Federal Register / Vol. 74, No. 202 / Wednesday, October 21, 2009 / Proposed Rules 53913 

systematically organized, work on the 

communication. 

* * * * * 

8. Section 109.21 is amended by 

revising paragraphs (d)(4)(ii) and 

(d)(5)(i) to read as follows: 

§ 109.21 What is a ‘‘coordinated 

communication’’? 

* * * * * 

(d) * * * 

Conduct Alternative 1 (No Change) 

(4) * * * 

(ii) That commercial vendor, 

including any owner, officer, or 

employee of the commercial vendor, has 

provided any of the following services 

to the candidate who is clearly 

identified in the communication, or the 

candidate’s authorized committee, the 

candidate’s opponent, the opponent’s 

authorized committee, or a political 

party committee, during the previous 

120 days; 

* * * * * 

(5) * * * 

(i) The communication is paid for by 

a person, or by the employer of a 

person, who was an employee or 

independent contractor of the candidate 

who is clearly identified in the 

communication, or the candidate’s 

authorized committee, the candidate’s 

opponent, the opponent’s authorized 

committee, or a political party 

committee, during the previous 120 

days; and 

* * * * * 

Conduct Alternative 2 (Two-Year 

Period) 

(4) * * * 

(ii) That commercial vendor, 

including any owner, officer, or 

employee of the commercial vendor, has 

provided any of the following services 

to the candidate who is clearly 

identified in the communication, or the 

candidate’s authorized committee, the 

candidate’s opponent, the opponent’s 

authorized committee, or a political 

party committee, during the two-year 

period ending on the date of the general 

election for the office or seat that the 

candidate seeks; 

* * * * * 

(5) * * * 

(i) The communication is paid for by 

a person, or by the employer of a 

person, who was an employee or 

independent contractor of the candidate 

who is clearly identified in the 

communication, or the candidate’s 

authorized committee, the candidate’s 

opponent, the opponent’s authorized 

committee, or a political party 

committee, during the previous 120 

days two-year period ending on the date 

of the general election for the office or 

seat that the candidate seeks; and 

* * * * * 

Conduct Alternative 3 (Current Election 

Cycle) 

(4) * * * 

(ii) That commercial vendor, 

including any owner, officer, or 

employee of the commercial vendor, has 

provided any of the following services 

to the candidate who is clearly 

identified in the communication, or the 

candidate’s authorized committee, the 

candidate’s opponent, the opponent’s 

authorized committee, or a political 

party committee, during the current 

election cycle; 

* * * * * 

(5) * * * 

(i) The communication is paid for by 

a person, or by the employer of a 

person, who was an employee or 

independent contractor of the candidate 

who is clearly identified in the 

communication, or the candidate’s 

authorized committee, the candidate’s 

opponent, the opponent’s authorized 

committee, or a political party 

committee, during the current election 

cycle; and 

* * * * * 

■ 9. Section 109.21 is amended by 

adding new paragraphs (i) and (j) to read 

as follows: 

§ 109.21 What is a ‘‘coordinated 

communication’’? 

* * * * * 

(i) Safe harbor for Federal candidates’ 

support of public policies or legislative 

initiatives. A public communication 

paid for by an organization described in 

26 U.S.C. 501(c)(3) and exempt from 

taxation under 26 U.S.C. 501(a), in 

which a candidate for Federal office 

expresses or seeks support for that 

organization, or for a position on a 

public policy or legislative proposal 

espoused by that organization, is not a 

coordinated communication with 

respect to the candidate unless the 

public communication promotes, 

supports, attacks, or opposes the 

candidate or another candidate who 

seeks election to the same office as the 

candidate. 

(j) Safe harbor for commercial 

transactions. A public communication 

in which a Federal candidate is clearly 

identified only in his or her capacity as 

the owner or operator of a business that 

existed prior to the candidacy is not a 

coordinated communication with 

respect to the clearly identified 

candidate if 

(1) The medium, timing, content, and 

geographic distribution of the public 

communication are consistent with 

public communications made prior to 

the candidacy; and 

(2) The public communication does 

not promote, support, attack, or oppose 

that candidate or another candidate who 

seeks the same office as that candidate. 

Dated: October 15, 2009. 

On behalf of the Commission. 

Steven T. Walther, 

Chairman, Federal Election Commission. 

[FR Doc. E9–25240 Filed 10–20–09; 8:45 am] 

BILLING CODE 6715–01–P 

SMALL BUSINESS ADMINISTRATION 

13 CFR Part 121 

RIN 3245–AF71 

Small Business Size Standards: 

Accommodation and Food Services 

Industries 

AGENCY: U.S. Small Business 

Administration. 

ACTION: Proposed rule. 

SUMMARY: The U.S. Small Business 

Administration (SBA) proposes to 

increase small business size standards 

for five industries in North American 

Industry Classification System (NAICS) 

Sector 72, Accommodation and Food 

Services—namely NAICS 721110, 

Hotels and Motels, from $7.0 million to 

$30 million; NAICS 721120, Casino 

Hotels, from $7.0 million to $30 million; 

NAICS 722211, Limited Service 

Restaurants, from $7.0 million to $10 

million; NAICS 722212, Cafeterias, from 

$7.0 million to $25.5 million; and 

NAICS 722310, Food Service 

Contractors, from $20.5 million to $35.5 

million. As part of its ongoing initiative 

to review all size standards, SBA has 

evaluated each industry in Sector 72 to 

determine whether the existing size 

standards should be retained or revised. 

This proposed rule is one of a series of 

proposals that will examine industries 

grouped by an NAICS Sector. As part of 

this series of proposed rules SBA is 

publishing concurrently in this issue of 

the Federal Register a proposed rule to 

modify small business size standards in 

Sector 44–45, Retail Trade, and Sector 

81, Other Services. SBA has established 

its ‘‘Size Standards Methodology’’ and 

published elsewhere in this issue of the 

Federal Register a notice of its 

availability on SBA’s Web site at http: 

//www.sba.gov/size. SBA has applied 

‘‘Size Standards Methodology’’ to this 

proposed rule. 


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53914 Federal Register / Vol. 74, No. 202 / Wednesday, October 21, 2009 / Proposed Rules 

DATES: SBA must receive comments to 

this proposed rule on or before 

December 21, 2009. 

ADDRESSES: You may submit comments, 

identified by RIN 3245–AF71 by one of 

the following methods: (1) Federal 

eRulemaking Portal: http:// 

www.regulations.gov. Follow the 

instructions for submitting comments; 

or (2) Mail/Hand Delivery/Courier: 

Khem R. Sharma, Chief, Size Standards 

Division, 409 Third Street, SW., Mail 

Code 6530, Washington, DC 20416. 

SBA will post all comments on 

www.regulations.gov. If you wish to 

submit confidential business 

information (CBI) as defined in the User 

Notice at www.regulations.gov, please 

submit the information to U.S. Small 

Business Administration, Khem R. 

Sharma, Chief, Size Standards Division, 

409 Third Street, SW., Mail Code 6530, 

Washington, DC 20416, or send an email to sizestandards@sba.gov. 

Highlight the information that you 

consider to be CBI and explain why you 

believe SBA should hold this 

information as confidential. SBA will 

review the information and make the 

final determination of whether it will 

publish the information or not. 

FOR FURTHER INFORMATION CONTACT: Carl 

J. Jordan, Program Analyst, Size 

Standards Division, (202) 205–6618 or 

sizestandards@sba.gov. 

SUPPLEMENTARY INFORMATION: To 

determine eligibility for Federal small 

business assistance programs, SBA 

establishes small business definitions 

(referred to as size standards) for private 

sector industries in the U.S. SBA’s 

existing size standards use two primary 

measures of business size—receipts and 

number of employees. Financial assets, 

electric output, and refining capacity are 

used as size measures for a few 

specialized industries. In addition, 

SBA’s Small Business Investment 

Company (SBIC) and the Certified 

Development Company (CDC) Programs 

determine small business eligibility 

using either the industry based size 

standards or net worth and net income 

size standards. Currently, SBA’s size 

standards consist of 45 different size 

levels, covering 1,141 NAICS industries 

and 17 sub-industry activities. Of these 

size levels, 32 are based on average 

annual receipts, eight are based on 

number of employees, and five are 

based on other measures. In addition, 

SBA has established 11 other size 

standards for its financial and 

procurement programs. 

Over the years, SBA has received 

comments that its size standards have 

not kept up with changes in the 

economy and, in particular, that they do 

not reflect the changes in the Federal 

contracting marketplace. The last 

overall review of size standards 

occurred during the late 1970s to early 

1980s. Since then, most reviews of size 

standards have been limited to in-depth 

analyses of specific industries in 

response to requests from the public and 

Federal agencies. SBA also makes 

periodic inflation adjustments to its 

monetary based size standards. The 

latest inflation adjustment to size 

standards was published in the Federal 

Register on July 18, 2008 (73 FR 41237). 

SBA recognizes that industrial 

changes over time have rendered 

existing size standards for some 

industries no longer supportable by 

current data. Accordingly, SBA has 

begun a comprehensive review of its 

size standards to ensure that existing 

size standards have supportable bases 

and, where necessary, to make revisions 

to current size standards. This proposed 

rule affords the public an opportunity to 

review and comment on the data and 

methodology SBA uses to evaluate and 

revise a size standard. 

Rather than review all size standards 

at one time, SBA believes that a more 

manageable approach would be to 

examine a group of related industries 

within an NAICS Sector in phases. 

Except for manufacturing, an NAICS 

Sector generally consists of 25 to 75 

industries. Once a review of size 

standards for industries within an 

NAICS Sector is completed, SBA will 

issue a proposed rule for those 

industries in which the analysis of 

industry data supports a change to the 

existing size standards. SBA expects to 

complete a review of all NAICS Sectors 

in two years. 

Below is a discussion of SBA’s size 

standards methodology, including 

analyses of industry structure, Federal 

procurement trends and other factors for 

industries within Sector 72, 

Accommodation and Food Services, and 

the impact of the proposed revisions to 

size standards on Federal small 

businesses assistance. 

Size Standards Methodology 

SBA has recently developed a ‘‘Size 

Standards Methodology’’ that it uses for 

developing and modifying size 

standards when necessary. SBA has 

published the document which is 

available at http://www.sba.gov/size. 

SBA does not apply all features of its 

‘‘Size Standards Methodology’’ to all 

cases because not all are appropriate. 

However, SBA does make it available in 

its entirety for parties with an interest 

in SBA’s overall approach to evaluating, 

establishing and modifying small 

business size standards. SBA always 

explains its analysis in the proposed 

and final rules that relate to size 

standards for specific industries. The 

following discussion is of SBA’s size 

standard analysis applied to industries 

in Sector 72, Accommodation and Food 

Services. 

SBA welcomes comments from the 

public on a number of issues. SBA is 

aware that different choices among size 

standards can involve complex tradeoffs 

among relevant variables; SBA invites 

comments on how to identify and weigh 

those variables. Suggestions are invited 

on alternative methodologies for 

determining small businesses; on how 

these size standards affect competition 

in general and within the specific 

industry; on alternative or additional 

factors that SBA should consider; on 

whether SBA’s approach to small 

business size standards makes sense in 

the current economic environment; on 

whether SBA’s using anchor size 

standards is appropriate in the current 

economy; on whether there are gaps in 

SBA’s methodology because of the lack 

of comprehensive data; and on 

alternative datasets SBA should 

consider for a specific sector. 

Congress granted SBA’s Administrator 

discretion to establish detailed small 

business size standards (15 U.S.C. 

632(a)(2)). Section 3(a)(3) of the Small 

Business Act (15 U.S.C. 632(a)(3)) 

requires that size standards vary by 

industry to the extent necessary to 

reflect differing characteristics among 

various industries. Accordingly, the 

economic structure of an industry serves 

as the underlying basis for developing 

and modifying small business size 

standards. By examining data on 

economic characteristics defining the 

industry structure (as described below), 

the small business segment of an 

industry is identified. In addition to the 

industry structure, SBA also takes into 

consideration its program objectives and 

whether a size standard successfully 

excludes businesses that are dominant 

in the industry. Discussed below is 

SBA’s analysis of the economic 

characteristics of each industry in 

Sector 72, Accommodation and Food 

Services, the impact of proposed size 

standards on SBA programs, and the 

evaluation of whether a revised size 

standard would exclude dominant firms 

in the industry from being considered as 

small. 

Industry Analysis 

For the current comprehensive size 

review, SBA has established three 

‘‘base’’ or ‘‘anchor’’ size standards that 

apply to most industries—$7.0 million 

in average annual receipts for industries 

that have receipts based size standards, 


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500 employees for manufacturing and 

other industries that have employee 

based size standards (except for 

Wholesale Trade), and 100 employees 

for industries in the Wholesale Trade 

Sector. SBA established 500 employees 

as the anchor size standard for the 

manufacturing industries at SBA’s 

inception in 1953 and shortly thereafter 

established a receipts based anchor size 

standard of $1 million in average annual 

receipts for the nonmanufacturing 

industries. The receipts based anchor 

size standard has been adjusted 

periodically for inflation. The inflation 

adjustment over the years has increased 

it to $7.0 million today. Since 1986, all 

industries in the Wholesale Trade 

Sector have had the 100-employee size 

standard for non-procurement SBA 

programs. For procurement purposes, 

the size standard for a non-manufacturer 

is 500 employees. 

These long standing anchor size 

standards have gained legitimacy 

through practice and general public 

acceptance. An anchor size standard is 

neither a minimum nor a maximum size 

standard. It is a common size standard 

for a large number of industries that 

have similar economic characteristics 

and serves as a reference point in 

evaluating size standards for individual 

industries. SBA uses the anchor in lieu 

of trying to establish precise small 

business size standards for each 

industry. Otherwise, theoretically, that 

could require that the number of size 

standards be as high as the number of 

industries for which SBA establishes 

size standards. SBA presumes an anchor 

size standard is appropriate for a 

particular industry unless that industry 

displays significantly different 

economic characteristics, as compared 

to the characteristics of industries with 

the anchor size standard, thereby 

suggesting a need for revision to an 

existing size standard. 

When evaluating a size standard, the 

economic characteristics of a specific 

industry under review are compared to 

the average characteristics of industries 

with one of the three anchor size 

standards (referred to as ‘‘anchor 

comparison group’’) to assess industry 

structure and to determine whether the 

industry displays significant differences 

relative to the industries in the anchor 

size standard group. If the 

characteristics of a specific industry 

under review are similar to the average 

characteristics of the anchor comparison 

group, the anchor size standard would 

be considered appropriate for that 

industry. SBA will consider adopting a 

size standard below the anchor size 

standard only when (1) all or most of 

the industry characteristics are 

significantly smaller than the average 

characteristics of the anchor comparison 

group, or (2) other industry 

considerations strongly suggest that the 

anchor size standard would be an 

unreasonably high size standard for the 

industry. 

If the specific industry’s 

characteristics are significantly higher 

than those of the anchor comparison 

group, a size standard higher than the 

anchor size standard may be considered 

appropriate. The larger the differences 

are between the characteristics of the 

industry under review and those in the 

anchor comparison group, the larger 

will be the difference between the 

appropriate industry size standard and 

the anchor size standard. To determine 

the level of a size standard above the 

anchor size standard, the characteristics 

of a second comparison group are 

analyzed. For industries with receipts 

based size standards, SBA has 

developed a second comparison group 

consisting of industries with the highest 

levels of receipts based size standards. 

The size standards for this group of 

industries range from $23 million to 

$35.5 million in average receipts, with 

the weighted average size standard for 

the group equaling $29 million. SBA 

refers to this comparison group as the 

‘‘higher level receipts based size 

standard group.’’ 

The primary factors that SBA 

evaluates in analyzing the structural 

characteristics of an industry include 

average firm size, startup costs and 

entry barriers, industry competition, 

and distribution of firms by size (13 CFR 

121.102(a) and (b)). SBA also evaluates 

the possible impact of both existing and 

revised size standards on Federal 

contracting assistance to small 

businesses as an additional primary 

factor. SBA generally considers these 

five factors as the most important ones 

for establishing or revising a size 

standard for an industry. However, SBA 

will also consider and evaluate other 

information that it believes relevant to 

the decision on a size standard for a 

particular industry (such as 

technological changes, growth trends, 

SBA financial assistance and other 

program factors, etc.). Public comments 

on a proposed size standard rule also 

provide important additional 

information. SBA thoroughly reviews all 

public comments before making a final 

decision on its proposed size standard. 

Below is a brief description of each of 

the five primary evaluation factors. A 

more detailed description of this 

analysis is provided in the ‘‘SBA Size 

Standards Methodology’’ paper which is 

available at http://www.sba.gov/size. 

1. Average firm size. SBA computes 

two measures of average firm size: 

simple average firm size and weighted 

average firm size. For industries with 

receipts based standards (including 

Accommodation and Food Services 

industries), the simple average firm size 

is calculated as total receipts of an 

industry divided by the total number of 

firms in that industry. The weighted 

average firm size is computed as the 

sum of weighted simple average firm 

size in different receipts size classes 

where weights are the shares of total 

industry receipts for respective size 

classes. The simple average firm size 

weighs all firms within an industry 

equally regardless of their size. The 

weighted average overcomes that 

limitation by giving more weights to 

larger firms. 

If the average firm size of an industry 

under review is significantly higher 

than the average firm size of industries 

in the anchor comparison industry 

group, this would generally support a 

size standard higher than the anchor 

size standard. Conversely, if the 

industry’s average firm size is similar to 

or significantly lower than that of the 

anchor comparison industry group, it 

would be a basis to adopt the anchor 

size standard or, in rare cases, a 

standard lower than the anchor. 

2. Startup costs. Startup costs reflect 

a firm’s initial size in an industry. New 

entrants to an industry must have 

sufficient capital to start and maintain a 

viable business. If firms entering a 

particular industry have greater capital 

requirements than firms do in industries 

in the anchor comparison group, this 

will form a basis for establishing a size 

standard higher than the anchor 

standard. In lieu of data on actual 

startup costs, SBA uses average assets 

size as a proxy measure to assess the 

levels of capital requirements for new 

entrants to an industry. 

SBA calculates the average assets size 

within a particular industry by applying 

the sales to total assets ratios from the 

Risk Management Association’s Annual 

Statement Studies, 2006–2008 to the 

average receipts size of firms in that 

industry. An industry with a 

significantly higher level of average 

assets size than that of the anchor 

comparison group is likely to have 

higher startup costs, which would 

support a size standard higher than the 

anchor size standard. Conversely, if the 

industry has a significantly smaller 

average assets size compared to the 

anchor comparison group, the anchor 

size standard, or in rare cases one lower 

than the anchor, would be considered 

appropriate. 


pwalker on DSK8KYBLC1PROD with PROPOSALS
53916 Federal Register / Vol. 74, No. 202 / Wednesday, October 21, 2009 / Proposed Rules 

3. Industry competition. Industry 

competition is generally assessed by 

measuring the share of total industry 

receipts obtained by firms that are 

among the largest in an industry. In this 

proposed rule, SBA evaluates the share 

of industry receipts generated by the 

four largest firms in the industry. This 

is referred to as the ‘‘four-firm 

concentration ratio.’’ SBA then 

compares the four-firm concentration 

ratio for an industry under review to the 

average four-firm concentration ratio for 

industries in the anchor comparison 

group. If a significant share of economic 

activity within the industry is 

concentrated among a few relatively 

large companies, SBA would establish a 

size standard relatively higher than the 

anchor size standard. SBA would not 

consider the four-firm concentration 

ratio as an important factor in assessing 

a size standard if its value for an 

industry under review is less than 40 

percent. For industries in which the 

four largest firms account for 40 percent 

or more of an industry’s total receipts, 

SBA examines the average size of the 

four largest firms in determining a size 

standard. 

4. Distribution of firms by size. SBA 

examines the shares of industry total 

receipts accounted for by firms of 

different receipts and employment size 

classes in an industry. This is an 

additional factor SBA evaluates in 

assessing competition within an 

industry. If the preponderance of an 

industry’s economic activity is 

attributable to smaller firms, this would 

indicate that small businesses are 

competitive in that industry and 

supports adopting the anchor size 

standard. A size standard higher than 

the anchor size standard would be 

supported for an industry in which the 

distribution of firms indicates that most 

of the economic activity is concentrated 

among the larger firms. 

Concentration among firms is a 

measure of inequality of distribution. To 

evaluate the degree of inequality of 

distribution within an industry, SBA 

computes the Gini coefficient by 

constructing the Lorenz curve. The Gini 

coefficient values vary between zero and 

one. If receipts are distributed perfectly 

equally among all the firms in an 

industry, the value of the Gini 

coefficient would equal to zero. If an 

industry’s total receipts are attributed to 

a single firm, the Gini coefficient would 

equal to one. 

SBA compares the degree of 

inequality of distribution for an industry 

under review with that for industries in 

the anchor comparison group. If an 

industry shows a higher degree of 

inequality of distribution (i.e., higher 

Gini coefficient) compared to industries 

in the anchor comparison industry 

group this would, all else being equal, 

warrant a higher size standard than the 

anchor. Conversely, for industries with 

similar or more equal distribution (i.e., 

similar or lower Gini coefficient values) 

than the anchor group, the anchor 

standard, or in some cases a standard 

lower than the anchor, would be 

adopted 

5. Impact on SBA programs. SBA 

examines the possible impact a size 

standard change may have on the level 

of Federal small business assistance. 

This assessment most often focuses on 

the share of Federal contracting dollars 

awarded to small businesses in the 

industry in question. In general, if the 

share of Federal contracting dollars 

awarded to small businesses in an 

industry that receives a significant 

amount of Federal contracting dollars is 

significantly less than the small 

business share of the industry’s total 

receipts, a justification would exist for 

considering a size standard higher than 

the existing size standard. The disparity 

between the small business Federal 

market share and industry-wide share 

may be attributed to a variety of reasons, 

such as extensive administrative and 

compliance requirements associated 

with Federal contracts, the different 

skill set required on Federal contracts as 

compared to typical commercial 

contracting work, and the size of 

contracting requirements of Federal 

customers. These, as wells as other 

factors, are likely to influence the type 

of firms within an industry that compete 

for Federal contracts and, hence, the 

firms receiving such contracts are 

expected to possess different 

characteristics than the average 

characteristics for all firms in that 

industry. By comparing the small 

business Federal contracting share with 

the industry-wide small business share, 

SBA includes in its size standards 

analysis the latest Federal contracting 

trends. This analysis may indicate a size 

standard larger than the current 

standard. 

For this proposed rule, SBA 

considered Federal procurement trends 

in the size standards analysis only if (1) 

the small business share of Federal 

contracting dollars is at least 10 

percentage points lower than the small 

business share of total industry receipts 

and (2) the amount of total Federal 

contracting averages $100 million or 

more during fiscal years 2006–2008 (the 

latest years for which complete Federal 

procurement data are available). SBA 

has selected these thresholds because 

they reflect a significant level of 

contracting in which a revision to a size 

standard may have an impact on 

expanding small business opportunities. 

Another factor that SBA evaluates is 

the impact of a proposed size standard 

on SBA’s loan programs, that is, the 

volume of SBA guaranteed loans within 

an industry and the size of firms 

obtaining those loans. This factor is 

examined to assess whether the existing 

or the proposed size standard for a 

particular industry may be restricting 

the level of financial assistance to small 

firms in that industry. If the analysis 

shows a reduction in financial 

assistance to small businesses, a higher 

size standard would be supportable. If 

small businesses have already been 

receiving significant amounts of 

financial assistance through SBA’s loan 

programs, or if the financial assistance 

has been provided mainly to businesses 

that are much smaller in size than the 

existing size standard, consideration of 

this factor for determining the size 

standard may not be necessary. 

Sources of Industry and Program Data 

The primary source of data for SBA’s 

industry analysis is a special tabulation 

of the 2002 Economic Census (see http: 

//www.census.gov/econ/census02/) 

prepared by the U.S. Bureau of the 

Census (Census Bureau) for SBA. The 

special tabulation provides SBA with 

industry-specific data on the number of 

firms, number of establishments, 

number of employees, annual payroll 

and annual receipts of companies by the 

size of firm reporting the data to Census. 

That is, the data are by the size class of 

the total company; however, the data 

itself, within a particular size class, 

represents the company’s total data in 

that industry only. The special 

tabulation enables SBA to evaluate 

average firm size, the four-firm 

concentration ratio, and distribution of 

firms by receipts and employment size. 

In some cases, where Census data 

were not available due to disclosure 

prohibitions, SBA either estimated 

missing values using available relevant 

data or, examined data at a higher level 

of industry aggregation, such as at the 2- 

or 3-digit NAICS level. In some 

instances, SBA had to base its analysis 

only on those factors for which data 

were available or missing values could 

be estimated. Data sources and 

estimation procedures SBA uses in its 

size standards analysis are documented 

in detail in the ‘‘SBA Size Standards 

Methodology’’ paper, which is available 

at http://www.sba.gov/size. 

Sales to total assets ratios used to 

calculate average assets size are from the 

Risk Management Association’s Annual 

Statement Studies, 2006–2008. 


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To evaluate Federal contracting 

trends, SBA examined Federal contract 

award data for fiscal years 2006–2008 

from the U.S. General Service 

Administration’s Federal Procurement 

Data System—Next Generation (FPDS– 

NG). SBA’s internal data on its 

guaranteed loan programs for fiscal 

years 2006–2008 were analyzed to 

assess the impact on financial assistance 

to small businesses. 

Dominant in Field of Operation 

Section 3(a) of the Small Business Act 

(15 U.S.C. 632(a)) defines a small 

business concern as one that is (1) 

independently owned and operated, (2) 

not dominant in its field of operation, 

and (3) within a specific small business 

definition or size standard established 

by the SBA Administrator. SBA 

considers as part of its evaluation of a 

size standard whether a business 

concern at a proposed size standard 

would be considered dominant in its 

field of operation. For this, SBA 

generally examines the industry’s 

market share of firms at the proposed 

standard or other factors that may 

indicate whether a firm can exercise a 

major controlling influence on a 

national basis in which significant 

numbers of business concerns are 

engaged. If SBA’s analysis indicates that 

a proposed size standard would include 

a dominant firm, a lower size standard 

would be considered to exclude the 

dominant firm from being defined as 

small. 

Selection of Size Standards 

To simplify size standards, for the 

ongoing comprehensive size standards 

review, SBA has proposed to select a 

size standard for an industry from a 

limited number of receipts based size 

standard levels. For many years, SBA 

has been concerned about the 

complexity of determining small 

business status caused by a large 

number of varying receipts based size 

standards (see 69 FR 13130, March 4, 

2004, and 57 FR 62515, December 31, 

1992). Currently, there are 32 different 

levels of receipts based size standards, 

ranging from $0.75 million to $35.5 

million, with many of those levels 

applying to one or just a few industries 

only. SBA believes that such a large 

number of variations with small 

variations are both unnecessary and 

difficult to justify analytically. 

Simplifying the administration of SBA’s 

size standards to a fewer number of size 

standard levels will produce more 

common size standards for businesses 

operating in multiple related industries 

and greater consistency in the size 

standards among industries that are 

similar in their economic 

characteristics. 

This proposed rule, therefore, applies 

one of eight receipts based size 

standards to each industry in Sector 72. 

These eight ‘‘fixed’’ size standard levels 

are $5 million, $7 million, $10 million, 

$14 million, $19 million, $25.5 million, 

$30.0 million and $35.5 million. These 

eight receipts based size standard levels 

are established by taking into 

consideration the minimum, maximum, 

and the more commonly used receipts 

based size standards. Currently, the 

more commonly used receipts based 

size standards cluster around the 

following six levels—$2.5 million to 

$4.5 million, $7 million, $9.0 million to 

$10 million, $12.5 million to $14.0 

million, $25.0 million to $25.5 million, 

and $33.5 million to $35.5 million. SBA 

has selected $7 million as one of eight 

fixed levels of receipts based size 

standards because this is also an anchor 

standard for receipts based standards. A 

lower or minimum receipts based size 

level is established at $5 million. 

Excluding monetary standards for 

agriculture and those based on net 

commissions (such as real estate brokers 

and travel agents), $5 million is in the 

close neighborhood of the current 

minimum receipts based standard of 

$4.5 million. Among the higher levels 

size clusters, $10 million, $14 million, 

$25.5 million, and $35.5 million are 

selected as other four levels of the fixed 

size standards. Because of a large gap 

between two of the size standard 

intervals, SBA has established 

intermediate levels of $19 million 

between $14 million and $25.5 million, 

and $30 million between $25.5 million 

and $35.5 million. These two 

intermediate size levels reflect roughly 

similar proportional differences 

between the two successive size 

standard levels. 

In a further effort to simplify size 

standards, SBA may propose a common 

size standard for certain closely related 

group of industries. Although the size 

standard analysis may support a specific 

size standard level for each industry, 

SBA believes that establishing different 

size standards for closely related 

industries may not be appropriate. For 

example, in cases where many of the 

same businesses operate in the same 

two industries, establishing the common 

size standard would better reflect the 

industry marketplace than establishing 

separate size standards for each of those 

industries. This situation has led SBA to 

establish a common size standard for 

the information technology (IT) services 

industries (NAICS 541511, NAICS 

541112, NAICS 541513 and NAICS 

541519), even though the industry data 

might support a distinct size standard 

for each industry. Businesses engaged in 

IT related services typically perform 

activities in two or more other related 

industries. Whenever SBA proposes a 

common size standard for closely 

related industries it will provide a 

justification for that in the proposed 

rule. 

Evaluation of Industry Structure 

SBA has evaluated the structure of 

each industry in the Accommodation 

and Food Services Sector to assess the 

appropriateness of the current size 

standards. As described above, SBA 

compared data on the economic 

characteristics of each industry in that 

Sector to the average characteristics of 

industries in two comparison groups. 

The first comparison group is comprised 

of all industries with $7.0 million size 

standards—referred to as the ‘‘receipts 

based anchor comparison group.’’ 

Because the goal of SBA’s size review is 

to assess whether a specific industry’s 

size standard should be at or different 

from the anchor size standard, this is 

the most logical set of industries to 

group together for the industry analysis. 

In addition, this group includes a 

sufficient number of firms to provide a 

meaningful assessment and comparison 

of industry characteristics. 

If the characteristics of an industry 

under review are similar to the average 

characteristics of industries in the 

anchor comparison group, the anchor 

size standard would be considered an 

appropriate standard for that industry. If 

an individual industry’s structure is 

significantly different from that of the 

anchor group, a size standard lower or 

higher than the anchor size standard 

would be selected. The level of the new 

size standard is determined based on 

the difference between the 

characteristics of the anchor comparison 

group and a second industry 

comparison group. As described above, 

the second comparison group for 

receipts based standards consists of 

industries with the highest receipts 

based size standards, ranging from $23 

million to $35.5 million, with the 

average size standard for the group 

equaling $29 million. SBA refers to this 

group of industries as the ‘‘higher level 

receipts based size standard comparison 

group.’’ Differences in industry 

structure between an industry under 

review and the industries in the two 

comparison groups are determined by 

comparing data on each of the industry 

factors, including average firm size, 

average assets size, four-firm 

concentration ratio, and the Gini 

coefficient of distribution of firms by 

size. Table 1 shows two measures of the 


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53918 Federal Register / Vol. 74, No. 202 / Wednesday, October 21, 2009 / Proposed Rules 

average firm size (simple and weighted), 

average assets size, four-firm 

concentration ratio, average receipts of 

the four largest firms, and the Gini 

coefficient for both anchor level and 

higher level comparison groups for 

receipts based size standards. 

TABLE 1—AVERAGE CHARACTERISTICS OF RECEIPTS BASED COMPARISON GROUPS

Receipts based comparison 

group 

Avg. firm size 

($ million) Avg. assets size 

($ million) 

Avg. fourfirm 

concentration 

ratio (%) 

Avg. receipts 

of four 

largest firms 

($ million) a

Gini 

coefficient 

Simple average Weighted average 

Anchor Level ............................... 1.19 .................. 17.64 ................ 0.71 .................. 18.7 .................. 189.9 ................ 0.599 

Higher Level ................................ 4.77 .................. 52.27 ................ 2.05 .................. 22.3 .................. 639.4 ................ 0.725 

a To be used for industries with a four-firm concentration ratio of 40% or greater. 

Derivation of Size Standards Based on 

Industry Factors 

For each of the industry factors shown 

in Table 1, SBA derives a separate size 

standard based on the amount of 

differences between their values for an 

industry under review and those for the 

two comparison groups. An estimated 

size standard that is supported by each 

industry factor is derived by comparing 

its value for a specific industry under 

review to the corresponding value for 

the two comparison groups. If the 

industry value for a particular factor is 

near that for the anchor comparison 

group, the $7.0 million anchor size 

standard would be considered 

appropriate for that factor. 

If an industry’s value for a factor is 

significantly above or below the anchor 

comparison group value, a size standard 

above or below the $7.0 million anchor 

size would be warranted. The level of 

the new size standard in these cases is 

derived based on the proportional 

difference between the industry value 

and the values for the two comparison 

groups. 

For example, if an industry’s simple 

average receipts size equals $3.0 

million, SBA’s analysis would supports 

a size standard of $19 million. The $3.0 

million level is 50.6 percent between 

the average firm size of $1.19 million for 

the anchor comparison group and $4.77 

million for the higher level comparison 

group (($3.00 million—$1.19 million) ÷ 

($4.77 million—$1.19 million) = 0.506 

or 50.6%). This proportional difference 

is applied to the difference between the 

$7.0 million anchor size standard and 

average size standard of $29 million for 

the higher level size standard group and 

then added to $7.0 million to estimate 

a size standard of $18.12 million 

([{$29.0 million—$7.0 million} * 0.506] 

+ $7.0 million = $18.12 million). The 

final step rounds the estimated size 

standard of $18.12 million to the nearest 

fixed size standard level, in this case to 

$19 million. 

SBA applies the above method of 

calculation to derive a size standard for 

each industry factor. Detailed formulas 

involved in these calculations are 

presented in ‘‘SBA Size Standards 

Methodology’’ which is available at 

http://www.sba.gov/size. Table 2 shows 

ranges of values for each industry factor 

and the levels of size standards 

supported by those values. 

TABLE 2—VALUES OF INDUSTRY FACTORS AND SUPPORTED SIZE STANDARDS

If simple 

avg. 

receipts size 

($ million) 

Or if 

weighted 

avg. receipts 

size 

($ million) 

Or if 

avg. assets 

size 

($ million) 

Or if 

avg. receipts 

of largest 

four firms 

($ million) 

Or if 

gini 

coefficient 

Then 

size standard 

is 

($ million) 

< 1.03 ..................................................... < 16.07 .................. < 0.65 .................... < 169.4 .................. < 0.593 .................. 5.0 

1.03 to 1.43 ............................................ 16.07 to 20.00 ....... 0.65 to 0.80 ........... 169.4 to 220.5 ....... 0.593 to 0.608 ....... 7.0 

1.44 to 2.00 ............................................ 20.01 to 25.51 ....... 0.81 to 1.02 ........... 220.6 to 292.0 ....... 0.609 to 0.628 ....... 10.0 

2.01 to 2.74 ............................................ 25.52 to 32.59 ....... 1.03 to 1.29 ........... 292.1 to 384.0 ....... 0.629 to 0.653 ....... 14.0 

2.75 to 3.67 ............................................ 32.60 to 41.65 ....... 1.30 to 1.64 ........... 384.1 to 501.5 ....... 0.654 to 0.686 ....... 19.0 

3.68 to 4.57 ............................................ 41.66 to 50.30 ....... 1.65 to 1.97 ........... 501.6 to 613.8 ....... 0.687 to 0.718 ....... 25.5 

4.58 to 5.38 ............................................ 50.31 to 58.17 ....... 1.98 to 2.28 ........... 613.9 to 716.1 ....... 0.719 to 0.746 ....... 30.0 

> 5.38 ..................................................... >58.17 ................... > 2.28 .................... > 716.1 .................. > 0.746 .................. 35.5 

Table 3 shows the results of industry 

analysis for each industry in Sector 72, 

Accommodation and Food Services. 

Each NAICS industry row in columns 2, 

3, 4, 6 and 7 shows two numbers. The 

upper number is the value for the 

industry factor shown on the top of the 

column and the lower number is the 

size standard supported by that factor. 

For the four-firm concentration ratio, a 

size standard is estimated based on the 

average receipts of the top four firms if 

its value is 40 percent or more. If the 

four-firm concentration ratio for an 

industry is less than 40 percent, no size 

standard is estimated for that factor and 

column 5 is left blank. Column 8 shows 

the proposed or revised size standard 

for each industry, calculated as the 

average of size standards supported by 

each industry factor and rounded to the 

nearest fixed size level. Analytical 

details involved in the averaging 

procedure are described in the SBA 

‘‘Size Standards Methodology’’ paper 

which is available at http:// 

www.sba.gov/size. For comparison, the 

current size standards for industries in 

Sector 72 are also shown in column 9 

of Table 3. 


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TABLE 3—SIZE STANDARDS SUPPORTED BY EACH INDUSTRY FACTOR

[Millions of dollars] 

NAICS 

Simple 

average 

firm size 

Weighted 

average 

firm size 

Average 

assets 

size 

Four-firm 

ratio 

(%) 

Four-firm 

average 

firm size 

Gini 

coefficient 

Revised 

size 

standard 

Current 

size 

standard 

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

721110—Hotels (except 

Casino Hotels) & Motels $2.5 $118.5 $4.9 .................... .................... 0.765 .................... ....................

$14.0 $35.5 $35.5 22.4% .................... $35.5 $30.0 $7.0 

721120—Casino Hotels ... $203.8 $523.8 $179.8 .................... $3,557.7 0.611 .................... ....................

$35.5 $35.5 $35.5 42.6% $35.5 $10.0 $30.0 $7.0 

721191—Bed-and-Breakfast Inns ........................ $0.3 $0.7 .................... .................... .................... 0.061 .................... ....................

$5.0 $5.0 .................... 3.0% .................... $5.0 $5.0 $7.0 

721199—All Other Traveler Accommodation ..... $0.3 $1.1 .................... .................... .................... 0.123 .................... ....................

$5.0 $5.0 .................... 9.9% .................... $5.0 $5.0 $7.0 

721211—RV (Recreational Vehicle) Parks 

& Campgrounds ........... $0.4 $2.5 $0.5 .................... .................... 0.287 .................... ....................

$5.0 $5.0 $5.0 9.1% .................... $5.0 $5.0 $7.0 

721214—Recreational & 

Vacation Camps (except Campgrounds) ...... $0.6 $1.7 0.8 .................... .................... 0.276 .................... ....................

$5.0 $5.0 $10.0 5.1% .................... $5.0 $7.0 $7.0 

721310—Rooming & 

Boarding Houses .......... 0.3 $1.2 .................... .................... .................... 0.187 .................... ....................

$5.0 $5.0 .................... 6.6% .................... $5.0 $5.0 $7.0 

722110—Full Service 

Restaurants .................. $0.9 $46.1 $0.3 .................... .................... 0.467 .................... ....................

$5.0 $25.5 $5.0 8.6% .................... $5.0 $7.0 $7.0 

722211—Limited Service 

Restaurants .................. $1.0 $52.3 $0.3 .................... .................... 0.599 .................... ....................

$5.0 $30.0 $5.0 10.2% .................... $7.0 $10.0 $7.0 

722212—Cafeterias ......... $1.3 $61.3 .................... .................... .................... 0.729 .................... ....................

$7.0 $35.5 .................... 39.2% .................... $30.0 $25.5 $7.0 

722213—Snack & Nonalcoholic Beverage Bars $0.5 $29.9 $0.2 .................... .................... 0.454 .................... ....................

$5.0 $14.0 $5.0 24.6% .................... $5.0 $7.0 $7.0 

722310—Food Service 

Contractors ................... $7.7 $471.8 $2.3 .................... $3,357.8 0.937 .................... ....................

$35.5 $35.5 $35.5 64.4% $35.5 $35.5 $35.5 $20.5 

722320—Caterers ............ $0.6 $2.4 $0.1 .................... .................... 0.333 .................... ....................

$5.0 $5.0 $5.0 2.1% .................... $5.0 $5.0 $7.0 

722330—Mobile Food 

Services ........................ $0.4 $9.1 .................... .................... .................... 0.464 .................... ....................

$5.0 $5.0 .................... 24.7% .................... $5.0 $5.0 $7.0 

722410—Drinking Places 

(Alcoholic Beverages) .. $0.3 $1.4 $0.1 .................... .................... 0.151 .................... ....................

$5.0 $5.0 $5.0 2.2% .................... $5.0 $5.0 $7.0 

As can be seen in Table 3, the results 

of SBA analyses of industry data would 

support lowering size standards from $7 

million in annual receipts to $5 million 

in annual receipts for seven industries 

in Sector 72. Those seven industries are 

NAICS 721191, Bed and Breakfast Inns; 

NAICS 721199, All Other Traveler 

Accommodation; NAICS 721211, 

Recreational Vehicle Parks and 

Campgrounds; NAICS 721310, Rooming 

and Boarding Houses; NAICS 722320 

Caterers; NAICS 722330, Mobile Food 

Services; and NAICS 722410, Drinking 

Places. 

However, SBA believes that lowering 

size standard for those industries would 

not be in the best interests of small 

businesses when the economy is in a 

deep recession. Aiming to promote 

economic recovery and to preserve and 

create jobs the U.S. Congress passed and 

the President signed the American 

Recovery and Reinvestment Act of 2009 

(Recovery Act). The purposes and goals 

of the Recovery Act are to promote 

economic recovery and to preserve and 

create jobs. Under the Recovery Act, 

SBA has changed its various programs 

to assist small businesses, including the 

following: (1) Temporary reduction or 

elimination of fees in the 7(a) and 504 

loan guarantee programs; (2) creation of 

a temporary 90 percent guarantee loan 

program; (3) creation of a temporary 

Secondary Market Guarantee Authority 

to provide a Federal guarantee for pools 

of first lien 504 loans that are to be sold 

to third-party investors; (4) new 

authority for refinancing community 

development loans under the 504 

program; (5) revision of the job creation 

goals of the 504 program; (6) 

simplification of the maximum leverage 

limits and aggregate investment limits 

required of Small Business Investment 

Companies; (7) temporary authority to 

provide loans on a deferred basis to 

viable small business concerns that have 

a qualifying small business loan and are 

experiencing immediate financial 

hardship; (8) temporary increase in the 

surety bond maximum amount; (9) 

establishment of a Secondary Market 


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Lending Authority to make loans to 

systemically important broker dealers in 

SBA’s 7(a) secondary market; and (10) 

application of SBA’s Certified 

Development Company (CDC) 

alternative size standard to its 7(a) 

Business Loan Program (see 13 CFR 

121.301). 

SBA believes that to reduce size 

standards and thereby reduce eligibility 

for those programs, or to reduce the 

number of firms that can participate in 

financial and Federal procurement 

assistance programs would run counter 

to what it is trying to do for small 

businesses. Reducing size eligibility for 

Federal procurement opportunities 

would not preserve or create more jobs; 

rather, it would have the opposite effect. 

Therefore, SBA has decided not to 

propose to reduce the size standards for 

those industries. SBA has decided to 

retain their current size standards. 

Further, SBA does not anticipate that it 

will propose to lower size standards 

after the Recovery Act terminates on 

September 30, 2010. SBA intends for the 

proposed size standards, if adopted, to 

remain in effect unless and until it 

receives information or data that 

suggests a change is needed. 

Evaluation of Federal Contracting and 

SBA Loan Data 

Besides industry structure, SBA also 

evaluates Federal contracting data to 

assess the extent to which small 

businesses are successful in getting 

Federal contracts under the existing size 

standards. However, the available data 

on Federal contracting are limited to 

identifying businesses as small or other 

than small, with no information on 

exact size of businesses receiving 

Federal contracts in order to conduct a 

more precise analysis. 

Given limited data, for the current 

comprehensive size review, SBA has 

decided to designate a size standard at 

one level higher than their current size 

standard for industries where the small 

business share of total Federal 

contracting dollars is between 10 and 30 

percentage points lower than their 

shares in total industry receipts and at 

two levels higher than the current size 

standard if the difference is higher than 

30 percentage points. 

SBA has chosen not to designate a 

size standard for the Federal contracting 

factor alone that is higher than two 

levels above the current size standard 

because doing so would result in most 

cases of designating a size standard 

more than twice the current size 

standard. Given the limitations of the 

FPDS data, and the complex 

relationships among a number of 

variables affecting small business 

participation in the Federal 

marketplace, SBA believes that a larger 

adjustment to size standards based on 

Federal contracting activity should be 

based on a more detailed analysis of the 

impact of any subsequent revision to the 

current size standard. In limited 

situations, however, SBA may conduct 

a more extensive examination of Federal 

contracting experience to support a 

different size standard than indicated by 

this general rule to take into 

consideration significant and unique 

aspects of small business 

competitiveness in the Federal contract 

market. 

SBA welcomes comment on its 

methodology of incorporating the 

Federal contracting factor in the size 

standard analysis and suggestions for 

alternative methods and other relevant 

information on small business 

experience in the Federal contract 

market. 

Only two industries in Sector 72, 

Accommodation and Food Services, 

received an average of $100 million or 

more annually in Federal contracting 

dollars during fiscal years 2006–2008. 

These industries are NAICS 721110, 

Hotels (except Casino Hotels) and 

Motels, and NAICS 722310, Food 

Service Contractors. However, because 

the small business share of total Federal 

contracting dollars was already higher 

than small business share of total 

industry receipts for both of these 

industries, the Federal procurement 

factor was not considered in 

determining the level of size standard. 

The latest data show that Federal 

contracting activity is insignificant for 

most of the industries in Sector 72 and, 

for those two industries where it is 

significant, small businesses seem to be 

doing well in terms of their share in 

Federal marketplace relative to their 

share in industry’s total sales. 

Before deciding on an industry’s size 

standard, SBA also considers the impact 

of new or revised standards on SBA’s 

loan programs. SBA examined 7(a) Loan 

Program data for fiscal years 2006–2008 

to assess whether the existing or 

proposed size standards need further 

adjustments to ensure credit 

opportunities for small businesses 

through that program. For the industries 

reviewed, primarily small businesses 

that are much smaller than the size 

standards use the 7(a) Loan Program. 

Based on that analysis, no size standard 

Sector 72, Accommodation and Food 

Services, needs an adjustment based on 

this factor. 

Summary of Size Standards Changes 

The analyses of industry structure, 

Federal contracting data and SBA loan 

information, support retaining the 

existing $7.0 million standard for three 

industries in Sector 72, Accommodation 

and Food Services. These are NAICS 

721214, Recreational and Vacation 

Camps (except Campgrounds); NAICS 

722110, Full Service Restaurants; and 

NAICS 722213, Snacks and 

Nonalcoholic Beverage Bars. 

The analyses support an increase to 

the current size standard for five 

industries, namely NAICS 721110, 

Hotels and Motels, from $7.0 million to 

$30 million; NAICS 721120, Casino 

Hotels, from $7.0 million to $30 million; 

NAICS 722211, Limited Service 

Restaurants, from $7.0 million to $10 

million; NAICS 722212, Cafeterias, from 

$7.0 million to $25.5 million; and 

NAICS 722310, Food Service 

Contractors, from $20.5 million to $35.5 

million. These revisions are 

summarized in Table 4. 

TABLE 4—SUMMARY OF PROPOSED SIZE STANDARD REVISIONS

NAICS 

Current size 

standard 

($ million) 

Revised size 

standard 

($ million) 

721110—Hotels (except Casino Hotels) & Motels .......................................................................................... $7.0 $30.0 

721120—Casino Hotels ................................................................................................................................... 7.0 30.0 

722211—Limited Service Restaurants ............................................................................................................ 7.0 10.0 

722212—Cafeterias ......................................................................................................................................... 7.0 25.5 

722310—Food Service Contractors ................................................................................................................ 20.5 35.5 


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SBA’s analyses support a decrease to 

the current standard for seven industries 

from $7.0 million to $5.0 million. These 

industries are NAICS 721191, Bed and 

Breakfast Inns; NAICS 721199, All 

Other Traveler Accommodation; NAICS 

721211, Recreational Vehicle Parks and 

Campgrounds; NAICS 721310, Rooming 

and Boarding Houses; NAICS 722320 

Caterers; NAICS 722330, Mobile Food 

Services; and NAICS 722410, Drinking 

Places. However, as discussed above, 

SBA has decided that proposing to 

lower small business size standards 

would be inconsistent with its ongoing 

effort to promote small business 

assistance under the Recovery Act. 

Therefore, SBA proposes to retain the 

current size standards for those 

industries. SBA intends for the 

proposed size standards, if adopted, to 

remain in effect unless and until it 

receives information or data that 

suggests a change is needed. 

Evaluation of Dominance in Field of 

Operation 

SBA has determined that for the 

industries in Sector 72, Accommodation 

and Food Services, no firm at or below 

the proposed size standard would be 

large enough to dominate its field of 

operation. A firm at the proposed size 

standard within these industries 

generates less than one percent of total 

industry receipts. This level of market 

share effectively precludes a firm at or 

below the proposed size standard from 

exerting a controlling effect on this 

industry. 

Request for Comments 

SBA invites public comments on the 

proposed rule, especially on the 

following areas. 

1. In an effort to simplify size 

standards, for this proposed rule SBA 

has proposed a set of eight fixed size 

levels for receipts based size standards: 

$5.0 million, $7.0 million, $10.0 

million, $14.0 million, $19.0 million, 

$25.5 million, $30.0 million, and $35.5 

million. SBA invites comments on 

whether simplification of size standards 

in this way is necessary and if these 

proposed fixed size levels are 

appropriate, or suggestions on 

alternative approaches to simplifying 

small business size standards. 

2. For all industries in Sector 72, 

Accommodation and Food Services, 

SBA has proposed receipts based size 

standards ranging from $7 million to 

$35.5 million. SBA seeks feedback on 

whether the levels of size standards it 

proposes seem right given the economic 

characteristics of each industry. SBA 

also seeks feedback and suggestions on 

alternative standards, if they would be 

more appropriate, including whether an 

employee based standard for certain 

industries is a more suitable measure of 

size, and what that employee level 

should be. 

3. SBA’s proposed standards are 

based on its evaluation of five primary 

factors—average firm size, average 

assets size (as proxy of startup costs and 

entry barriers), four-firm concentration 

ratio, distribution of firms by size, and 

the level and small business share of 

Federal contracting dollars. SBA 

welcomes comments on these and other 

factors that interested parties believe are 

important to consider for describing 

industry characteristics when SBA 

evaluates its size standards. Please 

provide relevant data sources, if 

available. 

4. SBA derives its proposed standards 

by applying equal weights to each of the 

five primary factors in all industries. 

Should SBA continue with the equal 

weighting of each factor or should it 

give more weight to one or more factors 

in size standard determination of certain 

industries? If it is more appropriate to 

weigh some factors more than others, 

SBA welcomes suggestions on specific 

weights for each factor along with 

supporting information. 

5. For some industries, SBA proposes 

to increase the existing size standards 

by a large amount, while for others the 

proposed increase is less. Should SBA, 

as a policy, limit the amount of increase 

or decrease to a size standard? Also 

should SBA, as a policy, establish 

certain minimum or maximum values 

for its size standards? SBA seeks 

suggestions on appropriate levels of 

change to size standards and on their 

minimum or maximum levels. 

6. For analytical simplicity and 

efficiency, SBA has refined its size 

standard methodology to obtain a single 

value as a proposed size standard 

instead of a range of values as was 

SBA’s methodology in its past size 

regulations. SBA welcomes any 

comments on this procedure and 

suggestions for alternative methods. 

Public comments on above issues are 

very critical for SBA to validate its size 

standard methodology and move 

forward in a timely manner with review 

of size standards of other industry 

groups under the two-year 

comprehensive size review. 

Compliance With Executive Orders 

12866, 12988, and 13132, the 

Paperwork Reduction Act (44 U.S.C. Ch. 

35), and the Regulatory Flexibility Act (5 

U.S.C. 601–612). 

Executive Order 12866 

The Office of Management and Budget 

(OMB) has determined that this 

proposed rule is a ‘‘significant’’ 

regulatory action for purposes of 

Executive Order 12866. Accordingly, 

the next section contains SBA’s 

Regulatory Impact Analysis. This is not 

a major rule, however, under the 

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

Regulatory Impact Analysis 

1. Is there a need for the regulatory 

action? 

SBA believes that adjustments to 

certain size standards in Sector 72, 

Accommodation and Food Services, are 

needed to better reflect the economic 

characteristics of small businesses in 

those industries. SBA’s mission is to aid 

and assist small businesses through a 

variety of financial, procurement, 

business development, and advocacy 

programs. To assist effectively the 

intended beneficiaries of these 

programs, SBA must establish distinct 

definitions of which businesses are 

deemed small businesses. The Small 

Business Act (15 U.S.C. 632(a)) 

delegates to SBA’s Administrator the 

responsibility for establishing small 

business definitions. The Act also 

requires that small business definitions 

vary to reflect industry differences. The 

supplementary information section of 

this proposed rule explains SBA’s 

methodology for analyzing a size 

standard for a particular industry. 

2. What are the potential benefits and 

costs of this regulatory action? 

The most significant benefit to 

businesses obtaining small business 

status as a result of this rule is eligibility 

for Federal small business assistance 

programs, including SBA’s financial 

assistance programs, economic injury 

disaster loans, and Federal procurement 

preference programs for small 

businesses. Federal procurement 

provides opportunities for small 

businesses under SBA’s business 

development programs, such as 8(a), 

Small Disadvantaged Businesses (SDB), 

small businesses located in Historically 

Underutilized Business Zones 

(HUBZone), women owned small 

businesses, and service disabled veteran 

owned small businesses (SDVOSB). 

Other Federal agencies also may use 

SBA size standards for a variety of 

regulatory and program purposes. 

Through the assistance of these 

programs, small businesses become 

more knowledgeable, stable, and 

competitive businesses. In five 

industries under Sector 72 for which 

SBA has proposed to increase their size 

standards, about 2,050 additional firms 

are estimated to obtain small business 

status and become eligible for these 


pwalker on DSK8KYBLC1PROD with PROPOSALS
53922 Federal Register / Vol. 74, No. 202 / Wednesday, October 21, 2009 / Proposed Rules 

programs. In the seven industries for 

which SBA’s analyses indicated a lower 

size standard as appropriate, there are 

about 450 firms that might have lost 

their small business status, had SBA 

proposed lowering them. That number 

is less than 0.6 percent of total number 

of firms in those industries defined as 

small under the current standards. 

Thus, the net impact for the sector as a 

whole is about 2,050 additional firms 

gaining and none losing small business 

status under the proposed rule. This 

will increase the small business share of 

total industry receipts for the Sector 

from about 46 percent under the current 

size standards to nearly 50 percent 

under the proposed standards. 

The benefits of increasing certain size 

standards to a more appropriate level 

would accrue to three groups: (1) 

Businesses that benefit by gaining small 

business status from the higher size 

standard that also use small business 

assistance programs; (2) growing small 

businesses that may exceed the current 

size standards in the near future and 

that will retain small business status 

from the higher size standard; and (3) 

Federal agencies that award contracts 

under procurement programs that 

require small business status. 

Nearly 90 percent of Federal 

contracting dollars spent in Sector 72 

during fiscal years 2006–2008 was 

accounted for by two of five industries 

for which size standards have been 

proposed to increase. SBA estimates 

that additional firms gaining small 

business status in those two industries 

under the proposed size standards could 

potentially obtain Federal contracts 

totaling up to $75 million per year 

under the small business set-aside 

program, the 8(a), HUBZone, and 

SDVOSB Programs, or unrestricted 

procurements. This represents about 5.5 

percent of the $1.13 billion in average 

Federal contracts awarded to the 

Accommodation and Food Services 

Sector during fiscal years 2006–2008. 

The added competition for many of 

these procurements also would likely 

result in a lower price to the 

Government for procurements reserved 

for small businesses, but SBA is not able 

to quantify this benefit. 

Under SBA’s 7(a) Guaranteed Loan 

Program and Certified Development 

Company (504) Program, SBA estimates 

only a few additional loans totaling $1 

million to $2 million in Federal loan 

guarantees could be made to these 

newly defined small businesses. 

Because of the size of the loan 

guarantees, however, most loans are 

made to small businesses well below the 

size standard. Moreover, under the 

Recovery Act, effective February 17, 

2009, SBA is temporarily raising 

guarantees on its SBA’s 7(a) loan 

program and also temporarily 

eliminating fees for borrowers on SBA 

7(a) loans and for both borrowers and 

lenders on 504 Certified Development 

Company loans, through calendar year 

2009, or until the funds are exhausted. 

The fee elimination is retroactive to 

February 17, 2009, the day the Recovery 

Act was signed. Furthermore, SBA is 

developing a mechanism for refunding 

fees paid on loans since then. In 

addition, since SBA has applied its CDC 

alternative size standard to its 7(a) 

Business Loan Program, more capital is 

available to small businesses. Thus, 

increasing the size standards will likely 

result in an increase in small business 

guaranteed loans to businesses in these 

industries, but it would be impractical 

to try to estimate the extent of their 

number and the total amount loaned. 

The newly defined small businesses 

would also benefit from SBA’s 

Economic Injury Disaster Loan (EIDL) 

Program. Since this program is 

contingent upon the occurrence and 

severity of a disaster, no meaningful 

estimate of benefits can be projected for 

future disasters. 

To the extent that 2,050 additional 

firms could become active in Federal 

procurement programs, this may entail 

some additional administrative costs to 

the Federal Government associated with 

additional bidders for Federal small 

business procurement opportunities, 

additional firms seeking SBA 

guaranteed lending programs, additional 

firms eligible for enrollment in the 

Central Contractor Registration’s 

Dynamic Small Business Search 

database, and additional firms seeking 

certification as 8(a) or HUBZone firms 

or qualifying for SDB status. Among 

businesses in this group seeking SBA 

assistance, there could be some 

additional costs associated with 

compliance and verification of small 

business status and protests of small 

business status. These additional costs 

are likely to be minimal because 

mechanisms are already in place to 

handle these additional administrative 

requirements. 

The costs to the Federal Government 

may be higher on some Federal 

contracts. With a greater number of 

businesses defined as small, Federal 

agencies may choose to set aside more 

contracts for competition among small 

businesses rather than using full and 

open competition. The movement from 

unrestricted to set-aside contracting is 

likely to result in competition among 

fewer bidders. In addition, higher costs 

may result if additional full and open 

contracts are awarded to HUBZone and 

SDB businesses because of a price 

evaluation preference. The additional 

costs associated with fewer bidders, 

however, are likely to be minor since, as 

a matter of law, procurements may be 

set aside for small businesses or 

reserved for the 8(a) or HUBZone 

Programs only if awards are expected to 

be made at fair and reasonable prices. 

The proposed size standards may 

have distributional effects among large 

and small businesses. Although the 

actual outcome of the gains and losses 

among small and large businesses 

cannot be estimated with certainty, 

several likely impacts can be identified. 

There will likely be a transfer of some 

Federal contracts to small businesses 

from large businesses. Large businesses 

may have fewer Federal contract 

opportunities as Federal agencies decide 

to set aside more Federal contracts for 

small businesses. Also, some Federal 

contracts may be awarded to HUBZone 

or SDB concerns instead of large 

businesses since those two categories of 

small businesses may be eligible for an 

evaluation adjustment for contracts 

competed on a full and open basis. 

Similarly, currently defined small 

businesses may obtain fewer Federal 

contracts due to the increased 

competition from more businesses 

defined as small. This transfer may be 

offset by a greater number of Federal 

procurements set aside for all small 

businesses. The number of newly 

defined and expanding small businesses 

that are willing and able to sell to the 

Federal Government will limit the 

potential transfer of contracts away from 

large and currently defined small 

businesses. The potential distributional 

impacts of these transfers may not be 

estimated with any degree of precision 

because the data on the size of business 

receiving a Federal contract are limited 

to identifying small or other than small 

businesses, without regard to the exact 

size of the business. 

The proposed revisions to the existing 

size standards for Accommodation and 

Food Services industries is consistent 

with SBA’s statutory mandate to assist 

small business. This regulatory action 

promotes the Administration’s 

objectives. One of SBA’s goals in 

support of the Administration’s 

objectives is to help individual small 

businesses succeed through fair and 

equitable access to capital and credit, 

Government contracts, and management 

and technical assistance. Reviewing and 

modifying size standards, when 

appropriate, ensures that intended 

beneficiaries have access to small 

business programs designed to assist 

them. 


pwalker on DSK8KYBLC1PROD with PROPOSALS
Federal Register / Vol. 74, No. 202 / Wednesday, October 21, 2009 / Proposed Rules 53923 

Executive Order 12988 

For purposes of Executive Order 

12988, SBA has determined that this 

rule is drafted, to the extent practicable, 

in accordance with the standards set 

forth in that Order. 

Executive Order 13132 

For purposes of Executive Order 

13132, SBA has determined that this 

rule does not have any federalism 

implications warranting the preparation 

of a federalism assessment. 

Paperwork Reduction Act 

For the purpose of the Paperwork 

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

has determined that this rule would not 

impose new reporting or record keeping 

requirements, other than those required 

of SBA. 

Initial Regulatory Flexibility Analysis 

Under the Regulatory Flexibility Act 

(RFA), this rule, if finalized, may have 

a significant impact on a substantial 

number of small entities in Sector 72, 

Accommodation and Food Services. As 

described above, this rule may affect 

small entities seeking Federal contracts, 

SBA (7a) and 504 Guaranteed Loan 

Programs, SBA Economic Injury 

Disaster Loans, and other Federal small 

business programs. 

Immediately below, SBA sets forth an 

initial regulatory flexibility analysis 

(IRFA) of this proposed rule addressing 

the following questions: (1) What is the 

need for and objective of the rule? (2) 

what is SBA’s description and estimate 

of the number of small entities to which 

the rule will apply? (3) what are the 

projected reporting, record keeping, and 

other compliance requirements of the 

rule? (4) what are the relevant Federal 

rules which may duplicate, overlap or 

conflict with the rule? and (5) what 

alternatives will allow the Agency to 

accomplish its regulatory objectives 

while minimizing the impact on small 

entities? 

(1) What is the need for and objective of 

the rule? 

Most of SBA’s size standards for 

Accommodation and Food Services 

industries have not been reviewed since 

the early 1980s. Technology, 

productivity growth, international 

competition, mergers and acquisitions, 

and updated industry definitions may 

have changed the structure of many 

industries. Such changes can be 

sufficient to support a revision to size 

standards for some industries. Based an 

analysis of the latest data available to 

the Agency, SBA believes that the 

revised standards in this proposed rule 

more appropriately reflect the size of 

businesses in those industries that need 

Federal assistance. 

(2) What is SBA’s description and 

estimate of the number of small entities 

to which the rule will apply? 

If the proposed rule is adopted in its 

present form, SBA estimates that 

approximately 2,050 additional firms 

will become small because of increases 

in size standard in five industries. That 

represents 1.1 percent of total firms in 

those industries. This will result in an 

increase in the small business share of 

total industry receipts for this Sector 

from about 46 percent under the current 

size standard to nearly 50 percent under 

the proposed standards. 

(3) What are the projected reporting, 

record keeping, and other compliance 

requirements of the rule and an estimate 

of the classes of small entities which 

will be subject to the requirements? 

A new size standard does not impose 

any additional reporting, record keeping 

or compliance requirements on small 

entities. Revising size standards alters 

the access to SBA programs that assist 

small businesses, but does not impose a 

regulatory burden as they neither 

regulate nor control business behavior. 

(4) What are the relevant Federal rules 

which may duplicate, overlap or conflict 

with the rule? 

This proposed rule overlaps with 

other Federal rules that use SBA’s size 

standards to define a small business. 

Under § 3(a)(2)(C) of the Small Business 

Act, 15 U.S.C. 632(a)(2)(c), Federal 

agencies must use SBA’s size standards 

to define a small business, unless 

specifically authorized by statute. In 

1995, SBA published in the Federal 

Register a list of statutory and 

regulatory size standards that identified 

the application of SBA’s size standards 

as well as other size standards used by 

Federal agencies (60 FR 57988–57991, 

dated November 24, 1995). SBA is not 

aware of any Federal rule that would 

duplicate or conflict with establishing 

size standards. 

However, the Small Business Act and 

SBA’s regulations allow Federal 

agencies to develop different size 

standards if they believe that SBA’s size 

standards are not appropriate for their 

programs, with the approval of SBA’s 

Administrator (13 CFR 121.903). The 

Regulatory Flexibility Act authorizes an 

Agency to establish an alternative small 

business definition, after consultation 

with the Office of Advocacy of the U.S. 

Small Business Administration (5 U.S.C. 

601(3). Thus, there may be instances 

where this rule conflicts with other 

rules. 

(5) What alternatives will allow the 

Agency to accomplish its regulatory 

objectives while minimizing the impact 

on small entities? 

SBA is required to develop numerical 

size standards for identifying businesses 

eligible for Federal small business 

programs. Other than varying the size 

standards, no viable alternative exists to 

the systems of numerical size standards. 

List of Subjects in 13 CFR Part 121 

Administrative practice and 

procedure, Government procurement, 

Government property, Grant programs— 

business, Individuals with disabilities, 

Loan programs—business, Reporting 

and recordkeeping requirements, Small 

businesses. 

For the reasons set forth in the 

preamble, SBA proposes to amend part 

13 CFR Part 121 as follows. 

PART 121—SMALL BUSINESS SIZE 

REGULATIONS 

1. The authority citation for part 121 

continues to read as follows: 

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

637(a), 644, and 662(5); and Pub. L. 105–135, 

sec. 401 et seq., 111 Stat. 2592. 

2. Amend the table in § 121.201 by 

revising all entries under Sector 72 to 

read as follows: 

§ 121.201 What size standards has SBA 

identified by North American Industry 

Classification System codes? 

* * * * * 


pwalker on DSK8KYBLC1PROD with PROPOSALS
53924 Federal Register / Vol. 74, No. 202 / Wednesday, October 21, 2009 / Proposed Rules 

SMALL BUSINESS SIZE STANDARDS BY NAICS INDUSTRY

NAICS codes NAICS U.S. industry title 

Size standards 

in millions of 

dollars 

Size standards 

in number of 

employees 

* * * * * * * 

Sector 72—Accommodation and Food Services 

Subsector 721—Accommodation 

721110 ............. Hotels (except Casino Hotels) and Motels ............................................................................... $30.0 ........................

721120 ............. Casino Hotels ............................................................................................................................ 30.0 ........................

721191 ............. Bed-and-Breakfast Inns ............................................................................................................ 7.0 ........................

721199 ............. All Other Traveler Accommodation ........................................................................................... 7.0 ........................

721211 ............. RV (Recreational Vehicle) Parks and Campgrounds ............................................................... 7.0 ........................

721214 ............. Recreational and Vacation Camps (except Campgrounds) ..................................................... 7.0 ........................

721310 ............. Rooming and Boarding Houses ................................................................................................ 7.0 ........................

Subsector 722—Food Services and Drinking Places 

722110 ............. Full-Service Restaurants ........................................................................................................... 7.0 ........................

722211 ............. Limited-Service Restaurants ..................................................................................................... 10.0 ........................

722212 ............. Cafeterias .................................................................................................................................. 25.5 ........................

722213 ............. Snack and Nonalcoholic Beverage Bars .................................................................................. 7.0 ........................

722310 ............. Food Service Contractors ......................................................................................................... 35.5 ........................

722320 ............. Caterers ..................................................................................................................................... 7.0 ........................

722330 ............. Mobile Food Services ............................................................................................................... 7.0 ........................

722410 ............. Drinking Places (Alcoholic Beverages) ..................................................................................... 7.0 ........................

* * * * * 

Dated: October 9, 2009. 

Karen G. Mills, 

Administrator. 

[FR Doc. E9–25204 Filed 10–20–09; 8:45 am] 

BILLING CODE 8025–01–P 

SMALL BUSINESS ADMINISTRATION 

13 CFR Part 121 

RIN: 3245–AF69 

Small Business Size Standards: Retail 

Trade 

AGENCY: U.S. Small Business 

Administration. 

ACTION: Proposed Rule. 

SUMMARY: The U.S. Small Business 

Administration (SBA) proposes to 

increase small business size standards 

for 48 industries in North American 

Industry Classification System (NAICS) 

Sector 44–45, Retail Trade, and retain 

the current standards for the remaining 

28 industries in the Sector. As part of its 

ongoing initiative to review all size 

standards, SBA has evaluated each 

industry in Sector 44–45 to determine 

whether the existing size standards 

should be retained or revised. This 

proposed rule is one of a series of 

proposals that will examine industries 

grouped by an NAICS Sector. As part of 

this series of proposed rules SBA is 

publishing concurrently in this issue of 

the Federal Register a proposed rule to 

modify small business size standards in 

Sector 72, Accommodation and Food 

Services, and in Sector 81, Other 

Services. SBA has established its ‘‘Size 

Standards Methodology’’ and published 

elsewhere in this issue of the Federal 

Register a notice of its availability on 

SBA’s Web site at http://www.sba.gov/ 

size. SBA has applied ‘‘Size Standards 

Methodology’’ to this proposed rule. 

DATES: SBA must receive comments to 

this proposed rule on or before 

December 21, 2009. 

ADDRESSES: You may submit comments, 

identified by RIN 3245–AF69 by one of 

the following methods: (1) Federal 

eRulemaking Portal: http:// 

www.regulations.gov. Follow the 

instructions for submitting comments; 

or (2) Mail/Hand Delivery/Courier: 

Khem R. Sharma, Chief, Size Standards 

Division, 409 Third Street, SW., Mail 

Code 6530, Washington, DC 20416. 

SBA will post all comments on 

http://www.regulations.gov. If you wish 

to submit confidential business 

information (CBI) as defined in the User 

Notice at http://www.regulations.gov, 

please submit the information to U.S. 

Small Business Administration, Khem 

R. Sharma, Chief, Size Standards 

Division, 409 Third Street, SW., Mail 

Code 6530, Washington, DC 20416, or 

send an e-mail to 

sizestandards@sba.gov. Highlight the 

information that you consider to be CBI 

and explain why you believe SBA 

should hold this information as 

confidential. SBA will review the 

information and make the final 

determination of whether it will publish 

the information or not. 

FOR FURTHER INFORMATION CONTACT: Carl 

J. Jordan, Program Analyst, Size 

Standards Division, (202) 205–6618 or 

sizestandards@sba.gov. 

SUPPLEMENTARY INFORMATION: To 

determine eligibility for Federal small 

business assistance programs, SBA 

establishes small business definitions 

(referred to as size standards) for private 

sector industries in the U.S. SBA’s 

existing size standards use two primary 

measures of business size—receipts and 

number of employees. Financial assets, 

electric output, and refining capacity are 

used as size measures for a few 

specialized industries. In addition, 

SBA’s Small Business Investment 

Company (SBIC) and the Certified 

Development Company (CDC) Programs 

determine small business eligibility 

using either the industry based size 

standards or net worth and net income 

size standards. Currently, SBA’s size 

standards consist of 45 different size 

levels, covering 1,141 NAICS industries 

and 17 sub-industry activities. Of these 

size levels, 32 are based on average 

annual receipts, eight are based on 

number of employees, and five are 

based on other measures. In addition, 

SBA has established 11 other size 

standards for its financial and 

procurement programs. 

Over the years, SBA has received 

comments that its size standards have 

not kept up with changes in the 

economy and, in particular, that they do 

not reflect the changes in the Federal 

contracting marketplace. The last 

overall review of size standards 

occurred during the late 1970s to early 

1980s. Since then, most reviews of size 

standards have been limited to in-depth 

analyses of specific industries in 

response to requests from the public and 

Federal agencies. SBA also makes 


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