34094 Federal Register / Vol. 87, No. 108 / Monday, June 6, 2022 / Rules and Regulations 

1These changes do not apply to the Paycheck 

Protection Program (PPP) because the authority for 

that program expired on June 30, 2021. Similarly, 

due to their temporary nature, the changes also do 

not apply to the COVID–19 related Economic Injury 

Disaster Loan (EIDL) Program. Moreover, effective 

January 1, 2022, SBA stopped accepting 

applications for new COVID EIDL loans or 

advances. 

2Some disaster loans, such as physical disaster 

and mitigation disaster loans, are available to firms 

regardless of size. Thus, the changes in this final 

rule are applicable only to the types of disaster 

loans that require applicants to meet size eligibility 

requirements, including Economic Injury Disaster 

Loans (EIDLs), Military Reservist Economic Injury 

Disaster Loans, and Immediate Disaster Assistance 

Program loans. 

SMALL BUSINESS ADMINISTRATION 

13 CFR Part 121 

RIN 3245–AH26 

Small Business Size Standards: 

Calculation of Number of Employees 

for All Programs and of Average 

Annual Receipts in the Business Loan, 

Disaster Loan, and Small Business 

Investment Company Programs 

AGENCY: U.S. Small Business 

Administration. 

ACTION: Final rule. 

SUMMARY: The U.S. Small Business 

Administration (SBA or Agency) is 

adopting a 24-month average to 

calculate a business concern’s number 

of employees for eligibility purposes in 

all of SBA’s programs. SBA is also 

permitting business concerns in its 

Business Loan, Disaster Loan, Surety 

Bond, and Small Business Investment 

Company (SBIC) Programs to use a fiveyear averaging period, in addition to the 

existing three-year averaging period, for 

the purposes of calculating average 

annual receipts. These changes will 

allow larger small businesses to retain 

their small business size status for 

longer, and some mid-sized businesses 

to regain their small business status. 

DATES: This rule is effective July 6, 

2022. 

FOR FURTHER INFORMATION CONTACT: 

Khem R. Sharma, Ph.D., Chief, Office of 

Size Standards, (202) 205–6618 or 

sizestandards@sba.gov. 

SUPPLEMENTARY INFORMATION: 

I. Background Information 

This final rule implements two 

legislative enactments that affect how 

SBA calculates a business concern’s size 

to determine whether the business 

qualifies as small for SBA’s contracting, 

loan,1 and other assistance programs. 

First, section 863 of the National 

Defense Authorization Act for Fiscal 

Year 2021, Public Law 116–283 

(‘‘NDAA’’), amended section 

3(a)(2)(C)(ii)(I) of the Small Business 

Act, 15. U.S.C. 632(a)(2)(C)(ii)(I), to 

change the averaging period for SBA’s 

employee-based size standards from 12 

months to 24 months. Second, the Small 

Business Runway Extension Act of 

2018, Public Law 115–324 (‘‘SBREA’’) 

amended section 3(a)(2)(C)(ii)(II) of the 

Small Business Act, 15 U.S.C. 

632(a)(2)(C)(ii)(II), to modify the 

requirements for proposed small 

business size standards prescribed by an 

agency without separate statutory 

authority to issue size standards. 

A. Changes to Calculation of Number of 

Employees 

Section 863 of the NDAA amended 

two provisions of section 3(a)(2) of the 

Small Business Act, which sets forth 

requirements for an agency that would 

prescribe a proposed size standard. 

First, the NDAA provides that those 

requirements apply to SBA when the 

agency acts pursuant to the authority in 

section 3(a)(2)(A) for SBA to specify 

small business definitions or size 

standards. Second, the NDAA amends 

section 3(a)(2)(C)(ii)(I) such that a 

proposed size standard for a 

manufacturing concern must provide for 

determining the size of the concern 

based on the employment during each 

of the concern’s pay periods for the 

preceding 24 months. Previously, the 

statute specified the use of a 12-month 

period. 

To implement these provisions, on 

November 2, 2021, SBA issued for 

comments a proposed rule to amend 13 

CFR 121.106 by changing the 12-month 

averaging period for determining the 

size of a business concern under an 

employee-based size standard to 24 

months for eligibility purposes in all of 

SBA’s programs (86 FR 60396). In this 

final rule, SBA is adopting the change 

from the November 2021 proposed rule 

without change. As a result, for 

certifications following the effective 

date, the size of a business concern 

under an employee-based size standard 

will be calculated by averaging the 

concern’s number of employees for each 

pay period in the preceding completed 

24 calendar months. In determining a 

concern’s number of employees, SBA 

counts all individuals employed on a 

full-time, part-time, or other basis. Parttime and temporary employees count as 

full-time employees, and the concern 

aggregates the employees of its domestic 

and foreign affiliates. If the concern has 

not been in business for 24 months, it 

would average its number of employees 

for each pay period during which it has 

been in business. 

This change to § 121.106 applies to all 

industries subject to employee-based 

size standards. Those size standards 

predominantly apply to manufacturers 

but not exclusively. Firms in certain 

mining, utilities, transportation, 

publishing, telecommunications, 

insurance, research and development, 

and environmental remediation 

industries are also subjected to SBA’s 

employee-based size standards. 

Significant to government contracting, 

nonmanufacturers also qualify for small 

business status for government 

procurement of supplies using an 

employee-based size standard. Though 

nonmanufacturers and the 

nonmanufacturing industries are not 

covered by the NDAA’s change to 

proposed size standards, SBA believes 

that it would be unworkable to use a 24- 

month average for manufacturing 

industries but retain a 12-month average 

for other industries with employeebased size standards. Firms may 

participate in multiple industries, and it 

is burdensome to use different averaging 

periods for different industries with 

employee-based size standards. 

B. Changes to Calculation of Average 

Annual Receipts 

In a final rule published December 5, 

2019 (84 FR 66561), SBA implemented 

SBREA by making changes to its 

receipts-based size standards for all 

SBA’s programs except the Business 

Loan and Disaster Loan Programs. The 

excepted programs include: (i) The 7(a) 

Loan Program, the Microloan Program, 

the Intermediary Lending Pilot Program, 

and the Certified Development 

Company (CDC/504) Loan Program 

(collectively, the ‘‘Business Loan 

Programs’’); and (ii) the Physical 

Disaster Business Loans, Economic 

Injury Disaster Loans, Military Reservist 

Economic Injury Disaster Loans, and 

Immediate Disaster Assistance Program 

loans (collectively, the ‘‘Disaster Loan 

Programs’’ 2). 

In the November 2, 2021, proposed 

rule, SBA proposed to extend the 

changes to SBA’s receipts-based size 

standards to the Business Loan and 

Disaster Loan Programs. Currently, 

applicants in those loan programs must 

calculate their average annual receipts 

using a three-year average; however, 

under the SBA’s proposal, applicants 

may choose to use either a three-year or 

a five-year receipts average. Thus, an 

applicant would be eligible for 

assistance if its five-year receipts 

average is equal to or less than the size 

standard, even if it would otherwise be 

ineligible because its three-year average 

exceeds that size standard. SBA also 

proposed to adopt this change for its 


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3Businesses seeking SBA 7(a) and 504 loans and 

those seeking financing from an SBIC could seek to 

qualify as small under a tangible net worth and net 

income-based alternative size standard, in addition 

to an industry-based employee or receipts-based 

size standard. 

Small Business Investment Company 

(SBIC) program, allowing small business 

applicants for financing from an SBIC to 

choose to use either a three-year average 

or a five-year average for purposes of 

determining eligibility based on a 

receipt-based size standard. In this final 

rule, SBA is adopting the changes to the 

averaging period for calculating average 

annual receipts for the Business Loan, 

Disaster Loan, and SBIC Programs as 

proposed in the November 2021 

proposed rule.3

The December 2019 final rule did not 

exempt the applicants in the SBA’s 

Surety Bond Guarantee (SBG) Program 

from the change in the calculation of 

average annual receipts in accordance 

with Public Law 115–324. 

Consequently, to establish eligibility 

under a receipts-based size standard, the 

applicants to the SBG Program were 

using either a three-year or a five-year 

receipts average until January 6, 2022, 

and a five-year receipts average 

thereafter. In the November 2021 

proposed rule, SBA did not propose to 

allow the applicants to the SBG Program 

to choose to use either a three-year or 

a five-year receipts average to establish 

eligibility under a receipts-based size 

standard. However, in response to a 

comment received from the public, this 

final rule provides that the change in 

the receipts calculation in the November 

2021 proposed rule is also applicable to 

the SBG program. 

Like the changes in the December 

2019 final rule, these changes will 

expand the eligibility of larger small 

businesses and some mid-sized 

businesses for SBA’s financial 

assistance. An advanced small business 

may be able to retain its small business 

status for a longer period, if it is close 

to exceeding the size standard. 

Similarly, a mid-sized business may be 

able to regain its small business status 

if it would otherwise have exceeded the 

size standard. 

These changes differ in some respects 

from what SBA implemented in the 

December 2019 final rule. In particular, 

SBA will not issue a ‘‘transition period’’ 

that SBA provided in the December 

2019 final rule. That rule applied size 

standards changes to all SBA’s 

programs, outside of the SBA Business 

Loan and Disaster Loan Programs. 

Starting on January 6, 2020, those 

programs began permitting participants 

to elect whether to use a three-year 

average or a five-year average to 

calculate average annual receipts. That 

election ended on January 6, 2022, 

however, marking the end of the 

transition period for those changes. As 

of January 6, 2022, all SBA programs, 

except SBA’s Business Loan and 

Disaster Loan Programs, use a five-year 

average for purposes of calculating 

average annual receipts. 

Conversely, the changes in this final 

rule allow for an election for the 

applicants to the SBA’s Business Loan, 

Disaster Loan, SBG, and SBIC Programs 

to choose either the three-year or fiveyear receipts average, but do not have a 

transition period. SBA intends to make 

this election available indefinitely. This 

recognizes the differences between the 

SBA’s financial assistance programs and 

the government contracting programs, 

where firms are competing against one 

another. Where there is competition, 

businesses should be competing on an 

equal basis; therefore, the December 

2019 final rule provided that, after the 

end of the transition period, government 

contractors all would use a five-year 

averaging period. By contrast, in the 

financial assistance programs, 

applicants are evaluated on an 

applicant-by-applicant basis. It is, thus, 

not prejudicial to ensure that applicants 

use the same size criteria. As a result, 

SBA does not believe it is necessary to 

limit the election in the financial 

assistance programs to a two-year 

period. 

In its June 24, 2019, proposed rule to 

implement the provision under SBREA 

(84 FR 29399), SBA received some 

comments from participants in the 

business loan programs. SBA also 

considered those comments in 

preparing this final rule. Prior 

commenters asked that SBA use the 

five-year receipts average only for 

calculating average annual receipts, not 

for other aspects of loan application 

purposes. Accordingly, in this final rule, 

SBA authorizes the three-year or fiveyear election only for the calculation of 

receipts for SBA’s Business Loan, 

Disaster Loan, SBG, and SBIC programs, 

but not for any other purposes. Other 

calculations remain unchanged. Prior 

commenters also asked that SBA 

authorize the applicants to the Business 

Loan Programs to continue to use a 

three-year average. Accordingly, this 

final rule uses an election, not a 

mandate. For the most part, lenders and 

applicants will continue to be able to 

use a three-year average. Where an 

applicant qualifies as small under the 3- 

year analysis, the analysis is complete, 

and the firm would not need to submit 

(and SBA would not need to review) 

any information pertaining to fiscal 

years beyond the last three fiscal years. 

The only exception will be where the 

applicant would not qualify as a small 

business using a three-year average. In 

that case, the applicant may use a fiveyear average to qualify as small. As 

noted previously, the applicants will 

also be allowed to qualify for a business 

loan using the alternative size standard 

in section 3(a)(5)(B) of the Small 

Business Act. 

II. Discussion of Comments 

In the November 2021 proposed rule, 

SBA sought comments on its proposal to 

change the 12-month averaging period 

for employee-based size standards to a 

24-month averaging period and permit 

businesses in the Business Loan, 

Disaster Loan, and SBIC Programs to use 

either a three-year average or a five-year 

average for calculating average annual 

receipts for the purposes of qualifying as 

a small business. SBA received 17 

timely comments to the proposed rule, 

of which 14 pertained to the SBA’s 

proposed change in the averaging period 

for calculating employees. Of the 14 

comments pertinent to the calculation of 

employees, eight supported the SBA’s 

proposed change and five opposed it. 

One commenter raised concerns about 

how SBA defines employees generally. 

SBA received nine comments 

pertaining to its proposal to allow 

applicants to the SBA’s Business Loan, 

EIDL and SBIC Programs to choose 

either a three-year or five-year averaging 

period to calculate average annual 

receipts. Of the nine comments 

pertinent to this issue, six supported the 

SBA’s proposed change and three 

opposed it. SBA also received one 

comment from OMB relating to a review 

of the information collection change 

related to from this rule. 

SBA also received a late comment 

regarding the treatment of SBA’s SBG 

program under the averaging rules. The 

comment raised valid concerns about 

how the SBG program was being treated 

inconsistently for receipts averaging, 

and, as such, SBA considers that 

comment below. 

All public comments to the proposed 

rule are available at 

www.regulations.gov (RIN 3245–AH16) 

and are summarized and discussed 

below by topic, along with SBA’s 

responses. 

Comments Supporting the 24-Month 

Averaging Period for the Calculation of 

Employees 

Eight commenters expressed support 

for SBA’s proposal to change the 

averaging period for calculating 

employees for SBA’s employee-based 

size standards from 12 months to 24 

months. Commenters supporting SBA’s 


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proposed change believed that the 

proposed 24-month averaging period 

would allow firms to better adjust to 

short-to-medium term spikes in hiring, 

provide certain growing small 

businesses the opportunity to retain 

their small business status and access to 

SBA programs for a longer period, and 

allow some firms that recently exceeded 

the size standard to regain their small 

business size status and become eligible 

for federal small business assistance 

again. One commenter expressed that 

SBA’s proposal would give small 

businesses much needed flexibility 

during these challenging times due to 

the COVID–19 pandemic and will help 

U.S. small businesses obtain necessary 

support to sustain operations and 

recover from the pandemic. 

SBA Response 

SBA agrees with commenters that 

SBA’s proposal to increase the averaging 

period for the calculation of employees 

from 12 months to 24 months will allow 

firms to better adjust to surges in 

employment in both the short and 

medium term. SBA also agrees with 

commenters that advanced small 

businesses will retain access to SBA’s 

procurement and financial assistance 

programs for a longer period because of 

this change and some businesses that 

recently exceeded their size standard 

will regain their eligibility for SBA’s 

programs. SBA believes that expanding 

the reach of its programs to include a 

greater number of small businesses 

supports all small businesses and the 

overall economy as the Nation 

continues to recover from the economic 

challenges caused by the COVID–19 

pandemic and small businesses remain 

in need of SBA assistance. 

As discussed in the regulatory impact 

analysis section of this rule, the change 

in averaging period for employees 

would result in four primary impacts, 

which can be categorized as either 

having a ‘‘expansive impact’’ or 

‘‘contractive impact’’ on size status of 

both currently large and small 

businesses. Allowing some firms that 

currently do not qualify as small to gain 

small business status and some 

advanced small firms to remain small 

business status for a longer period 

represents the expansive impact of the 

final rule. Causing some currently small 

firms to lose or shorten their small 

business is the contractive impact. 

While some small firms may 

experience contractive impacts from 

SBA’s proposed change to the averaging 

period for employees, SBA estimates 

that the number of firms with expansive 

impacts will be greater. For example, as 

shown in Table 16 of this final rule, 

based on the 2012 Economic Census 

data, the number of firms with 

expansive impacts (1,484) exceeds the 

number of firms with contractive 

impacts (1,050), with a net impact of 

about 435 firms either extending or 

regaining their small business status. 

SBA estimates that changing the period 

for calculating the average number of 

employees for size standards from 12 

months to 24 months would result in a 

net gain of about $158 million (or 0.3% 

increase from the baseline) in federal 

small business contract dollars. 

Comment on Allowing a Transition 

Period for Calculation of Employees 

Citing SBA’s transition period for 

calculating average annual receipts, one 

commenter urged SBA to adopt a twoyear transition period where firms could 

choose to use either a 12-month or 24- 

month averaging period to reduce any 

adverse impacts on small businesses 

caused by an abrupt change in the 

calculation of employees. The 

commenter also concurred with 

applying the change to both 

manufacturing industries and 

nonmanufacturers subject to employeebased size standards. The commenter 

maintained that in apparel 

manufacturing where IDIQ contracts are 

common, one or two large task orders 

may require a significant increase in the 

number of employees and could easily 

push a small business contractor over 

the size threshold, and it would take 

longer for the impacted small business 

to fall below the size threshold under 

the 24-month averaging method. 

Offering a transition period, the 

commenter added, would minimize the 

change’s negative impact on small 

businesses. 

SBA’s Response 

SBA believes that a two-year 

transition period for the calculation of 

employees at the current moment of the 

COVID–19 pandemic recovery will not 

provide enough benefit to deviate from 

the principles of fair competition. The 

data demonstrates a consistently 

increasing trend in employment in 

manufacturing and other industries 

subject to employee-based size 

standards since a drastic drop in 

employment in April 2020. For 

example, according to the Bureau of 

Labor Statistics (BLS) data, 

manufacturing employment has steadily 

increased from a low of about 11.4 

million in April 2020 (compared to 12.7 

million in March 2020) to about 12.6 

million in December 2021. As discussed 

in the proposed rule, when the 

employment figures are in an increasing 

trend, the 24-month employee-average 

will typically be lower than the 12- 

month average. With the economy 

continuing to recover from the COVID– 

19 pandemic with employment almost 

returning to the pre-pandemic level, 

SBA expects employment to continue 

its increasing trend in the coming 

months. Accordingly, going forward 

SBA expects the 24-month employee 

average to be lower than the 12-month 

average for most businesses, thereby 

rendering a transition period no longer 

necessary. 

For this reason, SBA will not use a 

multi-year transition period for the 

calculation of employees. That means 

that after this final rule takes on effect, 

SBA will calculate the number of 

employees using the 24-month 

averaging period only, as proposed. 

Comment on Ensuring Small Business 

Benefits Are Targeted to Intended 

Beneficiaries 

SBA received a comment from a trade 

association representing Black-owned 

businesses applauding SBA’s efforts to 

adjust small business size standards and 

to provide more flexibility in 

maintaining eligibility for growing small 

businesses to participate in the 8(a) 

Business Development (BD) Program 

and other SBA programs. The 

association supported the proposed 

change in the averaging period for 

employee-based size standards from 12 

months to 24 months with caution. On 

the one hand, the commenter 

maintained that this change will enable 

certain growing small businesses to 

retain their small business status longer 

and to remain eligible for SBA’s benefits 

without facing a benefits cliff. On the 

other hand, it raised concerns that the 

proposed 24-month average would place 

undue burden on small businesses 

facing contractions in employees due to 

economic downturns and ongoing 

financial hardship due to the COVID–19 

pandemic by causing them to lose their 

small business status sooner. The 

association urged SBA to ensure that the 

proposed changes do not allow large 

businesses to crowd out federal 

opportunities for small firms, including 

Black-owned small firms, and 

recommended that SBA track the size of 

businesses utilizing its programs to 

ensure that benefits from such programs 

are targeted to the small and 

disadvantaged businesses they are 

intended to serve. 

SBA’s Response 

SBA agrees with the comment urging 

SBA to track the size of businesses 

utilizing its programs to ensure that 

benefits are targeted to the small and 

disadvantaged businesses that they are 


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intended to serve. SBA has the 

necessary regulations, policies, 

procedures, and other oversight 

mechanisms in place to ensure that 

federal small business assistance is 

directed to its intended beneficiaries. 

The Federal Government is committed 

to ensure equity in procurement in 

accordance with the President’s 

Executive Order No. 13985 on 

Advancing Racial Equity and Support 

for Underserved Communities through 

the Federal Government and Office of 

Management and Budget (OMB) 

Memorandum No. M–22–03, Advancing 

Equity in Federal Procurement. 

Additionally, each year SBA releases a 

Small Business Procurement Scorecard 

on how the 24 Chief Financial Officer 

(CFO) Act agencies performed on their 

small business and socio-economic 

business contracting goals. The 

Scorecard is an assessment tool to 

measure how well the Federal 

Government performs in reaching its 

small business and socio-economic 

prime contracting and subcontracting 

goals, provide accurate and transparent 

contracting data, and report agencyspecific progress. The prime and 

subcontracting component goals include 

goals for small businesses, womanowned small businesses (WOSBs), 

small-disadvantaged businesses (SDBs), 

service-disabled veteran-owned small 

businesses (SDVOSBs), and small 

businesses located in Historically 

Underutilized Business Zones 

(HUBZone SBCs). Each year, SBA works 

with each CFO Act agency to set their 

prime contracting goals and ensures that 

the sum total of all agencies’ goals meets 

the 23% small business prime 

contracting goal for the Federal 

Government, as well as the socioeconomic goals established by statute 

and Executive Branch policy. 

Moreover, in December 2021, SBA 

released for the first time small business 

contracting data disaggregated by race 

and ethnicity. This release serves as a 

baseline for evaluating governmentwide performance within each of the 

socio-economic categories going 

forward. SBA continues to believe that 

the metrics provided by these releases 

are important tools in evaluating the 

effectiveness of SBA’s programs and 

ensuring that small business benefits are 

flowing to the intended beneficiaries. 

Comments Opposing a 24-Month 

Averaging Period for the Calculation of 

Employees 

Five commenters opposed SBA’s 

proposal to change the averaging period 

for SBA’s employee-based size 

standards from 12 months to 24 months. 

Two commenters opposed SBA’s 

proposed change based on the belief 

that increasing the averaging period 

would cause some firms with temporary 

surges in employment to remain other 

than small for a longer period than 

would be the case under the current 

averaging period. Three commenters 

opposed SBA’s proposed change to 

increase the averaging period for the 

calculation of employees on the grounds 

that it would allow larger small 

businesses to retain their small business 

status longer and some mid-size firms 

that have just exceeded the size 

standard to regain their small status, 

and thus would reduce the number of 

federal contracting opportunities and 

financial assistance available to existing 

small firms, especially the smaller small 

firms. One commenter maintained that 

businesses facing a decline in 

employment due to an economic 

downturn or other financial hardship 

may lose their small business status 

sooner under a longer 24-month 

averaging period and may have to wait 

longer to regain the small business 

status. 

SBA’s Response 

The change in the averaging period 

for employees from 12 months to 24 

months was statutorily required. In this 

final rule, SBA is implementing a 

statutory change requiring the use of a 

24-month averaging period. While 

businesses may have to wait a little 

longer under the 24-month averaging 

period to regain small business status 

after exceeding the size standard due to 

a temporary surge in employees, SBA 

believes that, in the long-run, the 24- 

month average provides a better and 

more stable measure of business size, 

and it gives all small businesses an 

expanded runway to grow and become 

competitive for federal opportunities. 

Small businesses with increasing 

number of employee counts can 

maintain their small business status for 

a longer period under the longer 24- 

month averaging period. With the 

availability of an expanded pool of 

small businesses under the change, the 

Federal Government is likely to set 

aside more contracts for small 

businesses, thereby benefiting all small 

businesses in the federal market. Based 

on the analysis of SBA’s business loan 

and economic injury disaster loan 

(EIDL) data for fiscal years 2018–2020, 

the change in the calculation of 

employees will have a very minimal 

impact on small businesses seeking 

SBA’s loans, with a vast majority of 

such loans going to businesses that are 

substantially smaller than their industry 

size standards. Overall, the benefits 

from the change to the 24-month 

averaging period outweigh any negative 

impacts of this change. 

While some small firms may 

experience contractive impacts due to 

SBA’s change to the averaging period, 

causing them to either lose or shorten 

their small business size status, SBA 

believes that the number of firms 

experiencing expansive impacts will be 

greater. As stated previously, SBA 

estimates that changing the averaging 

period for calculating the average 

number of employees for size standards 

from 12 months to 24 months will result 

in a net gain of about $158 million (or 

0.3% increase from the baseline) in 

federal small business contract dollars. 

As such, SBA determines that the net 

impacts of the rule support adopting the 

change. 

Moreover, SBA believes that the 

Federal Government and existing small 

businesses will benefit from the 

increased number of firms eligible to 

participate in SBA’s programs because 

of the change to the averaging period for 

the calculation of employees. With an 

expanded pool of small businesses, the 

Federal Government will have access to 

a greater number of qualified small 

businesses to source from, and as a 

result, will likely set aside more 

contracts for small businesses. 

Moreover, SBA analyzed its internal 

data on 7(a) and 504 loans for fiscal 

years 2018–2020 and determined that 

97% of loans to firms in industries with 

employee-based size standards were to 

firms with fewer than 50 employees, 

indicating that the majority of firms 

receiving SBA’s financial assistance are 

much smaller than the size standards. 

Thus, SBA does not anticipate that 

changes to the averaging period for the 

calculation of employees will 

significantly impact the distribution of 

loans by size of firm. 

Comment on Including 

Nonmanufacturing Industries in the 

Proposed Change in the Calculation of 

Employees 

One commenter opposed to SBA’s 

proposal believed that SBA’s proposed 

changes in the calculation of employees 

applied only to industries in the 

manufacturing sector, and not to other 

industries with employee-based size 

standards in other sectors. Thus, the 

commenter argued that SBA’s changes 

were arbitrary and capricious. The same 

commenter also argued that it would be 

arbitrary and capricious if SBA were to 

expand the requirements of this rule to 

industries apart from manufacturing 

since Congress did not explicitly 

provide for nonmanufacturing 

industries to be covered by this change. 


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34098 Federal Register / Vol. 87, No. 108 / Monday, June 6, 2022 / Rules and Regulations 

SBA’s Response 

SBA disagrees that applying the 24- 

month averaging period to all industries 

with an employee-based size standard is 

arbitrary. SBA believes that determining 

the size of a business concern 

consistently for all employee-based size 

standards avoids confusion and 

misapplication of the rules and is a 

reasonable application of the statutory 

provision. SBA proposed to change the 

averaging period for all employee-based 

size standards. Thus, in addition to the 

manufacturing industries, all 

nonmanufacturing industries and 

nonmanufacturers subject to employeebased size standards would be affected 

by the change. In the proposed rule, 

SBA stated that it would be confusing 

and unworkable to apply the 24-month 

averaging period to the manufacturing 

industries and 12-month averaging 

period to the nonmanufacturing 

industries and nonmanufacturers 

subject to employee-based size 

standards, as some businesses operate in 

both manufacturing and 

nonmanufacturing industries and some 

manufacturers also supply to 

Government as nonmanufacturers. 

Additionally, a nonmanufacturer may 

compete against manufacturers on the 

same procurement, and the principle of 

fair competition would have all 

competitors use the common averaging 

period. Thus, SBA is applying the 

change to all employee-based industries. 

Similarly, under the SBREA, Congress 

only changed the averaging period to 

calculate average annual receipts for 

services firms, but for consistency and 

to avoid confusion, SBA adopted the 

change for all industries subject to 

receipts-based size standards, including 

nonservices industries like construction 

and agriculture. Likewise, in this rule, 

for consistency and to avoid confusion, 

SBA is adopting the change in the 

averaging period for all industries 

subject to employee-based size 

standards. 

Comment on Closing the Loophole in 

Calculating Employees 

SBA also received one comment that 

neither expressed support nor 

opposition to the proposed change, but 

rather raised concerns about how SBA 

defines employees for size standards 

purposes. Specifically, the commenter 

urged SBA to close the loophole that 

allows advanced small businesses to 

remain perpetually small, or even large 

businesses in some cases to qualify as 

small, by outsourcing work to others or 

using independent contractors (1099 

contractors). 

SBA’s Response 

SBA disagrees with the premise 

underlying this comment. SBA counts 

all individuals employed on a full-time, 

part-time, or other basis. This includes 

employees obtained from a temporary 

employee agency, professional 

employee organization or leasing 

concern (see 13 CFR 121.106). In SBA 

Size Policy Statement No. 1, 51 FR 

6099, SBA further clarified that the 

‘‘other basis’’ ground reaches situations 

where the firm artificially reduces its 

number of employees to meet the size 

standards and qualify for SBA’s 

assistance. SBA will consider the 

totality of the circumstances to prevent 

circumvention of the SBA’s size 

regulations, and that may include 

situations where the firm would change 

employees’ statuses in order to reduce 

the firm’s size for SBA purposes. See 

Size Appeal of Maryland Assemblies, 

Inc., SBA No. SIZ–3134 (1989). 

Comments That Proposed Changes Help 

Large Businesses 

While a soon-to-be graduate from 

SBA’s 8(a) BD program expressed 

general appreciation for the benefit of a 

smooth transition from an SBA’s setaside program to full and open 

competition under the 24-month 

averaging period, it expressed concerns 

with respect to the size standard for the 

Environmental Remediation Services 

(ERS) exception to NAICS 562910 

(Remediation Services). Specifically, the 

commenter argued that the ERS 

exception already has an exceedingly 

high small business threshold of 750 

employees and a firm at that size would 

have necessary resources to adequately 

plan for its growth to an other than 

small business. Allowing a firm to 

remain qualified as a small business 

longer under the change would be 

detrimental to other small businesses 

when competing for federal 

opportunities intended for them. 

One commenter opposed expanding 

eligibility in the current environment to 

benefit large businesses and urged SBA 

to direct more resources to underserved 

small businesses, especially womanowned and disadvantaged small 

businesses, before expanding eligibility 

to include current large businesses. 

Another commenter opposed both 

proposed changes, arguing that these 

and past changes are contrary to the 

SBA’s mission to help small businesses. 

The commenter believed that both the 

size standards and averaging periods for 

calculating the business size keep 

increasing, thereby causing Government 

support intended for small businesses to 

go to large businesses. The commenter 

maintained that the definition of what is 

small has become incredibly high, 

thereby forcing actual small businesses 

to compete with large businesses with 

up to 1,000 employees or more than $30 

million in revenue that do not need 

financial assistance nor contracting 

preferences. 

SBA’s Response 

Size standards for specific industries 

or subindustries (or ‘‘exceptions’’), such 

as the 750-employee size standard for 

the ERS exception to NAICS 562910, are 

outside the scope of this rulemaking. 

Interested parties will have an 

opportunity to comment on the ERS size 

standard when SBA issues a separate 

proposed rulemaking on the review of 

employee-based size standards as part of 

the second five-year review of size 

standards. 

SBA disagrees with the comment 

suggesting that SBA should not 

implement this statutory change from 

the NDAA. As stated previously, SBA 

believes that the 24-month employee 

average provides a better and more 

stable measure of business size and it 

gives all small businesses, including 

disadvantaged small businesses, an 

expanded runway to grow and become 

competitive for federal opportunities. 

More importantly these changes are 

mandated by Congress. 

Moreover, SBA believes that 

expanding access to SBA’s financial 

assistance programs will help all small 

businesses to adapt to changes in 

business environment, recover from 

disasters more quickly, and grow 

successfully, while having no impact on 

the ability of smaller small firms to 

access financial services from SBA. 

Applicants to SBA’s financial assistance 

programs are typically much smaller 

than the industry size standard, and 

thus, would remain eligible for 

assistance after this rule is adopted. 

Also, SBA does not believe that the 

changes adopted in this final rule will 

create increased competition for loans 

between smaller and larger small 

businesses as the impacts to the loan 

program in terms of additional loans to 

small firms are minimal relative to the 

baseline. 

Comments Supporting the Option To 

Use Either a Three-Year or Five-Year 

Average for the Calculation of Average 

Annual Receipts for SBA’s Business 

Loan, Disaster Loan, and SBIC Programs 

Six commenters expressed support for 

the SBA’s proposal to give applicants to 

the SBA’s Business Loan, Disaster Loan, 

and SBIC Programs an option to use 

either a three-year or five-year averaging 

period for the calculation of average 


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annual receipts. The commenters 

maintained that the proposed change 

would allow more businesses to become 

eligible for SBA’s assistance, provide 

flexibility in measuring size which will 

help small businesses obtain 

Government support to recover from the 

COVID–19 pandemic and help small 

businesses to get more SBIC funding. 

One commenter urged SBA to continue 

to allow applicants for SBA’s business 

loan assistance to also qualify using the 

tangible net worth and net income based 

alternative size standard. 

SBA’s Response 

SBA agrees with the commenters that 

its proposal to allow the applicants in 

the SBA’s financial assistance programs 

to choose either the three-year or fiveyear receipts average will increase the 

number of small businesses that are 

eligible for such assistance. Like the 

SBA proposal to increase the averaging 

period for calculation of employees 

from 12 months to 24 months, the 

proposal to allow a firm to choose either 

a three-year or five-year averaging 

period for the calculation of average 

annual receipts will also enable more 

established business concerns to extend 

their small business status and some 

businesses that have just exceeded the 

size standard to regain small business 

status. This change will be particularly 

beneficial to those small businesses 

which cannot qualify under the 

alternative size standard. 

Comments on Impacts of the Proposed 

Change on the SBIC Program 

Participants 

SBA received two comments 

regarding the impacts of the SBA’s 

proposal to allow applicants for the 

SBIC financing to choose the five-year 

averaging period to calculate average 

annual receipts, in addition to the 

existing three-year averaging period. 

One comment expressed support for the 

SBA’s proposal, and the other opposed 

it. The commenter supporting the 

proposal argued that the proposed 

change will offer additional tools to 

help small businesses compete for 

capital they need. The commenter who 

opposed the proposed change argued 

that this will cause more SBIC funding 

to go to mid-size and larger small 

businesses at the expense of smaller 

small firms. The same commenter 

suggested improving data collection on 

the SBIC participants to be able to better 

assess the impact of the proposed 

change on the program. 

SBA’s Response 

SBA agrees with the comment that 

some applicants that do not qualify as 

small under the three-year receipts 

average could qualify under the fiveyear receipts average, thereby increasing 

the number of firms eligible to receive 

SBIC funding. For clarity, because the 

SBIC program was not specifically 

exempted from SBA’s prior change to 

the receipts-based averaging period, the 

program was covered by the change. 

Thus, from January 2020 to January 

2022, the regulation included a threeyear or five-year option for the SBIC 

program. The final rule continues that 

option indefinitely, rather than 

suspending it after January 2022. In 

other words, as of its effective date, this 

final rule will reinstate the option of 

choosing the 3-year or 5-year receiptsaverage for the SBIC program 

indefinitely. 

SBA disagrees that adopting the 

proposed changes to the calculation of 

employees and average annual receipts 

will cause SBIC funding to go to midsize and larger small businesses at the 

expense of smaller small firms. SBA 

estimates that there will be minimal 

impact to existing small businesses 

receiving SBIC funding since the 

number of firms newly qualifying under 

the five-year average would also likely 

qualify under the alternative size 

standard which is already used for 

assessing eligibility to receive SBIC 

funding. Moreover, of the businesses 

above the three-year receipts average, a 

larger number would qualify under the 

alternative size standard than under the 

five-year receipts average. The 

commenter did not provide any data 

demonstrating that the proposed 

changes in averaging periods for 

calculating employees and average 

annual receipts would cause more SBIC 

funding to go to larger small and midsize firms to the detriment of smaller 

small businesses. 

Comment on Allowing the Option of 

Choosing Three-Year or Five-Year 

Receipts Average for Federal 

Contractors Indefinitely 

One commenter commended SBA for 

providing flexibility for firms competing 

for federal contracts by allowing them to 

report either the three-year or five-year 

average receipts. The commenter added 

that this expands a pool of small 

contractors and expands opportunities 

to small businesses, including Blackowned small firms. The commenter also 

maintained that SBA’s proposal would 

allow fast growing small businesses that 

cannot qualify as small under the threeyear receipts average to elect to use the 

five-year receipts-average. Conversely, 

businesses experiencing declining 

revenues can use the three-year receipts 

average, rather than the five-year 

average, to qualify as small and become 

eligible for much needed federal 

opportunities. The commenter urged 

SBA to maintain the flexibility of 

choosing between the three-year or fiveyear receipts average indefinitely to the 

benefit of growing small businesses that 

continue to struggle to win federal 

opportunities. 

Another commenter recommended 

that SBA should allow three-year or 

five-year average receipts for small 

businesses without referencing to any 

specific program, such as the SBA’s 

financial or contracting programs. 

SBA’s Response 

In the December 5, 2019, final rule 

implementing the Small Business 

Runway Extension Act of 2018 

(‘‘SBREA’’), which changed the 

averaging period for calculating average 

annual receipts from three years to five 

years (84 FR 66561), SBA provided a 

two-year transition period until January 

6, 2022, in which businesses were able 

to use either the three-year or five-year 

averaging period to calculate average 

annual receipts for all SBA’s programs 

other than the SBA’s Business and 

Disaster Loan Programs. After January 6, 

2022, SBA’s calculation of average 

annual receipts is based only on the 

five-year averaging period for SBA’s 

contracting and other programs, except 

for SBA’s Business and Disaster Loan 

Programs. In the November 2, 2021, 

proposed rule, SBA proposed to 

permanently allow only the applicants 

in its Business Loan, Disaster Loan, and 

SBIC Programs to use either the threeyear or five-year averaging period for 

calculating average annual receipts. The 

calculation of average annual receipts 

for SBA’s contracting programs is not 

part of this rulemaking. The November 

2, 2021, proposed rule did not discuss 

the possibility of further extending the 

option to choose a three-year or fiveyear averaging period for Federal small 

business procurement opportunities. 

Thus, in this final rule, SBA is not 

granting an option of choosing either the 

three-year or five-year averaging period 

indefinitely for federal procurement 

purposes. 

Comments Opposing the Option To Use 

Either a Three-Year or Five-Year 

Average for the Calculation of Average 

Annual Receipts for SBA’s Business 

Loan, EIDL, and SBIC Programs 

Three commenters opposed SBA’s 

proposal to give applicants to SBA’s 

Business Loan, EIDL, and SBIC 

Programs the option to use either a 

three-year or five-year average for the 

calculation of average annual receipts. 

The commenters argued that the number 


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of small businesses eligible for SBA’s 

assistance would be increased by 

allowing larger small businesses to 

extend their small business status and 

some mid-size businesses to regain their 

small business status. They maintained 

that this would not only make it more 

difficult for smaller small businesses to 

compete for capital that they need, but 

also would cause assistance intended 

for small businesses to go to large 

businesses. The commenters added that 

this is contrary to SBA’s mission to 

assist truly small businesses. 

SBA’s Response 

SBA estimates that, as a result of its 

decision to give applicants to SBA’s 

Business Loan, EIDL, and SBIC 

Programs the option to use either a 

three-year or five-year averaging period 

for the calculation of average annual 

receipts, more firms will be eligible to 

participate in these programs. SBA 

believes that expanding the reach of its 

programs to include a greater number of 

small businesses supports all small 

businesses and the overall economy as 

the Nation continues to recover from the 

economic challenges caused by the 

COVID–19 pandemic. The three 

commenters opposing SBA’s proposal 

did not submit any data or additional 

analysis to support their position that 

SBA’s changes would make it difficult 

for smaller small businesses to compete 

for capital and cause assistance 

intended for small businesses to go to 

large businesses. 

Although more firms will be eligible 

to participate in SBA’s financial 

assistance programs as a result of the 

proposed changes to the averaging 

periods, SBA does not anticipate that 

these changes will significantly impact 

the distribution of loans by size of firm 

or impact the ability of any firm to 

obtain assistance from SBA. Based on its 

internal data on its financial assistance 

programs, SBA determined that 

applicants to these programs are 

generally much smaller than their 

industry size standards, or may qualify 

under SBA’s alternative size standard, 

which is not affected by this rule. Thus, 

SBA believes that although a greater 

number of larger small businesses will 

become eligible to participate in SBA’s 

financial assistance programs, the 

number of larger small firms that 

actually participate in such programs 

will be much lower. Under SBA’s 7(a) 

and 504 loan programs, based on the 

data for fiscal years 2018–2020, SBA 

estimates that about five SBA 7(a) and 

504 loans totaling $2.1 million could be 

made to larger small businesses 

experiencing expansive impacts under 

this rule. Additionally, small businesses 

could receive up to two additional EIDL 

loans totaling $0.2 million due to the 

expansion of their size status. Together, 

these amounts represent a 0.01% 

increase to the loan amount relative to 

the baseline. Moreover, the increase in 

the number of firms eligible for financial 

assistance in no way reduces or 

eliminates the ability of smaller firms to 

remain eligible for such assistance. In 

other words, there is no competition for 

financial assistance. That is, when one 

firm gets financial assistance, that does 

not reduce or eliminate the possibility 

for another firm to get such assistance. 

All firms eligible under the current rules 

would continue to be eligible under the 

change and all eligible firms would get 

financial assistance. 

Therefore, SBA disagrees with 

commenters that its proposal to give 

applicants to SBA’s Business Loan, 

EIDL, and SBIC Programs the option to 

use either a three-year or five-year 

average for the calculation of average 

annual receipts will harm existing small 

businesses by making it harder for them 

to obtain financial assistance from SBA. 

Thus, SBA is adopting the change to the 

averaging period for calculating average 

annual receipts in SBA’s Business Loan, 

Disaster Loan, and SBIC Programs, as 

proposed. 

Comment Advocating for Treating the 

SBG Program Similarly to the Business 

Loan and Disaster Loan Programs 

One comment observed that, under 

the prevailing structure in the proposed 

rule, the SBG program would be 

required to use five years of 

documentation to verify a small 

business’s eligibility under SBA’s size 

standards. The commenter believed that 

this requirement was burdensome on 

SBG program applicants in terms of 

both cost and time. The commenter 

asked that SBA treat the SBG program 

similarly to the Business Loan and 

Disaster Loan programs by exempting 

the SBG program from the five-year 

requirement. In support, the commenter 

pointed out that SBA’s Office of Surety 

Bond Guarantees is part of SBA’s Office 

of Capital Access. 

SBA’s Response 

SBA recognizes that requiring all SBG 

applicants to use a five-year average 

would create additional time and cost 

burdens on many SBG applicants. 

Additionally, as the commenter 

observed, the SBG Program is housed in 

SBA’s Office of Capital Access, which 

operates SBA’s Business Loan program. 

SBA believes that treating the SBG 

program similarly to the Business Loan 

programs promotes consistency among 

SBA’s programs and creates less 

confusion about what rules apply to 

which programs. Therefore, in this final 

rule, SBA adds the SBG program to the 

list of programs in which applicants 

may elect to use a three-year receipts 

average or a five-year receipts average. 

On the same reasoning, however, SBA 

disagrees with the commenter that the 

SBG program should be entirely exempt 

from using a five-year receipts average. 

All of SBA’s programs are required by 

the Small Business Act to adopt a fiveyear receipts average in some respect. 

SBA therefore is allowing SBA surety 

bond applicants to use either a threeyear or five-year average. As discussed 

in the impact analysis below, this 

change will have a small expansive 

effect on the program. 

Conclusion 

Based on the reasons discussed above, 

SBA is adopting the proposed changes 

without change. Specifically, pursuant 

to Public Law 116–283, SBA is adopting 

its proposal to increase the averaging 

period for computing the number of 

employees for size standards from 12 

months to 24 months for all programs. 

Similarly, pursuant to Public Law 115– 

324, SBA is also adopting its proposal 

to permit the applicants to its Business 

Loan, Disaster Loan, and SBIC programs 

to elect to choose either the three-year 

or five-five year averaging period for 

calculation of average annual receipts. 

While the proposed rule did not include 

the SBG program in the option of 

electing 3-year or 5-year averaging 

period in calculating average annual 

receipts, pursuant to a public comment 

and to maintain consistency across 

SBA’s financial programs, SBA is also 

allowing the applicants to the SBG 

program to choose either the three-year 

or 5-year averaging period. 

III. Section-by-Section Analysis 

A. Section 121.104 

In paragraph (c)(1), this final rule 

removes the sentence about 

certifications submitted prior to January 

2022 because that date has now passed. 

In paragraphs (c)(1), (c)(2), and (c)(3), 

SBA adds the SBG and SBIC Programs 

to the list of programs that are excepted 

from SBA’s current rule on calculating 

average annual receipts. 

In paragraph (c)(4), SBA amends the 

calculation of average annual receipts 

for the Business Loan, Disaster Loan, 

SBG, and SBIC Programs. A business in 

those programs may calculate its 

receipts using either a three-year 

average or a five-year average for the 

purposes of determining its size under 

a receipts-based size standard. This 

change does not affect the calculation of 


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any other figures in SBA’s programs. In 

particular, alternative size standards are 

not affected by this change. 

B. Section 121.106 

In paragraphs (b)(1) and (b)(3), SBA 

amends the current 12-month averaging 

period to a 24-month averaging period. 

Businesses that have been in existence 

for more than 24 months would 

calculate their number of employees by 

averaging the number of employees for 

each pay period for the preceding 

completed 24 months. Businesses that 

have been in existence for fewer than 24 

months would average their number of 

employees for each pay period during 

their existence. 

C. Section 121.903 

In paragraph (a)(1)(i), SBA amends the 

averaging period for size standards 

proposed by other agencies from a 12- 

month period to a 24-month period. 

Compliance With Executive Orders 

12866, 12988, 13132, and 13563, the 

Congressional Review Act (5 U.S.C. 

801–808), the Regulatory Flexibility Act 

(5 U.S.C. 601–612), 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 final 

rule is a significant regulatory action for 

purposes of Executive Order 12866. 

Accordingly, below, SBA provides a 

benefit-cost analysis of this final rule, 

including: (1) a statement of the need for 

this action, and (2) an evaluation of the 

benefits and costs—both quantitative 

and qualitative—of this regulatory 

action. 

Regulatory Impact Analysis 

A. Benefit-Cost Analysis 

1. What is the need for this regulatory 

action? 

As stated elsewhere, the Small 

Business Act delegates to SBA’s 

Administrator the responsibility for 

establishing small business size 

definitions (usually referred to as ‘‘size 

standards’’). First, Public Law 116–283 

(NDAA 2021) changed the averaging 

period for SBA’s employee-based size 

standards from 12 months to 24 months. 

Second, in 2018, Public Law 115–324 

(SBREA) modified the requirements for 

proposed small business size standards 

prescribed by an agency without 

separate statutory authority to issue size 

standards. Specifically, Public Law 115– 

324 changed the averaging period for 

receipts-based size standards for 

services industries from three years to 

five years. 

The need of this final rule is to carry 

out the intent of Public Law 116–283 

and Public Law 115–324, and to ensure 

consistency in the calculation of average 

number of employees and average 

annual receipts for size standards across 

the Federal Government. In addition to 

the averaging requirements, size 

standards prescribed under section 

3(a)(2)(C)(ii) of the Small Business Act 

must meet two other requirements: (1) 

be proposed with an opportunity for 

public notice and comment, and (2) be 

approved by the Administrator. Neither 

Public Law 116–283 nor Public Law 

115–324 repeals these two 

requirements, and this final rule 

satisfies these requirements. 

SBA’s mission is to aid and assist 

small businesses through a variety of 

financial, procurement, business 

development and counseling, and 

disaster assistance programs. This 

regulatory action promotes the 

Administration’s goals and objectives 

and meets the SBA’s statutory 

responsibility to implement a new law 

impacting size definitions for small 

businesses. One of SBA’s goals in 

support of promoting the 

Administration’s objectives is to help 

small businesses succeed through access 

to capital, Federal Government contracts 

and purchases, and management, 

technical and disaster assistance. 

2. What are the potential effects of this 

regulatory action? 

i. Potential Effects of Changing the 

Calculation of Employees 

Changing the period for calculating 

average number of employees from 12 

months to 24 months may enable some 

mid-size businesses that have just 

exceeded size standards to regain small 

business status. Similarly, it could also 

allow some advanced and larger small 

businesses about to exceed size 

standards to retain their small status for 

a longer period. However, it could also 

result in some advanced small 

businesses having the 24-month 

employee average that happens to be 

higher than the 12-month employee 

average, thus ejecting them out of their 

small business status sooner. Detailed 

impacts of this change are discussed 

below. 

It is difficult to determine the actual 

number of small and mid-size 

businesses that would be impacted by 

Public Law 116–283 and this regulatory 

action because there is no data on 

businesses’ employment by month or by 

pay period. The employment data from 

the Economic Census special tabulation 

are only available once every five years. 

Similarly, the System for Award 

Management (SAM) only records the 

data on the concern’s average number of 

employees for each pay period in the 

preceding completed 12 calendar 

months, but not their employee counts 

for each pay period or each month. For 

example, the 12-month average 

employee data for January 2020 is an 

average of number of employees for 

each pay period during preceding 

completed 12 calendar months (i.e., 

January 2019 to December 2019). 

Similarly, the 24-month average 

employee value for January 2020 is an 

average of number of employees for 

each pay period during preceding 

completed 24 calendar months (i.e., 

January 2018 to December 2019). 

Given the lack of employment data for 

each pay period or each month, SBA 

approximates a firm’s 24-month average 

number of employees as of January 2020 

as follows: 


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To estimate the 24-month employee 

average using the above formula, SBA 

analyzed the 2019 SAM extracts (as of 

September 1, 2019) and 2018 SAM 

extracts (as of September 1, 2018). The 

24-month average employee formula 

would only work for businesses that 

were present in both 2018 and 2019 

SAM extracts. One challenge was that 

some businesses found in 2019 SAM 

could not be found in 2018 SAM and 

vice versa. Excluding entities registered 

in SAM for purposes other than 

government contracting and entities 

ineligible for small business 

consideration (such as foreign entities 

and state-controlled institutions of 

higher learning), there were a total of 

152,450 unique business concerns in 

2019 SAM subject to at least one 

employee-based size standard. Of these 

concerns, 131,295 (or about 86.1%) 

were ‘‘small’’ in all North American 

Industry Classification System (NAICS) 

industries, 2,663 (or 1.7%) were ‘‘small’’ 

in some industries and ‘‘not small’’ in 

other industries, and 18,492 (or 12.1%) 

were ‘‘not small’’ in any industry 

subject to an employee-based size 

standard. 

Excluding entities with ‘‘null’’ or 

‘‘zero’’ employee values, 128,599 firms 

(or about 84.4%) appeared both in 2019 

SAM and in 2018 SAM and were 

included in the 24-month average 

employee approximation and 

calculation of number of businesses 

impacted. Of those 128,599 matched 

firms subject to an employee-based size 

standard, 108,541 (or about 84.4%) were 

‘‘small’’ in all NAICS industries, 2,526 

(or 2%) were ‘‘small’’ in some industries 

and other than small (‘‘not small’’) in 

other industries, and 17,532 (or about 

13.6%) were ‘‘not small’’ in any 

industry. In other words, 133,958 (or 

87.9%) of 152,450 total concerns in 

SAM 2019 and 111,067 (or 86.4%) of 

128,599 total matched firms were small 

in at least one NAICS industry with an 

employee-based size standard. These 

results are summarized in Table 1, ‘‘Size 

Status of Businesses in Industries 

Subject to Employee-Based Size 

Standards.’’ 

TABLE 1—SIZE STATUS OF BUSINESSES IN INDUSTRIES SUBJECT TO EMPLOYEE-BASED SIZE STANDARDS

Size status 

Total firms in 2019 SAM subject 

to least one employeebased size standard 

Firms in both 2018 SAM 

and 2019 SAM 

(matched) % Matched Total to 

matched ratio * 

Number of 

firms % Number of firms % 

Small in at least one industry .................. 133,958 87.9 111,067 86.4 82.9 1.206 

Small in all industries ............................... 131,295 86.1 108,541 84.4 82.7 1.210 

Small in some and not small in others .... 2,663 1.7 2,526 2.0 94.9 1.054 

Large in all industries ............................... 18,492 12.1 17,532 13.6 94.8 1.055 

Total .................................................. 152,450 100.0 128,599 100.0 84.4 1.185 

* To be used to translate the results from the matched data to overall 2019 SAM data. 

According to Table 2, ‘‘Distribution of 

Business Concerns Subject to EmployeeBased Size Standards by Number of 

NAICS Codes,’’ the distribution of firms 

by the number of NAICS codes in the 

matched data is very similar to that for 

the overall 2019 SAM data. About 45% 

of firms were in only one NAICS code 

that has an employee-based size 

standard, about 40% in 2–5 NAICS 

codes, about 9% in 6–10 NAICS codes, 

and about 5% in more than 10 NAICS 

codes. In other words, 55% of firms 

were in multiple NAICS codes with 

employee-based size standards. Thus, it 

is quite possible that the change may 

impact a firm’s small business status in 

multiple industries. For purposes of this 

analysis, an impacted firm is defined as 

one that would be impacted by the 

change in terms of gaining, regaining, 

extending, or losing small business 

status in at least one industry with an 

employee-based size standard. 

TABLE 2—DISTRIBUTION OF BUSINESS CONCERNS SUBJECT TO EMPLOYEE-BASED SIZE STANDARDS BY NUMBER OF

NAICS CODES

Number of NAICS codes 

Total firms in 2019 SAM 

with at least one 

employee-based NAICS code 

Matched firms between 

2019 and 2018 

SAM 

Count % Count % 

1 NAICS code .................................................................................................. 70,200 46.0 57,498 44.7 


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1 

AvgEmployee18 _19 = 24 * {(12 * AvgEmployee2018 (SAM))+ (12 * AvgEmployee2019 (SAM))} 

where: 

= 1⁄2 * { (AvgEmployee2018 (SAM)) + (AvgEmployee2019 (SAM))} 

AvgEmployee2018 =; Lk=1(Employeek,zo1s) 

AvgEmployee2019 =; Lk=1(Employeek,zo19) 

where k = 1, 2, ... t pay periods. 

I 

I 

I 

I 
Federal Register / Vol. 87, No. 108 / Monday, June 6, 2022 / Rules and Regulations 34103 

TABLE 2—DISTRIBUTION OF BUSINESS CONCERNS SUBJECT TO EMPLOYEE-BASED SIZE STANDARDS BY NUMBER OF

NAICS CODES—Continued 

Number of NAICS codes 

Total firms in 2019 SAM 

with at least one 

employee-based NAICS code 

Matched firms between 

2019 and 2018 

SAM 

Count % Count % 

2 to 5 NAICS codes ......................................................................................... 61,266 40.2 52,599 40.9 

6 to 10 NAICS codes ....................................................................................... 13,540 8.9 11,798 9.2

>10 NAICS codes ............................................................................................ 7,444 4.9 6,704 5.2 

Total .......................................................................................................... 152,450 100.0 128,599 100.0 

Note: A business concern is defined in terms of a unique local (vendor) DUNS number. 

A central premise of Public Law 116– 

283 is that a 24-month employee 

average (as opposed to a 12-month 

employee average) would enable some 

mid-size businesses who have recently 

exceeded the size standard to regain 

small business status and some 

advanced small businesses close to 

exceeding the size standard to retain 

their small business status for a longer 

period. However, this premise would 

only hold true when businesses’ 

monthly employees are rising. When 

businesses’ monthly employees are 

declining, due to economic downturns 

or other factors, the 24-month employee 

average could be higher than the 12- 

month employee average, thereby 

causing small businesses close to their 

size standards based on the 12-month 

average to lose their small business 

status sooner. In some cases where the 

24-month employee average could be 

higher than the size standard, thereby 

forcing small businesses to lose their 

small status immediately when the 

longer 24-month averaging period 

becomes effective. Additionally, such 

businesses with declining employees 

would have to wait longer to regain 

their small business status. 

ii. Potential Effects of Changing the 

Calculation of Receipts 

Changing the periods for calculating 

average annual receipts from three years 

to five years, pursuant to Public Law 

115–324, may enable some mid-size 

businesses that have just exceeded size 

standards to regain small business 

status. Similarly, it could also allow 

some advanced and larger small 

businesses about to exceed size 

standards to retain their small business 

status for a longer period. However, it 

could also result in some advanced 

small businesses having a five-year 

receipts average that happens to be 

higher than the three-year receipts 

average, thus ejecting them out of their 

small business status sooner. To 

mitigate this negative impact, SBA is 

permitting to allow applicants to its 

Business Loan, Disaster Loan, SBG, and 

SBIC Programs to choose either a threeyear average or a five-year average. 

Thus, an applicant might be eligible for 

assistance if its five-year average is 

equal to or less than the size standard, 

even if it would otherwise be ineligible 

under the three-year average. Detailed 

impacts of this change are discussed 

below. 

It is difficult to determine the actual 

number of small and mid-size 

businesses that would be impacted by 

Public Law 115–324 and this regulatory 

action because there is no annual data 

on receipts of businesses. The annual 

receipts data from the Economic Census 

special tabulation are only available 

once every five years. Similarly, the 

System for Award Management (SAM) 

only records the data on three-year 

average annual receipts of businesses 

over their three preceding fiscal years, 

but not their annual receipts for each 

fiscal year. For example, the receipts 

data for year 2019 is an average of 

annual receipts for 2018, 2017, and 

2016. Similarly, the receipts data for 

2018 is an average of annual receipts for 

2017, 2016, and 2015, and so on. A fiveyear receipts average for 2019 would be 

an average of annual receipts for 2018, 

2017, 2016, 2015, and 2014. 

Given the lack of annual receipts for 

each year, SBA approximated a firm’s 

five-year average annual revenue for 

2019 as follows: 


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This result may slightly 

underestimate the five-year revenue 

average when annual revenues are rising 

(i.e., 2015 revenue > 2014 revenue > 

2013 revenue) and overestimate it if 

annual revenues are declining (i.e., 2015 

revenue < 2014 revenue < 2013 

revenue). 

To estimate the five-year receipts 

average for 2019 using the above 

formula, SBA analyzed the 2019 SAM 

extracts (as of September 1, 2019) and 

2016 SAM extracts (as of September 1, 

2016). The above five-year average 

annual receipts formula would only 

work for businesses that were present in 

both 2016 and 2018 SAM extracts. One 

challenge was that some businesses 

found in 2019 SAM could not be found 

in 2016 SAM and vice versa. Excluding 

entities registered in SAM for purposes 

other than government contracting and 

entities ineligible for small business 

consideration (such as foreign entities 

and state-controlled institutions of 

higher learning), there were a total of 

334,990 unique business concerns in 

2019 SAM subject to at least one 

receipts-based size standard. Of these 

concerns, 282,671 (or about 84.4%) 

were ‘‘small’’ in all NAICS industries, 

9,783 (or 2.9%) were ‘‘small’’ in some 

industries and ‘‘not small’’ in other 

industries, and 42,536 (or 12.7%) were 

‘‘not small’’ in any industry. 

Excluding entities with ‘‘null’’ or 

‘‘zero’’ receipts values, 192,295 firms (or 

about 57.4%) appeared both in 2019 

SAM and in 2016 SAM and were 

included in the five-year average annual 

receipts approximation and calculation 

of number of businesses impacted. Of 

those 192,295 matched firms subject to 

a receipts-based size standard, 152,040 

(or about 79%) were ‘‘small’’ in all 

NAICS industries, 8,081 (or 4.2%) were 

‘‘small’’ in some industries and other 

than small (‘‘not small’’) in other 

industries, and 32,174 (or about 16.7%) 

were ‘‘not small’’ in any industry. In 

other words, 292,454 (or 87.3%) of 

334,990 total concerns in SAM 2019 and 

160,121 (or 83.3%) of 192,295 total 

matched firms were small in at least one 

NAICS industry with a receipts-based 

size standard. These results are 

summarized in Table 3, ‘‘Size Status of 

Businesses in Industries Subject to 

Receipts-Based Size Standards.’’ 

TABLE 3—SIZE STATUS OF BUSINESSES IN INDUSTRIES SUBJECT TO RECEIPTS-BASED SIZE STANDARDS

Size status 

Total firms in 2019 SAM subject 

to least one receipts-based 

standard 

Firms in both 2016 SAM and 

2019 SAM 

(matched) % Matched Total to 

matched ratio * 

Number of 

firms % Number of firms % 

Small in at least one industry .................. 292,454 87.3 160,121 83.3 54.8 1.826 

Small in all industries ............................... 282,671 84.4 152,040 79.1 53.8 1.859 

Small in some and not small in others .... 9,783 2.9 8,081 4.2 82.6 1.211 

Large in all industries ............................... 42,536 12.7 32,174 16.7 75.6 1.322 

Total .................................................. 334,990 100.0 192,295 100.0 57.4 1.742 

* To be used to translate the results from the matched data to overall 2019 SAM data. 

According to Table 4, ‘‘Distribution of 

Business Concerns Subject to ReceiptsBased Size Standards by Number of 

NAICS Codes,’’ the distribution of firms 

by the number of NAICS codes in the 

matched data is very similar to that for 

the overall 2019 SAM data. About 41– 

43% of firms were in only one NAICS 

code that has a receipts-based size 

standard, about 35% in 2–5 NAICS 

codes, about 12% in 6–10 NAICS codes, 

and about 8–10% in more than 10 

NAICS codes. In other words, 57–59% 

of firms were in multiple NAICS codes 

with receipts-based size standards. 

Thus, it is quite possible that the change 

may impact a firm’s small business 

status in multiple industries. For 

purposes of this analysis, an impacted 

firm is defined as one that would be 

impacted by the change in terms of 


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AvgRevenue2014_ 18 

and 

1 

= 5 * {(2 * AvgRevenue2016 (SAM))+ (3 * AvgRevenue2019 (SAM))} 

where: 

AvgRevenue2016 (SAM) = AvgRevenue2013 _ 15 = 

1 

= 3 * (Revenue2013+Revenue2014 +Revenue2015 ) 

AvgRevenue2019 (SAM) = AvgRevenue2016 _ 18 = 

1 

= 3 * (Revenue2016+Revenue2017+Revenue2018 ). 
Federal Register / Vol. 87, No. 108 / Monday, June 6, 2022 / Rules and Regulations 34105 

gaining, regaining, extending, or losing 

small business status in at least one 

industry with a receipts-based size 

standard. 

TABLE 4—DISTRIBUTION OF BUSINESS CONCERNS SUBJECT TO RECEIPTS-BASED SIZE STANDARDS BY NUMBER OF

NAICS CODES

Number of NAICS codes 

Total firms in 2019 SAM with at 

least one receipts-based 

NAICS code 

Matched firms between 

2019 and 2016 

SAM 

Count % Count % 

1 NAICS code .................................................................................................. 145,267 43.4 79,701 41.4 

2 to 5 NAICS codes ......................................................................................... 120,078 35.8 68,168 35.4 

6 to 10 NAICS codes ....................................................................................... 40,595 12.1 24,461 12.7 

>10 NAICS codes ............................................................................................ 29,050 8.7 19,965 10.4 

Total .......................................................................................................... 334,990 100.0 192,295 100.0 

Note: A business concern is defined in terms of a unique local (vendor) DUNS number. 

A central premise of Public Law 115– 

324 is that a five-year annual receipts 

average (as opposed to a three-year 

annual receipts average) would enable 

some mid-size businesses who have 

recently exceeded the size standard to 

regain small business status and some 

advanced small businesses close to 

exceeding the size standard to retain 

their small business status for a longer 

period. However, this premise would 

only hold true when businesses’ annual 

revenues are rising. When businesses’ 

annual revenues are declining, due to 

economic downturns or other factors, 

the five-year annual receipts average 

could be higher than the three-year 

annual receipts average, thereby causing 

small businesses close to their size 

standards to lose their small business 

status sooner. To mitigate such negative 

impacts on small businesses, SBA 

proposes, in consideration of public 

comments on the June 2019 proposed 

rule and the results from its own 

analysis, to permit businesses in the 

Business Loan, Disaster Loan, and SBIC 

Programs to use either a three-year 

average or a five-year average for 

calculating average annual receipts for 

the purposes of qualifying as a small 

business. 

B. Impacts on Businesses From the 

Changes in Calculation of Employees 

and Receipts for Size Standards 

1. Impacts on Businesses From 

Changing the Averaging Period for 

Employees From 12 Months to 24 

Months 

By comparing the approximated 24- 

month employee average with the 

current employee-based size standard 

for each of the 128,599 matched 

business concerns in each NAICS code 

subject to an employee-based size 

standard, in this final rule, SBA 

identifies the following four possible 

impacts from changing the averaging 

period for employees from 12 months to 

24 months: 

i. The number of mid-size businesses 

that have exceeded the size standard 

and would regain small business status 

in at least one NAICS industry with an 

employee-based size standard (i.e., 12- 

month average > size standard ≥ 24- 

month average)—expansive impact. 

ii. The number of advanced small 

businesses within 10% below the size 

standard that would have their small 

business status extended for a longer 

period in at least one NAICS industry 

with an employee-based standard (24- 

month average < 12-month average ≤ 

size standard and 0.9*size standard < 

12-month average ≤ size standard)— 

expansive impact. 

iii. The number of currently small 

businesses that would lose their small 

business status in at least one NAICS 

industry subjected to an employeebased size standard (i.e., 12-month 

average ≤ size standard < 24-month 

average)—contractive impact. 

iv. The number of advanced small 

businesses within 10% below the size 

standard that would have their small 

status shortened in at least one NAICS 

industry subject to an employee-based 

standard (12-month average < 24-month 

average ≤ size standard and 0.9*size 

standard < 12-month average ≤ size 

standard)—contractive impact. 

In this final rule, SBA is changing the 

period for calculation of average 

employees for all of its employee-based 

size standards from 12 months to 24 

months. The purpose of Public Law 

116–283 is to allow small businesses 

more time to grow and develop 

competitiveness and infrastructure so 

that they are better prepared to succeed 

under full and open competition once 

they outgrow the size threshold. 

However, as stated previously, a longer 

24-month averaging period may not 

always and necessarily provide relief to 

every small business concern. As 

discussed previously, when monthly 

employees are declining, the 24-month 

average would be higher than the 12- 

month average, thereby ejecting some 

advanced small businesses out of their 

small business status sooner or 

rendering some small businesses under 

the 12-month average not small 

immediately. 

As discussed earlier, the change in the 

averaging period for employees from 12 

months to 24 months results in four 

different types of impacts on small 

businesses: (i) Enabling current large or 

mid-size businesses to gain small 

business status (impact i); (ii) Enabling 

current advanced small businesses to 

lengthen their small business status 

(impact ii); (iii) Causing current small 

businesses to lose their small business 

status (impact iii); and (iv) Causing 

current small businesses to shorten their 

small business status (impact iv). Table 

5, ‘‘Percentage Distribution of Impacted 

Firms with Employee-Based Size 

Standards by the Number of NAICS 

Codes,’’ provides these results based on 

the 2019 SAM—2018 SAM matched 

firms. 

It is highly notable that the 

distribution of impacted firms by the 

number of NAICS codes, as shown in 

Table 5, is very different as compared to 

a similar distribution based on the 

overall matched and total 2019 SAM 

data (see Table 2), especially with 

respect to firms with only one NAICS 

code and those with more than five 

NAICS codes. For example, about 45% 

of all firms in the overall data were 

associated with only one NAICS code, 

as compared only about 20% among 

impacted firms. Similarly, firms with 

more than five NAICS codes accounted 

for about 13–14% of all firms in the 

original data, as compared to 30–40% 

among impacted firms. It is also notable 


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that, among the industries with 

employee-based size standard, NAICS 

Sector 31–33 (Manufacturing) and 

Sector 42 (Wholesale Trade) together 

accounted for about 90% of impacted 

firms (in terms of both contractive and 

expansive impacts), with Sector 31–33 

accounting for about 65% and Sector 42 

about 25%. 

TABLE 5—PERCENTAGE DISTRIBUTION OF IMPACTED FIRMS WITH EMPLOYEE-BASED SIZE STANDARDS BY THE NUMBER OF

NAICS CODES

Impact * 

Number of 

impacted 

firms 

% Distribution of impacted firms by number of NAICS codes 

1 NAICS code 2–5 NAICS 

codes 

6–10 NAICS 

codes 

>10 NAICS 

codes Total 

Currently small in all NAICS codes 

Impact (ii) ................................................. 195 33.3 47.2 10.3 9.2 100 

Impact (iii) ................................................ 178 33.1 44.4 15.7 6.7 100 

Impact (iv) ................................................ 66 19.7 47.0 13.6 19.7 100 

Currently large business in all NAICS codes 

Impact (i) .................................................. 188 39.9 44.1 11.2 4.8 100 

Currently small in some NAICS and not small in others 

Impact (i) .................................................. 182 0 34.1 31.9 34.1 100 

Impact (ii) ................................................. 130 0 36.2 32.3 31.5 100 

Impact (iii) ................................................ 42 0 40.5 40.5 19.0 100 

Impact (iv) ................................................ 20 0 50 15 35 100 

Total Impact by Impact Type 

Impact (i) .................................................. 370 20.3 39.2 21.4 19.2 100 

Impact (ii) ................................................. 325 20.0 42.8 19.1 18.2 100 

Impact (iii) ................................................ 220 18.2 29.5 13.8 6.2 100 

Impact (iv) ................................................ 86 15.1 47.7 14.0 23.3 100 

Overall Impact 

Expansive ................................................. 689 20.3 40.8 20.2 18.7 100 

Contractive ............................................... 306 23.5 44.8 18.6 13.1 100 

Total .................................................. 995 21.3 42.0 19.7 17.0 100 

* Impact (i) = Current large businesses gaining small status; Impact (ii) = Current small businesses extending small status; Impact (iii) = Current small businesses losing small status; Impact (iv) = Current small businesses shortening small status. 

Each of these impacts was then 

multiplied by an applicable factor or 

ratio, as shown in the last column of 

Table 1, to obtain the respective impacts 

corresponding to all firms in 2019 SAM 

subject to at least one employee-based 

size standard. These results are 

presented below in Table 6, ‘‘Impacts 

from Changing the Averaging Period for 

Employees from 12 Months to 24 

Months.’’ The last column of the table 

shows the percentages of firms impacted 

relative to all business concerns in 2019 

SAM. Because the SAM data only 

captures businesses that are primarily 

interested in federal procurement 

opportunities, the SAM-based results do 

not fully capture the impacts the change 

may have on businesses participating in 

various non-procurement programs that 

apply to SBA’s employee-based size 

standards, such as SBA loan programs 

and exemptions from compliance with 

paperwork and other regulatory 

requirements. 

The Economic Census, combined with 

the Census of Agriculture and County 

Business Patterns Reports, provides for 

each NAICS code information on the 

number of total small and large 

businesses subjected to an employeebased size standard. Based on the 

matched SAM data, SBA computed 

percentages of businesses impacted 

under each impact category for each 

NAICS industry subject to an employeebased size standard. By applying such 

percentages to the 2012 Economic 

Census tabulation (the latest available 

when this rule was developed), SBA 

estimated the number of all businesses 

impacted under each impact type for 

each NAICS code subject to an 

employee-based size standard. These 

results are presented in Table 7, 

‘‘Impacts from Changing the Averaging 

Period for Employees from 12 Months to 

24 Months (2012 Economic Census).’’ 

TABLE 6—IMPACTS FROM CHANGING THE AVERAGING PERIOD FOR EMPLOYEES FROM 12 MONTHS TO 24 MONTHS

Impact 1

Firms 

impacted in 

matched 

dataset 

Total to 

matched 

ratio 

Total firms 

impacted in 

2019 SAM 

Total firms 

in 2019 SAM % Impacted 

Entities only small under all NAICS code(s) 

Impact (ii) ............................................................................. 195 1.210 236 131,295 0.2 

Impact (iii) ............................................................................ 178 1.210 215 131,295 0.2 


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Federal Register / Vol. 87, No. 108 / Monday, June 6, 2022 / Rules and Regulations 34107 

TABLE 6—IMPACTS FROM CHANGING THE AVERAGING PERIOD FOR EMPLOYEES FROM 12 MONTHS TO 24 MONTHS— 

Continued 

Impact 1

Firms 

impacted in 

matched 

dataset 

Total to 

matched 

ratio 

Total firms 

impacted in 

2019 SAM 

Total firms 

in 2019 SAM % Impacted 

Impact (iv) ............................................................................ 66 1.210 80 131,295 0.1 

Entities other than small under all NAICS code(s) 

Impact (i) .............................................................................. 188 1.055 198 18,492 1.1 

Entities small in some NAICS code(s) and other than small in other(s) 

Impact (i) .............................................................................. 182 1.054 192 2,663 7.2 

Impact (ii) ............................................................................. 130 1.054 137 2,663 5.1 

Impact (iii) ............................................................................ 42 1.054 44 2,663 1.7 

Impact (iv) ............................................................................ 20 1.054 21 2,663 0.8 

Total impact by impact type 

Impact (i) .............................................................................. 370 ........................ 390 21,155 1.8 

Impact (ii) ............................................................................. 325 ........................ 373 133,958 0.3 

Impact (iii) ............................................................................ 220 ........................ 260 133,958 0.2 

Impact (iv) ............................................................................ 86 ........................ 101 133,958 0.1 

Overall total by expansive or contractive impact 2

Expansive [impact (i) or impact (ii)] ..................................... 689 1.098 757 152,450 0.5 

Contractive [impact (iii) or impact (iv)] ................................. 306 1.178 361 152,450 0.2 

Total impact .................................................................. 995 ........................ 1,117 152,450 0.7 

1 Impact (i) = Current large businesses gaining small business status; Impact (ii) = Current small businesses extending small status; Impact (iii) 

= Current small businesses losing small status; Impact (iv) = Current small businesses shortening small status. 2 Number of firms under overall positive, negative and total impacts refer to the number of unique firms. Some firms could appear in multiple 

impact types and hence individual impacts may not add up to overall impact. 

TABLE 7—IMPACTS FROM CHANGING THE AVERAGING PERIOD FOR EMPLOYEES FROM 12 MONTHS TO 24 MONTHS

[2012 Economic Census] 

Impact 1 Total firms 

(in millions) 

Estimate of 

impacted firms 

% 

Impacted 

Impact (i) ...................................................................................................................................... 22,324 281 1.3 

Impact (ii) ..................................................................................................................................... 657,942 1,203 0.2 

Impact (iii) .................................................................................................................................... 657,942 763 0.1 

Impact (iv) .................................................................................................................................... 657,942 287 0.04 

Overall impact 

Expansive [impact (i) or impact (ii)] ............................................................................................. 680,266 1,484 0.2 

Contractive [impact (iii) or impact (iv)] ......................................................................................... 657,942 1,050 0.2 

Total impact .......................................................................................................................... 680,266 2,534 0.4 

1 Impact (i) = Current large businesses gaining small status; Impact (ii) = Current small businesses extending small status; Impact (iii) = Current small businesses losing small status; Impact (iv) = Current small businesses shortening small status. 

Currently large or mid-size businesses 

regaining small business status would 

become eligible for various benefits as 

small business concerns, including 

access to federal set-aside contracts, 

SBA’s guaranteed loans and disaster 

assistance, reduced patent fees, and 

exemptions from various compliance 

and paperwork requirements. With their 

small business status extended, 

advanced small businesses would 

continue to receive such benefits for a 

longer period. However, the change may 

also cause some small businesses to lose 

their small business status in at least 

one employee-based size standard and 

access to small business assistance, 

especially federal set-aside 

opportunities. 

2. Impacts on Businesses From 

Changing the Averaging Period for 

Receipts From Three Years to Five Years 

By comparing the approximated fiveyear annual receipts average with the 

current receipts-based size standard for 

each of the 192,295 matched business 

concerns in each NAICS code subject to 

a receipts-based size standard, in this 

final rule, SBA identifies the following 

four possible impacts from changing the 

averaging period for annual receipts 

from three years to five years: 

i. The number of mid-size businesses 

that have exceeded the size standard 

and would regain small business status 

in at least one NAICS industry with a 

receipts-based size standard (i.e., 3-year 


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average > size standard ≥ 5-year 

average)—expansive impact. 

ii. The number of advanced small 

businesses within 10% below the size 

standard that would have their small 

business status extended for a longer 

period in at least one NAICS industry 

with a receipts-based standard (5-year 

average < 3-year average ≤ size standard 

and 0.9*size standard < 3-year average 

≤ size standard)—expansive impact. 

iii. The number of currently small 

businesses that would lose their small 

business status in at least one NAICS 

industry subjected to a receipts-based 

size standard (i.e., 3-year average ≤ size 

standard < 5-year average)—contractive 

impact. 

iv. The number of advanced small 

businesses within 10% below the size 

standard that would have their small 

business status shortened in at least one 

NAICS industry subject to a receiptsbased standard (3-year average < 5-year 

average ≤ size standard and 0.9*size 

standard < 3-year average ≤ size 

standard)—contractive impact. 

In this final rule, SBA is changing the 

period for calculation of average annual 

receipts for SBA receipts-based size 

standards for Business Loan, Disaster 

Loan, SBG, and SBIC Programs from 

three years to five years. The purpose of 

Public Law 115–324 is to allow small 

businesses more time to grow and 

develop competitiveness and 

infrastructure so that they are better 

prepared to succeed under full and open 

competition once they outgrow the size 

threshold. However, a longer five-year 

averaging period may not always and 

necessarily provide relief to every small 

business concern. As discussed in the 

June 2019 proposed rule, when annual 

revenues are declining or when annual 

revenues for the latest three years are 

lower than those for the earliest two 

years of the five-year period, the fiveyear average would be higher than the 

three-year average, thereby ejecting 

some advanced small businesses out of 

their small business status sooner or 

rendering some small businesses under 

the three-year average not small 

immediately. 

There are four different types of 

impacts on small businesses from 

changes to the averaging period for 

annual receipts from three years to five 

years as follows: (i) Enabling current 

large or mid-size businesses to gain 

small business status (impact i); (ii) 

Enabling current advanced small 

businesses to lengthen their small 

business status (impact ii); (iii) Causing 

current small businesses to lose their 

small business status (impact iii); and 

(iv) Causing current small businesses to 

shorten their small business status 

(impact iv). 

However, with the SBA’s decision to 

permit businesses in the Business Loan, 

Disaster Loan, SBG, and SBIC programs 

to use either a three-year average or a 

five-year average for calculating average 

annual receipts for the purposes of 

qualifying as a small business, the two 

contractive impacts (namely impact (iii) 

and impact (iv)) do not apply to this 

final rule. Accordingly, this final rule 

provides the analysis of the two 

expansive impacts of changing the 

averaging periods for annual receipts 

from three years to five years (namely 

impact (i) and impact (ii)) only. 

Table 8, ‘‘Percentage Distribution of 

Impacted Firms with Receipts-Based 

Size Standards by the Number of NAICS 

Codes,’’ provides these results based on 

the 2019 SAM–2016 SAM matched 

firms. 

TABLE 8—PERCENTAGE DISTRIBUTION OF IMPACTED FIRMS WITH RECEIPTS-BASED SIZE STANDARDS BY THE NUMBER OF

NAICS CODES

Impact * 

Number of 

impacted 

firms 

% Distribution of impacted firms by number of NAICS codes 

1 NAICS code 2–5 NAICS 

codes 

6–10 NAICS 

codes 

>10 NAICS 

codes Total 

Currently large in all NAICS codes 

Impact (i) .................................................. 899 36.3 33.9 12.6 17.2 100.0 

Currently small in all NAICS codes 

Impact (ii) ................................................. 1,227 27.3 36.3 17.8 18.6 100.0 

Currently small in some NAICS and not small in others 

Impact (i) .................................................. 1,761 0 27.4 22.7 50.0 100.0 

Impact (ii) ................................................. 1,072 0 27.8 24.3 47.9 100.0 

Total Impact by Impact Type 

Impact (i) .................................................. 2,660 12.3 29.6 19.2 38.9 100.0 

Impact (ii) ................................................. 2,299 14.6 32.3 20.8 32.3 100.0 

Total expansive impact ..................... 4,702 14.1 31.8 20.2 34.0 100.0 

* Impact (i) = Current large businesses gaining small business status; and Impact (ii) = Current small businesses extending small business 

status. 

It is highly notable that the 

distribution of impacted firms by the 

number of NAICS codes, as shown in 

Table 8, is very different as compared to 

a similar distribution based on the 

overall matched and total 2019 SAM 

data (see Table 4), especially with 

respect to firms with only one NAICS 

code and those with more than five 

NAICS codes. For example, as shown in 

Table 4, above, more than 40% of all 

firms in the overall data were associated 

with only one NAICS code, as compared 

to less than 15% among impacted firms 

in Table 8. Similarly, firms with more 

than five NAICS codes accounted for 

about 20% of all firms in the original 

data, as compared to more than 50% 

among impacted firms. It is also notable 

that, among the industries with receiptsbased size standards, NAICS Sectors 54, 

56, and 23 together accounted for more 

than 70% of impacted firms, with Sector 

54 (Professional, Scientific and 

Technical Services) accounting for 

about 30–35%, followed by Sector 23 

(Construction) about 25–30%, and 


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Sector 56 (Administrative and Support, 

Waste Management and Remediation 

Services) about 10–13%. 

Each of these impacts was then 

multiplied by an applicable factor or 

ratio, as shown in the last column of 

Table 3, to obtain the respective impacts 

corresponding to all firms in 2019 SAM 

subject to at least one receipts-based 

size standard. These results are 

presented below in Table 9, ‘‘Impacts 

from Changing the Averaging Period for 

Receipts from 3 Years to 5 Years.’’ The 

last column of the table shows the 

percentage of firms impacted relative to 

all business concerns in 2019 SAM. 

Because the SAM data only captures 

businesses that are primarily interested 

in federal procurement opportunities, 

the SAM-based results do not fully 

capture the impacts the change may 

have on businesses participating in 

various non-procurement programs that 

apply SBA’s receipts-based size 

standards, such as exemptions from 

compliance with paperwork and other 

regulatory requirements. 

TABLE 9—IMPACTS FROM CHANGING THE AVERAGING PERIOD FOR RECEIPTS FROM 3 YEARS TO 5 YEARS

Impact 1

Firms 

impacted in 

matched 

dataset 

Total to 

matched 

ratio 

(Table 1) 

Total firms 

impacted in 

2019 SAM 

Total firms in 

2019 SAM % Impacted 

Entities other than small under all NAICS code(s) 

Impact (i) .............................................................................. 899 1.32 1,189 42,536 2.8 

Entities small under all NAICS code(s) 

Impact (ii) ............................................................................. 1,227 1.859 2,281 282,671 0.8 

Entities small in some NAICS code(s) and other than small in other(s) 

Impact (i) .............................................................................. 1,761 1.211 2,132 9,783 21.8 

Impact (ii) ............................................................................. 1,072 1.211 1,298 9,783 13.3 

Total expansive impact by impact type 

Impact (i) .............................................................................. 2,660 ........................ 3,320 52,319 6.3 

Impact (ii) ............................................................................. 2,299 – 3,579 292,454 1.2 

Overall total expansive impact 2 ................................... 4,702 1.391 6,542 334,990 2.0 

1 Impact (i) = Current large businesses gaining small business status; and Impact (ii) = Current small businesses extending small business status. 2 Number of firms under total positive impacts refer to the number of unique firms. Some firms could appear in both impact types and hence individual impacts may not add up to overall impact. 

The Economic Census, combined with 

the Census of Agriculture and County 

Business Patterns Reports, provides for 

each NAICS code information on the 

number of total small and large 

businesses subjected to a receipts-based 

size standard. Based on the matched 

SAM data, SBA computed percentages 

of businesses impacted under each 

impact category for each NAICS 

industry subject to a receipts-based size 

standard. By applying such percentages 

to the 2012 Economic Census 

tabulation, SBA estimated the number 

of all businesses impacted under each 

impact type for each NAICS code 

subject to a receipts-based size standard. 

These results are presented in Table 10, 

‘‘Impacts from Changing the Averaging 

Period for Receipts from 3 Years to 5 

Years (2012 Economic Census).’’ 

TABLE 10—IMPACTS FROM CHANGING THE AVERAGING PERIOD FOR RECEIPTS FROM 3 YEARS TO 5 YEARS

[2012 Economic Census] 

Impact 1 Total firms Estimate of 

impacted firms % Impacted 

Impact (i) ...................................................................................................................................... 271,505 8,565 3.2 

Impact (ii) ..................................................................................................................................... 6,896,633 60,176 0.9 

Overall expansive impact ..................................................................................................... 7,168,138 68,742 1.0 

1 Impact (i) = Current large businesses gaining small business status; and Impact (ii) = Current small businesses extending small business 

status. 

Currently large or mid-size businesses 

regaining small business status would 

get various benefits as small business 

concerns, including access to SBA loan 

programs, and exemptions from various 

compliance and paperwork 

requirements. With their small business 

status extended, advanced small 

businesses would continue to receive 

such benefits for a longer period. 

However, the change from three-year 

average receipts to five-year average 

may also harm some small businesses 

by causing them to lose or shorten their 

small business status in at least one 

receipts-based size standard, thereby 

depriving them of access to small 

business assistance, including SBA’s 

lending. To mitigate such impacts, SBA 

is allowing businesses to elect either the 

three-year average annual receipts or the 

five-year average annual receipts for the 

Business Loan, Disaster Loan, and SBIC 

programs. SBA sought comment on 


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implementation of Public Law 115–324 

for the Business Loan, Disaster Loan, 

and SBIC programs. 

C. The Baseline 

1. Baseline for Changing the Averaging 

Period for Employees From 12 Months 

to 24 Months 

In this rulemaking, SBA establishes 

an appropriate baseline to evaluate 

benefits, costs, or transfer impacts of 

this action and alternative approaches 

considered, if any. A baseline should 

represent the agency’s best assessment 

of what the world would look like 

absent the regulatory action. For a new 

regulatory action modifying an existing 

regulation (such as changing the 

calculation of the average number of 

employees from 12 months to 24 

months), a baseline assuming no change 

to the regulation (i.e., maintaining the 

status quo) generally provides an 

appropriate benchmark for evaluating 

benefits, costs, or transfer impacts of 

proposed regulatory changes and their 

alternatives. 

Based on the 2012 Economic Census 

special tabulations (the latest available) 

and 2012 County Business Patterns 

Reports (for industries not covered by 

the Economic Census), of a total of 

about 680,266 firms in all industries 

with employee-based size standards, 

about 96.7% were considered small and 

3.3% other than small under the 12- 

month employee average. Similarly, of 

152,450 businesses that were subject to 

at least one employee-based size 

standard and eligible for federal 

contracting, 87.9% were small in at least 

one NAICS code and 12.1% other than 

small in all NAICS codes with an 

employee-based size standard. 

Based on the data from the Federal 

Procurement Data System—Next 

Generation (FPDS–NG) for fiscal year 

2019, on average, about 39,714 unique 

firms in industries subject to employeebased size standards received at least 

one federal contract during 2019, of 

which 85.3% were small. Businesses 

subject to employee-based size 

standards received $232.6 billion in 

annual average federal contract dollars 

in 2019, of which nearly $47 billion or 

about 20.2% went to small businesses. 

Of total dollars awarded to small 

businesses subject to employee-based 

size standards, $23.8 billion or 50.6% 

was awarded through various small 

business set-aside programs and 49.4% 

was awarded through non-set aside 

contracts. 

Based on SBA’s internal data on its 

loan programs, small businesses subject 

to employee-based size standards 

received, on an annual basis, a total of 

7,672 7(a) and 504 loans during fiscal 

years 2018–2020, totaling $4.9 billion, 

of which 75% was issued through the 

7(a) program and 25% was issued 

through the CDC/504 program. During 

fiscal years 2018–2020, small businesses 

in those industries also received about 

370 loans through the SBA’s EIDL loan 

program, totaling about $0.02 billion on 

an annual basis. Table 11, ‘‘Baseline 

Analysis of Employee-Based Size 

Standards,’’ provides these baseline 

results. 

Based on SBA’s internal data on its 

SBGProgram for fiscal years 2018–2020, 

small businesses subject to employeebased size standards received, on an 

annual basis, a total of 52 surety bonds 

guaranteed by SBA, which supported 

about $41 million in contracts. Surety 

Bonds to firms with employee-based 

size standards account for only about 

1% of overall program activity. 

Based on SBA’s internal data on its 

SBIC program for fiscal years 2018– 

2020, on an annual basis, 375 small 

businesses subject to employee-based 

size standards received SBIC financing, 

resulting in $1.8 billion in capital to 

those small firms. SBIC financing to 

firms with employee-based size 

standards account for about 34% of 

overall program activity. 

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 

federal agencies that use SBA’s size 

standards. However, SBA has no data to 

estimate the number of small businesses 

receiving such benefits. 

TABLE 11—BASELINE ANALYSIS OF EMPLOYEE-BASED SIZE STANDARDS

Measure Value 

Total industries subject to employee-based size standards ............................................................................................................... 500 

Total firms subject to at least one employee-based size standard (million)—2012 Economic Census ............................................. 680,266 

Total small firms subject to at least one employee-based size standard (million)—2012 Economic Census ................................... 657,942 

Total small firms subject to at least one employee-based size standard as % of total firms—2012 Economic Census .................. 96.7 

Total business concerns in SAM 1 (as of September 1, 2019) ........................................................................................................... 403,116 

Total business concerns subject to an employee-based size standard in at least one NAICS code 2 (2019 SAM) ........................ 152,450 

Total businesses that are small in at least one NAICS code subject to an employee-based size standard (2019 SAM) ................ 133,958 

Small business concerns as % of total business concerns subject to employee-based standards (2019 SAM) .............................. 87.9 

Average total number of unique eligible vendors getting federal contracts 1—FPDS–NG (2019) ..................................................... 106,230 

Average total number of unique firms with employee-based size standards getting federal contracts 2—FPDS–NG (2019) ........... 39,714 

Average total contract dollars awarded to business concerns, subject to employee-based standards ($ billion)—FPDS–NG 

(2019) ............................................................................................................................................................................................... $233.6 

Average total small business contract dollars awarded to businesses subject to employee-based standards ($ billion)—FPDS– 

NG (2019) ........................................................................................................................................................................................ $47.1 

Small business dollars as % of total dollars awarded to firms subject to employee-based standards (FPDS–NG (2019) ............... 20.2 

Annual average number of 7(a) and 504 loans to businesses subject to employee-based standards (FY 2018–2020) .................. 7,672 

Annual average amount of 7(a) and 504 loans ($ billion) (FY 2018–2020) ....................................................................................... $4.9 

Number of EIDL loans to businesses subject to employee-based size standards (FY 2018–2020) 3 ............................................... 369 

Amount of EIDL loans ($ billion) (FY 2018–2020) 3 ............................................................................................................................ $0.02 

Number of surety bonds to firms subject to employee-based size standards (FY 2018–2020) ........................................................ 52 

Total value of contracts supported ($ billion) (FY 2018–2020) ........................................................................................................... $0.04 

Number of firms subject to employee-based size standards receiving SBIC financing (FY 2018–2020) .......................................... 375 

Total value of SBIC financing ($ billion) (FY 2018–2020) .................................................................................................................. $1.8 

1Entities in SAM and FPDS–NG presented above only include business concerns that can be eligible to qualify as small for federal contracting. That is, entities that can never qualify as small (e.g., foreign, not-for-profit and government entities) are excluded as they are not impacted by this rule. 2A business concern could appear in multiple NAICS industries involving both employee-based and size standards and those based on other 

measures (such as employees). Similarly, a business could be small in some industries and other than small in others. 3Excludes 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. 


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As mentioned previously, businesses 

that would regain or lose small business 

status can be identified by comparing 

their 24-month employee average with 

the employee-based size standard. That 

is, if the 24-month employee average of 

a firm currently above the size standard 

is lower than the applicable employeebased size standard, that firm will gain 

or regain small business status. 

Similarly, if the 24-month employee 

average of a currently small business is 

higher than the size standard, that 

business will lose its small business 

status. However, to estimate the number 

of small businesses that would benefit 

by having their small business status 

extended for a longer period or would 

be penalized by having their small size 

status shortened, SBA considered small 

businesses whose 12-month employee 

average was within 10% below their 

employee-based size thresholds. Small 

businesses that are not immediately 

impacted may be impacted either 

negatively or positively someday as they 

continue to grow and approach the size 

standard threshold. 

2. Baseline for Changing the Averaging 

Period for Receipts From Three Years to 

Five Years 

For this new regulatory action 

modifying an existing regulation (such 

as changing the average annual receipts 

calculation from three years to five 

years), a baseline assuming no change to 

the regulation (i.e., maintaining the 

status quo) generally provides an 

appropriate benchmark for evaluating 

benefits, costs, or transfer impacts of 

proposed regulatory changes and their 

alternatives. 

Based on the 2012 Economic Census 

special tabulations (the latest available), 

2012 County Business Patterns Reports 

(for industries not covered by the 

Economic Census), and 2012 

Agricultural Census tabulations (for 

agricultural industries), of a total of 

about 7.2 million firms in all industries 

with receipts-based size standards, 

about 96% are considered small and 4% 

other-than-small under the three-year 

annual receipts average. Similarly, of 

334,990 businesses in SAM 2019 that 

were subject to at least one receiptsbased size standard and eligible to 

qualify as small business concerns, 

87.3% were small in at least one NAICS 

code and 12.7% other than small in all 

NAICS codes. 

Based on SBA’s internal data on its 

loan programs, small businesses subject 

to receipts-based size standards 

received, on an annual basis, a total of 

about 50,150 7(a) and 504 loans for 

fiscal years 2018–2020, totaling nearly 

$24 billion, of which 85% was issued 

through the 7(a) program and 15% was 

issued through the CDC/504 program. 

During fiscal years 2018–2020, small 

businesses in those industries also 

received about 3,534 loans through the 

SBA’s EIDL program, totaling about $0.1 

billion on an annual basis. 

Besides financial assistance discussed 

above, small businesses also benefit 

through reduced fees, less paperwork, 

and fewer compliance requirements that 

are available to small businesses 

through federal agencies that use SBA’s 

size standards. However, SBA has no 

data to estimate the number of small 

businesses receiving such benefits. 

Similarly, due to the lack of data, SBA 

is not able to determine impacts the 

final rule are subject to their own size 

standards based on average annual 

receipts. 

Based on SBA’s internal data on its 

SBG Program for fiscal years 2018–2020, 

small businesses subject to receiptbased size standards received, on an 

annual basis, a total of 10,433 surety 

bonds guaranteed by SBA which 

supported $6.7 billion in contracts. Over 

95% of surety bond activity, in terms of 

the value of contracts supported, occurs 

under Sector 23 (Construction). 

Based on SBA’s internal data on SBIC 

program for fiscal years 2018–2020, on 

an annual basis, 724 small businesses 

subject to receipts-based size standards 

received SBIC financing, resulting in 

$3.4 billion in capital to those small 

firms. Table 12, ‘‘Baseline Analysis of 

Receipts-Based Size Standards,’’ below, 

provides these baseline results. 

TABLE 12—BASELINE ANALYSIS OF RECEIPTS-BASED SIZE STANDARDS

Measure Value 

Total industries subject to receipts-based standards .......................................................................................................................... 518 

Total firms subject to at least one receipts-based standard (million)—2012 Economic Census ....................................................... 7.17 

Total small firms subject to at least one receipts-based standard (million)—2012 Economic Census .............................................. 6.9 

Total small firms subject to at least one receipts-based standard as % of total firms—2012 Economic Census ............................. 96.2 

Total business concerns in SAM 1 (as of September 1, 2019) ........................................................................................................... 403,116 

Total business concerns subject to a receipts-based size standard in at least one NAICS code 2 (2019 SAM) .............................. 334,990 

Total businesses that are small in at least one NAICS code subject to a receipts-based size standard (2019 SAM) ..................... 292,454 

Small business concerns as % of total business concerns subject to receipts-based standards (2019 SAM) ................................. 87.3 

Annual average number of 7(a) and 504 loans to businesses subject to receipts-based standards (FY 2018–2020) ..................... 50,153 

Annual average amount of 7(a) and 504 loans ($ billion) (FY 2018–2020) ....................................................................................... $23.9 

Number of EIDL loans to businesses subject to receipts-based size standards (FY 2018–2020) 3 .................................................. 3,534 

Amount of EIDL loans ($ billion) (FY 2018–2020) 3 ............................................................................................................................ $0.1 

Number of surety bonds to firms subject to receipts-based size standards (FY 2018–2020) ........................................................... 10,433 

Total value of contracts supported ($ billion) (FY 2018–2020) ........................................................................................................... $6.7 

Number of firms subject to receipts-based size standards receiving SBIC financing (FY 2018–2020) ............................................. 724 

Total value of SBIC financing ($ billion) (FY 2018–2020) .................................................................................................................. $3.4 

1Entities in SAM presented above only include business concerns that can be eligible to qualify as small for federal assistance. That is, entities that can never qualify as small (e.g., foreign, not-for-profit and government entities) are excluded as they are not impacted by this rule. 2A business concern could appear in multiple NAICS industries involving both receipts-based size standards and those based on other measures (such as employees). Similarly, a business could be small in some industries and other-than-small in others. 3Excludes 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. 

Businesses that would regain or 

expand their small business status can 

be identified by comparing the estimate 

of their five-year receipts average with 

the size standard. That is, if the fiveyear receipts average of a firm currently 

above the size standard is lower than 

the applicable size standard, that firm 

will gain or regain small business status. 

To estimate the number of small 

businesses that would benefit by having 

their small business status extended for 

a longer period or would be penalized 

by having their small business status 

shortened, SBA considered small 


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businesses whose three-year average 

annual receipts was within ten percent 

below their receipts-based size 

thresholds. Depending upon whether 

their annual receipts are growing or 

declining, small businesses that are not 

immediately impacted may be 

impacted, either positively (i.e., gaining 

small business status) or negatively (i.e., 

losing small business status) someday as 

they continue to grow and approach the 

size standard threshold as in the current 

three-year averaging method. However, 

SBA is not able to quantify such impacts 

now. 

D. Expansions in Small Business Size 

Status 

1. Expansive Effects of Changing the 

Averaging Period for Employees From 

12 Months to 24 Months 

The most significant expansive effects 

to businesses from the change in the 

averaging period for calculation of the 

number of employees for size standards 

from 12 months to 24 months include: 

(i) Enabling some mid-size businesses 

currently categorized above their 

corresponding size standards to gain or 

regain small business size status and 

thereby qualify for participation in 

federal assistance intended for small 

businesses, and (ii) Allowing some 

advanced and larger small businesses 

close to their size thresholds to lengthen 

their small business status for a longer 

period and thereby continue their 

participation in federal small business 

programs. These programs include 

SBA’s Business and Disaster Loan 

Programs, SBG and SBIC Programs, 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, including 8(a) Business 

Development (BD), HUBZone, WomenOwned Small Business (WOSB), 

Economically Disadvantaged WomenOwned Small Business (EDWOSB), and 

Service-Disabled Veteran-Owned Small 

Business (SDVOSB) programs. 

Expansive effects accruing to businesses 

gaining and extending small status are 

presented below in Table 13, 

‘‘Expansive Impacts of Changing the 

Averaging Period for Employees from 12 

Months to 24 Months.’’ The results in 

Table 13 pertain to businesses and 

industries subject to employee-based 

size standards only. 

As shown in Table 13, of 21,155 firms 

not currently considered small in any 

employee-based size standards, 390 (or 

1.8%) would benefit from the change by 

gaining or regaining small status under 

the 24-month employee average in at 

least one NAICS industry that is subject 

to an employee-based size standard. 

Additionally, 373 or 0.3% of small 

businesses within 10% below size 

standards would see their average 

number of employees decrease under 

the 24-month averaging period, 

consequently enabling them to keep 

their size status for a longer period. 

Using the 2012 Economic Census, 

SBA estimated that about 280 or 1.3% 

of currently large businesses would gain 

or regain small status and about 1,200 

or 0.2% of total small businesses would 

see their small business status extended 

for a longer period as the result of the 

change in the calculation of employees. 

These results are shown in Table 13, 

below. 

With more businesses qualifying as 

small under the change in the 

calculation of employees, federal 

agencies will have a larger pool of small 

businesses from which to draw for their 

small business procurement programs. 

Growing small businesses that are close 

to exceeding the current employeebased size standards will be able to 

retain their small business status for a 

longer period under the 24-month 

employee average, thereby enabling 

them to continue to benefit from the 

small business programs. 

TABLE 13—EXPANSIVE IMPACTS OF CHANGING AVERAGING PERIOD FOR EMPLOYEES FROM 12 MONTHS TO 24 MONTHS

Impact of the change 

Large firms 

gaining small 

status 

Small firms 

extending 

small 

status 

Total 

expansive 

impact 

Number of impacted industries .................................................................................................... 196 184 1 260 

Number of large firms becoming small or/and small firms extending small status—SAM (as of 

Sept 1, 2019) ........................................................................................................................... 390 373 2 757 

Large firms becoming small or/and small firms with extended small status as % of total large 

or/and small firms in the baseline—SAM (as of Sept 1, 2019) ............................................... 1.8 0.3 0.5 

Number of large firms becoming small or/and small firms extending small status—2012 Economic Census .......................................................................................................................... 281 1,203 1,484 

Large firms becoming small or/and small firms extending small status as % of total large or/ 

and small firms in the baseline—2012 Economic Census ...................................................... 1.3 0.2 0.2 

Number of large firms becoming small or/and small firms extending small status for small 

business contracts—FPDS–NG (2019) ................................................................................... 139 83 219 

Additional small business dollars available to newly qualified firms or/and current small firms 

with extended small status ($ million)—FPDS–NG (2019) ..................................................... 332.7 90.5 423.2 

Additional small business dollars as % total small business contract dollars in the baseline 

FPDS–NG (2019) ..................................................................................................................... 0.7 0.2 0.9 

Number of additional 7(a) and 504 loans to newly qualified firms or/and current small firms 

extending small status (FY 2018–2020) .................................................................................. 1 1 2 

Additional 7(a) and 504 loan amount to newly qualified firms or/and current small firms extending small status ($ million) (FY 2018–2020) ..................................................................... 0.01 0.02 0.03 

Additional 7(a) and 504 loan amount as % of total 7(a) and 504 loan amount in the baseline 

(FY 2018–2020) ....................................................................................................................... 0.0 0.0 0.01 

Number of additional EIDL loans to newly qualified firms or/and small firms extending small 

status 3 (FY 2018–2020) .......................................................................................................... 0 0 0 

Additional EIDL loan amount to newly qualified firms or/and small firms with extended small 

status ($ million) 3 (FY 2018–2020) ......................................................................................... 0 0 0 

Additional EIDL loan amount as % of total loan amount in the baseline 3 (FY 2018–2020) ...... 0 0 0 

1Total impact represents total unique industries impacted to avoid double counting as some industries have large firms gaining small status 

and small firms extending small status. 2Total impact represents total unique firms impacted to avoid double counting as some firms may gain small business status in at least one 

NAICS code, while extending small business status in at least one other NAICS code. 


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3Excludes 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. 

Based on the FPDS–NG data for fiscal 

year 2019, as shown in Table 13, SBA 

estimates that those newly-qualified 

small businesses (i.e., large businesses 

gaining small status) under the final rule 

could receive about $333 million in 

small business contract dollars annually 

under SBA’s small business, 8(a) BD, 

HUBZone, WOSB, EDWOSB, and 

SDVOSB programs. That represents a 

0.7% increase to total small business 

contract dollars from the baseline in 

Table 11, above. Additionally, small 

businesses could receive approximately 

$90 million in additional small business 

contract dollars because of extension of 

their small business status, which is 

about a 0.2% increase from the total 

small business contract dollars in the 

baseline. That is, businesses gaining or 

extending small business status could 

receive about $423 million in additional 

small business contract dollars, which is 

a 0.9% increase to the total small 

business dollars in the baseline. 

Under SBA’s 7(a) and 504 loan 

programs, based on the data for fiscal 

years 2018–2020, SBA estimates up to 

about one SBA 7(a) or 504 loans totaling 

nearly $0.01 million could be made to 

these newly-qualified small businesses 

under the change in this final rule. 

Additionally, small businesses could 

receive one SBA 7(a) or 504 loans 

totaling nearly $0.02 million due to the 

extension of their size status. These 

amounts represent a 0.001% increase to 

the 7(a) and 504 loan amount in the 

baseline. 

Newly-qualified small businesses and 

those with extended small business 

status under the 24-month averaging 

period may also benefit from the SBA’s 

EIDL loan program. However, 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. Based on the historical 

trends of the SBA’s EIDL loan data 

which shows that firms receiving loans 

under employee-based size standards 

are well below the industry size 

thresholds, SBA estimates that newlydefined small businesses and small 

businesses extending small business 

status for a longer period would not 

receive any additional EIDL loans under 

the change adopted in this final rule. 

SBA also assessed the impacts of the 

changes in the SBG Program. SBA 

estimates that the changes to the 

averaging period for employees will 

have no impacts on the program as most 

surety bonds guaranteed by SBA go to 

firms much smaller than their respective 

employee-based size standards or to 

firms operating under a receipts-based 

size standard. These firms would 

continue to be eligible for SBA surety 

bonds after adoption of the change to 

the averaging period for employee-based 

size standards in this final rule., Thus, 

SBA believes that changing the 

averaging period for employee-based 

size standards from 12 months to 24 

months will have no impact on the SBG 

Program. 

Additionally, SBA assessed the 

impacts of the changes in the SBIC 

Program. Similar to the distribution of 

firms under SBA’s financial assistance 

programs discussed above, the majority 

of firms subject to employee-based size 

standards that receive capital through 

an SBIC are generally much smaller 

than their respective industry size 

standard. Based on internal data from 

fiscal years 2018–2020, SBA estimates 

that only about 10% of firms receiving 

SBIC financing are greater than 90% of 

their respective employee-based size 

standard. Moreover, only a small 

proportion (about 0.06%) of total small 

businesses subject to employee-based 

size standards that are eligible to 

participate in the SBIC program receive 

financing through an SBIC. Thus, based 

on these historical trends of the SBIC 

program, SBA believes that changing the 

averaging period for employee-based 

size standards from 12 months to 24 

months will have no impact on the 

program as there are likely few firms 

with expansive impacts at the higher 

margin of their respective employeebased size standard that would 

participate in and receive funding 

through the SBIC program. 

The added competition from more 

businesses qualifying as small may 

result in lower prices to the Federal 

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 a larger 

pool of small businesses under the 

change adopted in this final rule, 

HUBZone firms might end up getting 

more set-aside contracts and fewer full 

and open contracts, thereby resulting in 

some cost savings to federal agencies. 

SBA cannot estimate such costs savings, 

as it is impossible to determine the 

number and value of unrestricted 

contracts to be otherwise awarded to 

HUBZone firms that 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. 

Additionally, the newly-defined small 

businesses, as well as those with a 

longer small business status, would also 

benefit from reduced fees, less 

paperwork, and fewer compliance 

requirements but SBA has no data to 

quantify this impact. 

The change in the averaging period 

for employees from 12 months to 24 

months will also address some of the 

challenges and uncertainties small 

businesses face in the open market once 

they graduate from their small business 

status. Small and mid-size businesses 

experience a considerable disadvantage 

in competing for full and open contracts 

against large businesses, including the 

largest in the industry. These large 

businesses often have several 

competitive advantages over small and 

mid-size firms, including vast past 

performance qualifications and 

experience, strong brand-name 

recognition, a plethora of professional 

certifications, security clearances, and 

greater financial and marketing 

resources. Small and mid-size 

businesses cannot afford to maintain 

these resources, leaving them at a 

considerable disadvantage. 

With contracts getting bigger, one 

large set-aside contract could throw a 

firm out of its small business size status, 

thereby subjecting it to certain 

requirements that apply to other-thansmall firms, such as developing 

subcontracting plans. That firm may not 

have the infrastructure, existing 

business processes, and/or other 

resources in place in order to comply 

with such requirements. This may also 

result in constant shuffling between 

small and other-than-small status. 

By allowing smaller mid-size 

companies that have just exceeded the 

size threshold to regain small business 

status and advanced small businesses 

close to size standards to prolong their 

small business status for a longer 

period, this final rule can expand the 

pool of qualified small firms for 

agencies to draw upon to meet their 

small business requirements. 


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2. Expansive Effects of Changing the 

Averaging Period for Receipts From 

Three Years to Five Years 

The most significant benefits to 

businesses from the change in the 

period for calculation of average annual 

receipts from three years to five years 

include: (i) Enabling some mid-size 

businesses currently categorized above 

their corresponding size standards to 

gain or regain small business status and 

thereby qualify for participation in 

federal assistance intended for small 

businesses, including access to SBA’s 

financial assistance and (ii) Allowing 

some advanced and larger small 

businesses close to their size thresholds 

to lengthen their small business status 

for a longer period and thereby continue 

their participation in SBA’s Business 

Loan, Disaster Loan, SBG, and SBIC 

Programs. Benefits accruing to 

businesses gaining and extending small 

business status are presented below in 

Table 14, ‘‘Expansive Impacts of 

Changing the Averaging Period for 

Receipts from 3 Years to 5 Years.’’ The 

results in Table 14 pertain to businesses 

and industries subject to SBA’s receiptsbased size standards only. 

As shown in Table 14, of 42,536 firms 

not currently considered small in any 

receipts-based size standards, 3,320 (or 

6.4%) would benefit from the change by 

gaining or regaining small business 

status under the five-year receipts 

average in at least one NAICS industry 

that is subject to a receipts-based size 

standard. Additionally, nearly 3,600 or 

1.2% of small businesses within 10% 

below size standards would see their 

annual receipts decrease under the fiveyear averaging period, consequently 

enabling them to keep their small 

business status for a longer period. 

Using the 2012 Economic Census, 

SBA estimated that more than 5,900 or 

3.3% of currently large businesses 

would gain or regain small business 

status and more than 61,250 or 0.9% of 

total small businesses would see their 

small business status extended for a 

longer period as the result of this final 

rule. These results are shown in Table 

14. 

TABLE 14—EXPANSIVE IMPACTS OF CHANGING THE AVERAGING PERIOD FOR RECEIPTS FROM 3 YEARS TO 5 YEARS

Impact of change 

Firms gaining 

small business 

status 

Firms extending 

small business 

status 

Total expansive 

impact 

Number of impacted industries ........................................................................................ 377 382 1 447 

Number of large firms becoming small or/and small firms extending small business 

status—SAM (as of Sept 1, 2019) ............................................................................... 3,320 3,579 2 6,542 

Large firms becoming small or/and small firms with extended small business status 

as % of total large or/and small firms in the baseline—SAM (as of Sept 1, 2019) .... 6.4 1.2 2.0 

Number of large firms becoming small or/and small firms extending small business 

status—2012 Economic Census .................................................................................. 5,938 61,263 67,201 

Large firms becoming small or/and small firms extending small business status as % 

of total large or/and small firms in the baseline—2012 Economic Census ................ 3.3 0.9 0.9 

Number of additional 7(a) and 504 loans to newly qualified firms or/and current small 

firms extending small status (FY 2018–2020) ............................................................. 1 4 5 

Additional 7(a) and 504 loan amount to newly qualified firms or/and current small 

firms extending small status ($ million) (FY 2018–2020) ............................................ $0.2 $1.9 $2.1 

Additional 7(a) and 504 loan amount as % of total disaster loan amount in the baseline (FY 2018–2020) .................................................................................................... 0.0 0.0 0.01 

Number of additional EIDL loans to newly qualified firms or/and small firms extending 

small status 3 (FY 2018–2020) .................................................................................... 1 1 2 

Additional EIDL loan amount to newly qualified firms or/and small firms with extended 

small status ($ million) 3 (FY 2018–2020) .................................................................... $0.001 $0.003 $0.004 

Additional EIDL loan amount as % of total loan amount in the baseline 3 (FY 2018– 

2020) ............................................................................................................................ 0.0 0.0 0.03 

1Total impact represents total unique industries impacted to avoid double counting as some industries have large firms gaining small business 

status and small firms extending small business status. 2Total impact represents total unique firms impacted to avoid double counting as some firms may gain small business status in at least one 

NAICS code, while extending small business status in at least one other NAICS code. 3Excludes 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. 

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 five-year receipts average, 

thereby enabling them to continue to 

benefit from the small business 

programs. 

Under SBA’s 7(a) and 504 loan 

programs, based on the data for fiscal 

years 2018–2020, SBA estimates that 

one SBA 7(a) or 504 loans totaling $0.2 

million could be made to these newly 

qualified small businesses under the 

change adopted in this final rule. 

Additionally, small businesses could 

receive up to four SBA 7(a) or 504 loans 

totaling $1.9 million due to the 

expansion of their size status. Together, 

these amounts represent a 0.01% 

increase to the loan amount in the 

baseline. 

Newly-qualified small businesses and 

those with extended small business 

status 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 meaningful estimate of 

this impact. However, based on the 

historical trends of the SBA EIDL loan 

data, SBA estimates that, on an annual 

basis, the newly-defined small 

businesses under the change could 

receive about one EIDL loan, totaling 

about $0.001 million. Similarly, 

extending small business status for a 

longer period could result in small 

businesses receiving one disaster loan, 

totaling about $0.003 million. These 

results are presented in Table 14, above. 

SBA also assessed the impacts of the 

changes in the SBG Program. Based on 

internal data for fiscal years 2018–2020, 

SBA estimates that, on an annual basis, 

about two additional bonds supporting 

$0.6 million in contracts could be made 

to newly qualified small businesses 

subject to receipts-based size standards 

under the change. SBA believes that this 


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4 Due to data limitations, SBA was not able to 

obtain revenue information for recipients of SBIC 

financing, however, data on total employees were 

available. Thus, SBA analyzed the distribution of 

firms by size using employee equivalent size 

standards. 

impact is de minimis as these figures 

represent an increase of less than 0.02% 

of the total number of bonds guaranteed 

by SBA and the total value of contracts 

supported on an annual basis as 

compared to the amounts in the 

baseline. 

Additionally, SBA assessed the 

impacts of the changes in the SBIC 

Program. While the majority of firms 

subject to receipts-based size standards 

that receive capital through an SBIC are 

much smaller than their respective 

industry size standard, based on 

internal data from fiscal years 2018– 

2020, SBA estimates that about 42% of 

firms receiving SBIC financing are 

greater than 90% of their respective 

employee equivalent receipts-based size 

standard.4 However, similar to the 

proportion of firms receiving capital 

from SBICs under employee-based size 

standards, only a small proportion 

(about 0.01%) of total small businesses 

subject to receipts-based size standards 

that are eligible to participate in the 

SBIC program receive financing through 

an SBIC. Based on these historical 

trends, SBA estimates that, under the 

change to the averaging period for 

receipts, on an annual basis, about three 

additional firms subject to receiptsbased size standards could receive about 

$14 million in SBIC financing. SBA 

believes that this impact is de minimis 

as these figures represent an increase of 

less than 0.4% of total financings as 

compared to the amounts in the 

baseline. Additionally, the newlydefined small businesses, as well as 

those with a longer small business 

status, would also benefit from reduced 

fees, less paperwork, and fewer 

compliance requirements, but SBA has 

no data to quantify this impact. 

E. Contractions in Eligibility for Small 

Business Status 

1. Contractive Effects of Changing the 

Averaging Period for Employees From 

12 Months to 24 Months 

As stated previously, the change 

enacted under Public Law 116–283 may 

not always and necessarily benefit every 

small business concern. When 

businesses’ monthly employees are 

declining or when the number of 

employees for the latest 12 months are 

lower than those for the earliest 12 

months of the 24-month averaging 

period, the 24-month employee average 

would be higher than the 12-month 

average, thereby ejecting small 

businesses out of their small status 

sooner or rendering some small 

businesses other than small 

immediately. Such small businesses 

would no longer be eligible for federal 

small business opportunities, such as 

SBA’s loans, federal small business 

contracts, and other federal assistance 

available to small businesses. These 

impacts are provided in Table 15, 

‘‘Contractive Impacts from Changing the 

Averaging Period for Employees from 12 

Months to 24 Months,’’ below. 

TABLE 15—CONTRACTIVE IMPACTS FROM CHANGING THE AVERAGING PERIOD FOR EMPLOYEES FROM 12 MONTHS TO 24 

MONTHS

Impact of the change 

Small firms 

losing small 

status 

Small firms 

shortening small 

status 

Total 

contractive 

impact 

Number of industries impacted ........................................................................................ 190 64 1 211 

Number of small firms losing or/and shortening small status—SAM (as of Sept 1, 

2019) ............................................................................................................................ 260 101 2 361 

Small firms losing or shortening small status as % of total small firms—SAM (as of 

Sept 1, 2019) ............................................................................................................... 0.2 0.08 0.3 

Number of small firms losing or extending small status—2012 Economic Census ....... 763 287 1,050 

Small firms losing or shortening small status as % of total small firms in the baseline—2012 Economic Census ...................................................................................... 0.1 0.04 0.2 

Number of small firms losing or shortening small business eligibility for set-aside contracts—FPDS–NG (2019) ............................................................................................ 178 20 197 

Small business dollars unavailable to small firms losing or shortening small status ($ 

million)—FPDS–NG (2019) .......................................................................................... $197.1 $68.7 $265.8 

Small business dollars as % of total small business dollars in the baseline .................. 0.42 0.15 0.56 

Number of 7(a) and 504 loans unavailable to small firms losing or shortening small 

status (FY 2018–2020) ................................................................................................ 1 1 2 

7(a) and 504 loan amount unavailable to small firms losing or shortening ($ million) 

(FY 2018–2020) ........................................................................................................... $0.01 $0.01 $0.02 

Unavailable 7(a) and 504 loan amount as % of total loan amount in the baseline 

(baseline = $24.5 billion) (FY 2018–2020) .................................................................. 0.0 0.0 0.0 

Number of EIDL loans unavailable to small firms losing or shortening small status 3

(FY 2018–2020) ........................................................................................................... 0.0 0.0 0.0 

Unavailable EIDL loan amount to small firms losing or extending small status ($ million) 3 (FY 2018–2020) ................................................................................................. $0.0 $0.0 $0.0 

Unavailable EIDL loan amount as % of total EIDL loan amount in the baseline (baseline = $1.0 billion) 3 (FY 2018–2020) ........................................................................... 0.0 0.0 0.0 

1Total impact represents total unique industries impacted to avoid double counting as some industries have small firms losing small status and 

small firms shortening small status. 2Total impact represents total unique firms impacted to avoid double counting as some firms may gain small business status in at least one 

NAICS code, while extending small business status in at least one other NAICS code. 3Excludes 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. 


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As shown in Table 15, SBA estimates 

that, of 133,958 firms in 2019 SAM that 

were small under at least one employeebased size standard based on the 12- 

month employee average, 260 firms (or 

0.2%) would lose their small status and 

another 100 firms (or 0.08%) would see 

their size status shortened as a result of 

the change adopted in this final rule. 

Similarly, based on the 2012 Economic 

Census data and 2012 Census of 

Agriculture, 763 firms would lose their 

small business status and 287 firms 

would see their size status shortened, 

which represent, respectively, 0.1% and 

0.04% of total small firms subject to an 

employee-based size standard. 

Based on the contract awards data 

from FPDS–NG for fiscal year 2019, 

businesses losing or shortening small 

status would lose access to about $266 

million in federal small business 

contract collars, which is about a 0.6% 

decrease from the corresponding value 

in the baseline. Similarly, based on 

SBA’s loan data for fiscal years 2018– 

2020 and the number of impacted firms 

from the Economic Census, SBA 

estimates that businesses losing or 

shortening small business status would 

also lose access to about $0.02 million 

in SBA 7(a) and 504 loans. Based on the 

historical trends of the SBA’s EIDL loan 

data which shows that firms receiving 

loans under employee-based size 

standards are well below the industry 

size thresholds, SBA estimates that 

businesses losing or shortening small 

business status would not lose access to 

any additional EIDL loans under the 

change adopted in this final rule. 

Similarly, based on the historical trends 

of the SBA’s SBG and SBIC Programs, 

which shows that the majority of firms 

participating in these programs are 

much smaller than their respective 

employee-based size standards, or 

operate under a receipts-based size 

standard, SBA estimates that businesses 

losing or shortening small business 

status under the employee-based size 

standards would not lose access to any 

additional surety bond guarantees or 

SBIC financing under the change 

adopted in this final rule. 

Businesses losing small status and 

those with size status shortened would 

also be deprived of other federal 

benefits available, including reduced 

fees and exemptions from certain 

paperwork and compliance 

requirements. However, there exists no 

data to quantify this impact. 

Additionally, by enabling mid-size 

businesses to regain small business 

status and lengthening the small 

business status of advanced and 

successful larger small businesses, the 

final rule may disadvantage smaller 

small businesses in more need of federal 

assistance than their larger counterparts 

in competing for federal opportunities. 

SBA frequently receives concerns from 

smaller small businesses that they lack 

resources, past performance 

qualifications and expertise to be able to 

compete against more resourceful, 

qualified and experienced large small 

businesses for federal opportunities for 

small businesses. 

Besides having to register in SAM to 

be able 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. All businesses willing 

to do business with the Federal 

Government have to register in SAM 

and update their SAM profiles annually, 

regardless of their size status. SBA 

believes that a vast majority of 

businesses that are willing to participate 

in federal contracting are already 

registered in SAM. Furthermore, this 

final rule does not establish the new 

size standards for the first time; rather, 

it merely proposes to modify the 

calculation of annual average receipts 

that apply to the existing size standards 

in accordance with a statutory 

requirement. 

The change adopted in this final rule 

may entail some additional 

administrative costs to the Federal 

Government because more businesses 

may qualify 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, WOSB, EDWOSB, and 

SDVOSB status; and more firms 

applying for SBA’s 8(a)/BD and MentorProte ́ge ́ programs. With an expanded 

pool of small businesses, it is likely that 

federal agencies will set aside more 

contracts for small businesses under the 

change adopted in this final rule. 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 size protests actually 

show that the number of size protests 

actually decreased after an increase in 

the number of businesses qualifying as 

small as a result of size standards 

revisions as part of the first five-year 

review of size standards. Specifically, 

on an annual basis, the number of size 

protests dropped from about 600 during 

fiscal years 2011–2013 (review of most 

receipts-based size standards was 

completed by the end of fiscal year 

2013) to less than 500 during fiscal 

years 2017–2019. However, with more 

months of the data to be reviewed, 24- 

month averaging may increase time 

needed by size specialists to process a 

size protest. Among those newlydefined small businesses seeking SBA’s 

loans, there could be some additional 

costs associated with compliance and 

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 standard 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 under this final rule, federal 

agencies may choose to set aside more 

contracts for competition among small 

businesses only instead of using 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 change adopted 

in this final rule. 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, 

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 

change to the averaging period for 

employees from 12 months to 24 

months, 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. 

2. Contractive Effects of Changing the 

Averaging Period for Receipts From 

Three Years to Five Years 

As stated previously, the change 

enacted under Public Law 115–324 may 

not always and necessarily benefit every 

small business concern. When 

businesses’ annual revenues are 


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declining or when annual revenues for 

the latest three years are lower than 

those for the earliest two years of the 

five-year period, the five-year average 

would be higher than the three-year 

average, thereby ejecting small 

businesses out of their small business 

status sooner or rendering some small 

businesses other than small 

immediately. Similarly, small 

businesses that lose their small business 

status would have to wait longer to 

qualify as small again. Such small 

businesses would no longer be eligible 

for federal small business opportunities, 

such as federal small business contracts, 

SBA loan programs and other Federal 

benefits (such as reduced fees and 

exemptions from certain paperwork and 

compliance requirements) available to 

small businesses. However, the SBA’s 

proposal to allow businesses applying 

for its Business Loan, Disaster Loan, 

Surety Bond, and SBIC Programs to 

elect to use either the three-year receipts 

average or the five-year receipts average 

will mitigate such impacts. Moreover, 

the change in the averaging period for 

receipts in this final rule only applies to 

businesses in the SBA Business Loan, 

Disaster Loan, SBG, and SBIC Programs. 

In other words, the change in the 

calculation of average annual receipts in 

this final rule will have no impacts on 

businesses participating in federal 

procurement and all other nonprocurement programs except SBA 

Loan, SBG, and SBIC programs. 

By enabling mid-size businesses to 

regain small business status and 

lengthening the small business status of 

advanced and successful larger small 

businesses, the final rule may 

disadvantage smaller small businesses 

in more need of federal assistance than 

their larger counterparts in competing 

for federal opportunities. SBA 

frequently receives concerns from 

smaller small businesses that they lack 

resources, past performance 

qualifications and expertise to be able to 

compete against more resourceful, 

qualified, and experienced larger small 

businesses for federal opportunities for 

small businesses. SBA believes that 

overall benefits to small businesses from 

this final rule change outweigh the costs 

to small businesses. 

F. Net Impact 

1. Net Impact of Changing the Averaging 

Period for Employees From 12 Months 

to 24 Months 

As discussed elsewhere, the change in 

averaging period for employees would 

result in four primary impacts, which 

can be categorized as either having an 

‘expansive impact’ or a ‘contractive 

impact’ on size status of both currently 

large and small businesses. Allowing 

some currently large firms to gain or 

regain small business status and some 

advanced small firms to remain small 

for a longer period represents the 

expansive impact of the final rule. 

Causing some currently small firms to 

lose or shorten their small business is 

the rule’s contractive impact. 

Although businesses in a majority of 

industries with employee-based size 

standards would be both positively and 

negatively impacted by this final rule, in 

totality the number of firms with 

expansive impacts was generally greater 

than the number of firms with 

contractive impacts. The final rule 

would result in a net gain of about $158 

million (or 0.3% increase from the 

baseline) in federal small business 

contract dollars. The net impact of the 

final rule on SBA’s loans was also 

positive, but very small. Specifically, 

SBA estimates a net gain of $0.01 

million in 7(a) and 504 loans and no 

change in EIDL loans as a result of 

changing the period for calculating the 

average number of employees for size 

standards from 12 months to 24 months. 

Similarly, SBA estimates that changes to 

the averaging period for employee-based 

size standards will have no impact on 

the Surety Bond and SBIC programs. 

Net impacts of the final rule are 

summarized in Table 16, ‘‘Net Impact 

from Changing the Averaging Period for 

Employees from 12 Months to 24 

Months.’’ 

TABLE 16—NET IMPACT FROM CHANGING THE AVERAGING PERIOD FOR EMPLOYEES FROM 12 MONTHS TO 24 MONTHS

Impact of the change Total expansive 

impact 

Total contractive 

impact Net impact 

Total Number of impacted firms—SAM (as of Sept 1, 2019) ......................................... 757 361 396 

Impacted firms as % of total firms in the baseline—SAM (as of Sept 1, 2019) ............. 0.5 0.2 0.3 

Number of impacted firms—2012 Economic Census ..................................................... 1,484 1,050 435 

Impacted firms as % of total firms in the baseline—2012 Economic Census ................ 0.2 0.2 0.1 

Number of impacted firms eligible for set-aside contracts (FPDS–NG) ......................... 219 197 22 

Small business dollars impacted ($ million) .................................................................... $423.2 $265.8 $157.8 

Small business dollars impacted as % total set-aside dollars in the baseline ............... 0.9 0.6 0.3 

Number of 7(a) and 504 loans impacted ........................................................................ 2 2 0 

7(a) and 504 loan amount impacted ($ million) .............................................................. $0.03 $0.02 $0.01 

7(a)and 504 loan amount impacted as % of total 7(a)and 504 loan amount in the 

baseline ........................................................................................................................ 0.0 0.0 0.0 

Number of EIDL loans impacted 1 ................................................................................... 0 0 0 

EIDL loan amount impacted ($ million) 1 ......................................................................... $0.0 $0.0 $0.0 

EIDL loan amount impacted as % of total EIDL loan amount in the baseline 1 ............. 0.0 0.0 0.0 

1Excludes 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. 

2. Net Impact of Changing the Averaging 

Period for Receipts From Three Years to 

Five Years 

Under SBA’s decision allowing 

businesses to elect to choose either a 

three-year receipts average or a five-year 

receipts average to establish small 

business eligibility for its Business 

Loan, Disaster Loan, SBG, and SBIC 

Programs, none of the currently eligible 

small businesses will experience a 

contractive impact from the change. In 

other words, the change will not cause 

any currently small businesses to lose or 

shorten their small business status. The 

change will enable some mid-size 

businesses above the size standard gain 

or regain small business status and some 

advanced small businesses close to the 

size standard to lengthen their small 

status. In the absence of contractive 

impacts, the expansive impacts shown 

in Table 14 (above) will also represent 

as net impacts of the change. 


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34118 Federal Register / Vol. 87, No. 108 / Monday, June 6, 2022 / Rules and Regulations 

G. Transfer Impacts 

1. Transfer Impacts of Changing the 

Averaging Period for Employees From 

12 Months to 24 Months 

The change may result in some 

redistribution of federal contracts 

between businesses gaining or 

extending small status and large 

businesses, and between businesses 

gaining or extending small status and 

other existing small businesses. 

However, it would have no impact on 

the overall economic activity since the 

total federal contract dollars available 

for businesses to compete for will not 

change. While SBA cannot quantify 

with certainty the actual outcome of the 

gains and losses from the redistribution 

of 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 change, 

some unrestricted federal contracts may 

be set aside for small businesses. As a 

result, large businesses may lose access 

to some federal contracts. Similarly, 

some currently small businesses may 

obtain fewer set-aside contracts due to 

the increased competition from some 

large businesses qualifying as small and 

advanced small businesses remaining 

small for a longer period. This impact 

may be offset by a greater number of 

procurements being set aside for all 

small businesses. With large businesses 

qualifying as small and advanced larger 

small businesses remaining small for a 

longer period under the final rule, 

smaller small businesses could face 

some disadvantages in competing for 

set-aside contracts against their larger 

counterparts. However, SBA cannot 

quantify these impacts. 

2. Transfer Impacts of Changing the 

Averaging Period for Receipts From 

Three Years to Five Years 

The change from a three-year 

averaging period to a five-year averaging 

period may result in some redistribution 

of federal contracts between businesses 

gaining or extending small business 

status and large businesses, and 

between businesses gaining or 

extending small business status and 

other existing small businesses. 

However, since the change in 

calculation of receipts in this final rule 

does not apply to federal contracting, 

these distributional impacts are not 

relevant for changing the averaging 

period for receipts from three years to 

five years. 

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. This action does not have 

retroactive or preemptive effect. 

Executive Order 13132 

For purposes of Executive Order 

13132, SBA has determined that this 

final 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 final rule has 

no federalism implications warranting 

preparation of a federalism assessment. 

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 BenefitCost Analysis under Executive Order 

12866. Additionally, Executive Order 

13563, Section 6, calls for retrospective 

analyses of existing rules. 

Following the enactment of Public 

Law 115–324, SBA issued a public 

notice advising business and contracting 

communities that SBA must go through 

a rulemaking process to implement the 

new law and that businesses still must 

report their receipts-based on a threeyear average until SBA changes its 

regulations. SBA updated the Small 

Business Procurement Advisory Council 

(SBPAC) at its March 26, 2019, April 23, 

2019, and August 26, 2019, meetings 

about SBA’s rulemaking process to 

implement Public Law 115–324. On 

April 18, 2019, SBA also presented an 

update on the implementation of Public 

Law 115–324 at the 2019 Annual 

Government Procurement Conference. 

Through phone calls and emails, SBA 

also advised business and contracting 

communities and other interested 

parties about SBA’s process to 

implement the new law. 

Congressional Review Act 

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. 

OIRA has determined that this rule is 

not a ‘‘major rule’’ as defined by 5 

U.S.C. 804(2). 

Regulatory Flexibility Act (Final 

Regulatory Flexibility Analysis) 

Under the Regulatory Flexibility Act 

(RFA), this final rule may have a 

significant economic impact on a 

substantial number of small businesses 

in industries subject to both employeebased and receipts-based size standards. 

As described above, this rule may affect 

small businesses in those industries 

seeking assistance under federal small 

business programs. Specifically, the 

change in the averaging period for 

calculating the number employees for 

size standards from 12 months to 24 

months may have a significant impact 

on a substantial number of businesses in 

industries subject to employee-based 

size standards in terms of qualifying for 

federal small business programs, 

including Federal contracts set aside for 

small businesses and SBA’s loan 

programs. Similarly, the change in the 

averaging period for receipts from three 

years to five years will also impact a 

substantial number of businesses in the 

SBA Business Loan, Disaster Loan, SBC, 

and SBIC programs. 

Accordingly, immediately below, SBA 

sets forth a final regulatory flexibility 

analysis (FRFA) of this final rule to 

address 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? (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? 

First, section 863 of the NDAA 2021, 

Public Law 116–283, changed the 

averaging period for SBA’s employeebased size standards from 12 months to 

24 months. The intent of this final rule 

is to implement Public Law 116–283 by 

amending 13 CFR 121.106 such that a 

concern would average its employees 


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Federal Register / Vol. 87, No. 108 / Monday, June 6, 2022 / Rules and Regulations 34119 

over all pay periods in the preceding 

completed 24 months. Second, in 2018, 

Public Law 115–324 amended section 

3(a)(2)(C)(ii)(II) of the Small Business 

Act by modifying the period for 

calculating average annual receipts for 

prescribing size standards for business 

concerns in services industries by an 

agency without separate statutory 

authority to issue size standards from 

three years to five years. In a final rule 

published December 5, 2019 (84 FR 

66561), SBA implemented Public Law 

115–324 by making changes to its 

receipts-based size standards for all SBA 

programs except the Business Loan and 

Disaster Loan Programs. This final rule 

would extend the changes to SBA’s 

receipts-based size standards for the 

Business Loan, Disaster Loan, SBG, and 

SBIC Programs. 

2. What are SBA’s description and 

estimate of the number of small 

businesses to which the rule will apply? 

This final rule applies to all small 

businesses that are subject to either an 

employee-based or a receipts-based size 

standard. Based on the 2012 Economic 

Census special tabulations, 2012 County 

Business Patterns Reports, and 2012 

Agricultural Census tabulations, of a 

total of 680,266 firms in all industries 

with employee-based size standards to 

which this final rule will apply, 657,942 

or about 96.7% are considered small 

under the 12-month employee average. 

Of 152,450 total concerns in SAM 2019 

to which an employee-based size 

standard will apply, about 133,958 or 

87.9% were small in at least one NAICS 

industry with an employee-based size 

standard. Similarly, based on the data 

from FPDS–NG for fiscal year 2019, 

about 39,700 unique firms in industries 

subject to employee-based size 

standards received at least one federal 

contract in 2019, of which 85.3%, or 

33,867 were small. 

Based on the same data sources listed 

above, of a total of nearly 7.2 million 

firms in all industries with receiptsbased size standards to which this final 

rule will apply, 6.9 million or about 

96% were considered small under the 

three-years receipts average. Of 334,990 

total concerns in SAM 2019 to which a 

receipts-based size standard will apply, 

292,454 or 87.3% were small in at least 

one NAICS industry with a receiptsbased size standard. 

3. What are the projected reporting, 

record-keeping and other compliance 

requirements of the rule? 

The final rule changes existing 

reporting or record-keeping 

requirements for small businesses. To 

qualify for federal procurement and a 

few other programs, businesses are 

required to register in SAM and to selfcertify that they are small at least once 

annually (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 

certification. The change in the 

calculation of employees from a 12- 

month averaging period to a 24-month 

averaging period may result in some 

redistribution of federal contracts 

between businesses gaining or 

extending small status and large 

businesses, and between businesses 

gaining or extending small status and 

other existing small businesses. 

However, it would have no impact on 

the overall economic activity since the 

total federal contract dollars available 

for businesses to compete for will not 

change. Since the change in the 

calculation of annual average receipts in 

this final rule only applies to SBA 

financial assistance programs, this will 

have no impact on federal contracting 

and associated record-keeping 

requirements. 

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 develop different size standards if 

they believe that SBA’s size standards 

are not appropriate for their programs, 

with the approval of SBA’s 

Administrator (13 CFR 121.903). The 

Regulatory Flexibility Act, 5 U.S.C. 

601(3), 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. 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 or 

changing a measurement period, no 

practical alternative exists to the 

systems of numerical size standards. As 

stated elsewhere, the objective of this 

final rule is to change SBA’s regulations 

on the calculation of business size in 

terms of average number of employees 

to implement Public Law 116–283 for 

all SBA programs and of average annual 

receipts to implement Public Law 115– 

324 for the SBA’s Business Loan, 

Disaster Loan, SBG, and SBIC programs. 

This rule is expected to affect a 

substantial number of small entities, but 

the effects are not expected to be 

significant. However, to mitigate any 

unintended negative impacts of a fiveyear averaging period on small 

businesses and to allow small 

businesses to continue to use the threeyear receipts average, in this final rule 

SBA is allowing applicants in Business 

Loan, Disaster Loan, SBG, and SBIC 

programs to elect to calculate average 

annual receipts using either a three-year 

averaging period or a five-year averaging 

period. 

Paperwork Reduction Act 

For purposes of the Paperwork 

Reduction Act, 44 U.S.C. Chapter 35, 

SBA determined that this rule will 

require technical amendments to 

existing information collections as 

described below. SBA did not receive 

any comments related to the 

information collection revisions 

discussed in the proposed rule. Thus, 

SBA will proceed to amend the 

information collections to reflect the 

changes made by this final rule. 

With respect to SBA Form 355, 

Information for Small Business Size 

Determination, OMB Control Number 

3245–0101, SBA will revise Instruction 

No. 5 to specify that respondents will 

use a 24-month average to calculate 

number of employees. In Part II, 

question 10, respondents will then 

provide an average number of 

employees over 24 months. 

SBA has determined that the changes 

to the Form 355 will not impact the 

paperwork burden, and it will remain at 

4 hours. 


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34120 Federal Register / Vol. 87, No. 108 / Monday, June 6, 2022 / Rules and Regulations 

SBA will revise the SBA Form 480, 

Size Status Declaration, for SBIC 

applicants to reflect the change to the 

24-month average for applicants using 

an employee-based size standard, and 

the change to an election between a 

three-year average and a five-year 

average for applicants using a receiptsbased size standard. The tangible net 

worth and net income measures for the 

alternative size standard for SBIC 

applicants will not change. SBA has 

determined that the changes to the Form 

480 will not impact the paperwork 

burden. 

Finally, SBA will revise Part M (Size 

Analysis) of SBA Form 1920 (7(a) 

Lender Application), OMB Control No.: 

3245–0348, and Exhibit 4 of SBA Form 

1244 (504 Loan Application), OMB 

Control No.: 3245–0071. The revisions 

will reflect the change to an election 

between a three-year average or a fiveyear average for applicants using a 

receipts-based size standard. The 

tangible net worth and net income 

values for the alternative size standard 

for 7(a) and 504 applicants will not 

change. 

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 amends 13 CFR part 121 

as follows: 

PART 121—SMALL BUSINESS SIZE 

REGULATIONS 

■ 1. The authority citation for part 121 

continues to read as follows: 

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

636(a)(36), 662, and 694a(9); Public Law 116– 

136, Section 1114. 

■ 2. In § 121.104, revise paragraph (c) to 

read as follows: 

§ 121.104 How does SBA calculate annual 

receipts? 

* * * * * 

(c) Period of measurement. (1) Except 

for the Business Loan, Disaster Loan, 

Surety Bond Guarantee, and Small 

Business Investment Company (SBIC) 

Programs, annual receipts of a concern 

that has been in business for 5 or more 

completed fiscal years means the total 

receipts of the concern over its most 

recently completed 5 fiscal years 

divided by 5. 

(2) Except for the Business Loan, 

Disaster Loan Programs, Surety Bond 

Guarantee, and SBIC Programs, annual 

receipts of a concern which has been in 

business for less than 5 complete fiscal 

years means the total receipts for the 

period the concern has been in business 

divided by the number of weeks in 

business, multiplied by 52. 

(3) Except for the Business Loan, 

Disaster Loan, Surety Bond Guarantee, 

and SBIC Programs, where a concern 

has been in business 5 or more complete 

fiscal years but has a short year as one 

of the years within its period of 

measurement, annual receipts means 

the total receipts for the short year and 

the 4 full fiscal years divided by the 

total number of weeks in the short year 

and the 4 full fiscal years, multiplied by 

52. 

(4) For the Business Loan, Disaster 

Loan, Surety Bond Guarantee, and SBIC 

Programs, a concern that has been in 

business for three or more completed 

fiscal years may elect to calculate 

annual receipts using either the total 

receipts of the concern over its most 

recently completed 5 fiscal years 

divided by 5, or the total receipts of the 

concern over its most recently 

completed 3 fiscal years divided by 3. 

Annual receipts of a concern which has 

been in business for less than three 

complete fiscal years means the total 

receipts for the period the concern has 

been in business divided by the number 

of weeks in business, multiplied by 52. 

Where a concern has been in business 

three or more complete fiscal years but 

has a short year as one of the years 

within its period of measurement, 

annual receipts means the total receipts 

for the short year and the two full fiscal 

years divided by the total number of 

weeks in the short year and the two full 

fiscal years, multiplied by 52. For the 

purposes of this subsection, the 

Business Loan Programs consist of the 

7(a) Loan Program, the Microloan 

Program, the Intermediary Lending Pilot 

Program, and the Development 

Company Loan Program (‘‘504 Loan 

Program’’). The Disaster Loan Programs 

consist of Economic Injury Disaster 

Loans, Military Reservist Economic 

Injury Disaster Loans, and Immediate 

Disaster Assistance Program loans. 

* * * * * 

■ 3. In § 121.106, revise paragraphs 

(b)(1) and (3) to read as follows: 

§ 121.106 How does SBA calculate number 

of employees? 

* * * * * 

(b) * * * 

(1) The average number of employees 

of the concern is used (including the 

employees of its domestic and foreign 

affiliates) based upon numbers of 

employees for each of the pay periods 

for the preceding completed 24 calendar 

months. 

* * * * * 

(3) If a concern has not been in 

business for 24 months, the average 

number of employees is used for each of 

the pay periods during which it has 

been in business. 

* * * * * 

■ 4. In § 121.903, revise paragraph 

(a)(1)(i) to read as follows: 

§ 121.903 How may an agency use size 

standards for its programs that are different 

than those established by SBA? 

(a) * * * 

(1) * * * 

(i) The size of a manufacturing 

concern by its average number of 

employees based on the preceding 24 

calendar months, determined according 

to § 121.106; 

* * * * * 

Isabella Casillas Guzman, 

Administrator. 

[FR Doc. 2022–12131 Filed 6–3–22; 8:45 am] 

BILLING CODE 8026–03–P 

DEPARTMENT OF TRANSPORTATION 

Federal Aviation Administration 

14 CFR Part 39 

[Docket No. FAA–2021–0877; Project 

Identifier AD–2020–01316–T; Amendment 

39–22049; AD 2022–10–11] 

RIN 2120–AA64 

Airworthiness Directives; The Boeing 

Company Airplanes 

AGENCY: Federal Aviation 

Administration (FAA), DOT. 

ACTION: Final rule. 

SUMMARY: The FAA is adopting a new 

airworthiness directive (AD) for certain 

The Boeing Company Model 747–100B 

SUD, 747–200B, 747–200C, 747–200F, 

747–300, 747SP, 747–400, 747–400D, 

and 747–400F series airplanes. This AD 

was prompted by a determination that a 

certain fastener type that penetrates the 

fuel tank walls has insufficient bond to 

the structure, and energy from a 

lightning strike or high-powered short 

circuit could cause arcing to occur at the 

ends of fasteners in the fuel tanks. This 

AD requires, for certain airplanes, 

reconfiguring the clamps of certain wire 

bundles, applying sealant to certain 

fasteners that penetrate the fuel tank 

walls, installing cushion clamps and 

polytetrafluoroethylene (TFE) sleeves, 

inspecting to determine if sealant was 

applied to certain fasteners, and 


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