This regulatory action 
promotes the Administration's goals and objectives as well as meets the 
SBA's statutory responsibility. One of SBA's goals in support of 
promoting the Administration's objectives is to help small businesses 
succeed through fair and equitable access to capital and credit, 
Federal Government contracts and purchases, and management and 
technical assistance. Reviewing and modifying size standards, when 
appropriate, ensures that intended beneficiaries are able to access 
Federal small business programs that are designed to assist them to 
become competitive and create jobs.
2. What are the potential benefits and costs of this regulatory action?
    OMB directs agencies to establish an appropriate baseline to 
evaluate any benefits, costs, or transfer impacts of regulatory actions 
and alternative approaches considered. The baseline should represent 
the agency's best assessment of what the world would look like absent 
the regulatory action. For a new regulatory action promulgating 
modifications to an existing regulation (such as modifying the existing 
size standards), a baseline assuming no change to the regulation (i.e., 
making no changes to current size standards) generally provides an 
appropriate benchmark for evaluating benefits, costs, or transfer 
impacts of proposed regulatory changes and their alternatives.
Proposed Changes to Size Standards
    Based on the results from the analyses of the latest industry and 
Federal contracting data, as well as consideration of impact of size 
standards changes on small businesses and significant adverse impacts 
of the COVID-19 emergency on small businesses and the overall economic 
activity, of the total of 432 industries and subindustries (or 
``exceptions'') in Sector 31-33 and other sectors that have employee-
based size standards, SBA proposes to increase size standards for 150 
industries or subindustries (``exceptions'') and maintain current size 
standards for the remaining 282 industries or subindustries 
(``exceptions'').
The Baseline
    For purposes of this regulatory action, the baseline represents 
maintaining the ``status quo,'' i.e., making no changes to the current 
size standards. Using the number of small businesses and levels of 
benefits (such as set-aside contracts, SBA's loans, disaster 
assistance, etc.) they receive under the current size standards as a 
baseline, one can examine the potential benefits, costs, and transfer 
impacts of proposed changes to size standards on small businesses and 
on the overall economy.
    Based on the 2012 Economic Census (the latest available when this 
proposed rule was prepared), of a total of about 337,524 businesses in 
industries in Sectors 31-33 and other sectors with employee-based size 
standards, 96.9% are considered small under the current size standards. 
That percentage varies from 86.1% in NAICS Sector 22 to 99.8% in Sector 
11. Based on the data from FPDS-NG for fiscal years 2018-2020, about 
43,168 unique firms in those industries received at least one Federal 
contract during that period, of which 83.6% were small under the 
current size standards. A total of $231 billion in average annual 
contract dollars were awarded to businesses in those industries during 
the period of evaluation, and 18.6% of the dollars awarded went to 
small businesses. For industries and subindustries (``exceptions'') 
reviewed in this proposed rule, providing contract

[[Page 24817]]

dollars to small business through set-asides is quite important. From 
the total small business contract dollars awarded during the period 
considered, 47.1% were awarded through various small business set-aside 
programs and 52.9% were awarded through non-set aside contracts. Based 
on the SBA's internal data on its loan programs for fiscal years 2018-
2020, small businesses in those industries received, on an annual 
basis, a total of 4,997 7(a) and 504 loans in that period, totaling 
about $3.1 billion, of which 75.7% was issued through the 7(a) program 
and 24.3% was issued through the 504/CDC program. During fiscal years 
2018-2020, small businesses in those industries also received 243 loans 
through the SBA's Economic Injury Disaster Loan (EIDL) program, 
totaling about $10.7 million on an annual basis.\5\ Table 14, Baseline 
for All Industries, below, provides these baseline results by 
Manufacturing (Sector 31-33) and all other sectors.
---------------------------------------------------------------------------

    \5\ The analysis of the disaster loan data excludes physical 
disaster loans that are available to anyone regardless of size, 
disaster loans issued to nonprofit entities, and EIDLs issued under 
the COVID-19 relief program. Effective January 1, 2022, SBA stopped 
accepting applications for new COVID EIDL loans or advances. Thus, 
the disaster loan analysis presented here pertains to the regular 
EIDL loans only.
    SBA estimates impacts of size standards changes on EIDL loans by 
calculating the ratio of businesses getting EIDL loans to total 
small businesses (based on the Economic Census data) and multiplying 
it by the number of impacted small firms. Due to data limitations, 
for FY 2019-20, some loans with both physical and EIDL loan 
components could not be broken into the physical and EIDL loan 
amounts. In such cases, SBA applied the ratio of EIDL amount to 
total (physical loan + EIDL) amount using FY 2016-18 data to the FY 
2019-20 data to obtain the amount attributable to the EIDL loans.

                       Table 14--Baseline for All Industries Under Current Size Standards
----------------------------------------------------------------------------------------------------------------
                                                                   Sector 31-33    Other sectors       Total
----------------------------------------------------------------------------------------------------------------
Number of industries or subindustries (``exceptions'') reviewed              360              72             432
 in this proposed rule..........................................
Total firms in industries reviewed in this proposed rule (2012           266,774          70,750         337,524
 Economic Census) \1\...........................................
Total small firms in those industries under current size                 258,290          68,679         326,969
 standards (2012 Economic Census) \1\...........................
Small firms as % of total firms (2012 Economic Census) \1\......           96.8%           97.1%           96.9%
Total contract dollars ($ million) (FPDS-NG FY 2018-2020).......        $181,818         $49,198        $231,016
Total small business contract dollars under current standards ($         $28,713         $14,326         $43,039
 million) (FPDS-NG FY2016-2018).................................
Small business dollars as % of total dollars (FPDS-NG FY 2018-             15.8%           29.1%           18.6%
 2020)..........................................................
Total number of unique firms getting Federal contracts (FPDS-NG           34,209           8,959          43,168
 FY 2018-2020)..................................................
Total number of unique small firms getting small business                 29,037           7,065          36,102
 contracts (FPDS-NG FY 2018-2020)...............................
Small firms getting Federal contracts as % of total firms                  84.9%           78.9%           83.6%
 getting Federal contracts (FPDS-NG FY 2018-2020)...............
Number of 7(a) and 504/CDC loans (FY 2018-2020).................           4,484             513           4,997
Amount of 7(a) and 504 loans ($ million) (FY 2018-2020).........          $2,863            $235          $3,098
Number of EIDL loans (FY 2018-2020) \2\.........................             202              41             243
Amount of EIDL loans ($million) (FY 2018-2020) \2\..............            $8.3            $2.4           $10.7
----------------------------------------------------------------------------------------------------------------
\1\ These figures do not include two 6-digit NAICS industries and 5 subindustries or ``exceptions'' for which
  Economic Census data is not available.
\2\ Excludes COVID-19 related EIDL loans due to their temporary nature. Effective January 1, 2022, SBA stopped
  accepting applications for new COVID EIDL loans or advances.

Increases to Size Standards
    As stated above, of 432 employee-based size standards in Sectors 
31-33 and other sectors that are reviewed in this rule, based on the 
results from analyses of latest industry and Federal market data as 
well as impacts of size standards changes on small businesses and 
considerations for the impacts from the COVID-19 pandemic, SBA proposes 
to increase 150 size standards, including 120 in Sector 31-33 and 30 in 
other sectors. Below are descriptions of the benefits, costs, and 
transfer impacts of these proposed increases to size standards.
Benefits of Increases to Size Standards
    The most significant benefit to businesses from proposed increases 
to size standards is gaining eligibility for Federal small business 
assistance programs or retaining that eligibility for a longer period. 
These include SBA's business loan programs, EIDL program, and Federal 
procurement programs intended for small businesses. Federal procurement 
programs provide targeted, set-aside opportunities for small businesses 
under SBA's various business development and contracting programs. 
These include the 8(a)/Business Development (BD) Program, the Small 
Disadvantaged Businesses (SDB) Program, the Historically Underutilized 
Business Zones (HUBZone) Program, the Women-Owned Small Businesses 
(WOSB) Program, the Economically Disadvantaged Women-Owned Small 
Businesses (EDWOSB) Program, and the Service-Disabled Veteran-Owned 
Small Businesses (SDVOSB) Program.
    Besides set-aside contracting and financial assistance discussed 
above, small businesses also benefit through reduced fees, less 
paperwork, and fewer compliance requirements that are available to 
small businesses through the Federal Government programs. However, SBA 
has no data to estimate the number of small businesses receiving such 
benefits.
    Based on the 2012 Economic Census (latest available when this 
proposed rule was prepared), SBA estimates that in 150 industries or 
subindustries (``exceptions'') in NAICS Sector 31-33 and other sectors 
with employee-based size standards for which it has proposed to 
increase size standards, 248 firms (see Table 15), not small under the 
current size standards, will become small under the proposed size 
standards increases and therefore become eligible for these programs. 
That represents about 0.3% of all firms classified as small under the 
current size standards in industries for which SBA has proposed 
increasing size standards. If adopted, proposed size standards would 
result in an increase to the small business share of total receipts in 
those industries from 26.0% to 26.5%.
    With more businesses qualifying as small under the proposed 
increases to size standards, Federal agencies will have a larger pool 
of small businesses from which to draw for their small business 
procurement programs.

[[Page 24818]]

Growing small businesses that are close to exceeding the current size 
standards will be able to retain their small business status for a 
longer period under the higher size standards, thereby enabling them to 
continue to benefit from the small business programs.
    Based on the FPDS-NG data for fiscal years 2018-2020, SBA estimates 
that 111 firms that are active in Federal contracting in those 
industries would gain small business status under the proposed size 
standards. Based on the same data, SBA estimates that those newly-
qualified small businesses under the proposed increases to size 
standards, if adopted, could receive Federal small business contracts 
totaling $253 million annually. That represents a 2.4% increase to 
small business contract dollars from the baseline. Table 15, Impacts of 
Proposed Increases to Size Standards, provides these results by NAICS 
sector.
    The added competition from more businesses qualifying as small can 
result in lower prices to the Government for procurements set aside or 
reserved for small businesses, but SBA cannot quantify this impact. 
Costs could be higher when full and open contracts are awarded to 
HUBZone businesses that receive price evaluation preferences. However, 
with agencies likely setting aside more contracts for small businesses 
in response to the availability of a larger pool of small businesses 
under the proposed increases to size standards, HUBZone firms might 
receive more set-aside contracts and fewer full and open contracts, 
thereby resulting in some cost savings to agencies. SBA cannot estimate 
such cost savings as it is impossible to determine the number and value 
of unrestricted contracts to be otherwise awarded to HUBZone firms will 
be awarded as set-asides. However, such cost savings are likely to be 
relatively small as only a small fraction of full and open contracts 
are awarded to HUBZone businesses.
    As shown in Table 15, under SBA's 7(a) and 504 loan programs, based 
on the data for fiscal years 2018-2020, SBA estimates up to about 9 SBA 
7(a) and 504 loans totaling about $5.6 million could be made to these 
newly-qualified small businesses in those industries under the proposed 
size standards. That represents a 0.7% increase to the loan amount 
compared to the baseline.

                            Table 15--Impacts of Proposed Increases to Size Standards
----------------------------------------------------------------------------------------------------------------
                                                                   Sector 31-33    Other sectors       Total
----------------------------------------------------------------------------------------------------------------
Number of industries or subindustries (``exceptions'') with                  120              30             150
 proposed increases to size standards...........................
Total current small businesses in industries with proposed                68,925           5,914          74,839
 increases to size standards (2012 Economic Census) \1\.........
Additional firms qualifying as small under proposed increases to             194              54             248
 size standards (2012 Economic Census) \1\......................
% of additional firms qualifying as small relative to current               0.3%            0.9%            0.3%
 small businesses in industries with proposed increases to size
 standards (2012 Economic Census) \1\...........................
Number of current unique small firms getting small business               13,759             815          14,574
 contracts in industries with proposed increases to size
 standards (FPDS-NG FY 2018-2020) \2\...........................
Additional number of small business firms gaining small business              87              24             111
 status under proposed increases to size standards (FPDS-NG FY
 2018-2020).....................................................
% increase to number of small businesses relative to current                0.6%            2.9%            0.8%
 unique small firms getting small business contracts in
 industries with proposed increases to size standards (FPDS-NG
 FY 2018-2020)..................................................
Total small business contract dollars under current size                  $9,465          $1,243         $10,708
 standards in industries or subindustries with proposed
 increases to size standards ($ million) (FPDS-NG FY 2018-2020).
Estimated small business dollars available to newly-qualified                $73            $180            $253
 small firms ($ million) (FPDS-NG FY 2018-2020) \3\.............
% increase to small business dollars relative to total small                0.8%           14.6%            2.4%
 business contract dollars under current standards in industries
 with proposed increases to size standards......................
Total number of 7(a) and 504 loans to small business in                    1,144              62           1,206
 industries with proposed increases to size standards (FY 2018-
 2020)..........................................................
Total amount of 7(a) and 504 loans to small businesses in                   $741            $350            $776
 industries with proposed increases to size standards ($
 million) (FY 2018-2020)........................................
Estimated number of 7(a) and 504 loans to newly-qualified small                5               4               9
 firms..........................................................
Estimated 7(a) and 504 loan amount to newly-qualified small                 $3.2            $2.4            $5.6
 firms ($ million)..............................................
% increase to 7(a) and 504 loan amount relative to the total                0.4%            7.0%            0.7%
 amount of 7(a) and 504 loans in industries with proposed
 increases to size standards....................................
Total number of EIDL loans to small businesses in industries                  67              12              79
 with proposed increases to size standards (FY 2018-2020) \4\...
Total amount of EIDL loans to small businesses in industries                $2.9            $0.8            $3.7
 with proposed increases to size standards ($ million) (FY 2018-
 2020) \4\......................................................
Estimated no. of EIDL loans to newly-qualified small firms \4\..               3               4               7
Estimated EIDL loan amount to newly-qualified small firms ($                $0.1            $0.2            $0.3
 million) \4\...................................................
% increase to EIDL loan amount relative to the total amount of              4.5%           36.3%            9.1%
 disaster loans in industries with proposed increases to size
 standards \4\..................................................
----------------------------------------------------------------------------------------------------------------
\1\ These figures do not include two 6-digit NAICS industries and 5 subindustries or ``exceptions'' for which
  Economic Census data is not available.
\2\ Total impact represents total unique number of firms impacted to avoid double counting as some firms
  participate in more than one industry.
\3\ Additional dollars are calculated multiplying average small business dollars obligated per unique firm times
  change in number of firms. Numbers of firms are calculated using the SBA's current size standards, not the
  contracting officer's size designation.
\4\ Excludes COVID-19 related EIDL loans due to their temporary nature. Effective January 1, 2022, SBA stopped
  accepting applications for new COVID EIDL loans or advances.


[[Page 24819]]

    Newly-qualified small businesses will also benefit from the SBA's 
EIDL program. Since the benefit provided through this program is 
contingent on the occurrence and severity of a disaster in the future, 
SBA cannot make a precise estimate of this impact. However, based on 
the disaster loan program data for fiscal years 2018-2020, SBA 
estimates that, on an annual basis, the newly-defined small businesses 
under the proposed increases to size standards, if adopted, could 
receive seven disaster loans, totaling about $0.3 million. 
Additionally, the newly-defined small businesses would also benefit 
through reduced fees, less paperwork, and fewer compliance requirements 
that are available to small businesses through the Federal Government, 
but SBA has no data to quantify this impact.
Costs of Increases to Size Standards
    Besides having to register in the System of Award Management (SAM) 
to be eligible to participate in Federal contracting and update the SAM 
profile annually, small businesses incur no direct costs to gain or 
retain their small business status as a result of proposed increases to 
size standards. All businesses willing to do business with the Federal 
Government must register in SAM and update their SAM profiles annually, 
regardless of their size status. SBA believes that a vast majority of 
impacted businesses that are willing to participate in Federal 
contracting are already registered in SAM and update their SAM profiles 
annually. More importantly, this proposed rule does not establish the 
new size standards for the very first time; rather it intends to modify 
the existing size standards in accordance with a statutory requirement, 
the latest data, and other relevant factors.
    To the extent that the newly-qualified small businesses could 
become active in Federal procurement, the proposed increases to size 
standards, if adopted, may entail some additional administrative costs 
to the Federal Government as a result of more businesses qualifying as 
small for Federal small business programs. For example, there will be 
more firms seeking SBA's loans, more firms eligible for enrollment in 
the Dynamic Small Business Search (DSBS) database or in 
certify.sba.gov, more firms seeking certification as 8(a)/BD or HUBZone 
firms or qualifying for small business, SDB, WOSB, EDWOSB, and SDVOSB 
status, and more firms applying for SBA's 8(a)/BD mentor-
prot[eacute]g[eacute] programs. With an expanded pool of small 
businesses, it is likely that Federal agencies would set aside more 
contracts for small businesses under the proposed increases to size 
standards. One may surmise that this might result in a higher number of 
small business size protests and additional processing costs to 
agencies. However, the SBA's historical data on the number of size 
protests processed shows that the number of size protests decreased 
following the increases to size standards as part of the first five-
year review of size standards. Specifically, on an annual basis, the 
number of size protests fell from about 600 during fiscal years 2011-
2013 (review of most receipts-based size standards was completed by the 
end of FY 2013), as compared to about 500 during fiscal years 2018-2020 
when size standard increases were in effect. That represents a 17% 
decline.
    Among those newly-defined small businesses seeking SBA's loans, 
there could be some additional costs associated with verification of 
their small business status. However, small business lenders have an 
option of using the tangible net worth and net income based alternative 
size standard instead of using the industry-based size standards to 
establish eligibility for SBA's loans. For these reasons, SBA believes 
that these added administrative costs will be minor because necessary 
mechanisms are already in place to handle these added requirements.
    Additionally, some Federal contracts may possibly have higher 
costs. With a greater number of businesses defined as small due to the 
proposed increases to size standards, Federal agencies may choose to 
set aside more contracts for competition among small businesses only 
instead of using a full and open competition. The movement of contracts 
from unrestricted competition to small business set-aside contracts 
might result in competition among fewer total bidders, although there 
will be more small businesses eligible to submit offers under the 
proposed size standards. However, the additional costs associated with 
fewer bidders are expected to be minor since, by law, procurements may 
be set aside for small businesses under the 8(a)/BD, SDB, HUBZone, 
WOSB, EDWOSB, or SDVOSB programs only if awards are expected to be made 
at fair and reasonable prices.
    Costs may also be higher when full and open contracts are awarded 
to HUBZone businesses that receive price evaluation preferences. 
However, with agencies likely setting aside more contracts for small 
businesses in response to the availability of a larger pool of small 
businesses under the proposed increases to size standards, HUBZone 
firms might end up getting fewer full and open contracts, thereby 
resulting in some cost savings to agencies. However, such cost savings 
are likely to be minimal as only a small fraction of unrestricted 
contracts are awarded to HUBZone businesses.
Transfer Impacts of Increases to Size Standards
    The proposed increases to 150 size standards, if adopted, may 
result in some redistribution of Federal contracts between the newly-
qualified small businesses and large businesses and between the newly-
qualified small businesses and small businesses under the current 
standards. However, it would have no impact on the overall economic 
activity since total Federal contract dollars available for businesses 
to compete for will not change with changes to size standards. While 
SBA cannot quantify with certainty the actual outcome of the gains and 
losses from the redistribution contracts among different groups of 
businesses, it can identify several probable impacts in qualitative 
terms. With the availability of a larger pool of small businesses under 
the proposed increases to size standards, some unrestricted Federal 
contracts which would otherwise be awarded to large businesses may be 
set aside for small businesses. As a result, large businesses may lose 
some Federal contracting opportunities. Similarly, some small 
businesses under the current size standards may obtain fewer set aside 
contracts due to the increased competition from larger businesses 
qualifying as small under the proposed increases to size standards. 
This impact may be offset by a greater number of procurements being set 
aside for all small businesses. With larger businesses qualifying as 
small under the higher size standards, smaller small businesses could 
face some disadvantage in competing for set aside contracts against 
their larger counterparts. However, SBA cannot quantify these impacts.
3. What alternatives have been considered?
    Under OMB Circular A-4, SBA is required to consider regulatory 
alternatives to the proposed changes in the proposed rule. In this 
section, SBA describes and analyzes two such alternatives to the 
proposed rule. Alternative Option One, a more stringent alternative to 
the SBA's proposal, would propose adopting size standards based solely 
on the analytical results. In other words, the size standards of 150 
industries or subindustries (or ``exceptions'') for which the 
analytical results, as

[[Page 24820]]

presented in Table 4 (above), suggested raising size standards would be 
raised. However, the size standards of 216 industries for which the 
analytical results suggest lowering size standards would be lowered. 
For the 66 remaining industries or subindustries for which the results 
suggested no changes, size standards would be maintained at their 
current levels. Alternative Option Two would propose retaining existing 
size standards for all industries, given the uncertainty generated by 
the ongoing COVID-19 pandemic. Below, SBA discusses benefits, costs and 
net impacts of each option.
Alternative Option One: Adopting All Calculated Size Standards
    As discussed in the Alternatives Considered section of this 
proposed rule, Alternative Option One would cause a substantial number 
of currently small businesses to lose their small business status and 
hence to lose their access to Federal small business assistance, 
especially small business set-aside contracts and SBA's financial 
assistance in some cases. These consequences could be mitigated. For 
example, in response to the 2008 Financial Crisis and economic 
conditions that followed, SBA adopted a general policy in the first 
five-year review of size standards to not lower any size standard 
(except to exclude one or more dominant firms) even when the analytical 
results suggested the size standard should be lowered. Currently, 
because of the economic challenges presented by the COVID-19 pandemic 
and the measures taken to protect public health, SBA has decided to 
propose the same general policy of not lowering size standards in the 
ongoing second five-year review of size standards review as well.
    The primary benefits of adopting Alternative Option One would 
include: (1) SBA's procurement, management, technical and financial 
assistance resources would be targeted to their intended beneficiaries 
according to the analytical results; (2) Adopting the size standards 
based on the analytical results would also promote consistency and 
predictability of SBA's implementation of its authority to set or 
adjust size standards; and (3) Firms who would remain small would face 
less competition from larger small firms for the remaining set aside 
opportunities. Specifically, SBA seeks comment on the impact of 
adopting the size standard based on the analytical results.
    As explained in the ``Size Standards Methodology'' white paper, in 
addition to adopting all results of the analysis of the primary 
factors, SBA evaluates other relevant factors as needed such as the 
impact of the reductions or increases of size standards on the 
distribution of contracts awarded to small businesses, and may adopt 
different results with the intention of mitigating potential negative 
impacts.
    We have already discussed the benefits, costs and transfer impacts 
of increasing 150 and retaining 282 size standards. Below we discuss 
the benefits, costs, and transfer impacts of decreasing 216 size 
standards based on the analytical results.
Benefits of Decreases to Size Standards
    The most significant benefit to businesses from decreases to size 
standards when SBA's analysis suggests such decreases is to ensure that 
size standards are more reflective of latest industry structure and 
Federal market trends and that Federal small business assistance is 
more effectively targeted to its intended beneficiaries. These include 
SBA's loan programs, disaster program, and Federal procurement programs 
intended for small businesses. Federal procurement programs provide 
targeted, set-aside opportunities for small businesses under SBA's 
business development programs, such as small business, 8(a)/BD, 
HUBZone, WOSB, EDWOSB, and SDVOSB programs. The adoption of smaller 
size standards when the results support them diminishes the risk of 
awarding contracts to firms which are not small anymore.
    Decreasing size standards may reduce the administrative costs of 
the Government, because the risk of awarding set aside contracts to 
other than small businesses may diminish when the size standards 
reflect better the structure of the market. This may also reduce the 
risks of providing SBA's loans to firms that are not needing them the 
most or of allowing firms that are not eligible for small business set-
asides to participate on the SBA procurement programs, which might 
provide a better chance for smaller firms to grow and benefit from the 
opportunities available on the Federal market, and strengthen the small 
business industrial base for the Federal Government. In this proposed 
rule, SBA is proposing to decrease the size standard for NAICS 221118 
in order to exclude dominant firms from obtaining small business status 
in this industry. As explained in more detail in the Evaluation of 
Dominance in Field of Operation sections, based on the evaluation of 
the latest available industry data, SBA does not anticipate that 
decreasing the size standard for this industry will impact any 
currently small firms.
Costs of Decreases to Size Standards
    Table 16, Impacts of Decreases to Size Standards Under Alternative 
Option One, shows the various impacts of lowering size standards in 216 
industries based solely on the analytical results. Based on the 2012 
Economic Census, about 620 (0.3%) firms would lose their small business 
status under Alternative Option One. Similarly, based on the FPDS-NG 
data for fiscal years 2018-2020, 167 (0.7%) small businesses 
participating in Federal contracting would lose their small status and 
become ineligible to compete for set-aside contracts. With fewer 
businesses qualifying as small under the decreases to size standards, 
Federal agencies will have a smaller pool of small businesses from 
which to draw for their small business procurement programs. For 
example, in Alternative Option One, during fiscal years 2018-2020, 
agencies awarded, on an annual basis, about $28.0 billion in small 
business contracts in those 216 industries for which this option 
considered decreasing size standards. Table 16 shows that lowering size 
standards in 216 industries would reduce Federal contract dollars 
awarded to small businesses by $247 million or about 0.9% relative to 
the baseline level. Because of the importance of these industries for 
the Federal procurement, SBA may adopt mitigating measures to reduce 
the negative impact. SBA could take one or more of the following three 
actions: (1) Accept decreases in size standards as suggested by the 
analytical results; (2) Decrease size standards by a smaller amount 
than the calculated threshold; or (3). Retain the size standards at 
their current levels.

                  Table 16--Impacts of Decreases to Size Standards Under Alternative Option One
----------------------------------------------------------------------------------------------------------------
                                                                   Sector 31-33    Other sectors       Total
----------------------------------------------------------------------------------------------------------------
Number of industries for which SBA considered decreasing size                187              29             216
 standards......................................................
Total current small businesses in industries for which SBA               164,271          55,876         220,147
 considered decreasing size standards (2012 Economic Census)....

[[Page 24821]]

 
Estimated number of firms losing small status in industries for              512             108             620
 which SBA considered decreasing size standards (2012 Economic
 Census)........................................................
% of firms losing small status relative to current small                   0.31%            0.2%            0.3%
 businesses in industries for which SBA considered decreasing
 size standards (2012 Economic Census)..........................
Number of current unique small firms getting small business               19,342           6,020          24,632
 contracts in industries for which SBA considered decreasing
 size standards (FPDS-NG FY 2018-2020) \1\......................
Estimated number of small business firms that would have lost                130              50             167
 small business status in industries for which SBA considered
 decreasing size standards (FPDS-NG FY 2018-2020) \1\...........
% decrease to small business firms relative to current unique               0.7%            0.8%            0.7%
 small firms getting small business contracts in industries for
 which SBA considered decreasing size standards (FPDS-NG FY 2018-
 2020) \1\......................................................
Total small business contract dollars under current size                 $15,261          12,990         $28,251
 standards in industries for which SBA considered decreasing
 size standards ($ million) (FPDS-NG FY 2018-2020)..............
Estimated small business dollars not available to firms losing              $127            $120            $247
 small business status in industries for which SBA considered
 decreasing size standards ($ million) (FPDS-NG FY 2018-2020)
 \2\............................................................
% decrease to small business dollars relative to total small                0.8%            0.9%            0.9%
 business contract dollars under current size standards in
 industries for which SBA considered decreasing size standards..
Total number of 7(a) and 504 loans to small businesses in                  2,886             389           3,275
 industries for which SBA considered decreasing size standards
 (FY 2018-2020).................................................
Total amount of 7(a) and 504 loans to small businesses in                 $1,817            $171          $1,988
 industries for which SBA considered decreasing size standards
 ($ million) (FY 2018-2020).....................................
Estimated number of 7(a) and 504 loans not available to firms                 10               7              17
 that would have lost small business status in industries for
 which SBA considered decreasing size standards.................
Estimated 7(a) and 504 loan amount not available to firms that              $6.5            $3.2            $9.7
 would have lost small status ($ million).......................
% decrease to 7(a) and 504 loan amount relative to the total                0.4%            1.9%            0.5%
 amount of 7(a) and 504 loans in industries for which SBA
 considered decreasing size standards...........................
Total number of EIDL loans to small businesses in industries for             113              28             141
 which SBA considered decreasing size standards (FY 2018-2020)
 \3\............................................................
Total amount of EIDL loans to small businesses in industries for            $3.9            $1.6            $5.5
 which SBA considered decreasing size standards ($ million) (FY
 2018-2020) \3\.................................................
Estimated number of EIDL loans not available to firms that would               3               6               9
 have lost small business status in industries for which SBA
 considered decreasing size standards \3\.......................
Estimated EIDL loan amount not available to firms that would                $0.1            $0.4            $0.5
 have lost small business status ($ million) \3\................
% decrease to EIDL loan amount relative to the baseline \3\.....            2.7%           23.8%            8.7%
----------------------------------------------------------------------------------------------------------------
\1\ Total impact represents total unique number of firms impacted to avoid double counting as some firms
  participate in more than one industry.
\2\ Additional dollars are calculated multiplying average small business dollars obligated per unique small firm
  times change in number of firms. Numbers of firms are calculated using the SBA's current size standards, not
  the contracting officer's size designation.
\3\ Excludes COVID-19 related EIDL loans due to their temporary nature. Effective January 1, 2022, SBA stopped
  accepting applications for new COVID EIDL loans or advances.

    Nevertheless, since Federal agencies are still required to meet the 
statutory small business contracting goal of 23%, actual impacts on the 
overall set-aside activity is likely to be smaller as agencies are 
likely to award more set-aside contracts to small businesses that 
continue to remain small under the reduced size standards so that they 
could meet their small business contracting goals.
    With fewer businesses qualifying as small, the decreased 
competition can also result in higher prices to the Government for 
procurements set aside or reserved for small businesses, but SBA cannot 
quantify this impact. Lowering size standards may cause current small 
business contract or option holders to lose their small business 
status, thereby making those dollars unavailable to count toward the 
agencies' small business procurement goals. Additionally, impacted 
small businesses will be unable to compete for upcoming options as 
small businesses.
    As shown in Table 16, decreases to size standards would have a very 
minor impact on small businesses applying for SBA's 7(a) and 504 loans 
because a vast majority of such loans are issued to businesses that are 
far below the current or calculated size standards. For example, based 
on the loan data for fiscal years 2018-2020, SBA estimates that about 
17 of SBA's 7(a) and 504 loans with total amounts of $9.7 million could 
not be made to those small businesses that would lose eligibility under 
the calculated size standards. That represents about 0.5% decrease to 
the loan amount compared to the baseline. However, the actual impact on 
businesses seeking SBA's loans could be much less as businesses losing 
small business eligibility under the decreases to industry-based size 
standards could still qualify for SBA's 7(a) and CDC/504 loans under 
the tangible net worth and net income-based alternative size standard.
    Businesses losing small business status would also be impacted in 
terms of access to loans through the SBA's EIDL program. However, SBA 
expects such impact to be minimal as only a small number of businesses 
in those industries received such loans during fiscal years 2018-2020. 
Additionally, all those businesses were below the calculated size 
standards. Since this program is contingent on the occurrence and 
severity of a disaster in the future, SBA cannot make a precise 
estimate of this impact. However, based on the disaster loan data for 
fiscal years 2018-2020, SBA estimates that, under Alternative Option 
One, about nine SBA's disaster loans totaling $0.5 million could not be 
made to those small businesses that would lose

[[Page 24822]]

eligibility under the calculated size standards (see Table 16).
    Small businesses becoming other than small if size standards were 
decreased might lose benefits through reduced fees, less paperwork, and 
fewer compliance requirements that are available to small businesses 
through the Federal Government programs, but SBA has no data to 
quantify this impact. However, if agencies determine that SBA's size 
standards do not adequately serve such purposes, they can establish a 
different size standard with an approval from SBA if they are required 
to use SBA's size standards for their programs.
Transfer Impacts of Decreases to Size Standards
    If the size standards were decreased under alternative option one, 
it may result in a redistribution of Federal contracts between small 
businesses losing their small business status and large businesses and 
between small businesses losing their small business status and small 
businesses remaining small under the reduced size standards. However, 
as under the proposed increases to size standards, it would have no 
impact on the overall economic activity since the total Federal 
contract dollars available for businesses to compete for will stay the 
same. While SBA cannot estimate with certainty the actual outcome of 
the gains and losses among different groups of businesses from contract 
redistribution resulting from decreases to size standards, it can 
identify several probable impacts. With a smaller pool of small 
businesses under the decreases to size standards, some set-aside 
Federal contracts to be otherwise awarded to small businesses may be 
competed on an unrestricted basis. As a result, large businesses may 
have more Federal contracting opportunities. However, because agencies 
are still required by law to award 23% of Federal dollars to small 
businesses, SBA expects the movement of set-aside contracts to 
unrestricted competition to be limited. For the same reason, small 
businesses under the reduced size standards are likely to obtain more 
set-aside contracts due to the reduced competition from fewer 
businesses qualifying as small under the decreases to size standards. 
With some larger small businesses losing small business status under 
the decreases to size standards, smaller small businesses would likely 
become more competitive in obtaining set-aside contracts. However, SBA 
cannot quantify these impacts.
Net Impact of Alternative Option One
    To estimate the net impacts of Alternative Option One, SBA followed 
the same methodology used to evaluate the impacts of the proposed 
increases to size standards (see Table 15). However, under Alternative 
Option One, SBA used the calculated size standards instead of the 
proposed increases to determine the impacts of changes to current 
thresholds. The impact of the increases of size standards were shown in 
Table 15 (above). Table 16 (above) and Table 17, Net Impacts of Size 
Standards Changes under Alternative Option One, below, present the 
impact of the decreases of size standards and the net impact of 
adopting the calculated results under alternative option one, 
respectively. Net impacts are obtained by subtracting impacts of 
decreases to size standards in Table 16 from impacts of increases to 
size standards in Table 15.
    Based on the 2012 Economic Census (the latest available when this 
proposed rule was developed), SBA estimates that in 366 industries and 
subindustries (``exceptions'') reviewed in this proposed rule for which 
the analytical results suggested to change size standards, about 372 
firms (see Table 17), would become other than small under Alternative 
Option One. That represents about 0.1% of all firms classified as small 
under the current size standards.
    Based on the FPDS-NG data for fiscal years 2018-2020, SBA estimates 
that about 58 unique active firms in Federal contracting in those 
industries would lose their small business status under alternative 
option one, most of them from Sector 31-33. This represents a decrease 
of about 0.1% of the total number of small businesses participating in 
Federal contracting under the current size standards. Based on the same 
data, SBA estimates that about $6.0 million of Federal procurement 
dollars would become available to all small firms, including those 
gaining small status. This represents an increase of 0.02% from the 
baseline. SBA estimates that the dollars obligated to small businesses 
will increase despite a reduction in the total number of small firms 
because the contract dollars to newly qualified small businesses in 
sectors other than manufacturing with increases to size standards is 
higher than the contract dollars to small businesses losing small 
business status in sectors other than manufacturing with decreases to 
size standards.
    Based on the SBA's loan data for fiscal years 2018-2020, the total 
number of 7(a) and 504 loans may decrease by about eight loans, and the 
loan amount by about $4.1 million. This represents a 0.1% decrease of 
the loan amount relative to the baseline.
    Firms' participation under the SBA's EIDL program will be affected 
as well. Since the benefit provided through this program is contingent 
on the occurrence and severity of a disaster in the future, SBA cannot 
make a meaningful estimate of this impact. However, based on the 
disaster loan program data for fiscal years 2018-2020, SBA estimates 
that the total number of EIDL loans may decrease by about two loans, 
and the loan amount by about $0.1 million. This represents a 1.3% 
decrease of the loan amount relative to the baseline.

                  Table 17--Net Impacts of Size Standards Changes Under Alternative Option One
----------------------------------------------------------------------------------------------------------------
                                                                   Sector 31-33    Other sectors       Total
----------------------------------------------------------------------------------------------------------------
Number of industries or subindustries (``exceptions'') with                  307              59             366
 changes to size standards......................................
Total number of small firms under the current size standards in          233,196          61,790         294,986
 industries with changes to size standards (2012 Economic
 Census) \1\....................................................
Additional number of firms qualifying as small under size                   -318             -54            -372
 standards changes (2012 Economic Census) \1\...................
% of additional firms qualifying as small relative to total                -0.1%           -0.1%           -0.1%
 current small firms (2012 Economic Census) \1\.................
Number of current unique small firms getting small business               33,101           6,835          39,206
 contracts in industries with changes to size standards (FPDS-NG
 FY 2018-2020)..................................................
Additional number of unique small firms gaining small business               -43             -26             -56
 status in industries with changes to size standards (FPDS-NG FY
 2018-2020) \2\.................................................
% increase to small firms relative to current unique small firms           -0.1%           -0.4%           -0.1%
 gaining small business status (FPDS-NG FY 2018-2020)...........

[[Page 24823]]

 
Total small business contract dollars under current size                 $24,726         $14,233         $38,959
 standards in industries with changes to size standards ($
 million) (FPDS-NG FY 2018-2020)................................
Estimated small business dollars available to newly-qualified             -$54.0           $61.0            $7.0
 small firms ($ million) FPDS-NG FY 2018-2020)..................
% increase to dollars relative to total small business contract            -0.2%            0.4%           0.02%
 dollars under current size standards...........................
Total number of 7(a) and 504 loans to small businesses (FY 2018-           4,484             513           4,997
 2020)..........................................................
Total amount of 7(a) and 504 loans to small businesses (FY 2018-          $2,863            $235          $3,098
 2020)..........................................................
Estimated number of additional 7(a) and 504 loans available to              -5.0            -3.0            -8.0
 newly-qualified small firms....................................
Estimated additional 7(a) and 504 loan amount to newly-qualified           -$3.3           -$0.8           -$4.1
 small firms ($ million)........................................
% increase to 7(a)and 504 loan amount relative to the total                -0.1%           -0.3%           -0.1%
 amount of 7(a) and 504 loans to small businesses...............
Total number of EIDL loans to small businesses (FY 2018-2020)                202              41             243
 \4\............................................................
Total amount of EIDL loans to small businesses (FY 2018-2020)               $8.3            $2.4           $10.7
 \4\............................................................
Estimated number of additional EIDL loans to newly qualified                   0              -2              -2
 small firms \4\................................................
Estimated additional EIDL loan amount to newly qualified small             $0.02           -$0.2           -$0.1
 firms ($ million) \4\..........................................
% increase to EIDL loan amount relative to the total amount of              0.3%           -6.8%           -1.3%
 disaster loans to small businesses \4\.........................
----------------------------------------------------------------------------------------------------------------
\1\ These figures do not include two 6-digit NAICS industries and 5 subindustries or ``exceptions'' for which
  Economic Census data is not available.
\2\ Total impact represents total unique number of firms impacted to avoid double counting as some firms
  participate in more than one industry.
\3\ Additional dollars are calculated multiplying average small business dollars obligated per unique firm times
  change in number of firms. Numbers of firms are calculated using the SBA's current size standards, not the
  contracting officer's size designation.
\4\ Excludes COVID-19 related EIDL loans due to their temporary nature. Effective January 1, 2022, SBA stopped
  accepting applications for new COVID EIDL loans or advances.

Alternative Option Two: Retaining All Current Size Standards
    Under this option, given the current COVID-19 pandemic, as 
discussed elsewhere, SBA considered retaining the current levels of all 
size standards even though the analytical results suggested changing 
them. Under this option, as the current situation develops, SBA will be 
able to assess new data available on economic indicators, Federal 
procurement, and SBA loans as well. When compared to the baseline, 
there is a net impact of zero (i.e., zero benefit and zero cost) for 
retaining all size standards. However, this option would cause 
otherwise qualified small businesses to forgo various small business 
benefits (e.g., access to set-aside contracts and capital) that become 
available to them under the option of increasing 150 and retaining 282 
size standards under this proposed rule. Moreover, retaining all size 
standards under Alternative Option Two would also be contrary to the 
SBA's statutory mandate to review and adjust, every five years, all 
size standards to reflect current industry and Federal market 
conditions. Retaining all size standards without required periodic 
adjustments would increasingly exclude otherwise eligible small firms 
from small business benefits.

Congressional Review Act, 5 U.S.C. 801-808

    Subtitle E of the Small Business Regulatory Enforcement Fairness 
Act of 1996 (codified at 5 U.S.C. 801-808), also known as the 
Congressional Review Act or CRA, generally provides that before a rule 
may take effect, the agency promulgating the rule must submit a rule 
report, which includes a copy of the rule, to each House of the 
Congress and to the Comptroller General of the United States. SBA will 
submit a report containing this rule and other required information to 
the U.S. Senate, the U.S. House of Representatives, and the Comptroller 
General of the United States. A major rule under the CRA cannot take 
effect until 60 days after it is published in the Federal Register. The 
OMB's Office of Information and Regulatory Affairs has determined that 
this is not a major rule under 5 U.S.C. 804(2).

Initial Regulatory Flexibility Analysis

    According to the Regulatory Flexibility Act (RFA), 5 U.S.C. 601-
612, when an agency issues a rulemaking, it must prepare a regulatory 
flexibility analysis to address the impact of the rule on small 
entities.
    This proposed rule, if adopted, may have a significant impact on a 
substantial number of small businesses in the industries covered by 
this proposed rule. As described above, this rule may affect small 
businesses seeking Federal contracts, loans under SBA's 7(a), 504 and 
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 is the need for and objective of the rule? (2) What 
is 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 SBA to accomplish 
its regulatory objectives while minimizing the impact on small 
businesses?
1. What is the need for and objective of the rule?
    Changes in industry structure, technological changes, productivity 
growth, mergers and acquisitions, and updated industry definitions have 
changed the structure of many industries covered by this proposed rule. 
Such changes can be enough to support revisions to current size 
standards for some industries. Based on the analysis of the latest data 
available, SBA believes that the proposed standards revisions in this 
proposed rule more appropriately reflect the size of businesses that 
need Federal assistance. The 2010 Jobs Act also requires SBA to review 
all size standards and make necessary adjustments to reflect market 
conditions.

[[Page 24824]]

2. What is SBA's description and estimate of the number of small 
businesses to which the rule will apply?
    Based on data from the 2012 Economic Census (the latest available 
when this proposed rule was prepared), SBA estimates that there are 
nearly 295,000 small firms in industries covered by this rulemaking for 
which SBA is proposing to change size standards. If the proposed rule 
is adopted in its present form, SBA estimates that nearly 250 
additional businesses will become small.
3. What are the projected reporting, record keeping and other 
compliance requirements of the rule?
    The proposed size standard changes impose no additional reporting 
or record keeping requirements on small businesses. However, qualifying 
for Federal procurement and a number of other programs requires that 
businesses register in SAM and self-certify that they are small at 
least once annually (Federal Acquisition Regulation (FAR) 52.204-13). 
For existing contracts, small business contractors are required to 
update their SAM registration as necessary to ensure that they reflect 
the contractor's current status (FAR 52.219-28). Businesses are also 
required to verify that their SAM registration is current, accurate, 
and complete with the submission of an offer for every new contract 
(FAR 52.204-7 and 52.204-8). Therefore, businesses opting to 
participate in those programs must comply with SAM requirements. There 
are no costs associated with SAM registration or annual re-
certification. Changing size standards alters the access to SBA's 
programs that assist small businesses but does not impose a regulatory 
burden because they neither regulate nor control business behavior.
4. What are the relevant Federal rules, which may duplicate, overlap, 
or conflict with the rule?
    Under section 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 establish 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 SBA 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.
    However, SBA considered two alternatives to its proposal to 
increase 150 size standards and maintain 282 size standards at their 
current levels. The first alternative SBA considered was adopting size 
standards based solely on the analytical results, including the results 
from the evaluation of dominance and field of operation. In other 
words, the size standards of 150 industries for which the analytical 
results suggest raising size standards would be raised. However, the 
size standards of 216 industries for which the analytical results 
suggest lowering size standards would be lowered. This would cause a 
significant number of small businesses to lose their small business 
status, particularly in Sector 31-33 (see Table 16). Under the second 
alternative, in view of the COVID-19 pandemic, SBA considered retaining 
all size standards at the current levels, even though the analytical 
results may suggest increasing 150 size standards and decreasing 216. 
SBA believes retaining all size standards at their current levels would 
be more onerous for small businesses than the option of increasing 150 
and retaining 282 size standards. Postponing the adoption of the higher 
calculated size standards would be detrimental for otherwise small 
businesses in terms of access to various small business benefits, 
including access to set-aside contracts and capital through SBA 
contracting and financial programs, and exemptions from paperwork and 
other compliance requirements.

Executive Order 13563

    Executive Order 13563 emphasizes the importance of quantifying both 
costs and benefits, reducing costs, harmonizing rules, and promoting 
flexibility. 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, is 
included above in the Regulatory Impact Analysis under Executive Order 
12866. Additionally, Executive Order 13563, section 6, calls for 
retrospective analyses of existing rules.
    The review of size standards in the industries covered by this 
proposed rule is consistent with section 6 of Executive Order 13563 and 
the 2010 Jobs Act which requires SBA to review every five years all 
size standards and make necessary adjustments to reflect market 
conditions. Specifically, the 2010 Jobs Act requires SBA to review at 
least one-third of all size standards during every 18-month period from 
the date of its enactment (September 27, 2010) and to review all size 
standards not less frequently than once every 5 years, thereafter. In 
accordance with the Jobs Act, SBA completed the review of all small 
business size standards (except those for agricultural enterprises 
previously set by Congress), making appropriate adjustments to size 
standards for a number of industries to reflect current Federal and 
industry market conditions.
    SBA issued a revised white paper entitled ``Size Standards 
Methodology'' and published a notification in the April 27, 2018, 
edition of the Federal Register (83 FR 18468) to advise the public that 
the document is available for public review and comments. The ``Size 
Standards Methodology'' white paper explains how SBA establishes, 
reviews, and modifies its receipts-based and employee-based small 
business size standards. SBA considered all input, suggestions, 
recommendations, and relevant information obtained from industry 
groups, individual businesses, and Federal agencies before finalizing 
and adopting the revised Methodology. For a summary of comments 
received and SBA's responses, see the notification published in the 
Federal Register on April 11, 2019 (84 FR 14587).

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.

[[Page 24825]]

Executive Order 13132

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

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 13 
CFR part 121 as follows:

PART 121--SMALL BUSINESS SIZE REGULATIONS

0
1. The authority citation for part 121 continues to read as follows:

    Authority:  15 U.S.C. 632, 634(b)(6), 636(a)(36), 662, and 
694a(9); Public Law 116-136, Section 1114.

0
2. In Sec.  121.201, amend the table ``Small Business Size Standards by 
NAICS Industry'' by:
0
a. Revising entries ``212210,'' ``212230,'' ``212299,'' ``212313,'' 
``212319,'' ``212322,'' ``212325,'' ``212391,'' ``212393,'' ``212399,'' 
entries ``221111'' through ``221115,'' ``221117,'' ``221118,'' 
``221121,'' ``221122,'' ``221210,'' ``311111,'' ``311119,'' ``311211,'' 
``311212,'' ``311221,'' ``311224,'' ``311225,'' ``311230,'' ``311313,'' 
``311314,'' ``311411,'' ``311422,'' ``311511,'' ``311514,'' ``311611,'' 
``311824,'' ``311920,'' ``311930,'' ``311941,'' ``311942,'' ``311991,'' 
``311999,'' ``312111,'' ``312112,'' ``312140,'' ``313220,'' ``313230,'' 
``314999,'' ``315190,'' ``315990,'' ``316110,'' ``321113,'' ``321114,'' 
``321211,'' ``322110,'' ``322122,'' ``323111,'' ``323120,'' ``324122,'' 
``324191,'' ``324199,'' ``325110,'' ``325120,'' ``325130,'' ``325220,'' 
``325311,'' ``325312,'' ``325314,'' ``325320,'' ``325412,'' ``325520,'' 
entries ``325611'' through ``325613,'' ``325910,'' ``325991,'' 
``325998,'' ``326121,'' ``326130,'' ``326220,'' ``326299,'' ``327211,'' 
``327410,'' ``327910,'' ``327992,'' ``327999,'' ``331313,'' ``331315,'' 
``331420,'' ``331491,'' ``331492,'' ``331512,'' ``331513,'' ``331523,'' 
``331524,'' ``332112,'' ``332114,'' ``332117,'' ``332215,'' ``332439,'' 
``332613,'' ``332722,'' ``332812,'' ``332992,'' ``332996,'' ``333131,'' 
``333243,'' ``333314,'' ``333924,'' ``333991,'' ``333993,'' ``333995,'' 
``333997,'' ``334290,'' ``334416,'' ``334511,'' ``334512,'' ``334514,'' 
``334517,'' ``334519,'' ``335122,'' ``335129,'' ``335311,'' ``335912,'' 
``335931,'' ``335991,'' ``335999,'' ``336310,'' ``336414,'' ``336419,'' 
``336611,'' ``336991,'' ``337125,'' ``337214,'' ``339113,'' ``339910,'' 
``339930,'' ``339991,'' ``339994,'' ``339999,'' ``483111,'' ``483113,'' 
``483114,'' ``483211,'' ``483212,'' ``511199,'' ``512230,'' and 
``512250;''
0
b. Removing the entry ``541715'' and the three ``Except'' entries 
following ``541715;''
0
c. Adding entries ``541715,'' ``541715 (Exception 1)'', ``541715 
(Exception 2)'', and ``541715 (Exception 3)'' in numerical order; and
0
d. Revising the entry ``562910 (Exception)''.
    The revisions and additions read as follows:


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

* * * * *

                                 Small Business Size Standards by NAICS Industry
----------------------------------------------------------------------------------------------------------------
                                                                            Size standards in  Size standards in
                 NAICS code                     NAICS U.S. industry title      millions of         number of
                                                                                 dollars           employees
----------------------------------------------------------------------------------------------------------------
 
                                                  * * * * * * *
----------------------------------------------------------------------------------------------------------------
                            Sector 21--Mining, Quarrying, and Oil and Gas Extraction
----------------------------------------------------------------------------------------------------------------
 
                                                  * * * * * * *
----------------------------------------------------------------------------------------------------------------
                                   Subsector 212--Mining (except Oil and Gas)
----------------------------------------------------------------------------------------------------------------
 
                                                  * * * * * * *
212210......................................  Iron Ore Mining.............  .................              1,400
 
                                                  * * * * * * *
212230......................................  Copper, Nickel, Lead, and     .................              1,400
                                               Zinc Mining.
 
                                                  * * * * * * *
212299......................................  All Other Metal Ore Mining..  .................              1,250
 
                                                  * * * * * * *
212313......................................  Crushed and Broken Granite    .................                850
                                               Mining and Quarrying.
212319......................................  Other Crushed and Broken      .................                550
                                               Stone Mining and Quarrying.
 
                                                  * * * * * * *
212322......................................  Industrial Sand Mining......  .................                750
 

[[Page 24826]]

 
                                                  * * * * * * *
212325......................................  Clay and Ceramic and          .................                650
                                               Refractory Minerals Mining.
212391......................................  Potash, Soda, and Borate      .................              1,050
                                               Mineral Mining.
 
                                                  * * * * * * *
212393......................................  Other Chemical and            .................                600
                                               Fertilizer Mineral Mining.
212399......................................  All Other Nonmetallic         .................                600
                                               Mineral Mining.
 
                                                  * * * * * * *
----------------------------------------------------------------------------------------------------------------
                                              Sector 22--Utilities
                                            Subsector 221--Utilities
----------------------------------------------------------------------------------------------------------------
221111......................................  Hydroelectric Power           .................                750
                                               Generation.
221112......................................  Fossil Fuel Electric Power    .................                950
                                               Generation.
221113......................................  Nuclear Electric Power        .................              1,150
                                               Generation.
221114......................................  Solar Electric Power          .................                500
                                               Generation.
221115......................................  Wind Electric Power           .................              1,150
                                               Generation.
 
                                                  * * * * * * *
221117......................................  Biomass Electric Power        .................                550
                                               Generation.
221118......................................  Other Electric Power          .................                650
                                               Generation.
221121......................................  Electric Bulk Power           .................                950
                                               Transmission and Control.
221122......................................  Electric Power Distribution.  .................              1,100
221210......................................  Natural Gas Distribution....  .................              1,150
 
                                                  * * * * * * *
----------------------------------------------------------------------------------------------------------------
                                           Sector 31-33--Manufacturing
                                        Subsector 311--Food Manufacturing
----------------------------------------------------------------------------------------------------------------
311111......................................  Dog and Cat Food              .................              1,250
                                               Manufacturing.
311119......................................  Other Animal Food             .................                650
                                               Manufacturing.
311211......................................  Flour Milling...............  .................              1,050
311212......................................  Rice Milling................  .................                750
 
                                                  * * * * * * *
311221......................................  Wet Corn Milling............  .................              1,300
311224......................................  Soybean and Other Oilseed     .................              1,250
                                               Processing.
311225......................................  Fats and Oils Refining and    .................              1,100
                                               Blending.
311230......................................  Breakfast Cereal              .................              1,300
                                               Manufacturing.
311313......................................  Beet Sugar Manufacturing....  .................              1,150
311314......................................  Cane Sugar Manufacturing....  .................              1,050
 
                                                  * * * * * * *
311411......................................  Frozen Fruit, Juice, and      .................              1,100
                                               Vegetable Manufacturing.
 
                                                  * * * * * * *
311422......................................  Specialty Canning...........  .................              1,400
 
                                                  * * * * * * *
311511......................................  Fluid Milk Manufacturing....  .................              1,150
 
                                                  * * * * * * *
311514......................................  Dry, Condensed, and           .................              1,000
                                               Evaporated Dairy Product
                                               Manufacturing.
 
                                                  * * * * * * *
311611......................................  Animal (except Poultry)       .................              1,150
                                               Slaughtering.
 
                                                  * * * * * * *
311824......................................  Dry Pasta, Dough, and Flour   .................                850
                                               Mixes Manufacturing from
                                               Purchased Flour.
 
                                                  * * * * * * *
311920......................................  Coffee and Tea Manufacturing  .................              1,000
311930......................................  Flavoring Syrup and           .................              1,100
                                               Concentrate Manufacturing.
311941......................................  Mayonnaise, Dressing, and     .................                850
                                               Other Prepared Sauce
                                               Manufacturing.
311942......................................  Spice and Extract             .................                650
                                               Manufacturing.
311991......................................  Perishable Prepared Food      .................                700
                                               Manufacturing.
311999......................................  All Other Miscellaneous Food  .................                700
                                               Manufacturing.
----------------------------------------------------------------------------------------------------------------

[[Page 24827]]

 
                            Subsector 312--Beverage and Tobacco Product Manufacturing
----------------------------------------------------------------------------------------------------------------
312111......................................  Soft Drink Manufacturing....  .................              1,400
312112......................................  Bottled Water Manufacturing.  .................              1,100
 
                                                  * * * * * * *
312140......................................  Distilleries................  .................              1,100
 
                                                  * * * * * * *
----------------------------------------------------------------------------------------------------------------
                                          Subsector 313--Textile Mills
----------------------------------------------------------------------------------------------------------------
 
                                                  * * * * * * *
313220......................................  Narrow Fabric Mills and       .................                550
                                               Schiffli Machine Embroidery.
313230......................................  Nonwoven Fabric Mills.......  .................                850
----------------------------------------------------------------------------------------------------------------
                                      Subsector 314--Textile Product Mills
----------------------------------------------------------------------------------------------------------------
 
                                                  * * * * * * *
314999......................................  All Other Miscellaneous       .................                550
                                               Textile Product Mills.
----------------------------------------------------------------------------------------------------------------
                                      Subsector 315--Apparel Manufacturing
----------------------------------------------------------------------------------------------------------------
 
                                                  * * * * * * *
315190......................................  Other Apparel Knitting Mills  .................                850
 
                                                  * * * * * * *
315990......................................  Apparel Accessories and       .................                600
                                               Other Apparel Manufacturing.
----------------------------------------------------------------------------------------------------------------
                             Subsector 316--Leather and Allied Product Manufacturing
----------------------------------------------------------------------------------------------------------------
316110......................................  Leather and Hide Tanning and  .................                800
                                               Finishing.
 
                                                  * * * * * * *
----------------------------------------------------------------------------------------------------------------
                                    Subsector 321--Wood Product Manufacturing
----------------------------------------------------------------------------------------------------------------
321113......................................  Sawmills....................  .................                550
321114......................................  Wood Preservation...........  .................                550
321211......................................  Hardwood Veneer and Plywood   .................                600
                                               Manufacturing.
 
                                                  * * * * * * *
----------------------------------------------------------------------------------------------------------------
                                       Subsector 322--Paper Manufacturing
----------------------------------------------------------------------------------------------------------------
322110......................................  Pulp Mills..................  .................              1,050
 
                                                  * * * * * * *
322122......................................  Newsprint Mills.............  .................              1,050
 
                                                  * * * * * * *
----------------------------------------------------------------------------------------------------------------
                             Subsector 323--Printing and Related Support Activities
----------------------------------------------------------------------------------------------------------------
323111......................................  Commercial Printing (except   .................                650
                                               Screen and Books).
 
                                                  * * * * * * *
323120......................................  Support Activities for        .................                550
                                               Printing.
----------------------------------------------------------------------------------------------------------------
                            Subsector 324--Petroleum and Coal Products Manufacturing
----------------------------------------------------------------------------------------------------------------
 
                                                  * * * * * * *
324122......................................  Asphalt Shingle and Coating   .................              1,100
                                               Materials Manufacturing.
324191......................................  Petroleum Lubricating Oil     .................                900
                                               and Grease Manufacturing.
324199......................................  All Other Petroleum and Coal  .................                950
                                               Products Manufacturing.
----------------------------------------------------------------------------------------------------------------

[[Page 24828]]

 
                                      Subsector 325--Chemical Manufacturing
----------------------------------------------------------------------------------------------------------------
325110......................................  Petrochemical Manufacturing.  .................              1,300
325120......................................  Industrial Gas Manufacturing  .................              1,200
325130......................................  Synthetic Dye and Pigment     .................              1,050
                                               Manufacturing.
 
                                                  * * * * * * *
325220......................................  Artificial and Synthetic      .................              1,050
                                               Fibers and Filaments
                                               Manufacturing.
325311......................................  Nitrogenous Fertilizer        .................              1,050
                                               Manufacturing.
325312......................................  Phosphatic Fertilizer         .................              1,350
                                               Manufacturing.
325314......................................  Fertilizer (Mixing Only)      .................                550
                                               Manufacturing.
325320......................................  Pesticide and Other           .................              1,150
                                               Agricultural Chemical
                                               Manufacturing.
 
                                                  * * * * * * *
325412......................................  Pharmaceutical Preparation    .................              1,300
                                               Manufacturing.
 
                                                  * * * * * * *
325520......................................  Adhesive Manufacturing......  .................                550
325611......................................  Soap and Other Detergent      .................              1,100
                                               Manufacturing.
325612......................................  Polish and Other Sanitation   .................                900
                                               Good Manufacturing.
325613......................................  Surface Active Agent          .................              1,100
                                               Manufacturing.
 
                                                  * * * * * * *
325910......................................  Printing Ink Manufacturing..  .................                750
 
                                                  * * * * * * *
325991......................................  Custom Compounding of         .................                600
                                               Purchased Resins.
 
                                                  * * * * * * *
325998......................................  All Other Miscellaneous       .................                650
                                               Chemical Product and
                                               Preparation Manufacturing.
----------------------------------------------------------------------------------------------------------------
                            Subsector 326--Plastics and Rubber Products Manufacturing
----------------------------------------------------------------------------------------------------------------
 
                                                  * * * * * * *
326121......................................  Unlaminated Plastics Profile  .................                600
                                               Shape Manufacturing.
 
                                                  * * * * * * *
326130......................................  Laminated Plastics Plate,     .................                650
                                               Sheet (except Packaging),
                                               and Shape Manufacturing.
 
                                                  * * * * * * *
326220......................................  Rubber and Plastics Hoses     .................                800
                                               and Belting Manufacturing.
 
                                                  * * * * * * *
326299......................................  All Other Rubber Product      .................                650
                                               Manufacturing.
----------------------------------------------------------------------------------------------------------------
                            Subsector 327--Nonmetallic Mineral Product Manufacturing
----------------------------------------------------------------------------------------------------------------
 
                                                  * * * * * * *
327211......................................  Flat Glass Manufacturing....  .................              1,100
 
                                                  * * * * * * *
327410......................................  Lime Manufacturing..........  .................              1,050
 
                                                  * * * * * * *
327910......................................  Abrasive Product              .................                900
                                               Manufacturing.
 
                                                  * * * * * * *
327992......................................  Ground or Treated Mineral     .................                600
                                               and Earth Manufacturing.
 
                                                  * * * * * * *
327999......................................  All Other Miscellaneous       .................                750
                                               Nonmetallic Mineral Product
                                               Manufacturing.
----------------------------------------------------------------------------------------------------------------
                                   Subsector 331--Primary Metal Manufacturing
----------------------------------------------------------------------------------------------------------------
 
                                                  * * * * * * *
331313......................................  Alumina Refining and Primary  .................              1,300
                                               Aluminum Production.
 

[[Page 24829]]

 
                                                  * * * * * * *
331315......................................  Aluminum Sheet, Plate, and    .................              1,400
                                               Foil Manufacturing.
 
                                                  * * * * * * *
331420......................................  Copper Rolling, Drawing,      .................              1,050
                                               Extruding, and Alloying.
331491......................................  Nonferrous Metal (except      .................                900
                                               Copper and Aluminum)
                                               Rolling, Drawing, and
                                               Extruding.
331492......................................  Secondary Smelting,           .................                850
                                               Refining, and Alloying of
                                               Nonferrous Metal (except
                                               Copper and Aluminum).
 
                                                  * * * * * * *
331512......................................  Steel Investment Foundries..  .................              1,050
331513......................................  Steel Foundries (except       .................                700
                                               Investment).
331523......................................  Nonferrous Metal Die-Casting  .................                700
                                               Foundries.
331524......................................  Aluminum Foundries (except    .................                550
                                               Die-Casting).
 
                                                  * * * * * * *
----------------------------------------------------------------------------------------------------------------
                              Subsector 332--Fabricated Metal Product Manufacturing
----------------------------------------------------------------------------------------------------------------
 
                                                  * * * * * * *
332112......................................  Nonferrous Forging..........  .................                950
332114......................................  Custom Roll Forming.........  .................                600
332117......................................  Powder Metallurgy Part        .................                550
                                               Manufacturing.
 
                                                  * * * * * * *
332215......................................  Metal Kitchen Cookware,       .................              1,000
                                               Utensil, Cutlery, and
                                               Flatware (except Precious)
                                               Manufacturing.
 
                                                  * * * * * * *
332439......................................  Other Metal Container         .................                600
                                               Manufacturing.
 
                                                  * * * * * * *
332613......................................  Spring Manufacturing........  .................                600
 
                                                  * * * * * * *
332722......................................  Bolt, Nut, Screw, Rivet, and  .................                600
                                               Washer Manufacturing.
 
                                                  * * * * * * *
332812......................................  Metal Coating, Engraving      .................                600
                                               (except Jewelry and
                                               Silverware), and Allied
                                               Services to Manufacturers.
 
                                                  * * * * * * *
332992......................................  Small Arms Ammunition         .................              1,300
                                               Manufacturing.
 
                                                  * * * * * * *
332996......................................  Fabricated Pipe and Pipe      .................                550
                                               Fitting Manufacturing.
 
                                                  * * * * * * *
----------------------------------------------------------------------------------------------------------------
                                   Subsector 333--Machinery Manufacturing \6\
----------------------------------------------------------------------------------------------------------------
 
                                                  * * * * * * *
333131......................................  Mining Machinery and          .................                900
                                               Equipment Manufacturing.
 
                                                  * * * * * * *
333243......................................  Sawmill, Woodworking, and     .................                550
                                               Paper Machinery
                                               Manufacturing.
 
                                                  * * * * * * *
333314......................................  Optical Instrument and Lens   .................                600
                                               Manufacturing.
 
                                                  * * * * * * *
333924......................................  Industrial Truck, Tractor,    .................                900
                                               Trailer, and Stacker
                                               Machinery Manufacturing.
333991......................................  Power-Driven Hand Tool        .................                950
                                               Manufacturing.
 
                                                  * * * * * * *
333993......................................  Packaging Machinery           .................                600
                                               Manufacturing.
 

[[Page 24830]]

 
                                                  * * * * * * *
333995......................................  Fluid Power Cylinder and      .................                800
                                               Actuator Manufacturing.
 
                                                  * * * * * * *
333997......................................  Scale and Balance             .................                700
                                               Manufacturing.
 
                                                  * * * * * * *
----------------------------------------------------------------------------------------------------------------
                        Subsector 334--Computer and Electronic Product Manufacturing \6\
----------------------------------------------------------------------------------------------------------------
 
                                                  * * * * * * *
334290......................................  Other Communications          .................                800
                                               Equipment Manufacturing.
 
                                                  * * * * * * *
334416......................................  Capacitor, Resistor, Coil,    .................                550
                                               Transformer, and Other
                                               Inductor Manufacturing.
 
                                                  * * * * * * *
334511......................................  Search, Detection,            .................              1,350
                                               Navigation, Guidance,
                                               Aeronautical, and Nautical
                                               System and Instrument
                                               Manufacturing.
334512......................................  Automatic Environmental       .................                650
                                               Control Manufacturing for
                                               Residential, Commercial,
                                               and Appliance Use.
 
                                                  * * * * * * *
334514......................................  Totalizing Fluid Meter and    .................                850
                                               Counting Device
                                               Manufacturing.
 
                                                  * * * * * * *
334517......................................  Irradiation Apparatus         .................              1,200
                                               Manufacturing.
334519......................................  Other Measuring and           .................                600
                                               Controlling Device
                                               Manufacturing.
 
                                                  * * * * * * *
----------------------------------------------------------------------------------------------------------------
                 Subsector 335--Electrical Equipment, Appliance and Component Manufacturing \6\
----------------------------------------------------------------------------------------------------------------
 
                                                  * * * * * * *
335122......................................  Commercial, Industrial, and   .................                600
                                               Institutional Electric
                                               Lighting Fixture
                                               Manufacturing.
335129......................................  Other Lighting Equipment      .................                550
                                               Manufacturing.
 
                                                  * * * * * * *
335311......................................  Power, Distribution, and      .................                800
                                               Specialty Transformer
                                               Manufacturing.
 
                                                  * * * * * * *
335912......................................  Primary Battery               .................              1,300
                                               Manufacturing.
 
                                                  * * * * * * *
335931......................................  Current-Carrying Wiring       .................                600
                                               Device Manufacturing.
 
                                                  * * * * * * *
335991......................................  Carbon and Graphite Product   .................                900
                                               Manufacturing.
335999......................................  All Other Miscellaneous       .................                600
                                               Electrical Equipment and
                                               Component Manufacturing.
----------------------------------------------------------------------------------------------------------------
                            Subsector 336--Transportation Equipment Manufacturing \6\
----------------------------------------------------------------------------------------------------------------
 
                                                  * * * * * * *
336310......................................  Motor Vehicle Gasoline        .................              1,050
                                               Engine and Engine Parts
                                               Manufacturing.
 
                                                  * * * * * * *
336414......................................  Guided Missile and Space      .................              1,300
                                               Vehicle Manufacturing.
 
                                                  * * * * * * *
336419......................................  Other Guided Missile and      .................              1,050
                                               Space Vehicle Parts and
                                               Auxiliary Equipment
                                               Manufacturing.
 
                                                  * * * * * * *
336611......................................  Ship Building and Repairing.  .................              1,300
 

[[Page 24831]]

 
                                                  * * * * * * *
336991......................................  Motorcycle, Bicycle, and      .................              1,050
                                               Parts Manufacturing.
 
                                                  * * * * * * *
----------------------------------------------------------------------------------------------------------------
                           Subsector 337--Furniture and Related Product Manufacturing
----------------------------------------------------------------------------------------------------------------
 
                                                  * * * * * * *
337125......................................  Household Furniture (except   .................                950
                                               Wood and Metal)
                                               Manufacturing.
 
                                                  * * * * * * *
337214......................................  Office Furniture (except      .................              1,100
                                               Wood) Manufacturing.
 
                                                  * * * * * * *
----------------------------------------------------------------------------------------------------------------
                                   Subsector 339--Miscellaneous Manufacturing
----------------------------------------------------------------------------------------------------------------
 
                                                  * * * * * * *
339113......................................  Surgical Appliance and        .................                800
                                               Supplies Manufacturing.
 
                                                  * * * * * * *
339910......................................  Jewelry and Silverware        .................                700
                                               Manufacturing.
 
                                                  * * * * * * *
339930......................................  Doll, Toy, and Game           .................                700
                                               Manufacturing.
 
                                                  * * * * * * *
339991......................................  Gasket, Packing, and Sealing  .................                600
                                               Device Manufacturing.
 
                                                  * * * * * * *
339994......................................  Broom, Brush, and Mop         .................                750
                                               Manufacturing.
 
                                                  * * * * * * *
339999......................................  All Other Miscellaneous       .................                550
                                               Manufacturing.
 
                                                  * * * * * * *
----------------------------------------------------------------------------------------------------------------
                                  Sector 48-49--Transportation and Warehousing
----------------------------------------------------------------------------------------------------------------
 
                                                  * * * * * * *
----------------------------------------------------------------------------------------------------------------
                                       Subsector 483--Water Transportation
----------------------------------------------------------------------------------------------------------------
483111......................................  Deep Sea Freight              .................              1,050
                                               Transportation.
 
                                                  * * * * * * *
483113......................................  Coastal and Great Lakes       .................                800
                                               Freight Transportation.
483114......................................  Coastal and Great Lakes       .................                550
                                               Passenger Transportation.
483211......................................  Inland Water Freight          .................              1,050
                                               Transportation.
483212......................................  Inland Water Passenger        .................                550
                                               Transportation.
 
                                                  * * * * * * *
----------------------------------------------------------------------------------------------------------------
                                             Sector 51--Information
                             Subsector 511--Publishing Industries (except Internet)
----------------------------------------------------------------------------------------------------------------
 
                                                  * * * * * * *
511199......................................  All Other Publishers........  .................                550
 
                                                  * * * * * * *
----------------------------------------------------------------------------------------------------------------
                          Subsector 512--Motion Picture and Sound Recording Industries
----------------------------------------------------------------------------------------------------------------
 
                                                  * * * * * * *
512230......................................  Music Publishers............  .................                900
 

[[Page 24832]]

 
                                                  * * * * * * *
512250......................................  Record Production and         .................                900
                                               Distribution.
 
                                                  * * * * * * *
----------------------------------------------------------------------------------------------------------------
                           Sector 54--Professional, Scientific and Technical Services
                         Subsector 541--Professional, Scientific and Technical Services
----------------------------------------------------------------------------------------------------------------
 
                                                  * * * * * * *
541715......................................  Research and Development in   .................         \11\ 1,000
                                               the Physical, Engineering,
                                               and Life Sciences (except
                                               Nanotechnology and
                                               Biotechnology) \11\.
541715 (Exception 1)........................  Aircraft, Aircraft Engine     .................         \11\ 1,500
                                               and Engine Parts \11\.
541715 (Exception 2)........................  Other Aircraft Parts and      .................         \11\ 1,250
                                               Auxiliary Equipment \11\.
541715 (Exception 3)........................  Guided Missiles and Space     .................         \11\ 1,300
                                               Vehicles, Their Propulsion
                                               Units and Propulsion Parts
                                               \11\.
 
                                                  * * * * * * *
----------------------------------------------------------------------------------------------------------------
               Sector 56--Administrative and Support and Waste Management and Remediation Services
----------------------------------------------------------------------------------------------------------------
 
                                                  * * * * * * *
----------------------------------------------------------------------------------------------------------------
                            Subsector 562--Waste Management and Remediation Services
----------------------------------------------------------------------------------------------------------------
 
                                                  * * * * * * *
562910 (Exception)..........................  Environmental Remediation     .................         \14\ 1,000
                                               Services \14\.
 
                                                  * * * * * * *
----------------------------------------------------------------------------------------------------------------
Footnotes
 * * * * * * *
\6\ NAICS Subsectors 333, 334, 335 and 336--For rebuilding machinery or equipment on a factory basis, or
  equivalent, use the NAICS code for a newly manufactured product. Concerns performing major rebuilding or
  overhaul activities do not necessarily have to meet the criteria for being a ``manufacturer'' although the
  activities may be classified under a manufacturing NAICS code. Ordinary repair services or preservation are
  not considered rebuilding.
 * * * * * * *
\11\ NAICS code 541713, 541714, and 541715--
(a) ``Research and Development'' means laboratory or other physical research and development. It does not
  include economic, educational, engineering, operations, systems, or other nonphysical research; or computer
  programming, data processing, commercial and/or medical laboratory testing.
(b) For research and development contracts requiring the delivery of a manufactured product, the appropriate
  size standard is that of the manufacturing industry.
(c) For purposes of the Small Business Innovation Research (SBIR) and Small Business Transfer Technology (STTR)
  programs, the term ``research'' or ``research and development'' means any activity which is (A) a systematic,
  intensive study directed toward greater knowledge or understanding of the subject studied; (B) a systematic
  study directed specifically toward applying new knowledge to meet a recognized need; or (C) a systematic
  application of knowledge toward the production of useful materials, devices, and systems or methods, including
  design, development, and improvement of prototypes and new processes to meet specific requirements. See 15
  U.S.C. 638(e)(5) and section 3 of the SBIR and STTR policy directives available at www.sbir.gov. For size
  eligibility requirements for the SBIR and STTR programs, see Sec.   121.702 of this part.
(d) ``Research and Development'' for guided missiles and space vehicles includes evaluations and simulation, and
  other services requiring thorough knowledge of complete missiles and spacecraft.
 * * * * * * *
\14\ NAICS 562910--Environmental Remediation Services:
(a) For SBA assistance as a small business concern in the industry of Environmental Remediation Services, other
  than for Government procurement, a concern must be engaged primarily in furnishing a range of services for the
  remediation of a contaminated environment to an acceptable condition including, but not limited to,
  preliminary assessment, site inspection, testing, remedial investigation, feasibility studies, remedial
  design, containment, remedial action, removal of contaminated materials, storage of contaminated materials and
  security and site closeouts. If one of such activities accounts for 50 percent or more of a concern's total
  revenues, employees, or other related factors, the concern's primary industry is that of the particular
  industry and not the Environmental Remediation Services Industry.
(b) For purposes of classifying a Government procurement as Environmental Remediation Services, the general
  purpose of the procurement must be to restore or directly support the restoration of a contaminated
  environment (such as, preliminary assessment, site inspection, testing, remedial investigation, feasibility
  studies, remedial design, remediation services, containment, removal of contaminated materials, storage of
  contaminated materials or security and site closeouts), although the general purpose of the procurement need
  not necessarily include remedial actions. Also, the procurement must be composed of activities in three or
  more separate industries with separate NAICS codes or, in some instances (e.g., engineering), smaller sub-
  components of NAICS codes with separate, distinct size standards. These activities may include, but are not
  limited to, separate activities in industries such as: Heavy Construction; Specialty Trade Contractors;
  Engineering Services; Architectural Services; Management Consulting Services; Hazardous and Other Waste
  Collection; Remediation Services, Testing Laboratories; and Research and Development in the Physical,
  Engineering and Life Sciences. If any activity in the procurement can be identified with a separate NAICS
  code, or component of a code with a separate distinct size standard, and that industry accounts for 50 percent
  or more of the value of the entire procurement, then the proper size standard is the one for that particular
  industry, and not the Environmental Remediation Service size standard.


[[Page 24833]]

* * * * *

Isabella Casillas Guzman,
Administrator.
[FR Doc. 2022-08091 Filed 4-25-22; 8:45 am]
BILLING CODE 8026-03-P


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