[Federal Register Volume 68, Number 107 (Wednesday, June 4, 2003)]
[Rules and Regulations]
[Pages 33348-33355]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 03-14037]
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SMALL BUSINESS ADMINISTRATION
13 CFR Part 121
RIN 3245-AE89
Small Business Size Standards; Forest Fire Suppression and Fuels
Management Services
AGENCY: Small Business Administration (SBA).
ACTION: Final rule.
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SUMMARY: The U.S. Small Business Administration (SBA) is adopting a
size standard of $15 million in average annual receipts for the
activities of ``Forest Fire Suppression and Fuels Management Service''
classified within the ``Support Activities for Forestry'' industry
(North American Industry Classification System (NAICS) 115310). This
action will better define the size of businesses in these activities
that the SBA believes should be eligible for Federal small business
assistance programs. The size standard for the remainder of activities
in this industry remains at $6 million.
DATES: This rule is effective July 7, 2003.
FOR FURTHER INFORMATION CONTACT: Diane Heal, Program Analyst, Office of
Size Standards, at (202) 205-6618 or sizestandards@sba.gov.
SUPPLEMENTARY INFORMATION: On July 19, 2002, the SBA published a
proposed rule in the Federal Register (67 FR 47480) to establish a $15
million size standard for forest fire suppression and fuels management
services under NAICS code 115310, the Support Activities for Forestry
industry. The SBA proposed to establish a size standard for these
activities after reviewing requests from firms in the forestry
industry. These firms believe that this action is warranted in light of
the increased emphasis by the Federal Government on removing biomass
fuels from the Nation's forest, the dramatic increase in funding for
this effort, and the Federal Government's growing reliance upon the
private sector to perform fuels management tasks and to suppress forest
fires.
Based on these concerns, the SBA conducted a review of this
industry's size standard. In addition to reviewing patterns of Federal
procurement in this industry, it collected and evaluated data on the
industry's structure. This review involved comparisons of average firm
size, the size distribution of firms, measures of start-up costs, and
the degree of concentration of economic activity among very large firms
in the industry. Based on its review of each of these evaluation
factors, and the nature and patterns of Federal contracting for forest
fire suppression and fuels management services, the SBA concluded that
the data supported a size standard for forest fire suppression and
fuels management services industry activities of $15 million in average
annual receipts. The SBA did not propose a change to the $6 million
size standard for all the other remaining forestry activities within
the industry. (For more information on the reasons for the proposed
establishment of a $15 million size standard, see the July 19, 2002,
proposed rule.) After careful consideration of the comments received on
the proposed rule, the SBA has decided to adopt its proposed size
standard of $15 million.
Discussion of Comments on the Proposed Rule
The SBA received 19 comments on the proposed size standard from
eight environmental and economic associations, five firms, three
Federal agencies, two individuals, and one trade association. In
summary, eight commenters supported the proposed size standard and 11
commenters opposed that change. Below is a summary of the major issues
raised by the comments received on the proposed rule and the SBA's
response.
Comments Supporting a Higher Size Standard
One organization supported the proposed increase in the size
standard, but claimed that the increase could be greater than $15
million due to the 2002 fire season. This commenter did not provide any
supporting statistics or documentation.
The SBA does not adopt this comment. In the proposed rule, the SBA
discussed the reasons for proposing the size standard at $15 million.
Even though the U.S. Forest Service (USFS) and Bureau of Land
Management (BLM) expended record contract dollars for the 2002 fire
season, the SBA found that the firms impacted the most were those whose
revenues were below $6 million before the 2002 season. Several of these
firms now exceed the current size standard. The increased revenues from
this past fire season support the SBA's reasons for establishing a size
standard above the current $6 million level for forest fire suppression
and fuels management services activities. The SBA believes that a $15
million size standard is sufficient to allow these companies to grow to
a size to meet the capital requirements of forest fire suppression and
fuels management services contracts. The SBA is reluctant to adopt a
higher size standard than it proposed without more information on the
structure of the industry that demonstrates a stronger basis for a
higher size standard.
Three commenters supported the proposed size standard because of
the importance it has on firms engaged in forest fire suppression and
fuels management services. One commenter pointed out that the firms
performing these tasks have been developed primarily for Federal
Government work. The commenter contends ``it is a logical extension of
the effort that Federal agencies have pursued to allow companies that
have been developed for Federal work to continue this work * * * The
higher standard allows continued growth as well as expansion of the
small business pool through subcontracting.'' Another commenter added
that the Federal Government's reliance on the private sector is
expected to significantly increase due to the emphasis on contract use
under the National Fire Plan and the effort to outsource commercial
work that can be done by private concerns.
One Federal agency expressed concern about the shift in the
forestry industries away from logging and into forest fire suppression
and fuels management services. The commenter stated that if a firm
exceeds the size standard, there is no commercial market for these
types of firms, as ``The Government is in the only game in town.''
These firms make up a significant portion of one of its contracting
offices' fire fighting resources. It also pointed out that normally
small business set-aside programs are designed to help small businesses
graduate and go onto bigger and more lucrative commercial contracts. In
this industry, the Federal Government far exceeds the amount of work
done by private landowners, or even by the states and counties.
The SBA agrees with these comments. As stated in the preamble to
the proposed rule, over the last several years the Federal Government
has placed greater reliance upon contractors to perform these services,
resulting in a dramatic increase in contract funding for forest fire
suppression and fuels management activities. This is especially true in
the western part of the country where the Federal Government
[[Page 33349]]
owns vast amounts of land. This development has significantly changed
the size structure of firms engaged in these activities, and supports
the need to establish a higher size standard.
Two commenters cited increased contractor costs as a basis for
increasing the size standard. One commenter identified the increasing
prevailing wages mandated by the U.S. Department of Labor; the
increases in fuels costs for mechanical equipment, chain saws, and drip
torches for igniting prescribed fires; and the use of specialty
personal protective clothing and equipment as factors leading to the
increased costs. Another commenter applauded the SBA's acknowledgment
of the increased capital costs placed upon companies due to the Federal
Government's reliance upon these firms.
The SBA agrees with these comments. As stated in the proposed rule,
because of the shift in forest fire fighting and fuels management
services policies by the Federal Government, many firms have had to
make capital investments in equipment and specialized clothing. In
addition, the SBA obtained from the National Interagency Fire Center
(NIFC) information on the average fire crew labor costs for fiscal year
2002. This information shows that the Federal Government's labor costs
contracted for fire crews range between $23 and $35 per hour, with an
average being $30 per hour. The level of labor costs and capital
investments supports the SBA's proposal for a higher size standard.
One Federal agency commented that the increase will benefit the
Government by increasing the number of viable small businesses eligible
for small business set-aside awards for forest fire suppression and
fuels management services. This agency noted that it has witnessed a
decreasing number of business bidding on fuels reduction road
maintenance contracts. Many of the firms no longer qualify under the $6
million size standard. Many of these firms qualify under the higher
size standard of their primary industry (e.g., Other Waste Collection
(which includes brush removal) with a $10.5 million size standard and
Site Preparation Contractors with a $12 million size standard). In
addition, the agency is aware of one contractor who is already hiring
fewer crews and refusing fire assignments in order to stay under the
size standard.
The agency also expressed concern that it may receive little or no
competition for small business set-aside projects because of the number
of firms doing fire suppression work and who have also qualified to do
prescribed burns are at or above the current size standard. The
commenter pointed out that substantial costs are incurred in the
acquisition and maintenance of equipment as well as the training and
retention of quality employees. In addition, the agency has several
contractors who are now running crews under State contracts, and ``with
the number of fire emergencies in the 2 years, these firms are near or
at the current size standard.''
The agency's comments support the SBA's findings discussed in the
proposed rule that due to the increased funding for fuels management
services and the severe fire seasons, many firms who perform these
services for the Federal Government have had a significant increase in
their revenues. Without an increase to the size standard, the Federal
Government may help small business to develop their abilities in forest
fire suppression and fuels management services only to have them either
restrict their growth or force the agency to find and develop a new
group of inexperienced firms. This, coupled with the earlier comment
that the Federal Government is the primary source of revenues for the
industry, strongly supports increasing the current size standard.
Comments Opposing a Size Standard Increase
Four commenters opposed an increase to the current size standard
because they believe that there are ample small businesses to perform
fuels management services. One of these commenters provided calendar
year 2000 data on the number of employees in the Support Activities for
Forestry industry for the State of Oregon from the U.S. Bureau of
Census' County Business Patterns statistical database. These data show
that firms with 99 or less employees comprise 97% of the firms in
Oregon, while 60% of the firms have four employees or less. This
commenter also stated that in fiscal year 2001, using the BLM and the
USFS databases for contracts awarded to firms in the States of Oregon
and Washington, $87 million was expended for forestry services. The
average income per contractor was $156,000, with the largest contractor
capturing $7.2 million. Only 16 firms captured more than $1 million in
work, while 396 captured contracts totaling $100,000.
The SBA does not agree with the comment that a size standard
increase is unnecessary. The information presented by one of the
commenters does not accurately reflect all firms, nationwide, that are
involved in forest fire suppression and fuels management services. When
developing size standards, the SBA looks at industry statistics on a
national level, as its size standards affect all industry firms and
Federal programs. One commenter relied on a Census Bureau report for
the State of Oregon that presented information only on the number of
employees in the Support Activities for Forestry industry. This report
did not give data on industry receipts, which is a more accurate
representation of the size distribution of firms in this industry
because of its seasonal nature. The SBA's reasons for using receipts
instead of employees were discussed in the proposed rule. In addition,
the information presented by these commenters was for the entire
Support Activities for Forest industry in Oregon, which includes firms
that estimate timber, provide forest pest control services, consultant
on wood attributes and reforestation, plant trees, and provide land
treatment services. As explained in the proposed rule, the SBA could
not use the Census Bureau data it usually relies upon to evaluate
industry structure. Although that database (a special tabulation of the
1997 Economic Census) provides national industry data on firms by
receipts size, it does not provide firm data on specific activities
within the industry. Moreover, the significant increase in spending for
forest fire suppression and fuels management services occurred after
the 1997 Economic Census, and thus, the data do not reflect the impact
of this increased spending on the size distribution of firms in the
industry.
This commenter also presented Federal contract awards limited to
firms in the States of Oregon and Washington for all forestry support
services. As stated in the proposed rule, the SBA obtained information
from the Federal Data Procurement Center on forest fire suppression and
fuels management services contract awards from fiscal years 1998--2000,
which showed that the contract awards to firms increased from $29
million in fiscal year 1998 to $173 million in fiscal year 2000. During
that period the percentage of Federal contract award dollars to small
business for forest fire suppression decreased from 76% to 51%. During
the period of 1998 through the first two quarters of fiscal year 2002,
the percentage of Federal contract award dollars to small business for
fuels management decreased from 100% to 75%. The SBA believes that
these trends reflect the changing composition of businesses in forest
fire suppression and fuels management services and the need to
establish a new size standard.
Two commenters stated that the SBA's approximation for forest fire
[[Page 33350]]
suppression firm size is unrealistically large. These commenters stated
that the SBA's estimate of 20 fire crews (one crew has 20 members) for
90 days is overestimated. They pointed out that the largest firms in
the Pacific Northwest have 10 crews, and that 60 days is more of a
realistic fire season. One of these commenters also used a labor cost
of $20.25 per hour.
The SBA does not agree with this comment. In the proposed rule, the
SBA stated that it had received a request from an organization,
representing forest fire suppression firms, to increase the size
standard for forest fire suppression and fuels management services to
500 employees or $27.5 million. This organization justified its
recommendations, in part, by stating that 20 fire crews for 90 days
could generate $10.8 million.
The SBA obtained information on fire crew lists and labor and
engine rates on the national fire fighting contract from NIFC for the
2002 season. The national average labor rate for fire crews was $30 per
hour and the average rate for a fire engine was $1,500 per day. The
average number of fire crews was four and the average number of engines
was three. In addition, the 2002 fire season was unusually long,
starting in April and ending in October, a 150-180 day season. Using
this information the SBA calculated the potential revenues of firms
engaged in forest fire suppression. With the extended fire season, the
SBA recognized that the crews would not work everyday, and used a 120
estimate of days crews worked. The table below estimates the potential
revenues by the number of crews.
Table 1.--Potential Revenues by Number of crews
----------------------------------------------------------------------------------------------------------------
of Total of 2002
work day days worked crews employees revenues
----------------------------------------------------------------------------------------------------------------
$30....................................... 12 120 4 80 $3.5M
$30....................................... 12 120 9 180 $7.8M
$30....................................... 12 120 15 300 $12.9M
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Using these estimates, the average firm with four crews would have
the potential to generate $3.5 million in revenues just from forest
fire suppression activities. Add in the cost of three fire engines at
$1,500 per engine, $4,500 per day, for the 120 days, $540,000, and the
average firm's 2002 revenues for just fire suppression is greater than
$4 million. Given that many of the firms that fight forest fires are in
other industries, these firms potentially will have revenues in excess
of $6 million. The SBA believes that the size standard must be set at a
level above $6 million to properly take into account these higher cost
activities.
Two commenters stated that increasing the size standard will cause
greater market concentration in the fuels management services. Two
other commenters stated that an increase would allow for ``dominant
industries'' to out-compete small businesses.
The SBA disagrees with these comments. Federal procurement
statistics show that there has been a dramatic drop in the percentage
of award dollars going to small business in fuels management services.
In 1998, 100% went to small businesses. However, in the first two
quarters of fiscal year 2002 small business captured only 75% of the
award dollars. The percentage of contract dollars going to small
business will continue to decrease because of the dramatic increase in
fire suppression dollars in 2002, the growth in Federal monies for
fuels reduction, and because many of the fuels management firms also
are forest fire suppression contractors. As discussed in the proposed
rule, the SBA believes that increasing the size standard will increase
competition in the industry, thereby increasing opportunities for small
business.
Seven commenters stated that the problem of size growth stems from
the way the Federal Government is issuing contracts, i.e., the size of
each requirement, the use of Request for Proposals and Indefinite
Delivery Indefinite Quantity (IDIQ) type contracts, and the bundling of
requirements. Two of these commenters recommended that Federal land
management agencies issue smaller contracts that would be accessible to
smaller businesses. Both claimed that the rapid growth of the largest
firms in the industry is a result of the Federal Government offering
increasing large contracts.
The SBA does not agree with this comment. The SBA reviewed the
fiscal year 2003 procurement forecasts for the BLM and USFS and found
that these agencies were structuring their requirements for specific
areas and not offering large bundled contracts. All but two of the
BLM's fiscal year 2003 projected solicitations and three of the USFS
fiscal year 2003 projected solicitations have estimated values not to
exceed $250,000. Also, this issue is not relevant to adopting or
rejecting the proposed size standard. Additionally, issues concerning
contract bundling relate to the structuring of individual procurements
and therefore are separate from the SBA's determination of the
appropriate small business size standard for a particular industry. For
more information about the SBA's efforts to address the impact of
contract bundling on small businesses, see its recently proposed rule
on this issue (68 FR 5134, dated January 31, 2003).
One commenter stated that $15 million was not a small business. In
fact, this commenter stated that $1 million is larger than any small
business operation existing in her area. The commenter claimed that a
$15 million business would not be a local forestry small business.
The SBA does not agree with this recommendation. Firms with
revenues below $1 million are not representative of all small
businesses that perform forest fire suppression and fuels management
contracts. Data the SBA analyzed on firms engaged in forest fire
suppression and fuels management services clearly support a size
standard above the current $6 million size standard.
Separate Forest Fire Suppression and Fuels Management Services
Categories
The SBA received five comments recommending that forest fire
suppression be separated from fuels management services. All five
commenters claimed that many of the small firms were well below the
current size standard and are capable of doing fuels management
services. Three of these commenters acknowledge that the forest fire
suppression activity may have higher capital costs, start up costs, and
training costs. These firms stated that the capital costs, start up
costs, and training needs may be more limited for fuels management
services. Two commenters claimed that combining
[[Page 33351]]
these two activities into one industry activity may inaccurately merge
businesses of two different types together. Two different commenters
stated that fuels management firms are more like firms in other
forestry services than they are like forest fire suppression firms. The
equipment and skill levels for mechanical thinning are unrelated to
fire suppression equipment.
The SBA acknowledges that some misinterpretation may have been
caused by combining forest fire suppression and fuels management
services into a single sub-industry description. Both are separate
activities under the Support Activities for Forestry industry. Instead
of listing one exemption for both forest fire suppression and fuels
management services, the SBA will modify its table of small business
size standards by listing two separate exceptions under Support
Activities for Forestry--one for forest fire suppression and one for
fuels management services.
The SBA does not agree with the comments regarding mechanical
thinning, capital costs, training, and skill levels. Mechanical
thinning is only one aspect of fuels management services. As stated in
the definition of fuels management services in the proposed rule, this
activity also involves prescribed fire, establishment of fuel breaks,
as well as thinning, pruning, and piling. In addition, contracts for
these services include the removal and/or disposal of biomass. The use
of prescribed fire for these services requires firms experienced in
controlling forest fires. Firms who perform this portion of fuels
management have expended capital on fire retardant clothing, fire
fighting equipment, and training. These firms also pay higher insurance
premiums because of the danger in working with controlled fire. These
firms, along with their fire engines, are also certified for
controlling fires by the USFS. Firms that establish fuel breaks as part
of their fuel management services, require capital investment in heavy
equipment such as yarders, and earth moving equipment. Many times,
these firms are also involved as excavation contractors and heavy
equipment contractors (site preparation contractors have a $12 million
size standard and heavy equipment contractors have a $28.5 million size
standard). In addition, fuels management contracts may include the
removal and/or disposal of the biomass (brush removal contractors have
a size standard of $10.5 million size standard). Fuels management
services is not limited to mechanical thinning, as suggested by some
commenters. The costs, training, and equipment for various fuels
management contractors may be just as high as for forest fire
suppression contractors.
Periodic Reviews and Adjustments Aside From Inflationary Adjustments
One commenter recommended that the SBA perform periodic reviews on
the Forestry industry aside from inflationary adjustments. The SBA
agrees with this comment. As stated in the proposed rule, the SBA would
continue to monitor this activity in the future to determine if another
increase is warranted. If the review shows that another change in the
size standard is needed, the SBA will issue a proposed rule, outlining
the reasons for the change.
Use of Receipts Over Number of Employees
One commenter, a contracting officer, supported the SBA's decision
to establish this size standard by receipts instead of number of
employees because of the great fluctuation in employment which rises
and falls throughout the year due to the fire suppression season.
During a severe fire season, like 2002, some firms may operate 25 20-
person crews for a period of weeks or a few months. The number of
employees then drops to the amount needed to conduct fuels management.
As discussed in the proposed rule, the SBA believes that using a
number of employees size standard is not appropriate for forest fire
suppression and fuels management services, as most firms performing
these activities have fluctuating numbers of employees because of the
seasonal nature of forest fire suppression. A receipts-based size
standard is a more appropriate measure of a firm's operations in these
activities.
Contrary to National Fire Plan
Three commenters stated that the SBA's actions would be contrary to
the National Fire Plan, which was developed to reduce forest fire
hazards and increase preparedness for fire suppression. All three
emphasized that Congress' approach was not to create larger businesses
but to build new capacity in rural communities near national forests
and other public lands, and that they provided authority to direct work
to small and micro businesses.
The SBA does not agree with this comment. The SBA believes its
actions are aligned with Congress' intent for the National Fire Plan.
Because of the devastating fire seasons during the past 5 years, and
the establishment of National Fire Plan, funding to firms in forest
fire suppression and fuels management services has dramatically
increased. With this rule and because of the National Fire Plan, the
SBA is recognizing the effect this dramatic increase in funding has
had, and will continue to have, on firms in this industry.
Workers' Health and Safety in Jeopardy
One commenter claimed that increasing the size standard would
``allow firms to grow beyond the point where contractors can ensure
adequate attention to worker health and safety.'' This issue does not
pertain to factors related to establishing a size standard. Health and
safety issues are the function of the administrative contracting
officer as they monitor the compliance with the clauses in the contract
that regulate these issues.
Negative Environmental Outcome
One commenter stated that the SBA actions would ``open the doors to
the potentially damaging new industry of removing unsustainable
quantities of biomass fuel from the nation's forest.'' This comment
deals with environmental issues and does not relate to the size of a
firm in the forest fire suppression and fuels management services.
Compliance With Executive Orders 12866, 12988, and 13132, the Paperwork
Reduction Act (44 U.S.C. Ch. 35), and the Regulatory Flexibility Act (5
U.S.C. 601-612)
The Office of Management and Budget (OMB) has determined that the
proposed 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, the 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, the SBA
has determined that this rule does not have any federalism implications
warranting the preparation of a Federalism Assessment. For the purpose
of the Paperwork Reduction Act, 44 U.S.C. Ch. 35, the SBA has
determined that this rule would not impose new reporting or record
keeping requirements. Below is a regulatory impact analysis of this
size standard change.
Regulatory Impact Analysis
1. Is There a Need for the Regulatory Action?
The SBA is chartered to aid and assist small businesses through a
variety of
[[Page 33352]]
financial, procurement, business development, and advocacy programs. To
effectively assist intended beneficiaries of these programs, the SBA
must establish distinct definitions of which businesses are deemed
small businesses. The Small Business Act (15 U.S.C. 632(a)) delegates
to the SBA Administrator the responsibility for establishing small
business definitions. It also requires that small business definitions
vary to reflect industry differences. The preamble of this rule
explains the approach the SBA follows when analyzing a size standard
for a particular industry. Based on that analysis, the SBA believes
that a size standard for forest fire suppression and fuels management
services is needed to better define small businesses engaged in these
industry activities.
2. What Are the Potential Benefits and Costs of This Regulatory Action?
The most significant benefit to businesses obtaining small business
status as a result of this rule is eligibility for Federal small
business assistance programs. Under this rule, approximately 50 to 60
additional firms will obtain small business status and become eligible
for these programs. These programs include the SBA's financial
assistance programs and Federal procurement preference programs for
small businesses, 8(a) firms, small disadvantaged businesses (SDB), and
small businesses located in Historically Underutilized Business Zones
(HUBZone), including the application of a HUBZone or SDB price
evaluation preference or adjustment for contracts awarded through full
and open competition. Through the assistance of these programs, small
businesses may benefit by becoming more knowledgeable, stable, and
competitive businesses.
Other Federal agencies also use the SBA size standards for a
variety of regulatory and program purposes. In situations where the
SBA's size standard is not appropriate for an agency's program, the
agency may establish its own size standards with the approval of the
SBA Administrator (see 13 CFR 121.902).
The benefits of a size standard increase to a more appropriate
level would accrue to three groups: (1) Businesses that benefit by
gaining small business status from the proposed size standards and use
small business assistance programs; (2) growing small businesses that
may exceed the current size standards in the near future and who will
retain small business status from the proposed size standards; and (3)
Federal agencies that award contracts under procurement programs that
require small business status.
Newly defined small businesses would benefit from the SBA's
financial programs, in particular its 7(a) Guaranteed Loan program.
Under this program the SBA estimates that $100,000 in new Federal loan
guarantees could be made to the newly defined small businesses. Because
of the size of the loan guarantees, most loans are made to small
businesses well below the size standard. Thus, increasing the size
standard to include 50 to 60 additional businesses will likely result
in only one or two small business guaranteed loans to businesses in
this industry.
The newly defined small businesses would also benefit from the
SBA's Economic Injury Disaster Loan (EIDL) program. Since this program
is contingent upon the occurrence and severity of a disaster, no
meaningful estimate of benefits can be projected. During fiscal years
2001-02, however, no loans were made to firms in the Support Activities
for Forestry industry.
Awards to small businesses for forest fire suppression and fuels
management services have decreased 27% over the last three fiscal
years. Small business award dollars to firms in the forestry services
activities, most of which were for forest fire suppression and fuels
management services, amounted to $185 million. If this rule becomes
final, small business status would be restored to several firms that
have lost small business status because of the rapid growth in Federal
funding and contracting in this industry. The SBA estimates that firms
gaining small business status could potentially obtain Federal
contracts worth $50 million per year ($185 million x 27%) under the
small business set-aside program, the 8(a) and HUBZone programs, or
unrestricted contracts.
Federal agencies may benefit from the higher size standards if the
newly defined and expanding small businesses compete for more set-aside
procurements. The larger base of small businesses would likely increase
competition and lower the prices on set-aside procurements. A large
base of small businesses may create an incentive for Federal agencies
to set aside more procurements, thus creating greater opportunities for
all small businesses. Federal contractors with small business
subcontracting goals may also benefit from a larger pool of small
businesses by enabling them to better achieve their subcontracting
goals at lower prices. No estimate of cost savings from these
contracting decisions can be made since data are not available to
directly measure price or competitive trends on Federal contracts.
To the extent that approximately 50 to 60 additional firms could
become active in Federal Government programs, this may entail some
additional administrative costs to the Federal Government associated
with additional bidders for Federal small business procurement
programs, additional firms seeking the SBA guaranteed lending programs,
and additional firms eligible for enrollment in the SBA's PRO-Net
database program. Among businesses in this group seeking the SBA
assistance, there will be some additional costs associated with
compliance and verification of small business status and protests of
small business status. These costs are likely to generate minimal
incremental costs since mechanisms are currently in place to handle
these administrative requirements.
The costs to the Federal Government may be higher on some Federal
contracts as a result of this rule. With greater numbers of businesses
defined as small, Federal agencies may choose to set aside more
contracts for competition among small businesses rather than using full
and open competition. The movement from unrestricted to set-aside
contracting is likely to result in competition among fewer bidders for
a contract. Also, higher costs may result if additional full and open
contracts are awarded to HUBZone and SDB businesses as a result of a
price evaluation preference. However, the additional costs associated
with fewer bidders are likely to be minor since procurements may be set
aside for small businesses or under the 8(a), and HUBZone programs only
if awards are expected to be made at fair and reasonable prices.
The new size standard may have distributional effects among large
and small businesses. Although the actual outcome of the gains and
losses among small and large businesses cannot be estimated with
certainty, several trends are likely to emerge. First, a transfer of
some Federal contracts to small businesses from large businesses. Large
businesses may have fewer Federal contract opportunities as Federal
agencies decide to set aside more Federal procurements for small
businesses. Also, some Federal contracts may be awarded to HUBZone or
SDB businesses instead of large businesses since those two categories
of small businesses are eligible for price evaluation preferences for
contracts competed on a full and open basis. Similarly, currently
defined small businesses may obtain fewer Federal contracts due to the
increased
[[Page 33353]]
competition from more businesses defined as small. This transfer may be
offset by a greater number of Federal procurements set aside for all
small businesses. The potential transfer of contracts away from large
and currently defined small businesses would be limited by the newly
defined and expanding small businesses that were willing and able to
sell to the Federal Government. The potential distributional impacts of
these transfers cannot be estimated with any degree of precision since
the data on the size of business receiving a Federal contract are
limited to identifying small or other-than-small businesses.
The revision to the current size standard for forest fire
suppression and fuels management services is consistent with the SBA's
statutory mandate to assist small businesses. This regulatory action
promotes the Administrator's objectives. One of the SBA's goals in
support of the Administrator's objectives is to help individual small
businesses succeed through fair and equitable access to capital and
credit, Federal Government contracts, and management and technical
assistance. Reviewing and modifying size standards when appropriate
ensures that intended beneficiaries have access to small business
programs designed to assist them. Size standards do not interfere with
State, local, and tribal governments in the exercise of their
government functions. In a few cases, State and local governments have
voluntarily adopted the SBA's size standards for their programs to
eliminate the need to establish an administrative mechanism for
developing their own size standards.
Final Regulatory Flexibility Analysis
Under the Regulatory Flexibility Act (RFA), this rule may have a
significant impact on a substantial number of small entities. The SBA
estimates that an additional 50 to 60 businesses may obtain small
business status as a result of this rule. Also, small businesses may
obtain an additional $50 million in Federal contracts.
The size standard may also affect small businesses participating in
programs of other agencies that use the SBA size standards. As a
practical matter, however, the SBA cannot estimate the impact of a size
standard change on each and every Federal program that uses its size
standards. In cases where an SBA size standard is not appropriate, the
Small Business Act and the SBA's regulations allow Federal agencies to
develop different size standards with the approval of the SBA
Administrator (13 CFR 121.902). For purposes of a regulatory
flexibility analysis, agencies must consult with the SBA's Office of
Advocacy when developing different size standards for their programs
(13 CFR 121.902(b)(4)).
Immediately below, the SBA sets forth a final regulatory
flexibility analysis (FRFA) of this rule addressing the need for and
objective of the rule; a description and estimate of small entities to
which the rule will apply; the projected reporting, record keeping, and
other compliance requirements of the rule; the relevant Federal rules
which may duplicate, overlap or conflict with the rule; and
alternatives to the final rule considered by the SBA that minimize the
impact on small businesses.
(1) What Is the Need for and Objective of the Rule?
The SBA's objective of this rule is to establish an appropriate
small business definition of businesses engaged in forest fire
suppression and fuels management services, and therefore, eligible for
Federal small business assistance programs. The significant increase in
Federal funding and the Federal Government's increased use of
contractors to perform these services has altered the structure of the
industry and support the need for a new size standard for these
activities.
(2) What Significant Issues Were Raised by the Public Comments in
Response to the Initial Regulatory Flexibility Act (IRFA)?
The SBA received no comments in response to the IRFA of the
proposed rule.
(3) What Is the SBA's Description and Estimate of the Number of Small
Entities to Which the Rule Will Apply?
The SBA estimates that 200 to 300 businesses are engaged in forest
fire suppression and fuels management services. These businesses come
from industries in the Forestry and Logging Subsector (NAICS codes
113110, 113210, 113310, and 115310). As this is an emerging industry,
the SBA developed its estimate from discussions with, and information
provided by the USFS, the BLM, and industry groups. From these
discussions, the SBA estimates that approximately 50% of these firms
are small businesses, many of which may be currently at or just below
the $6 million threshold. With the adoption of this rule, 50 to 60
additional businesses will gain small business status. Although this
may not represent a substantial number of small businesses, the SBA is
preparing an FRFA to ensure that the impact on small businesses of
higher size standards are known and have been considered. These
businesses would be eligible to seek available SBA assistance provided
that they meet other program requirements.
Based on the relative size of these firms and the SBA's knowledge
of contracting in these areas, the SBA estimates that small business
coverage will increase by 12% of total revenues in this activity. These
revenue estimates were calculated from the size distributions of the
parent industries in which forest fire suppression and fuels management
service firms are presently classified.
(4) Will This Rule Impose Any Additional Reporting or Record Keeping
Requirements on Small Businesses?
A new size standard does not impose any additional reporting,
record keeping or other compliance requirements on small entities for
the SBA programs. A change in a size standard would not create
additional costs on a business to determine whether or not it qualifies
as a small business. A business needs to only examine existing
information to determine its size, such as Federal tax returns, payroll
records, and accounting records. Size standards determines
``voluntary'' access to the SBA and other Federal programs that assist
small businesses, but does not impose a regulatory burden as they
neither regulate nor control business behavior. In addition, this rule
does not impose any new information collecting requirements from the
SBA which requires approval by OMB under the Paperwork Reduction Act of
1980, 44 U.S.C. 3501-3520.
(5) What Are the Steps the SBA Has Taken To Minimize the Significant
Economic Impact on Small Businesses?
Most of the economic impact on small businesses will be positive.
The most significant benefits to businesses that will obtain small
business status as a result of this final rule are (1) eligibility for
the Federal Government's procurement preference programs for small
businesses, 8(a) firms, small disadvantaged businesses, and businesses
located in Historically Underutilized Business Zones (HUBZone); and (2)
eligibility for the SBA's financial assistance programs such as 7(a)
business loans, 504 business loans, and EIDL assistance. The SBA
estimates that firms gaining small business status could potentially
obtain Federal contracts worth $50 million per year under the small
business set-aside program, the 8(a) program, the HUBZone program, or
unrestricted contracts. This represents approximately 27% of the $185
million
[[Page 33354]]
in total Federal expenditures for forest fire suppression and fuels
management.
(6) Alternatives
(a) What Are the Legal Policies or Factual Reasons for Selecting the
Alternative Adopted in the Final Rule?
As stated in the Small Business Act, 15 U.S.C. 632, and 13 CFR part
121, the SBA establishes size standards based on industry
characteristics and for non-manufacturing concerns on the basis of
gross receipts of a business concern over a period of 3 years. The
increased emphasis by the Federal Government on removing biomass fuels
from the Nation's forests, the dramatic increase in funding for this
effort, and the Government's growing reliance upon the private sector
to perform fuels management tasks and to suppress forest fires supports
establishing a separate size standard of $15 million.
(b) What Alternatives Did the SBA Reject?
One commenter recommended a $1 million size standard, stating that
$15 million was not a small business. In fact, this commenter stated
that $1 million is larger than any small business operation existing in
the commenter's area and that a $15 million business would not be a
local forestry small business.
The SBA does not consider this alternative realistic. Firms with
revenues below $1 million are not representative of all small
businesses that perform forest fire suppression and fuels management
services. A $1 million size standard is well below the $6 million size
standard for all forestry industries, including Support Activities for
Forestry. In addition, a $1 million size standard is below the base
size standard for non-manufacturing industries.
By adopting the size standard at $15 million, the SBA will minimize
the impact on the small businesses in these emerging activities.
Increased Federal funding and requirements, the Federal Government's
growing reliance on the private sector for these services, and the
severe fire seasons over the last several years have caused many firms
to outgrow the $6 million size standard, thus reducing small business
competition for these services. The $15 million size standard will
allow firms in these activities to grow to an appropriate level without
losing their small business status, but not to a level where a few
firms would be able to control a significant portion of Federal
contracts at the expense of other small businesses.
List of Subjects in 13 CFR Part 121
Administrative practice and procedure, Government procurement,
Government property, Grant programs-business, Loan programs-business,
Small businesses.
0
For the reasons stated in the preamble, amend part 121 of title 13 of
the Code of Federal Regulations as follows:
PART 121--SMALL BUSINESS SIZE REGULATIONS
0
1. The authority citation of part 121 continues to read as follows:
Authority: 15 U.S.C. 632(a), 634(b)(6), 637(a), 644(c) and
662(5) and Sec. 304, Pub. L. 103-403, 108 Stat. 4175, 4188.
0
2. Amend Sec. 121.201 as follows:
0
a. In the table ``Small Business Size Standards by NAICS Industry''
under the heading ``Subsector 115--Support Activities for Agriculture
and Forestry,'' revise the entry for 115310 to read as follows; and
0
b. Add footnote 17 at the end of the table to read as follows:
Small Business Size Standards by NAICS Industry
----------------------------------------------------------------------------------------------------------------
Size Size
standards in standards in
NAICS codes NAICS U.S. industry title millions of number of
dollars employees
----------------------------------------------------------------------------------------------------------------
* * * * * * *
Subsector 115--Support Activities for Agriculture and Forestry
----------------------------------------------------------------------------------------------------------------
* * * * * * *
115310..................................... Support Activities for Forestry.... $6.0 ..............
EXCEPT..................................... Forest Fire Suppression \17\....... \17\ 15.0 ..............
EXCEPT..................................... Fuels Management Services \17\..... \17\ 15.0 ..............
* * * * * * *
----------------------------------------------------------------------------------------------------------------
Footnotes
* * * * * * *
\17\ 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.
[[Page 33355]]
Dated: April 25, 2003.
Hector V. Barreto,
Administrator.
[FR Doc. 03-14037 Filed 6-3-03; 8:45 am]
BILLING CODE 8025-01-P