Source: https://www.federalregister.gov/documents/2004/03/19/04-5049/small-business-size-standards-restructuring-of-size-standards
Timestamp: 2019-10-18 03:36:40
Document Index: 707532369

Matched Legal Cases: ['§\u2009121', '§\u200921', '§\u2009121', '§\u2009121', '§\u2009121', '§\u2009121', '§\u2009121', '§\u2009121', '§\u2009121', '§\u2009121', '§\u2009121', '§\u2009121', '§\u2009121', '§\u2009121', '§\u2009121', 'art 13', 'art 121', '§\u2009121', '§\u2009121', '§\u2009121', '§\u2009121', '§\u2009121', '§\u2009121', '§\u2009121', '§\u2009121', '§\u2009121', '§\u2009121', '§\u2009121']

A Proposed Rule by the Small Business Administration on 03/19/2004
Comments must be received on or before May 18, 2004.
69 FR 13129
13129-13164 (36 pages)
04-5049
Proposal to Use Employee-based Size Standards for All Industries
Why the SBA Proposes Employee-Based Size Standards for All Industries
How SBA Determined the Number of Employees for Size Standards With Annual Receipts and Other Size Measures
Selection of Employment Size Standard for Industries With a $6 Million Size Standard
Selection of Employment Size Standard for Industries Size Standards Above or Below $6 Million
Summary of Proposed Employee Size Standards
Selection of Employment Size Standard for Industries With Size Standards Based on Electric Generation and Financial Assets
Proposal To Add a Maximum Average Annual Receipts Cap as an Additional Component of the Size Standard for Certain Industries
How the SBA Determined the Maximum Annual Receipts Cap Level for the Industry Activities in Table 4 (Above)
Simplification of Other Program and Special Size Standards
Exceptions to the SBA's Proposal To Simplify Size Standards by Basing All of Them on Number of Employees
Impact on Small Business Eligibility of the Proposed Rule
Alternatives to This Proposed Rule
2. Potential Benefits and Costs of This Regulatory Action
2. Description and Estimate of the Number of Small Entities To Which the Rule Will Apply
3. Projected Reporting, Record Keeping, and Other Compliance Requirements of the Rule
4. Relevant Federal Rules That May Duplicate, Overlap, or Conflict With the Rule
5. Alternatives To Allow the Agency To Accomplish Its Regulatory Objectives While Minimizing the Impact on Small Entities
https://www.federalregister.gov/d/04-5049 https://www.federalregister.gov/d/04-5049
Start Preamble Start Printed Page 13130
The U.S. Small Business Administration (SBA) proposes to modify its small business size standards by establishing size standards in terms of the number of employees of a business concern for most industries and SBA programs. This change will reduce the number of different size standard levels and at the same time simplify size standards and their application to Federal Government programs. Under this proposal, size standards will range between 50 employees and 1,500 employees, depending on the industry or SBA program.
For a limited number of industries, SBA proposes to establish a maximum average annual receipts amount (referred to as a receipts cap) along with the employee-based size standard. Concerns in those industries that meet the employee-based size standard also cannot exceed a specific receipts cap to qualify as an eligible small business.
To further simplify size standards, SBA also proposes the following: (1) modify the size standard for the Surety Bond Guarantee (SBG) Program by replacing the $6 million size standard with the requirement that the contractor meet the size standard for its primary industry; (2) extend the 125,000 barrels per calendar day component of the size standard for petroleum refiners beyond Federal Government procurement to all Federal small business programs using SBA's size standards; (3) eliminate the special size standard based on market share for tire manufacturers that applies to only Federal Government procurement; (4) modify three receipts-based size standards and one employee-based size standard for the sale or lease of Government property; and (5) revise the nonmanufacturer size standard applicable to Federal procurements from 500 employees to 100 employees, the size standard that applies to wholesale trade businesses for all other SBA programs.
Send comments to Gary M. Jackson, Assistant Administrator for Size Standards, 409 Third Street, SW., Mail Code 6530, Washington DC 20416; by email to restructure.sizestandards@sba.gov; or by facsimile at (202) 205-6390. You may also submit comments to www.regulations.gov. Upon receipt of a written request under the Freedom of Information Act, SBA will make all public comments available.
SBA's 37 small business size standards have evolved over the past 40 years from a considerably smaller number that applied only to SBA's financial assistance programs and to Federal procurement programs. Presently, there are size standards for 1,151 industries and 11 special financial and procurement programs. Many of these size standards resulted from the expansion and development of new SBA programs, the increasing size and complexity of the U.S. economy, and demands from small businesses to address unique situations.
SBA's current size standards use two primary measures of business size—number of employees and average annual receipts. Financial assets, electric generation, and refining capacity are used 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 based on either the industry-based size standards or net worth and net income size standards.
The current structure of SBA's size standards has worked well. However, several recurring criticisms suggest that SBA should consider improving their current structure. These criticisms raise questions about the complexity of determining if a business is small, the fairness of defining a business as small in some industries but not others, the influence of Federal procurement programs in establishing size standards, and the intentional misclassification of Federal contracts or the primary industry activity of a business to apply a different, and usually a much higher, size standard.
SBA's last comprehensive attempt to address size standards was in the late 1970s and early 1980s. Although SBA considered several approaches, it made only a few minor changes. The most important change replaced two sets of size standards, one for procurement programs and one for financial programs, with a single set for all programs. SBA also adjusted receipts-based size standards for inflation and formalized a methodology for evaluating size standards.
In the early 1990s, SBA proposed to streamline size standards with nine levels of size standards (four receipts-based size standards and five employee-based size standards) similar to one aspect of this proposed rule. Public comments tended to favor this approach. However, SBA determined that converting receipts-based size standards in effect at that time to one of four proposed receipts levels created a number of unacceptable anomalies and, therefore, did not adopt it as a final rule.
Currently, SBA's size standards consist of 37 different size levels which apply to 1,151 industries and 13 sub-industry activities in the North American Industry Classification System (NAICS). In addition, a size standard has been established for 11 financial and procurement programs. Thirty size standards are based on annual receipts, five are based on number of employees, and two are based on other measures. Table 1a below summarizes the current receipts-based size standards and Table 1b summarizes the current employee-based and other size standards.
Table 1a.—Size Standards Based on Annual Receipts
Range of receipts-based size standards
Number of different receipts- based size standards in the range
Number of industries covered by size standards in this range
$48.5 million 1 1
$21.5 million to $30 million 8 52
$12.5 million to $21 million 7 24
$12 million 1 24
$7 million to $11 million 7 46
$6 million 1 337
$1.5 million to $4 million 4 18
$0.75 million 1 46
Table 1b.—Employee-based and Other Size Standards
Number of industries covered by the size standard
1,500 employees 17
1,000 employees 66
750 employees 63
500 employees 388
100 employees 71
$150 million in assets 6
4 million megawatt hours 6
Most variations in size standards occur among those based on annual receipts. In many cases, a specific receipts-based size standard applies to only one or a few industries. SBA believes it can simplify size standards and make them less complicated by establishing a single size standard measure and reducing the number of different size standard levels. With fewer size standards, they will be clearer, more consistent, and easier to understand, resulting in less confusion to users, particularly the non-governmental users, such as small businesses. In addition, a single size measure eliminates a problem that some concerns encounter when they operate in different industries that have different size standard measures. The information technology industries provide a good example of this situation. Many information technology businesses provide both goods and services. Yet, SBA's size standards are based on number of employees for providers of computer and peripheral equipment and receipts for providers of computer services. Consequently, an information technology business may be small for one type of work but not small for a related activity.
SBA proposes to restructure its size standards by establishing an employee-based size standard for each industry. The number of employees of a business concern is its average number of persons employed for each pay period over the firm's latest 12 months and includes the employees of all affiliates. Any person on the payroll must be included as one employee regardless of hours worked or temporary status. The number of employees of a firm in business under 12 months is based on the average for each pay period it has been in business. For more information on how SBA calculates the employment size of a business, see 13 CFR 121.106.
The size standards currently based on number of employees will be retained at their current levels. This proposal converts the current size standards that are based on receipts, financial assets, or generating capacity to employee-based size standards. SBA proposes to establish an employee-based size standard which varies for each industry, but is limited to one of the following ten employee levels:
Table 2.—Proposed Employee Size Standard Levels
400 500 750 1,000 1,500
SBA believes that fewer size standard levels also help to simplify size standards. In converting receipts-based size standards to employee-based size standards (described further below), five new employee size levels (50, 150, 200, 300, and 400) along with the current five employee size levels (100, 500, 750, 1,000 and 1,500) results in employee-based size standards that equate to about the same number of eligible small businesses as does the current receipts-based size standards. A fewer number of employee size levels would result in a much larger number of businesses gaining or losing small business eligibility while a greater number of employee size levels would apply to only a small number of businesses and not simplify the size standards to the same degree.
SBA believes that a single measure of size helps make size standards less complex. Having a single size measure simplifies the structure and enables SBA to establish fewer size standard levels. Under a structure composed of one size measure and fewer size standard levels, many small businesses that currently operate in several industries each with different size standards would in many cases be subject to only one or two different size standards under the proposed employee-based size standards. SBA believes that the benefits of simplification that come from having a single size measure outweigh the benefits of retaining multiple size measures.
Proposing number of employees as the only measure of business size departs from SBA's long tradition of using receipts and other non-employee size measures. SBA has generally utilized receipts as a preferred size measure because it constitutes the value of a concern's output. Other measures of size are used where receipts tend to skew the value added by a concern in the production of goods and services. For example, SBA uses number of employees to define a small manufacturing concern. For manufacturing, two manufacturers in the same industry with the same number of employees can generate significantly different receipts depending on the number of stages in their production operations. Receipts for a manufacturer in its final production stage include the value added by the manufacturer(s) in its earlier production stages. This is true even though the value added by the final manufacturer may be minor relative to the value of the final product. Because of this characteristic of manufacturing, number of employees has a stronger correlation to value added than do receipts.
Several aspects of employee-based size standards support SBA's decision to use them as the single measure of size Start Printed Page 13132for all industries. The single best reason to do so is that they do not vary with changing economic conditions. Inflation, for example, has no direct impact on employee-based size standards. Similarly, rising costs unique to an industry have no direct impact on employee-based size standards. An ideal size standard would not affect eligibility, unless a company's level of real output of goods and services changes.
Employment also tends to be a more stable measure of business size. Businesses have economic incentives to maintain their workforce as business fluctuates to avoid recruitment and training costs. Using overtime can satisfy short-term increases in output until management is convinced that a permanent increase in business activity justifies adding personnel. Most businesses, especially small businesses, display a strong commitment to their employees and they are reluctant to change employment levels frequently in response to short-term business considerations.
Finally, number of employees is a widely accepted measure of business size. More than half of the present SBA size standards are expressed in employees. Although employment is an input into the production of goods and services, it generally accounts for a significant portion of total costs. A business's employment level is a representative indicator of its resources as well as its scale of operations. In one of the few studies conducted on an appropriate size standard measure, two researchers concluded that the number of employees of a business had a stronger correlation with the qualitative description of a small business (an approach to defining a small business preferred by many small business analysts) than did receipts. (See “Definition of Small Business,” Scott Holmes and Brian Gibson, The University of Newcastle, April 5, 2001. The report is available at http://www.smallbusiness.org.au/​sbc/​publications/​sbc004a.htm.)
SBA developed criteria for deciding which of the ten employee size standard levels to apply to an industry that currently has a receipts-based size standard. These criteria were designed to convert a receipts-based size standard to an equivalent employee-based size standard. The primary tool used to calculate the equivalent employee size standard associated with a receipts-based size standard is the receipts-to-employee ratio for an industry. Data to calculate these ratios were provided to the SBA by the U.S. Bureau of the Census in a special tabulation of the 1997 Economic Census (The 1997 Economic Census is available at
http://www.census.gov/​epcd/​www/​econ97.html). Since total receipts in an industry are provided along with employees in the industry, SBA was able to calculate receipts per employee ratios for almost all industries covered by this rule. These ratios were next adjusted 8.54% to account for inflation that occurred from 1997 to 2002 (the year in which receipts-based size standards were last adjusted for inflation). SBA used the chain-type price index for gross domestic product (GDP) (as published by the U.S. Department of Commerce, Bureau of Economic Analysis, and is available at
http://www.bea.gov/​bea/​ARTICLES/​2003/​10October/​D-Pages/​1003DpgC.pdf), which is a broad measure of inflation for the economy as a whole. The resulting figure was divided into the present receipt-based size standard for the industry under review to calculate an employee equivalent size standard. This employee equivalent size standard was then rounded to the closest of the ten employee size standard levels to minimize the difference between the current receipts-based size standard and the calculated employee-based size standard.
The criteria also preserve the common size standard level that SBA currently has established for related industries. That is, for closely related industries that have the same receipts size standard, SBA has proposed an employee size standard that best represents an equivalent employee size standard for that group of industries, such as the computer services industries.
Below are the criteria and how SBA applied them to receipts-based size standards.
For industries with a $6 million size standard, SBA had three considerations. The first consideration was whether to propose a 50 employee size standard for those industries. SBA's methodology for evaluating a size standard for a nonmanufacturing industry presumes that $6 million in average annual receipts is an appropriate size standard. This size standard is generally referred to as the “nonmanufacturing anchor size standard.” SBA considers a size standard higher or lower than the anchor level as appropriate for an industry when the structural economic characteristics of the industry are significantly different from the typical nonmanufacturing industry. SBA has decided to retain the concept of an anchor size standard for the nonmanufacturing industries as part of its restructuring and simplification of size standards. However, SBA proposes that the anchor size standard will be expressed in number of employees rather than receipts. Based on the ratio of receipts to employees in the nonmanufacturing industries, 50 employees is the employee anchor size standard for the nonmanufacturing industries. SBA is proposing a 50 employee size standard for industries currently with a $6 million size standard, unless the criteria discussed in the second and third considerations are present within an industry.
SBA's second consideration was whether the size standard should be higher than the 50 employee size standard anchor for industries where the conversion of receipts to employees produces a figure significantly above 50 employees. The SBA has decided to propose a size standard of 50 employees for industries where the conversion produces an equivalent size standard from 51 to 74 employees, since these levels round to the closest of the ten proposed employee size standards. For industries where the receipts to employees conversion results in a figure of 75 employees or more, the SBA selected a size standard above 50 employees, but only if other information justified the higher size standard. In these cases, a higher size standard is appropriate to (1) reflect the industrial structure of the industry, or (2) avoid a significant reduction in the number of small businesses currently eligible to compete for Federal procurements.[1]
SBA's third consideration examined the relationship of the size standard with other size standards within an Start Printed Page 13133industry subsector or industry group (three-digit and four-digit NAICS codes, respectively). For several industries with a $6 million size standard, SBA decided to propose a size standard greater than 50 employees in order to maintain the size standard relationship within their industry group (such as for the Land Subdivision and Land Development industry, NAICS 236110).
An example of the decision process utilizing the three criteria is Barber Shops (NAICS 81211), whose present size standard is $6 million. Dividing $6 million by the inflation-adjusted figure of $34,700 receipts per employee resulted in the equivalent size standard of 172 employees. This level rounds to 150 employees using the preselected employee size standards. However, the SBA believes that a 150 employee size standard for barber shops is too high, and that the 50 employee proposed anchor size standard better matches the industry structure for barber shops, as well as public perception of what constitutes a small business in this industry. This industry has one of the largest concentrations of very small businesses, where the average size barber shop is only three employees.
By contrast, the present size standard for the Other Airport Operations industry (NAICS 488119) has the same $6 million anchor size standard. Dividing $6 million by the $56,969 receipts per employee resulted in the equivalent size standard of 105 employees, which the SBA rounded to 100 employees. The average size firm in this industry has 49 employees—more than four times the average size firm of 11 employees for the nonmanufacturing industries with a $6 million size standard. In addition, the 50 employee anchor size standard would render approximately 50 currently defined small businesses ineligible to compete for Federal procurements that require small business status. In FY 2002, the Federal Government awarded more than $280 million in contract awards, with small businesses obtaining less than $17 million in contracts. A 50 employee size standard would have the unintended result of further diminishing the participation of small businesses in Federal contracting within this industry activity.
Three hundred and thirty-seven industries have a size standard of $6 million. In applying the above considerations, SBA proposes a 50 employee size standard for 315 industries, and a higher size standard for the remaining 21 industries. The chart below identifies the 21 industries with a size standard higher than 50 employees and the basis for proposing a higher size standard.
Table 3.—Industries Currently With a $6 Million Size Standard That SBA Proposes a Size Standard Higher Than 50 Employees
Proposed employee size standard
Reason for employee size standard different from anchor size standard
237210 Land Subdivision 200 Common size standard for all industries in Subsector 237 and impact on Federal procurement.
485111 Mixed Mode Transit Systems 100 Common size standard for most transit industries (NAICS Subsector 485).
485112 Commuter Rail Systems 100 Common size standard for most transit industries.
485113 Bus and Other Motor Vehicle Transit Systems 100 High average firm size.
485119 Other Urban Transit Systems 100 Common size standard for most transit industries.
485210 Interurban and Rural Bus Transportation 100 High average firm size.
485410 School and Employee Bus Transportation 100 High average firm size and common size standard for most transit industries.
485510 Charter Bus Service 100 Common size standard for most transit industries.
486210 Pipeline Transportation of Natural Gas 100 High average firm size and common size standard with NAICS 486990, All Other Pipeline Transportation.
488119 Other Airport Operations 100 High average firm size and impact on Federal procurement.
488190 Other Support Activities for Air Transportation 100 Common size standard with NAICS 488119 and impact on Federal procurement.
512131 Motion Picture Theatres (except Drive-In) 100 High average firm size.
518112 Web Search Portals 150 Common size standard for all industries in Subsector 518 and impact on Federal procurement.
561422 Telemarketing Bureaus 150 High average firm size.
621910 Ambulance Services 100 High average firm size and common size standard with other ambulatory health services.
711310 Promoters of Performing Arts, Sports, & Similar Events with Facilities 100 High average firm size.
713110 Amusement and Theme Parks 100 High average firm size.
713920 Skiing Facilities 200 High average firm size.
721110 Hotels (except Casino Hotels) and Motels 100 High average firm size and impact on Federal procurement.
721120 Casino Hotels 100 High average firm size and common size standard with hotels and motels.
812930 Parking Lots and Garages 100 High average firm size.
For industries that have a size standard below $6 million, SBA has proposed 50 employees. This would establish the policy that any business with 50 or fewer employees is a small business regardless of its industry. Only a few industries would be affected by this proposal, and we strongly believe that the benefits of simplification outweigh any impact on SBA's programs or on other Federal small business programs.
For industries with a size standard above $6 million, SBA calculated an equivalent employee size standard based on the ratio of receipts to employees. For example, the receipts per employee of a computer systems design firm is $152,000. A firm of $21 million equates to a firm with 127 employees. Because SBA is proposing to have size standards at one of ten employee levels, SBA rounded this figure to the nearest employee size standard, or 150 employees.
For most of these industries, SBA proposes the size standard resulting from the receipts per employee ratio. For closely related industries (those within the same 4-digit NAICS Industry Group or 3-digit NAICS Subsector) that currently have a common receipts-based size standard, SBA proposes a common employee-based size standard, even though a different size standard could be established for each closely related industry based on the receipts-to-employee calculation. SBA recognizes that small businesses are often eligible for SBA assistance in a number of closely related industries, and it simplifies size standards if closely related industries have the same size standard. An example of this pattern is the computer services industries in which businesses typically operate in at least several of the nine computer services industries. After reviewing the equivalent employee-based size standards for the nine computer services industries, SBA is recommending a common size standard of 150 employees for all nine computer services industries. Examples of other industries where SBA proposes a common size standard include the consulting service industries, the trucking industries, the warehousing industries, and the waste management industries.
In summary, the major factors influencing the proposed employee size standard are:
A size standard of 50 employees generally applies when an industry receipt-based size standard is at the present anchor of $6 million in average annual receipts or is less than $6 million;
An employee size standard above 50 employees applies to an industry with a $6 million size standard if the calculated equivalent employee size standard is above 76 employees and industry structure, existing size standards relationships, or Federal procurement implications merited a size standard above 50 employees.
An employee size standard for an industry above $6 million is based on the calculated equivalent employee-based size standard.
Exceptions to these rules occurred when SBA attempted to maintain traditional size standards relationships within closely related industries.
The size standard for the industries involved in the generation, transmission, or distribution of electric energy (NAICS 221111-221122) is 4 million megawatts of total electric output (see footnote 1 of the table to size standards in § 121.210). The U.S. Bureau of the Census does not publish capacity data on businesses in this industry. SBA identified small electric utilities from the U.S. Department of Energy's publication “Financial Statistics of Investor-Owned Electric Utilities, 1996” (available at
http://www.eia.doe.gov/​cneaf/​electricity/​invest/​invest _sum.html). SBA reviewed publicly available information, such as Security and Exchange Commission 10-K reports, to determine the employment levels of small electric utilities. Based on this review, SBA is proposing a 1,000 employee size standard for the electrical generation, transmission, and distribution industries. At that employment size, electric utilities under the current 4 million megawatt size standard would continue to be defined as small without adding other electric utilities as small.
The size standard for the banking and other credit intermediation industries (NAICS 522110—522210, and 522293) is $150 million in financial assets (see footnote 8 to the table of size standards in § 21.201). The U.S. Bureau of the Census does not publish industry financial data on the banking and credit industries. Using asset and employment data published by the Federal Deposit Insurance Corporation's Statistics on Depository Institutions (available at http://www2.fdic.gov/​SDI/​main4.asp), the average assets per employee of smaller banks is about $2.5 million. Based on those data, a $150 million bank would have, on average, about 60 employees. Applying the methodology described above, SBA is proposing a 50 employee size standard for banking and other credit intermediation industries since that is the nearest of the ten employee size standards proposed by this rule.
SBA further proposes that 31 industries will have a maximum average annual receipts amount (referred to as a receipts cap) along with the employee-based size standard. To qualify as small, concerns in those industries would have to be no greater in size than the employee-based size standard and have average annual receipts less than the receipts cap amount. SBA proposes that 36 size standards in the following 31 industries have an annual receipts cap along with the proposed employee size standard. Table 4, below, lists those industries and SBA's proposed employee size standards and receipts caps.
Table 4.—Industries With Proposed Receipts Caps
Proposed maximum annual receipts ($ million)
115310 Support Activities for Forestry 50 N/A
Except, Forest Fire Suppression 400 $20.0
Except, Fuels Management Services 400 $20.0
Start Printed Page 13135
236115 New Single-Family Housing Construction (except Operative Builders) 150 $35.0
236116 New Multifamily Housing Construction (except Operative Builders) 150 $35.0
236117 New Housing Operative Builders 150 $35.0
236118 Residential Remodelers 150 $35.0
236210 Industrial Building Construction 150 $35.0
236220 Commercial and Institutional Building Construction 150 $35.0
237110 Water and Sewer Line and Related Structures Construction 200 $35.0
237120 Oil and Gas Pipeline and Related Structures Construction 200 $35.0
237130 Power and Communication Line and Related Structures Construction 200 $35.0
237210 Land Subdivision 200 $35.0
237310 Highway, Street, and Bridge Construction 200 $35.0
237990 Other Heavy and Civil Engineering Construction 200 $35.0
Except, Dredging and Surface Cleanup Activities 150 $22.0
518210 Data Processing, Hosting, and Related Services 150 $30.0
541310 Architectural Services 50 $7.0
541330 Engineering Services 50 $7.0
Except, Military and Aerospace Equipment and Military Weapons 200 $30.0
Except, Contracts and Subcontracts for Engineering Services Awarded Under the National Energy Policy Act of 1992 200 $30.0
Except, Marine Engineering and Naval Architecture 150 $30.0
541511 Custom Computer Programming Services 150 $30.0
541512 Computer Systems Design Services 150 $30.0
541513 Computer Facilities Management Services 150 $30.0
541519 Other Computer Related Services 150 $30.0
541611 Administrative Management and General Management Consulting Services 50 $10.0
541612 Human Resources and Executive Search Consulting Services 50 $10.0
541613 Marketing Consulting Services 50 $10.0
541614 Process, Physical Distribution and Logistics Consulting Services 50 $10.0
541618 Other Management Consulting Services 50 $10.0
541620 Environmental Consulting Services 50 $10.0
541690 Other Scientific and Technical Consulting Services 50 $10.0
541990 All Other Professional, Scientific and Technical Services 50 $10.0
561110 Office Administrative Services 50 $10.0
561210 Facilities Support Services 400 $40.0
611519 Other Technical and Trade Schools 50 N/A
Except, Job Corps Centers 400 $30.0
In some industries, businesses have more latitude in deciding whether to hire employees to perform work or to subcontract the work to others. For example, general contractors can decide what and how much construction work to perform themselves and what work to subcontract to others. Under an employee-based size standard, a business may exceed the size standard because it decided to perform more work in-house while another business performing the same level of work stays under the employee size standard because more work is subcontracted. Under SBA's Small Business Size Regulations, the employees of a subcontractor are not included in counting the number of employees of a business (unless affiliation was found between the business and subcontractor). SBA recognizes that such decisions and their implications on small business status are best made by the management of concerns that will be affected. SBA is concerned, however, about cases where businesses operating in industries that have greater latitude in subcontracting significant portions of work purposely subcontract an unusual amount of work relative to customary industry practices to retain small business status. Because of this potential, SBA proposes to establish an average annual receipts cap along with employee size standards in the 31 industries listed in Table 4, above.
In the industries for which SBA proposes an employee-based size standards and receipts cap size standard, it expects that most businesses which are small under the applicable employee size standard will also meet the corresponding receipts cap. The purpose of the receipts cap is to prevent businesses from creatively manipulating their employment levels to remain small. Without such a receipts cap requirement, SBA might otherwise, and inappropriately, provide large businesses with assistance that is intended for small businesses, and put small businesses in the position of competing against businesses that by any consideration are not small. As discussed further below, the receipts cap will include almost all businesses under the employee size standard, but exclude those businesses that have an inordinate amount of receipts for their level of employment.
The methodology in determining the receipts caps was to first examine the size distribution of firms that are presently in SBA's Procurement Marketing and Access (PRO-Net) database which was merged with the Department of Defense Central Contractor Registration—the SBA's list of small businesses interested in doing business with the Federal Government. For each of the 31 industries under review, it has data on the number of Start Printed Page 13136employees and the annual receipts of each firm in that database that is active in the industry. SBA analyzed employment and receipts data of small businesses near the proposed employee size standard. By calculating a receipts to employee ratio for each of these small businesses, and then multiplying that ratio by the proposed size standard in employees, the SBA was able to estimate at what point a small business would lose eligibility under a receipt cap if it were to expand to the new size standard limit based on employees. In other words, if a business has 110 employees, what level of receipts would it produce if it expanded to a proposed 150 employee size standard.
The proposed receipt caps were designed to permit a majority of the small businesses that are presently under the size standard to expand to the proposed employee-based size standard without exceeding the dollar caps. The receipts caps proposed generally range from 22% to 35% higher than the current receipts size standards for those industries with a size standard of $15 million or higher, and from 67% to 74% higher than the current receipts size standard for those industries that have a receipts size standard of $6 million or less. The only exemption to this analysis was for the newly established Job Corps Centers size standard (part of NAICS 611519). This sub-industry consists of a small number of businesses. The current receipts size standard fully captures all small businesses under the proposed employee size standard for this sub-industry category and is retained as the receipts cap.
SBA has established a number of size standards to meet the needs of specific programs or to address special Federal procurement considerations. SBA proposes to eliminate or modify six of these size standards in an attempt to further simplify size standards and to apply consistent size standards for all Federal Government programs and purposes.
1. Surety Bond Guarantee (SBG) Program size standard: SBA proposes that any construction (general or special trade) concern or a concern performing a contract for services is small provided it meets the size standard for the NAICS code for its primary industry. Currently, the size standard for the SBG Program is $6 million for performing contracts for construction (general or special trades) or services (see 13 CFR 121.301(d)(1)).
Federal procurement regulations require a contractor to meet the size standard for the NAICS code that best describes the principal purposes of the procurement. Therefore, if a contractor bids and is successful as a prime contractor on a Federal procurement, it may qualify as a small business if it meets the size standard for the procurement, even if the size standard exceeds $6 million. Further, § 121.305 states “A concern qualified as small for a particular procurement, including an 8(a) subcontract, is small for financial assistance directly and primarily relating to the performance of the particular procurement.” SBA's SBG Program is a financial assistance program, and contractors awarded Federal contracts requiring a surety bond are therefore eligible for SBA's guarantee on the bond, if a guarantee is needed, including those with size standards in excess of $6 million, provided the contractor meets the size standard for its industry.
However, for SBA to guarantee a surety bond involving a subcontract or a bond running to an obligee other than the Federal Government, such as a private owner or non-Federal political subdivision or agency, a contractor is not eligible for an SBA guarantee unless it meets the current $6 million size standard. SBA believes this is inconsistent with the intent of its SBG Program because it does not provide assistance to small businesses otherwise eligible as small for SBA's other financial assistance programs. SBA proposes to eliminate the $6 million size standard. SBA proposes, rather, that a contractor applying for SBA's guarantee meet the size standard for its primary industry for any bond (§ 121.301(d)). This is consistent with the intent of this proposed rule, which is to base all size standards on number of employees and have a single size standard for all programs.
2. Petroleum refining size standard: The size standard for the Petroleum Refineries industry (NAICS 324110) is 1,500 employees. In addition, for purposes of the Federal Government's procurement of refined petroleum products, the refiner may not have more than 125,000 barrels per calendar day (bpcd) capacity of petroleum-based inputs, including crude oil or bona fide feedstocks. This is included in Footnote 4 to SBA's current table of small business size standards. SBA increased the refining capacity from 75,000 bpcd to 125,000 bpcd, effective April 28, 2003 (see 68 FR 15047 dated March 28, 2003, available at http://www.sba.gov/​size/​indexwhatsnew.html#petrol-fr).
SBA proposes to extend the 125,000 bpcd size standard component to all Federal Government programs. Before the April 28, 2003 revision, SBA had progressively increased the refining capacity component over a number of years. In its last two rulemaking actions pertaining to the petroleum refining size standard, SBA's proposed rules included a request for comments on whether SBA should retain or eliminate the refining capacity component. SBA retained it because industry comments have always been very strong in favor of doing so. The petroleum refining industry has always affirmed that refining capacity is the single best measure of a refiner's size. Further, it is the same measure that the U.S. Department of Energy, Energy Information Administration, uses to assess the size of refiners and their refineries.
Before proposing to increase the refining capacity component, SBA studied the petroleum refining industry to analyze the effect that it would have on existing small businesses. The final rule increasing it to 125,000 bpcd did not increase the number of small businesses, nor did any small businesses lose eligibility. That is, there was no change in the number of small refiners. There were other reasons for the rule, more fully described in the Federal Register notice cited above. This proposed change (footnote 5, § 121.201) is consistent with SBA's intention to simplify size standards, by having a single size standard apply to an industry for all Federal Government programs and purposes.
Because the remaining eligibility requirements for petroleum refiners are Federal procurement specific, and not part of the size standard, SBA does not propose to extend them to other Federal programs.
3. Tire manufacturing size standard: The size standard for the Tire Manufacturing (except Retreading) industry (NAICS 326211) is 1,000 employees. For the Federal Government's procurement of pneumatic tires under this NAICS code and within Census Classification codes 30111 and 30112, SBA has established an alternative size standard based on a concern's share of the worldwide tire market (see Footnote 5 to SBA's current table of size standards). Tire manufacturers satisfying the provisions of this alternative size standard exceed 1,000 employees in size. SBA implemented these requirements effective January 18, 1967 (see 31 FR 15737). SBA believes, based on Federal procurement data, that this footnote is no longer necessary. A review of Federal Start Printed Page 13137contract awards in fiscal years 2001 and 2002 found that all small businesses receiving tire supply contracts met the current 1,000 employee size standard. SBA therefore proposes to eliminate this alternative size standard.
4. Sales or lease of Federal Government property: SBA proposes to modify the following three receipts-based and one employee-based size standards that pertain to programs involving the sale and lease of Federal Government property:
(a) Size standards for sales or leases of Government property: The current size standard for concerns not primarily engaged in manufacturing is $6 million (see § 121.502(a)(2)). SBA proposes to establish a size standard of 50 employees for those concerns. This is consistent with the intent of this proposed rule, which is to base all size standards on number of employees. Also, this proposal is consistent with the criteria to propose a 50 employee size standard for industries that currently have a $6 million size standard unless certain conditions exits. SBA does not believe industry or procurement factors exist to warrant a different size standard.
(b) Size standards for the purchase of Government-owned Special Salvage Timber: To purchase Government-owned Special Salvage Timber from the U.S. Forest Service or the U.S. Bureau of Land Management, a concern, with its affiliates, can have no more than 25 employees during any of its pay periods for the last twelve months, and must meet other requirements as well (see § 121.508). SBA proposes to increase this size standard to 50 employees. SBA believes that applying the 50 employee anchor size standard as a minimum size standard is warranted to achieve its overall goal of simplicity and uniformity among the various size standards. SBA does not propose to amend any other parts of § 121.508, since they are Federal procurement specific requirements and not part of the size standard.
(c) Size standard for leasing of Government land for coal mining: Under the current size standard, a concern, together with its affiliates, may have no more than 250 employees (see § 121.509(a)). SBA proposes increasing this to 300 employees. Retaining 250 employees as a size standard would increase the number of size standards overall (from 10 to 11), and this would be the only 250 employee size standard. SBA has decided to round up this size standard to the 300 employee level instead of rounding down to 250 employees to avoid eliminating eligibility of currently defined small businesses for this program.
(d) Size standard for stockpile purchases: Under the current standard, a concern, together with its affiliates, may not have average annual receipts that exceed $48.5 million (§ 121.512(b)). SBA proposes to establish a size standard of 400 employees for those concerns. Based on the ratio of receipts to employees of businesses with $48.5 million or less in receipts ($109,000 receipts per employee), this size standard equates to 445 employees. Four hundred employees is the closest of the 10 employee-based size standards proposed in this rule. SBA believes that the proposed size standard would not eliminate the eligibility of currently defined small businesses for this program
5. Nonmanufacturer size standard: The SBA proposes to revise the nonmanufacturer size standard from 500 employees to 100 employees. A nonmanufacturer is a business that provides a manufactured product to the Federal Government that it itself did not manufacture (see § 121.406(b)). Substantially all nonmanufacturers are in industries categorized within the Wholesale Trade industries (NAICS Sector 42). A size standard of 100 employees applies to wholesalers for SBA and Federal Government programs, except for Federal procurement programs. Therefore, to further the simplification of small business size standards, the SBA is proposing to eliminate the special 500 employee nonmanufacturer size standard by applying the 100 employee size standard for Wholesale Trade to Federal procurement programs.
SBA continues to believe that 100 employees is an appropriate size standard for the Wholesale Trade Sector. The average size of a wholesaler is 16 employees. Wholesalers with fewer than 100 employees comprise 97% of all wholesalers, employ about 50% of all employees, and generate one-third of total industry receipts. The relatively small share of total industry receipts generated by small wholesalers, however, reflects the significantly higher receipts per employee generated by larger wholesalers in the industry than by small wholesalers. Given the industry share of firms and employment of wholesalers with fewer than 100 employees, SBA believes a current Wholesale Trade Sector size standard of 100 employees would be an appropriate size standard.
This proposed rule does not change three size standards, because they are either established by statute or reflect unique program objectives. To ensure that the public is aware of the reasons for not modifying these size standards, SBA explains why it does not propose to modify the following:
1. Agricultural Enterprises: The Small Business Act (15 U.S.C. 632(a)(1)) states in section 3(a)(1) “an agricultural enterprise shall be deemed to be a small business concern if it (including its affiliates) has annual receipts not in excess of $750,000.” This provision applies to concerns in the Crop Production (NAICS Subsector 111) and Animal Production (NAICS Subsector 112) industries. SBA has no authority to modify this Congressionally-mandated size standard.
2. Net Worth/Net Income: Size standards based on the net worth and net income of a business concern are an alternative to SBA's industry-based size standards for the CDC and SBIC financial assistance programs authorized under Title III and Title V of the Small Business Investment Act (Pub. L. 100-107). That is, an applicant may qualify as a small business if it meets the size standard for its primary industry or the net worth and net income size standards. For the CDC program, an applicant must meet either: (a) SBA's size standard established for its primary industry activity; or (b) have tangible net worth not in excess of $7 million and average net income after Federal income taxes for its two preceding completed fiscal years not in excess of $2.5 million (§ 121.301(b)). For assistance under SBA's SBIC Program, an applicant must meet either: (a) SBA's size standard established for its primary industry activity; or, (b) with its affiliates, have tangible net worth not in excess of $18 million and average net income after Federal income taxes for its two preceding completed fiscal years not in excess of $6 million (§ 121.301(c)).
The alternative net worth and net income size standards for the CDC and SBIC programs have been in place for many years and have worked well in serving the intended beneficiaries. Most small businesses qualifying under the net worth and net income size standards also qualify under the industry-based size standards. However, the option to qualify as small under the industry-based size standards ensures that a small business eligible for other SBA programs is also eligible for assistance under the CDC and SBIC Programs. Therefore, SBA believes that the net worth and net income size standards should be retained for these programs. Start Printed Page 13138
This proposed rule would change the 514 size standards that are based on receipts, financial assets, or electric generation. As discussed above, the proposed conversion of these receipts-based size standards to employee-based size standards attempts to establish an employment level that is generally equivalent to the receipts-based size standard. Because of variation within industries, some businesses will gain or lose small business eligibility. The decision to establish only ten employee size standard levels also results in some businesses gaining or losing small business eligibility. An analysis of the impact of the proposed rule on small business eligibility shows that a relatively small number of businesses will be affected. Out of approximately 4.4 million businesses in the industries with revised size standards, 35,200 businesses could gain and 34,100 could lose small business eligibility, with the net effect of 1,110 additional businesses defined as small. The 69,300 businesses affected by this proposal represent 1.6% of the 4.4 million businesses in industries with changing size standards. The regulatory impact and regulatory flexibility analyses discussed below describe the impact of this proposal in greater detail.
SBA considered a number of alternative approaches to simplify and restructure its size standards. These are briefly described below. SBA welcomes comments on these alternatives or other alternatives to restructure and simplify size standards.
1. Retain the existing employee-based size standards, while reducing the 30 receipts-based size standards to a fewer number of size standard levels, such as four to eight different receipts size standards. This approach is similar to SBA's proposals of December 31, 1992 (57 FR 62522) and September 2, 1993 (58 FR 46573), which SBA did not adopt as final rules. As discussed above in this proposed rule, SBA believes a single size measure (with a receipts size standards cap for a limited number of industries) represents a less complicated set of size standards.
2. Establish size standards by industry category that would generally be based on NAICS Industry Sectors or Subsectors, such as the size standards of the three Construction Subsectors. Under this approach, SBA could establish a size standard by number of employees and/or receipts for each industry group, and size standards across industries would vary considerably less. This approach would limit SBA's ability to fully assess the need for distinct size standards for specific industries, especially in the Professional, Scientific, and Technical Services Industry Sector.
3. Base all size standards on number of employees, with no receipts cap component. SBA discusses above in this proposed rule why it believes a receipts cap along with an employee size standard is needed for certain industries.
SBA requests comments on its proposal to simplify and restructure size standards. Specifically, SBA requests comments on the following issues:
1. Are SBA's small business size standards complex, confusing or difficult to use? If so, please describe to what extent the proposed rule addresses this concern.
2. Should all small business size standards be based on number of employees?
3. Do the proposed size standards essentially maintain the level of small business eligibility within an industry that currently exists under the current receipts-based size standards?
4. Should there be a receipts cap component for those industries where subcontracting and outsourcing opportunities may allow a business to remain small but generate an unusually large amount of receipts?
5. Is it appropriate to apply an additional receipts cap requirement for the 31 industries in Table 4, above? Are there other industries that SBA should have a receipts cap?
6. Are the proposed receipts cap levels an appropriate or acceptable way to exclude large businesses?
7. Is one or more of the alternatives that SBA considered preferable to the proposed rule? If so, please explain why. What would be the impact of SBA's adopting one of the alternatives in place of the proposed rule?
8. Should SBA modify the size standard for its SBG Program and require that any construction (general or special trade) concern or concern performing a contract for services is small provided it meets the size standard for its primary industry?
9. Should SBA extend to all Federal Programs the 125,000 bpcd component of the size standard applicable to the Federal Government's procurement of refined petroleum, as described above?
10. Should the SBA eliminate the 500 employee size standard for nonmanufacturers applicable to Federal procurement programs and apply the Wholesale Trade Sector size standard of 100 employees?
11. Should SBA eliminate the special market share size standard for tire manufacturers, as described above?
12. Does the expanded use of employee-based size standards result in additional burdens on businesses verifying small business status or on Federal agencies that use SBA's size standards? These issues are discussed as part of SBA's regulatory impact and regulatory flexibility analyses of this proposed rule (see following two sections).
The Office of Management and Budget (OMB) has determined that this rule is a significant regulatory action for purposes of Executive Order 12866. Size standards determine which businesses are eligible for Federal small business programs. This is not a major rule under the Congressional Review Act, 5 U.S.C. 800. 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. 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.
For purposes 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. It is important to note, however, that while there are no new reporting and record keeping requirements, the size status of a business in industries that currently have a receipts-based size standard will no longer be based on a concern's Federal Income Tax returns, except for those industries whose size standards have receipts caps. Rather, proof of eligibility as a small business will be a concern's payroll records for the period of measurement specified in § 121.106. SBA acknowledges that, in the event it must determine a business' employment size status, it may be more difficult to verify the accuracy of the payroll records submitted. At times, SBA may request a business provide more information to substantiate its employment information. SBA estimates that it takes four hours, on average, to complete an “Application for Small Business Size Determination” (SBA Form 355, OMB Approval No. 3245-0101). SBA invites comments on Start Printed Page 13139whether using employee-based size standards for new industries would be significantly more burdensome on small businesses and result in additional time to complete SBA Form 355. If so, how could SBA reduce the burden?
Small business size standards have become complicated and burdensome for many users. Because size standards have become more complex over time, SBA believes that they should be made more uniform and easier to use. SBA believes that these simplified size standards will be less of a hindrance to small businesses that would like to participate in Federal small business programs and to personnel involved in small business Federal procurement and lending programs.
SBA is chartered to aid and assist small businesses through a variety of financial, procurement, business development, and advocacy programs. To effectively assist intended beneficiaries of these programs, SBA must establish distinct definitions by which businesses are deemed small businesses. The Small Business Act (Act) gives the SBA Administrator responsibility for establishing small business definitions. The Act also requires that small business definitions vary to reflect industry differences. The supplementary information to this proposed rule explains how SBA proposes to modify size standards, and why it believes that establishing employee-based size standards for all industries will be simpler while defining small businesses as equally well as the current structure.
Small businesses will benefit because they will find it easier to use the small business size standards to determine if they are a small business. Also, there will be more common size standards among similar industries. Because size standards will be perceived as being less confusing and more straightforward, more small businesses will be encouraged to participate in Federal Government small business programs.
Other users of SBA's small business size standards, such as Federal Government Contracting Officers and commercial lenders that participate in SBA's financial assistance programs, will also benefit. There will be fewer size standards and they will be able to apply them more easily to their needs, and provide better and faster service to small businesses in need of assistance.
In the Federal Government, SBA's size standards are used for procurement programs, the Small Business Innovation Research Program (SBIR), loan programs, and regulatory flexibility analyses; plus, agencies use the size standards for other programmatic purposes. Currently, six agencies use small business size standards for various programs specific to their agencies. After discussions with each of these agencies, SBA believes that this proposed revision of its size standards would not negatively impact any of the program objectives of these agencies. Three agencies viewed positively the objective of simplifying size standards.
The U.S. Department of Transportation pointed out that certain Federal, state and local disadvantaged businesses enterprise (DBE) programs administer programs to certify businesses as small DBEs. Most of the businesses seeking DBE certification come from the construction and services industries that currently have receipts-based size standards. The change to employee size standards from receipts size standards will require applicants for small DBE certification to state their size in terms of number of employees. If a certification office questions the employment size of an applicant, the applicant will have to substantiate their employment size based on payroll records. A review of payroll records is a more time-consuming process than reviewing an applicant's Federal Income Tax return when questions arise concerning the applicant's receipts size. SBA believes that in most cases, the additional time to request and evaluate an applicant's employment size will not be substantial. SBA requests comments on the use of employee size standards on the DBE certification process and how to minimize an additional burden, if any, on the DBE process.
If an agency believes that a size standard different from an SBA's size standard is appropriate for its programs, it must contact SBA. If the agency seeks to change size standards in a general rulemaking context, then the agency should contact SBA's Office of Size Standards (see 13 CFR 121.901-904). If the agency seeks to change size standards for the purposes of its analysis under the Regulatory Flexibility Act (RFA), then the agency should contact SBA's Office of Advocacy (Advocacy) pursuant to section 601(3) of the RFA. Section 601(3) of the RFA requires the agency to consult with Advocacy and provide opportunity for public comment when it uses a different size standard for the RFA analysis.
Additional costs to the Federal Government will be negligible, if any. There will be approximately 1,100 additional small businesses under the proposed restructured size standards. This is less than 0.03% of the businesses in the affected industries. SBA believes that there will be a savings to the Federal Government because there will be fewer size standards, all having employee-based measures, which will reduce administrative costs.
In this rule, the SBA also proposes to revise the nonmanufacturer size standard from 500 employees to 100 employees. The great majority of nonmanufacturers are categorized under Wholesale Trade Sector (NAICS Sector 42) in which the size standard for all industries is 100 employees, except for Federal procurements. To further the simplification, SBA is proposing the same size standard of 100 employees for Federal procurement for wholesale trade industries under the nonmanufacturer size standard. This shift from a 500 employee size standard to one of 100 employees is estimated to affect 744 firms active in Federal procurement based on the SBA's Pro-Net data base of firms interested in doing business with the Federal Government. This data base includes a total of 30,700 firms in the wholesale trade NAICS codes, and a percentage loss of 2.4% would occur if the 100 employee size standard were finalized.
SBA estimates that there will be little distributional effects if this proposed rule is adopted. Small business size standards primarily serve Federal Government agencies in their procurement programs. Federal prime contractors also use them in their subcontracting plans. Since there will be less than a 0.03% increase in newly eligible small businesses, it is possible that a very limited amount of the Federal contracts will transfer from non-small businesses to small businesses.
The proposed revision to the current size standard structure 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. Reviewing and modifying size standards, when appropriate, ensures that intended beneficiaries have access to small business programs designed to assist them. Size standards do not interfere with State, local, or tribal governments in the exercise of their government functions. In a few cases, State and local governments and Start Printed Page 13140political subdivisions have voluntarily adopted SBA's size standards for their programs to eliminate the need to establish an administrative mechanism to develop their own size standards.
Under the RFA, this rule, if finalized, could have a significant impact on a substantial number of small entities because 35,200 businesses could gain and 34,100 could lose small business eligibility for Federal Government programs. SBA estimates that the net effect will be approximately 1,100 more eligible small businesses than at present. Immediately below, SBA sets forth an initial regulatory flexibility analysis of this rule addressing the following: (1) Need for and objective of the rule; (2) description and estimate of the number of small entities to which the rule will apply; (3) projected reporting, record keeping, and other compliance requirements of the rule; (4) relevant Federal rules that may duplicate, overlap, or conflict with the rule; and (5) alternatives to allow the Agency to accomplish its regulatory objectives while minimizing the impact on small entities.
Small business size standards have become complicated and difficult to apply for many users. Because size standards have become so complex and confusing, SBA believes size standards should be more uniform and consistent, easier to use, and more reliable. SBA believes that these simplified size standards will be less of a hindrance to small businesses that would like to participate in Federal small business programs. In addition, it will reduce perceived impediments for providers of small business assistance who use them, such as personnel involved in Federal procurement and commercial lending, and possibly increase small business participation in Federal programs.
The SBA estimates that the simplification of size standards by converting receipt-based size standards to employee-based size standards will have a net impact of increasing the number of businesses eligible for SBA assistance by 1,100 firms. This includes an additional 35,200 businesses in 196 industries and the loss of 34,100 businesses in 229 industries. Overall, the SBA estimates that a total of 69,300 businesses could be impacted by this rule in terms of eligibility for SBA's programs. Since approximately 4.4 million businesses are active in industries covered by this rule, SBA estimates that 1.6% of businesses could be affected. However, the great majority of these businesses are not involved in SBA's programs in any one year, and the actual impact is likely to be only a small proportion of the 69,300 estimate. SBA's guaranteed loan program, for example, generated approximately 55,000 loans in FY 2002, indicating that just over one percent of eligible small businesses seek out SBA financial assistance in a given year. The SBA's PRO-Net database of small businesses interested in Federal procurement includes approximately 200,000 businesses—again, only a small proportion (about 4%) of businesses considered small by the SBA. Overall, SBA estimates that fewer than 3,000 businesses out of 4.4 million firms will be directly affected if these proposed changes were to be finalized, and that about half of these businesses would gain eligibility while the other half would lose eligibility.
Although the overall impact will be small relative to the number of businesses with revised size standards, certain industries will be impacted more than others. In particular, the SBA notes that the two restaurant industries, Full Service Restaurants (NAICS 722110) and Limited Service Restaurants (NAICS 722211), have the largest number of businesses losing eligibility for SBA assistance if this rule were to be finalized. In total, these two industries would lose about 14,600 businesses out of 272,000 businesses in both industries, a loss of 5.4% of the total. This stems from SBA's moving from a $6 million size standard to a 50 employee size standard in these industries. However, even under the new anchor size standard of 50 employees, 252,000 out of 272,000 businesses in these two restaurant industries would remain small and eligible for SBA assistance, almost 93% of the total. Other industries with relatively higher proportion of small businesses that could lose eligibility include Child Day Care Services (NAICS 624410), with a loss of 3.1% of businesses; Golf Courses and Country Clubs (NAICS 7138910), with a loss of 10.7% of businesses; Vocational Rehabilitation Services (NAICS 624310), with a loss of 20.7% of businesses; and Fitness and Recreational Sports Centers (NAICS 713940), with a loss of 5.4% of businesses. Among industries gaining eligibility, the biggest impact is Offices of Real Estate Agents and Brokers (NAICS 531210), with an additional 3,600 businesses out of a total of 54,700, or 6.6%.
Overall, SBA estimates that most industries will experience a very small impact from this rule relative to the total number of businesses that are active in industries covered by this rule. Among industries for which the SBA has industry data provided by the U.S. Bureau of the Census, there are a total of 440 industries with 4.4 million businesses, or approximately 10,000 businesses in the average industry. Of these 440 industries, 198 would have a total impact of fewer than 20 businesses, while 288 would have a total impact of fewer than 50 businesses.
Also in this rule, the SBA proposes to revise the nonmanufacturer size standard from 500 employees to 100 employees. The great majority of nonmanufacturers are categorized under Wholesale Trade Sector (NAICS Sector 42) in which the size standard for all industries is 100 employees, except for Federal procurements. To further the simplification, SBA is proposing the same size standard of 100 employees for Federal procurements for wholesale trade industries under the nonmanufacturer size standard. This shift from a 500 employee size standard to one of 100 employees is estimated to affect 744 firms active in Federal procurement based on the SBA's PRO-Net data base of firms interested in doing business with the Federal Government. This data base includes a total of 30,700 firms in the wholesale trade NAICS codes, and a percentage loss of 2.4% would occur if the 100 employee size standard were finalized.
The new table with all size standards based on number of employees does not impose any additional reporting, record keeping, or compliance requirements on small entities. Users may need to revise existing data bases that use current size standards. However, this is true anytime SBA changes or otherwise modifies a size standard. For example, a much more extensive change occurred when SBA converted from the Standard Industrial Classification (SIC) system to NAICS effective October 1, 2000, and later adopted, effective October 1, 2002, the U.S. Office of Management and Budget's 2002 modifications to NAICS. SBA was not made aware of any user problems with those actions.
It is important to note, however, that while there are no new reporting and record keeping requirements, the size status of a business in industries that currently have a receipts-size standard will no longer be based on a concern's Federal Income Tax returns, except for Start Printed Page 13141those industries whose size standards have receipts caps. Rather, proof of eligibility as a small business will be a concern's payroll records for the period of measurement specified in § 121.106. SBA acknowledges that, in the event it must determine a business' employment size status, it may be more difficult to verify the accuracy of the payroll records submitted. At times, SBA may request a business to provide more information to substantiate its employment information. SBA estimates that it takes four hours, on average, to complete an “Application for Small Business Size Determination” (SBA Form 355). SBA invites comments as to whether using employee-based size standards for new industries would be significantly more burdensome on small businesses and result in additional time to complete a SBA Form 355 and, if so, how SBA could reduce the burden.
In the Federal Government, SBA's size standards are used for procurement programs, the SBIR Program, loan programs, and regulatory flexibility analysis; plus, agencies use the size standards for other programmatic purposes. Currently, six agencies use small business size standards for various programs specific to their agencies. After discussions with each of these agencies, SBA believes that this proposed revision of its size standards will not negatively impact any of the program objectives of these agencies. Three agencies viewed positively the objective of simplifying size standards.
The U.S. Department of Transportation pointed out that certain Federal, state, and local governments administer programs to certify businesses as small disadvantaged business enterprises (DBE). Most of the businesses seeking DBE certification come from the construction and services industries that currently have receipts-based size standards. The change to employee size standards from receipts size standards will require applicants for small DBE certification to state their size in terms of number of employees. If a certification office questions the employment size of an applicant, the applicant will have to substantiate its employment size based on payroll records. A review of payroll records is a more time-consuming process than reviewing an applicant's Federal Income Tax return when questions arise concerning the applicant's receipts size. SBA believes that in most cases, the additional time to request and evaluate an applicant's employment size will not be substantial. SBA requests comments on the use of employee size standards on the DBE certification process and how to minimize an additional burden, if any, on the DBE process.
As discussed above in the Supplementary Information, there are three alternatives to the proposed rule: (a) Retain the existing employee-based size standards, while reducing the 30 receipts-based size standards to a fewer number of size standard levels, such as four to eight different receipts size standards; (b) establish size standards by industry category that would generally be based on NAICS Industry Sectors or Subsectors, such as the size standards of the three Construction Subsectors; and (c) base all size standards on number of employees, with no receipts cap component.
SBA believes the proposed size standards based on number of employees will simplify size standards and will likely have a minimal adverse impact on small entities. The other alternatives SBA considered would achieve fewer benefits in terms of simplifying size standards or have a much greater impact on the number of businesses either gaining or losing small business eligibility.
For the reasons set forth in the preamble, SBA proposes to amend part 13 CFR Part 121.
2. Revise § 121.201 to read as follows:
3. § 121.201 What size standards has SBA identified by North American Industry Classification System codes?
The size standards set forth in this section apply to all SBA programs unless otherwise specified in this part. The size standards themselves are expressed in number of employees. Some of the NAICS industries have an additional maximum annual receipts amount. For those NAICS industries with additional annual receipts amounts, the business concern must not exceed the employee-based size standard and the annual receipts amount to qualify as a small business. The number of employees and annual receipts amount are together a single size standard, and they indicate the maximum allowed for a concern, together with its affiliates, to be considered a small business.
Maximum average annual receipts ($ million)
112112 Cattle Feedlots 50
112310 Chicken Egg Production 50
113110 Timber Tract Operations 50
113210 Forest Nurseries and Gathering of Forest Products 50
114111 Finfish Fishing 50
114112 Shellfish Fishing 50
114119 Other Marine Fishing 50
114210 Hunting and Trapping 50
115111 Cotton Ginning 50
115112 Soil Preparation, Planting, and Cultivating 50
115113 Crop Harvesting, Primarily by Machine 50
115114 Postharvest Crop Activities (except Cotton Ginning) 50
115115 Farm Labor Contractors and Crew Leaders 50
115116 Farm Management Services 50
115210 Support Activities for Animal Production 50
115310 Support Activities for Forestry 50
Except, Forest Fire Suppression 1 1 400 1 $20.0
Except, Fuels Management Services 1 1 400 1 $20.0
213112 Support Activities for Oil and Gas Operations 50
213113 Support Activities for Coal Mining 50
213114 Support Activities for Metal Mining 50
213115 Support Activities for Nonmetallic Minerals (except Fuels) 50
221111 Hydroelectric Power Generation 1,000
221112 Fossil Fuel Electric Power Generation 1,000
221113 Nuclear Electric Power Generation 1,000
221119 Other Electric Power Generation 1,000
221121 Electric Bulk Power Transmission and Control 1,000
221310 Water Supply and Irrigation Systems 50
221320 Sewage Treatment Facilities 50
221330 Steam and Air-Conditioning Supply 50
Start Printed Page 13144
Except, Dredging and Surface Cleanup Activities 2 2 150 2 $22.0
238110 Poured Concrete Foundation and Structure Contractors 100
238120 Structural Steel and Precast Concrete Contractors 100
238130 Framing Contractors 100
238140 Masonry Contractors 100
238150 Glass and Glazing Contractors 100
238160 Roofing Contractors 100
238170 Siding Contractors 100
238190 Other Foundation, Structure, and Building Exterior Contractors 100
238210 Electrical Contractors 100
238220 Plumbing, Heating, and Air-Conditioning Contractors 100
238290 Other Building Equipment Contractors 100
238310 Drywall and Insulation Contractors 100
238320 Painting and Wall Covering Contractors 100
238330 Flooring Contractors 100
238340 Tile and Terrazzo Contractors 100
238350 Finish Carpentry Contractors 100
238390 Other Building Finishing Contractors 100
238910 Site Preparation Contractors 100
238990 All Other Specialty Trade Contractors 100
Except, Building and Property Specialty Trade Services 3 3 100
Sectors 31—33—Manufacturing
311421 Fruit and Vegetable Canning 4 4 500
Start Printed Page 13145
313113 Thread Mills 500
Start Printed Page 13146
Start Printed Page 13147
324110 Petroleum Refineries 5 5 1,500
326211 Tire Manufacturing (except Retreading) 1,000
Start Printed Page 13148
331522 Nonferrous (except Aluminum) Die-Casting Foundries 500
331525 Copper Foundries (except Die-Casting) 500
Start Printed Page 13149
Subsector 333—Machinery Manufacturing 6
Subsector 335—Electrical Equipment, Appliance and Component Manufacturing 6
Subsector 336—Transportation Equipment Manufacturing 7
441110 New Car Dealers 50
441120 Used Car Dealers 50
441210 Recreational Vehicle Dealers 50
441221 Motorcycle Dealers 50
441222 Boat Dealers 50
441229 All Other Motor Vehicle Dealers 50
441310 Automotive Parts and Accessories Stores 50
441320 Tire Dealers 50
442110 Furniture Stores 50
442210 Floor Covering Stores 50
442291 Window Treatment Stores 50
442299 All Other Home Furnishings Stores 50
443111 Household Appliance Stores 50
443112 Radio, Television and Other Electronics Stores 50
443120 Computer and Software Stores 50
443130 Camera and Photographic Supplies Stores 50
444110 Home Centers 50
444120 Paint and Wallpaper Stores 50
444130 Hardware Stores 50
444190 Other Building Material Dealers 50
444210 Outdoor Power Equipment Stores 50
444220 Nursery and Garden Centers 50
445110 Supermarkets and Other Grocery (except Convenience) Stores 150
445120 Convenience Stores 150
445210 Meat Markets 50
445220 Fish and Seafood Markets 50
445230 Fruit and Vegetable Markets 50
445291 Baked Goods Stores 50
445292 Confectionery and Nut Stores 50
445299 All Other Specialty Food Stores 50
445310 Beer, Wine and Liquor Stores 50
446110 Pharmacies and Drug Stores 50
446120 Cosmetics, Beauty Supplies and Perfume Stores 50
446130 Optical Goods Stores 50
446191 Food (Health) Supplement Stores 50
446199 All Other Health and Personal Care Stores 50
447110 Gasoline Stations with Convenience Stores 100
447190 Other Gasoline Stations 50
448110 Men's Clothing Stores 50
448120 Women's Clothing Stores 50
448130 Children's and Infants' Clothing Stores 50
448140 Family Clothing Stores 50
448150 Clothing Accessories Stores 50
448190 Other Clothing Stores 50
448210 Shoe Stores 50
448310 Jewelry Stores 50
448320 Luggage and Leather Goods Stores 50
451110 Sporting Goods Stores 50
451120 Hobby, Toy and Game Stores 50
451130 Sewing, Needlework and Piece Goods Stores 50
451140 Musical Instrument and Supplies Stores 50
451211 Book Stores 50
451212 News Dealers and Newsstands 50
451220 Prerecorded Tape, Compact Disc and Record Stores 50
452111 Department Stores (except Discount Department Stores) 150
452112 Discount Department Stores 150
452910 Warehouse Clubs and Superstores 150
452990 All Other General Merchandise Stores 100
453110 Florists 50
453210 Office Supplies and Stationery Stores 50
453220 Gift, Novelty and Souvenir Stores 50
453310 Used Merchandise Stores 50
453910 Pet and Pet Supplies Stores 50
453920 Art Dealers 50
453930 Manufactured (Mobile) Home Dealers 50
453991 Tobacco Stores 50
453998 All Other Miscellaneous Store Retailers (except Tobacco Stores) 50
454111 Electronic Shopping 50
454112 Electronic Auctions 50
454113 Mail-Order Houses 50
454210 Vending Machine Operators 50
454311 Heating Oil Dealers 50
454312 Liquefied Petroleum Gas (Bottled Gas) Dealers 50
454319 Other Fuel Dealers 50
454390 Other Direct Selling Establishments 50
Except, Offshore Marine Air Transportation Services 150
481219 Other Nonscheduled Air Transportation 50
Subsector 483—Water Transportation 8
484110 General Freight Trucking, Local 200
484121 General Freight Trucking, Long-Distance, Truckload 200
484122 General Freight Trucking, Long-Distance, Less Than Truckload 200
484210 Used Household and Office Goods Moving 200
484220 Specialized Freight (except Used Goods) Trucking, Local 200
484230 Specialized Freight (except Used Goods) Trucking, Long-Distance 200
485111 Mixed Mode Transit Systems 100
485112 Commuter Rail Systems 100
485113 Bus and Motor Vehicle Transit Systems 100
485119 Other Urban Transit Systems 100
485210 Interurban and Rural Bus Transportation 100
485310 Taxi Service 50
485320 Limousine Service 50
485410 School and Employee Bus Transportation 100
485510 Charter Bus Industry 100
485991 Special Needs Transportation 50
485999 All Other Transit and Ground Passenger Transportation 50
486210 Pipeline Transportation of Natural Gas 100
486990 All Other Pipeline Transportation 100
487110 Scenic and Sightseeing Transportation, Land 50
487210 Scenic and Sightseeing Transportation, Water 50
487990 Scenic and Sightseeing Transportation, Other 50
488111 Air Traffic Control 50
488119 Other Airport Operations 100
488190 Other Support Activities for Air Transportation 100
488210 Support Activities for Rail Transportation 50
488310 Port and Harbor Operations 200
488320 Marine Cargo Handling 200
488330 Navigational Services to Shipping 50
488390 Other Support Activities for Water Transportation 50
488410 Motor Vehicle Towing 50
488490 Other Support Activities for Road Transportation 50
488510 Freight Transportation Arrangement 50
488991 Packing and Crating 100
488999 All Other Support Activities for Transportation 50
491110 Postal Service 50
Start Printed Page 13156
492110 Couriers 1,500
492210 Local Messengers and Local Delivery 200
493110 General Warehousing and Storage 200
493120 Refrigerated Warehousing and Storage 200
493130 Farm Product Warehousing and Storage 200
493190 Other Warehousing and Storage 200
511210 Software Publishers 150
512110 Motion Picture and Video Production 100
512120 Motion Picture and Video Distribution 100
512131 Motion Picture Theaters (except Drive-Ins) 100
512132 Drive-In Motion Picture Theaters 50
512191 Teleproduction and Other Postproduction Services 100
512199 Other Motion Picture and Video Industries 50
512210 Record Production 50
512240 Sound Recording Studios 50
512290 Other Sound Recording Industries 50
515111 Radio Networks 50
515112 Radio Stations 50
515120 Television Broadcasting 100
515210 Cable and Other Subscription Programming 100
517410 Satellite Telecommunications 100
517510 Cable and Other Program Distribution 100
517910 Other Telecommunications 100
518111 Internet Service Providers 150
518112 Web Search Portals 150
519110 News Syndicates 50
519120 Libraries and Archives 50
519190 All Other Information Services 50
Start Printed Page 13157
522110 Commercial Banking 50
522120 Savings Institutions 50
522130 Credit Unions 50
522190 Other Depository Credit Intermediation 50
522210 Credit Card Issuing 50
522220 Sales Financing 50
522291 Consumer Lending 50
522292 Real Estate Credit 50
522293 International Trade Financing 50
522294 Secondary Market Financing 50
522298 All Other Non-Depository Credit Intermediation 50
522310 Mortgage and Nonmortgage Loan Brokers 50
522320 Financial Transactions Processing, Reserve, and Clearing House Activities 50
522390 Other Activities Related to Credit Intermediation 50
523110 Investment Banking and Securities Dealing 50
523120 Securities Brokerage 50
523130 Commodity Contracts Dealing 50
523140 Commodity Contracts Brokerage 50
523210 Securities and Commodity Exchanges 50
523910 Miscellaneous Intermediation 50
523920 Portfolio Management 50
523930 Investment Advice 50
523991 Trust, Fiduciary and Custody Activities 50
523999 Miscellaneous Financial Investment Activities 50
524113 Direct Life Insurance Carriers 50
524114 Direct Health and Medical Insurance Carriers 50
524127 Direct Title Insurance Carriers 50
524128 Other Direct Insurance (except Life, Health and Medical) Carriers 50
524130 Reinsurance Carriers 50
524210 Insurance Agencies and Brokerages 50
524291 Claims Adjusting 50
524292 Third Party Administration of Insurance and Pension Funds 50
524298 All Other Insurance Related Activities 50
525110 Pension Funds 50
525120 Health and Welfare Funds 50
525190 Other Insurance Funds 50
525910 Open-End Investment Funds 50
525920 Trusts, Estates, and Agency Accounts 50
525930 Real Estate Investment Trusts 50
525990 Other Financial Vehicles 50
531110 Lessors of Residential Buildings and Dwellings 50
531120 Lessors of Nonresidential Buildings (except Miniwarehouses) 50
531130 Lessors of Miniwarehouses and Self Storage Units 150
531190 Lessors of Other Real Estate Property 50
Except, Leasing of Building Space to Federal Government by Owners 9 9 150
531210 Offices of Real Estate Agents and Brokers 50
531311 Residential Property Managers 50
531312 Nonresidential Property Managers 50
531320 Offices of Real Estate Appraisers 50
531390 Other Activities Related to Real Estate 50
532111 Passenger Car Rental 150
532112 Passenger Car Leasing 150
532120 Truck, Utility Trailer, and RV (Recreational Vehicle) Rental and Leasing 150
532210 Consumer Electronics and Appliances Rental 50
532220 Formal Wear and Costume Rental 50
532230 Video Tape and Disc Rental 50
532291 Home Health Equipment Rental 50
532292 Recreational Goods Rental 50
532299 All Other Consumer Goods Rental 50
532310 General Rental Centers 50
532411 Commercial Air, Rail, and Water Transportation Equipment Rental and Leasing 50
532412 Construction, Mining and Forestry Machinery and Equipment Rental and Leasing 50
532420 Office Machinery and Equipment Rental and Leasing 50
532490 Other Commercial and Industrial Machinery and Equipment Rental and Leasing 50
533110 Lessors of Nonfinancial Intangible Assets (except Copyrighted Works) 50
Subsector 541— Professional, Scientific and Technical Services
541110 Offices of Lawyers 50
541191 Title Abstract and Settlement Offices 50
541199 All Other Legal Services 50
541211 Offices of Certified Public Accountants 100
541213 Tax Preparation Services 50
541214 Payroll Services 100
541219 Other Accounting Services 100
541320 Landscape Architectural Services 50
541340 Drafting Services 50
541350 Building Inspection Services 50
541360 Geophysical Surveying and Mapping Services 50
541370 Surveying and Mapping (except Geophysical) Services 50
541380 Testing Laboratories 100
541410 Interior Design Services 50
541420 Industrial Design Services 50
541430 Graphic Design Services 50
541490 Other Specialized Design Services 50
Except, Information Technology Value Added Resellers 15 15 150
541710 Research and Development in the Physical, Engineering, and Life Sciences 10 10 500
541720 Research and Development in the Social Sciences and Humanities 50
541810 Advertising Agencies 50
541820 Public Relations Agencies 50
541830 Media Buying Agencies 50
541840 Media Representatives 50
541850 Display Advertising 50
541860 Direct Mail Advertising 50
541870 Advertising Material Distribution Services 50
541890 Other Services Related to Advertising 50
541910 Marketing Research and Public Opinion Polling 50
541921 Photography Studios, Portrait 50
541922 Commercial Photography 50
541930 Translation and Interpretation Services 50
541940 Veterinary Services 50
551111 Offices of Bank Holding Companies 50
551112 Offices of Other Holding Companies 50
561210 Facilities Support Services 11 11 400 11 $40.0
561310 Employment Placement Agencies 50
561320 Temporary Help Services 500
561330 Employee Leasing Services 500
561410 Document Preparation Services 50
561421 Telephone Answering Services 50
561422 Telemarketing Bureaus 150
561431 Private Mail Centers 50
561439 Other Business Service Centers (including Copy Shops) 50
561440 Collection Agencies 50
561450 Credit Bureaus 50
561491 Repossession Services 50
561492 Court Reporting and Stenotype Services 50
561499 All Other Business Support Services 50
561510 Travel Agencies 50
561520 Tour Operators 50
561591 Convention and Visitors Bureaus 50
561599 All Other Travel Arrangement and Reservation Services 50
561611 Investigation Services 200
561612 Security Guards and Patrol Services 500
561613 Armored Car Services 200
561621 Security Systems Services (except Locksmiths) 200
561622 Locksmiths 50
561710 Exterminating and Pest Control Services 50
561720 Janitorial Services 500
561730 Landscaping Services 50
561740 Carpet and Upholstery Cleaning Services 50
561790 Other Services to Buildings and Dwellings 50
561910 Packaging and Labeling Services 50
561920 Convention and Trade Show Organizers 50
561990 All Other Support Services 50
562111 Solid Waste Collection 100
562112 Hazardous Waste Collection 100
562119 Other Waste Collection 100
562211 Hazardous Waste Treatment and Disposal 100
562212 Solid Waste Landfill 100
562213 Solid Waste Combustors and Incinerators 100
562219 Other Nonhazardous Waste Treatment and Disposal 100
562910 Remediation Services 100
Except, Environmental Remediation Services 12 12 500
562920 Materials Recovery Facilities 100
562991 Septic Tank and Related Services 50
562998 All Other Miscellaneous Waste Management Services 50
Start Printed Page 13160
611110 Elementary and Secondary Schools 50
611210 Junior Colleges 50
611310 Colleges, Universities and Professional Schools 50
611410 Business and Secretarial Schools 50
611420 Computer Training 50
611430 Professional and Management Development Training 50
611511 Cosmetology and Barber Schools 50
611512 Flight Training 200
611513 Apprenticeship Training 50
611519 Other Technical and Trade Schools 50
Except, Job Corps Centers 13 13 400 13 $30.0
611610 Fine Arts Schools 50
611620 Sports and Recreation Instruction 50
611630 Language Schools 50
611691 Exam Preparation and Tutoring 50
611692 Automobile Driving Schools 50
611699 All Other Miscellaneous Schools and Instruction 50
611710 Educational Support Services 50
621111 Offices of Physicians (except Mental Health Specialists) 100
621112 Offices of Physicians, Mental Health Specialists 100
621210 Offices of Dentists 50
621310 Offices of Chiropractors 50
621320 Offices of Optometrists 50
621330 Offices of Mental Health Practitioners (except Physicians) 50
621340 Offices of Physical, Occupational and Speech Therapists and Audiologists 50
621391 Offices of Podiatrists 50
621399 Offices of All Other Miscellaneous Health Practitioners 50
621410 Family Planning Centers 100
621420 Outpatient Mental Health and Substance Abuse Centers 100
621491 HMO Medical Centers 100
621492 Kidney Dialysis Centers 200
621493 Freestanding Ambulatory Surgical and Emergency Centers 100
621498 All Other Outpatient Care Centers 100
621511 Medical Laboratories 100
621512 Diagnostic Imaging Centers 100
621610 Home Health Care Services 300
621910 Ambulance Services 100
621991 Blood and Organ Banks 100
621999 All Other Miscellaneous Ambulatory Health Care Services 100
622110 General Medical and Surgical Hospitals 400
622210 Psychiatric and Substance Abuse Hospitals 400
622310 Specialty (except Psychiatric and Substance Abuse) Hospitals 400
623110 Nursing Care Facilities 300
623210 Residential Mental Retardation Facilities 300
623220 Residential Mental Health and Substance Abuse Facilities 50
623311 Continuing Care Retirement Communities 300
623312 Homes for the Elderly 50
623990 Other Residential Care Facilities 50
624110 Child and Youth Services 50
624120 Services for the Elderly and Persons with Disabilities 50
624190 Other Individual and Family Services 50
624210 Community Food Services 50
624221 Temporary Shelters 50
624229 Other Community Housing Services 50
624230 Emergency and Other Relief Services 50
624310 Vocational Rehabilitation Services 50
624410 Child Day Care Services 50
711110 Theater Companies and Dinner Theaters 50
711120 Dance Companies 50
711130 Musical Groups and Artists 50
711190 Other Performing Arts Companies 50
711211 Sports Teams and Clubs 50
711212 Race Tracks 50
711219 Other Spectator Sports 50
711310 Promoters of Performing Arts, Sports and Similar Events with Facilities 100
711320 Promoters of Performing Arts, Sports and Similar Events without Facilities 50
711410 Agents and Managers for Artists, Athletes, Entertainers and Other Public Figures 50
711510 Independent Artists, Writers, and Performers 50
712110 Museums 50
712120 Historical Sites 50
712130 Zoos and Botanical Gardens 50
712190 Nature Parks and Other Similar Institutions 50
713110 Amusement and Theme Parks 100
713120 Amusement Arcades 50
713210 Casinos (except Casino Hotels) 50
713290 Other Gambling Industries 50
713910 Golf Courses and Country Clubs 50
713920 Skiing Facilities 200
713930 Marinas 50
713940 Fitness and Recreational Sports Centers 50
713950 Bowling Centers 50
713990 All Other Amusement and Recreation Industries 50
721110 Hotels (except Casino Hotels) and Motels 100
721120 Casino Hotels 100
721191 Bed and Breakfast Inns 50
721199 All Other Traveler Accommodation 50
721211 RV (Recreational Vehicle) Parks and Campgrounds 50
721214 Recreational and Vacation Camps (except Campgrounds) 50
721310 Rooming and Boarding Houses 50
722110 Full-Service Restaurants 50
722211 Limited-Service Restaurants 50
722212 Cafeterias 50
722213 Snack and Nonalcoholic Beverage Bars 50
722310 Food Service Contractors 400
722320 Caterers 50
722330 Mobile Food Services 50
722410 Drinking Places (Alcoholic Beverages) 50
811111 General Automotive Repair 50
811112 Automotive Exhaust System Repair 50
811113 Automotive Transmission Repair 50
811118 Other Automotive Mechanical and Electrical Repair and Maintenance 50
811121 Automotive Body, Paint and Interior Repair and Maintenance 50
811122 Automotive Glass Replacement Shops 50
811191 Automotive Oil Change and Lubrication Shops 50
811192 Car Washes 50
811198 All Other Automotive Repair and Maintenance 50
811211 Consumer Electronics Repair and Maintenance 50
811212 Computer and Office Machine Repair and Maintenance 150
811213 Communication Equipment Repair and Maintenance 50
811219 Other Electronic and Precision Equipment Repair and Maintenance 50
811310 Commercial and Industrial Machinery and Equipment (except Automotive and Electronic) Repair and Maintenance 50
811411 Home and Garden Equipment Repair and Maintenance 50
811412 Appliance Repair and Maintenance 50
811420 Reupholstery and Furniture Repair 50
811430 Footwear and Leather Goods Repair 50
811490 Other Personal and Household Goods Repair and Maintenance 50
812111 Barber Shops 50
812112 Beauty Salons 50
812113 Nail Salons 50
812191 Diet and Weight Reducing Centers 50
812199 Other Personal Care Services 50
812210 Funeral Homes and Funeral Services 50
812220 Cemeteries and Crematories 50
812310 Coin-Operated Laundries and Drycleaners 50
812320 Drycleaning and Laundry Services (except Coin-Operated) 50
812331 Linen Supply 200
812332 Industrial Launderers 200
812910 Pet Care (except Veterinary) Services 50
812921 Photo Finishing Laboratories (except One-Hour) 50
812922 One-Hour Photo Finishing 50
812930 Parking Lots and Garages 100
812990 All Other Personal Services 50
813110 Religious Organizations 50
813211 Grantmaking Foundations 50
813212 Voluntary Health Organizations 50
813219 Other Grantmaking and Giving Services 50
813311 Human Rights Organizations 50
813312 Environment, Conservation and Wildlife Organizations 50
813319 Other Social Advocacy Organizations 50
813410 Civic and Social Organizations 50
813910 Business Associations 50
813920 Professional Organizations 50
813930 Labor Unions and Similar Labor Organizations 50
813940 Political Organizations 50
813990 Other Similar Organizations (except Business, Professional, Labor, and Political Organizations) 50
Sector 92—Public Administration 14
1 NAICS code 115310—Support Activities for Forestry: Forest Fire Suppression and Fuels Management Services are two components of Support Activities for Forestry. Forest Fire Suppression includes establishments which provide services to fight forest fires. These firms usually have fire-fighting crews and equipment. Fuels Management Services firms provide services to clear land of hazardous materials that would fuel forest fires. The treatments used by these firms may include prescribed fire, mechanical removal, establishing fuel breaks, thinning, pruning, and piling.
2 NAICS code 237990—Dredging: To be considered small for purposes of Government procurement, a firm must perform at least 40% of the volume dredged with its own equipment or equipment owned by another small dredging concern.
3 NAICS code 238990—Building and Property Specialty Trade Services: If a procurement requires the use of multiple specialty trade contractors (i.e., plumbing, painting, plastering, carpentry, etc.), and no specialty trade accounts for 50% or more of the value of the procurement, all such specialty trade contractors activities are considered a single activity and classified as Building and Property Specialty Trade Services.
4 NAICS code 311421—Fruit and Vegetable Canning: For purposes of Government procurement for food canning and preserving, the standard of 500 employees excludes agricultural labor as defined in section 3306(k) of the Internal Revenue Code, 26 U.S.C. 3306(k).
5 NAICS code 324110—Petroleum Refineries: To be an eligible small business, a firm may not have more than 1,500 employees or more than 125,000 barrels per day capacity of petroleum-based inputs, including crude oil or bona fide feedstocks. Capacity includes owned or leased facilities as well as facilities under a processing agreement or an arrangement such as an exchange agreement or a throughput. In addition, for the Federal Government's procurement of refined petroleum products, the total product to be delivered under the contract must be at least 90% refined by the successful bidder from either crude oil or bona fide feedstocks. Start Printed Page 13163
6 NAICS Subsectors 333—Machinery Manufacturing; 334—Computer and Electronic Product Manufacturing; 335—Electrical Equipment, Appliance and Component Manufacturing; and 336—Transportation Equipment Manufacturing: For rebuilding machinery or equipment on a factory basis, or equivalent, use the NAICS code for a newly manufactured product. Concerns performing major rebuilding or overhaul activities do not necessarily have to meet the criteria for being a “manufacturer” although the activities may be classified under a manufacturing NAICS code. Ordinary repair services or preservation are not considered rebuilding.
7 NAICS code 336413—Other Aircraft Parts and Auxiliary Equipment Manufacturing: Contracts for the rebuilding or overhaul of aircraft ground support equipment on a contract basis are classified under NAICS code 336413.
8 Subsector 483—Water Transportation—Offshore Marine Services: The applicable size standard shall be 150 employees for firms furnishing specific transportation services to concerns engaged in offshore oil and/or natural gas exploration, drilling production, or marine research; such services encompass passenger and freight transportation, anchor handling, and related logistical services to and from the work site.
9 NAICS code 531190—Lessors of Other Real Property, Leasing of Building Space to the Federal Government by Owners: For Government procurement, a size standard of 150 employees applies to the owners of building space leased to the Federal Government. The standard does not apply to an agent.
10 NAICS code 541710—Research and Development in the Physical, Engineering, and Life Sciences: For research and development contracts requiring the delivery of a manufactured product, the appropriate size standard is that of the manufacturing industry.
(b) For purposes of the Small Business Innovation Research (SBIR) program only, a different definition has been established. See § 121.701 of these regulations.
11 NAICS 561210—Facilities Support Services:
(b) “Facilities Support Services” requires the performance of three or more separate activities in the areas of services or specialty trade construction industries. If services are performed, these service activities must each be in a separate NAICS industry. If the procurement requires the use of specialty trade contractors (plumbing, painting, plastering, carpentry, etc.), all such specialty trade construction activities are considered a single activity and classified as Base Housing Maintenance. Since Base Housing Maintenance is only one activity, two additional activities of separate NAICS industries are required for a procurement to be classified as “Facilities Support Services.”
12 NAICS 562910—Environmental Remediation Services:
(a) For SBA assistance as a small business concern in the industry of Environmental Remediation Services, other than for Government procurement, a concern must be engaged primarily in furnishing a range of services for the remediation of a contaminated environment to an acceptable condition including, but not limited to, preliminary assessment, site inspection, testing, remedial investigation, feasibility studies, remedial design, containment, remedial action, removal of contaminated materials, storage of contaminated materials and security and site closeouts. If one of such activities accounts for 50% or more of a concern's total revenues, employees, or other related factors, the concern's primary industry is that of the particular industry and not the Environmental Remediation Services Industry.
(b) For purposes of classifying a Government procurement as Environmental Remediation Services, the general purpose of the procurement must be to restore or directly support the restoration of a contaminated environment (such as, preliminary assessment, site inspection, testing, remedial investigation, feasibility studies, remedial design, remediation services, containment, removal of contaminated materials, storage of contaminated materials or security and site closeouts) and also the procurement must be composed of activities in three or more separate industries with separate NAICS codes or, in some instances (e.g., engineering), smaller sub-components of NAICS codes with separate, distinct size standards. These activities may include, but are not limited to, separate activities in industries such as: Heavy Construction; Special Trade Construction; Engineering Services; Architectural Services; Management Consulting Services; Hazardous and Other Waste Collection; Remediation Services; Testing Laboratories; and Research and Development in the Physical, Engineering and Life Sciences. If any activity in the procurement can be identified with a separate NAICS code, or component of a code with a separate distinct size standard, and that industry accounts for 50 percent or more of the value of the entire procurement, then the proper size standard is the one for that particular industry, and not the Environmental Remediation Service size standard.
13 NAICS code 611519—Job Corps Centers: For classifying a Federal procurement, the purpose of the solicitation must be for the management and operation of a U.S. Department of Labor Job Corps Center. The activities involved include admissions activities, life skills training, educational activities, comprehensive career preparation activities, career development activities, career transition activities, as well as the management and support functions and services needed to operate and maintain the facility. For SBA assistance as a small business concern, other than for Federal Government procurements, a concern must be primarily engaged in providing the services to operate and maintain Federal Job Corps Centers.
14 NAICS Sector 92—Public Administration: Small Business Size Standards are not established for this sector. Establishments in the Public Administration sector are Federal, state, and local government agencies which administer and oversee government programs and activities that are not performed by private establishments. Concerns performing operational services for the administration of a government program are classified under the NAICS private sector industry based on the activities performed. Similarly, procurements for these types of services are classified under the NAICS private sector industry that best describes the activities to be performed. For example, if a government agency issues a procurement for law enforcement services, the requirement would be classified using one of the NAICS industry codes under 56161, Investigation, Guard, and Armored Car Services.
15 NAICS code 541519: An Information Technology Value Added Reseller provides a total solution to information technology acquisitions by providing multi-vendor hardware and software along with significant services. Significant value added services consist of, but are not limited to, configuration consulting and design, systems integration, installation of multi-vendor computer equipment, customization of hardware or software, training, product technical support, maintenance, and end user support. For purposes of Government procurement, an information technology procurement classified under this industry category must consist of at least 15% and not more than 50% of value added services as measured by the total price less the cost of information technology hardware, computer software, and profit. If the contract consists of less than 15% of value added services, then it must be classified under a NAICS manufacturing industry. If the contract consists of more than 50% of value added services, then it must be classified under the NAICS industry that best describes the predominate service of the procurement. To qualify as an Information Technology Value Added Reseller for purposes of SBA assistance, other than for Government procurement, a concern must be primarily engaged in providing information technology equipment and computer software and provide value added services which account for at least 15% of its receipts but not more than 50% of its receipts.
3. Revise § 121.301(d) to read as follows:
(d) For Surety Bond Guarantee assistance an applicant, including its affiliates, must not exceed the size standard for the industry in which the applicant is primarily engaged.
4. Revise § 121.406(b)(1)(i) to read as follows:
How does a small business concern qualify to provide manufactured products under small business set-aside or MED procurements?
(i) Does not exceed 100 employees;
5. Revise § 121.502(a)(2) to read as follows:
What size standards are applicable to programs for sales or leases of Government property?
(2) A concern not primarily engaged in manufacturing is small for sales or leases of Government property if it does not exceed 50 employees.
6. Revise § 121.508(a)(2) to read as follows:
§ 121.508
What are the size standards and other requirements for the purchase of Government owned Special Salvage Timber?
(2) Have, together with its affiliates, no more than 50 employees during any pay period for the last 12 months; and,
7. Revise § 121.509(a) to read as follows:
§ 121.509
What is the size standard for leasing of Government land for coal mining?
(a) Together with its affiliates, does not have more than 300 employees;
9. Revise § 121.512(b) to read as follows:
(b) Together with its affiliates, it does not have more than 400 employees.
1. Federal procurement is an appropriate consideration because of the special support provided by SBA to small businesses through the 8(a) Business Development Program, the Small Disadvantaged Business Program, the HUBZone Program, the Small Business Set-Aside program and subcontracting programs. Not only has SBA implemented policies to assist small businesses to develop through these Federal procurement programs, but the businesses themselves have made economic and business decisions affecting their eligibility for these programs. The SBA wants to avoid taking away small business eligibility for Federal procurement programs from a large number of small businesses that could otherwise result from this size standards restructuring proposal. This consideration is limited to industries in which significant Federal Government contracting opportunities exist, or with approximately $100 million or more in Federal contracting.
[FR Doc. 04-5049 Filed 3-18-04; 8:45 am]