[Federal Register Volume 76, Number 197 (Wednesday, October 12, 2011)]
[Proposed Rules]
[Pages 63510-63525]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2011-26207]
[[Page 63509]]
Vol. 76
Wednesday,
No. 197
October 12, 2011
Part VI
Small Business Administration
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13 CFR Part 121
Small Business Size Standards: Administrative and Support, Waste
Management and Remediation Services; Proposed Rule
Federal Register / Vol. 76 , No. 197 / Wednesday, October 12, 2011 /
Proposed Rules
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SMALL BUSINESS ADMINISTRATION
13 CFR Part 121
RIN 3245-AG27
Small Business Size Standards: Administrative and Support, Waste
Management and Remediation Services
AGENCY: U.S. Small Business Administration.
ACTION: Proposed rule.
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SUMMARY: The U.S. Small Business Administration (SBA) proposes to
increase small business size standards for 37 industries in North
American Industry Classification System (NAICS) Sector 56,
Administrative and Support, Waste Management and Remediation Services.
As part of its ongoing comprehensive review of all size standards, SBA
has evaluated all receipts based standards in NAICS Sector 56 to
determine whether the existing size standards should be retained or
revised. This proposed rule is one of a series of proposals that will
examine size standards of industries grouped by an NAICS Sector. SBA
issued a White Paper entitled ``Size Standards Methodology'' and
published a notice in the October 21, 2009 issue of the Federal
Register that ``Size Standards Methodology'' is available on its Web
site at http://www.sba.gov/size for public review and comments. The
``Size Standards Methodology'' White Paper explains how SBA
establishes, reviews and modifies its receipts based and employee based
small business size standards. In this proposed rule, SBA has applied
its methodology that pertains to establishing, reviewing, and modifying
a receipts based size standard.
DATES: SBA must receive comments to this proposed rule on or before
December 12, 2011.
ADDRESSES: You may submit comments, identified by RIN 3245-AF27 by one
of the following methods: (1) Federal eRulemaking Portal: http://www.regulations.gov, following the instructions for submitting
comments; or (2) Mail/Hand Delivery/Courier: Khem R. Sharma, PhD,
Chief, Size Standards Division, 409 Third Street, SW., Mail Code 6530,
Washington, DC 20416. SBA will not accept comments to this proposed
rule submitted by e-mail.
SBA will post all comments to this proposed rule on http://www.regulations.gov. If you wish to submit confidential business
information (CBI) as defined in the User Notice at http://www.regulations.gov, you must submit such information to U.S. Small
Business Administration, Khem R. Sharma, PhD, Chief, Size Standards
Division, 409 Third Street, SW., Mail Code 6530, Washington, DC 20416,
or send an e-mail to [email protected]. You should highlight the
information that you consider to be CBI and explain why you believe SBA
should hold this information as confidential. SBA will review your
information and determine whether it will make the information public
or not.
FOR FURTHER INFORMATION CONTACT: Khem R. Sharma, PhD, Chief, Size
Standards Division, (202) 205-6618 or [email protected].
SUPPLEMENTARY INFORMATION: To determine eligibility for Federal small
business assistance, SBA establishes small business definitions
(referred to as size standards) for private sector industries in the
United States. SBA uses two primary measures of business size: average
annual receipts and average number of employees. SBA uses financial
assets, electric output, and refining capacity to measure the size of a
few specialized industries. In addition, SBA's Small Business
Investment Company (SBIC), Certified Development Company (504) and 7(a)
Loan Programs use either the industry based size standards or net worth
and net income based alternative size standards to determine
eligibility for those programs. At the start of the current
comprehensive size standards review, there were 41 different size
standards, covering 1,141 NAICS industries and 18 sub-industry
activities (``exceptions'' in SBA's table of size standards). Thirty-
one of these size levels were based on average annual receipts, seven
were based on average number of employees, and three were based on
other measures. In addition, SBA has established 11 other size
standards for its financial and procurement programs.
Over the years, SBA has received comments that its size standards
have not kept up with changes in the economy, in particular the changes
in the Federal contracting marketplace and industry structure. The last
time SBA conducted a comprehensive review of all size standards was
during the late 1970s and early 1980s. Since then, most reviews of size
standards were limited to in-depth analyses of specific industries in
response to requests from the public and Federal agencies. SBA also
makes periodic inflation adjustments to its monetary based size
standards. The SBA's latest inflation adjustment to size standards was
published in the Federal Register on July 18, 2008 (73 FR 41237).
Because of changes in the Federal marketplace and industry
structure since the last overall review, SBA recognizes that current
data may no longer support some of its existing size standards.
Accordingly, in 2007, SBA began a comprehensive review of all size
standards to determine if they are consistent with current data and to
adjust them when necessary. In addition, on September 27, 2010, the
President of the United States signed the Small Business Jobs Act of
2010 (Jobs Act). The Jobs Act directs SBA to conduct a detailed review
of all size standards and to make appropriate adjustments to reflect
market conditions. Specifically, the Jobs Act requires SBA to conduct a
detailed review of at least one-third of all size standards during
every 18-month period from the date of its enactment. In addition, the
Jobs Act requires that SBA do a complete review of all size standards
not less frequently than once every five years thereafter. Reviewing
existing small business size standards and making appropriate
adjustments based on current data are also consistent with Executive
Order 13563 on improving regulation and regulatory review.
Rather than review all size standards at one time, SBA has adopted
a more manageable approach of reviewing a group of industries within an
NAICS Sector. An NAICS Sector generally consists of 25 to 75
industries, except for the manufacturing sector, which has considerably
more. Once SBA completes its review of size standards for industries in
an NAICS Sector, it will issue a proposed rule to revise size standards
for those industries for which currently available data and other
relevant factors support doing so.
Below is a discussion of SBA's size standards methodology for
establishing receipts based size standards, which SBA applied to this
proposed rule, including analyses of industry structure, Federal
procurement trends and other factors for industries reviewed in this
proposed rule, the impact of the proposed revisions to size standards
on Federal small business assistance, and the evaluation of whether a
revised size standard would exclude dominant firms from being
considered small.
Size Standards Methodology
SBA has recently developed a ``Size Standards Methodology'' for
developing, reviewing, and modifying size standards when necessary. SBA
has published the document on its Web site at http://www.sba.gov/size
for public
[[Page 63511]]
review and comments and included it, as a supporting document, in the
electronic docket of this proposed rule at http://www.regulations.gov.
SBA does not apply all features of its ``Size Standards Methodology''
to all industries because not all are appropriate. For example, since
this proposed rule covers all industries with receipts based standards
in NAICS Sector 56, the methodology described here applies to
establishing receipts based standards. However, SBA makes the
methodology available in its entirety for parties who have an interest
in SBA's overall approach to establishing, evaluating and modifying
small business size standards. SBA always explains its analysis in
individual proposed and final rules relating to size standards for
specific industries.
SBA welcomes comments from the public on a number of issues
concerning its ``Size Standards Methodology,'' such as suggestions on
alternative approaches to establishing and modifying size standards;
whether there are alternative or additional factors that SBA should
consider; whether SBA's approach to small business size standards makes
sense in the current economic environment; whether SBA's use of anchor
size standards is appropriate in the current economy; whether there are
gaps in SBA's methodology because of the lack of comprehensive data;
and whether there are other facts or issues that SBA should consider.
Comments on the SBA's methodology should be submitted via (1) the
Federal eRulemaking Portal: http://www.regulations.gov; the docket
number is SBA-2009-0008, following the instructions for submitting
comments; or (2) Mail/Hand Delivery/Courier: Khem R. Sharma, Ph.D.,
Chief, Size Standards Division, 409 Third Street, SW, Mail Code 6530,
Washington, DC 20416. As with comments received to this and other
proposed rules, SBA will post all comments on its methodology on http://www.regulations.gov. As of October 12, 2011, SBA has received seven
comments to its ``Size Standards Methodology.'' The comments are
available to the public at http://www.regulations.gov. SBA continues to
welcome comments on its methodology from interested parties.
Congress granted SBA's Administrator discretion to establish
detailed small business size standards. 15 U.S.C. 632(a)(2). Section
3(a)(3) of the Small Business Act (15 U.S.C. 632(a)(3)) requires that
``* * * the [SBA] Administrator shall ensure that the size standard
varies from industry to industry to the extent necessary to reflect the
differing characteristics of the various industries and consider other
factors deemed to be relevant by the Administrator.'' Accordingly, the
economic structure of an industry is the basis for developing and
modifying small business size standards. SBA identifies the small
business segment of an industry by examining data on the economic
characteristics defining the industry structure itself (as described
below). In addition to analyzing an industry's structure, SBA considers
current economic conditions, together with its own mission, program
objectives, and the Administration's current policies, suggestions from
industry groups and Federal agencies, and public comments on the
proposed rule, when it establishes small business size standards. SBA
also examines whether a size standard based on industry and other
relevant data successfully excludes businesses that are dominant in the
industry.
This proposed rule includes information regarding the factors SBA
evaluated and the criteria it used to propose any adjustments to size
standards in NAICS Sector 56. The rule also explains why SBA has
proposed to adjust some size standards in Sector 56 but not others.
This proposed rule affords the public an opportunity to review and
comment on SBA's proposals to revise size standards in NAICS Sector 56
as well as on the data and methodology it uses to evaluate and revise a
size standard.
Industry Analysis
For the current comprehensive size standards review, SBA has
established three ``base'' or ``anchor'' size standards: $7.0 million
in average annual receipts for industries that have receipts based size
standards, 500 employees for manufacturing and other industries that
have employee based size standards (except for Wholesale Trade), and
100 employees for industries in the Wholesale Trade Sector. SBA
established 500 employees as the anchor size standard for manufacturing
industries at its inception in 1953. Shortly thereafter, SBA
established $1 million in average annual receipts as the anchor size
standard for nonmanufacturing industries. SBA has periodically
increased the receipts based anchor size standard for inflation, and it
stands today at $7 million. Since 1986, the size standard for all
industries in the Wholesale Trade Sector for SBA financial assistance
and for most Federal programs has been 100 employees. However, NAICS
codes for Wholesale Trade Industries (NAICS Sector 42) and their 100
employee size standards do not apply to Federal procurement programs.
Rather, for Federal procurement, the size standard for all industries
in Wholesale Trade and for all industries in Retail Trade (NAICS Sector
44-45) is 500 employees under SBA's nonmanufacturer rule (13 CFR
121.406(b)).
These long-standing anchor size standards have stood the test of
time and gained legitimacy through practice and general public
acceptance. An anchor size standard is neither a minimum nor a maximum.
It is a common size standard for a large number of industries that have
similar economic characteristics and serves as a reference point in
evaluating size standards for individual industries. SBA uses the
anchor in lieu of trying to establish precise small business size
standards for each industry. Otherwise, theoretically, the number of
size standards might be as high as the number of industries for which
SBA establishes size standards (1,141). Furthermore, the data SBA
analyzes are static, but the U.S. economy is not. Hence, absolute
precision is impossible. Therefore, SBA presumes an anchor size
standard is appropriate for a particular industry unless that industry
displays economic characteristics that are considerably different from
others with the same anchor size standard.
When evaluating a size standard, SBA compares the economic
characteristics of the specific industry under review to the average
characteristics of industries with one of the three anchor size
standards (referred to as the ``anchor comparison group''). This allows
SBA to assess the industry structure and to determine whether the
industry is appreciably different from the other industries in the
anchor comparison group. If the characteristics of a specific industry
under review are similar to the average characteristics of the anchor
comparison group, the anchor size standard is considered appropriate
for that industry. SBA may consider adopting a size standard below the
anchor when (1) all or most of the industry characteristics are
significantly smaller than the average characteristics of the anchor
comparison group, or (2) other industry considerations strongly suggest
that the anchor size standard would be an unreasonably high size
standard for the industry.
If the specific industry's characteristics are significantly higher
than are those of the anchor comparison group, then a size standard
higher than the anchor size standard may be appropriate. The larger the
differences are between the characteristics of the industry under
review and those of the
[[Page 63512]]
anchor comparison group, the larger will be the difference between the
appropriate industry size standard and the anchor size standard. To
determine a size standard above the anchor size standard, SBA analyzes
the characteristics of a second comparison group. For industries with
receipts based size standards, including those in NAICS Sector 56 that
are reviewed in this proposed rule, SBA has developed a second
comparison group consisting of industries with the highest levels of
receipts based size standards. To determine the level of a size
standard above the anchor size standard, SBA analyzes the
characteristics of this second comparison group. The size standards for
this group of industries range from $23 million to $35.5 million in
average annual receipts, with the weighted average size standard for
the group being $29 million. SBA refers to this comparison group as the
``higher level receipts based size standard group.''
The primary factors that SBA evaluates when analyzing the
structural characteristics of an industry include average firm size,
startup costs and entry barriers, industry competition, and
distribution of firms by size. SBA also evaluates, as an additional
primary factor, the possible impact that revising size standards might
have on Federal contracting assistance to small businesses. These are,
generally, the five most important factors SBA examines when
establishing or revising a size standard for an industry. However, SBA
will also consider and evaluate other information that it believes is
relevant to a particular industry (such as technological changes,
growth trends, SBA financial assistance, other program factors, etc.).
SBA also considers possible impacts of size standard revisions on
eligibility for Federal small business assistance, current economic
conditions, the Administration's policies, and suggestions from
industry groups and Federal agencies. Public comments on a proposed
rule also provide important additional information. SBA thoroughly
reviews all public comments before making a final decision on its
proposed size standard. Below are brief descriptions of each of the
five primary factors that SBA has evaluated in each industry in NAICS
Sector 56 being reviewed in this proposed rule. A more detailed
description of this analysis is provided in the SBA ``SBA Size
Standards Methodology,'' available at http://www.sba.gov/size.
1. Average firm size. SBA computes two measures of average firm
size: simple average and weighted average. For industries with receipts
based size standards, the simple average is the total receipts of the
industry divided by the total number of firms in the industry. The
weighted average firm size is the sum of weighted simple averages in
different receipts size classes, where weights are the shares of total
industry receipts for respective size classes. The simple average
weighs all firms within an industry equally, regardless of their size.
The weighted average overcomes that limitation by giving more weight to
larger firms.
If the average firm size of an industry under review is
significantly higher than the average firm size of industries in the
anchor comparison industry group, this will generally support a size
standard higher than the anchor size standard. Conversely, if the
industry's average firm size is similar to or significantly lower than
that of the anchor comparison industry group, it will be a basis to
adopt the anchor size standard, or, in rare cases, a standard lower
than the anchor.
2. Startup costs and entry barriers. Startup costs reflect a firm's
initial size in an industry. New entrants to an industry must have
sufficient capital and other assets to start and maintain a viable
business. If new firms entering a particular industry have greater
capital requirements than firms in industries in the anchor comparison
group, this can be a basis for establishing a size standard higher than
the anchor standard. In lieu of data on actual startup costs, SBA uses
average assets as a proxy measure to assess the levels of capital
requirements for new entrants to an industry.
To calculate average assets, SBA begins with the sales to total
assets ratio for an industry from the Risk Management Association's
Annual Statement Studies. SBA then applies these ratios to the average
receipts of firms in that industry. An industry with a significantly
higher level of average assets than that of the anchor comparison group
is likely to have higher startup costs; this in turn will support a
size standard higher than the anchor. Conversely, if the industry has a
significantly smaller average assets compared to the anchor comparison
group, the anchor size standard, or, in rare cases, one lower than the
anchor, may be appropriate.
3. Industry competition. Industry competition is generally measured
by the share of total industry receipts generated by the largest firms
in an industry. SBA generally evaluates the share of industry receipts
generated by the four largest firms in each industry. This is referred
to as the ``four-firm concentration ratio,'' a commonly used economic
measure of market competition. SBA compares the four-firm concentration
ratio for an industry under review to the average four-firm
concentration ratio for industries in the anchor comparison group. If a
significant share of economic activity within the industry is
concentrated among a few relatively large companies, all else being
equal, SBA will establish a size standard higher than the anchor size
standard. SBA does not consider the four-firm concentration ratio as an
important factor in assessing a size standard if its value for an
industry under review is less than 40 percent. For industries in which
the four-firm concentration ratio is 40 percent or more, SBA examines
the average size of the four largest firms in determining a size
standard.
4. Distribution of firms by size. SBA examines the shares of
industry total receipts accounted for by firms of different receipts
and employment size classes in an industry. This is an additional
factor SBA evaluates in assessing competition within an industry. If
most of an industry's economic activity is attributable to smaller
firms, this would indicate that small businesses are competitive in
that industry. This would support adopting the anchor size standard. If
most of an industry's economic activity is attributable to larger
firms, this indicates that small businesses are not competitive in that
industry. This would support adopting a size standard above the anchor.
Concentration among firms is a measure of inequality of
distribution. To evaluate the degree of inequality of distribution
within an industry, SBA computes the Gini coefficient by constructing
the Lorenz curve. The Lorenz curve presents the cumulative percentages
of units (firms) along the horizontal axis and the cumulative
percentages of receipts (or other measures of size) along the vertical
axis. (For further detail, please refer to SBA's ``Size Standards
Methodology'' on its Web site at http://www.sba.gov/size.) Gini
coefficient values vary from zero to one. If receipts are distributed
equally among all the firms in an industry, the value of the Gini
coefficient will equal zero. If an industry's total receipts are
attributed to a single firm, the Gini coefficient will equal one.
SBA compares the Gini coefficient value for an industry under
review with that for industries in the anchor comparison group. If an
industry shows a higher Gini coefficient value than industries in the
anchor comparison industry group, this may, all else being
[[Page 63513]]
equal, warrant a higher size standard than the anchor. Conversely, if
an industry's Gini coefficient is similar or lower than that for the
anchor group, the anchor standard, or in some cases a standard lower
than the anchor, may be adopted.
5. Impact on Federal contracting and SBA loan programs. SBA
examines the possible impact a size standard change may have on Federal
small business assistance. This most often focuses on the share of
Federal contracting dollars awarded to small businesses in the industry
in question. In general, if the small business share of Federal
contracting in an industry with significant Federal contracting is
appreciably less than the small business share of the industry's total
receipts, there is justification for considering a size standard higher
than the existing size standard. The disparity between the small
business Federal market share and industry-wide share may be due to
various factors, such as extensive administrative and compliance
requirements associated with Federal contracts, the different skill set
required by Federal contracts as compared to typical commercial
contracting work, and the size of Federal contracts. These, as well as
other factors, are likely to influence the type of firms within an
industry that compete for Federal contracts. By comparing the small
business Federal contracting share with the industry-wide small
business share, SBA includes in its size standards analysis the latest
Federal contracting trends. This analysis may indicate a size standard
larger than the current standard.
SBA considers Federal contracting trends in the size standards
analysis only if (1) the small business share of Federal contracting
dollars is at least 10 percent lower than the small business share of
total industry receipts, and (2) the amount of total Federal
contracting averages $100 million or more during the latest three
fiscal years. These thresholds reflect a significant level of
contracting where a revision to a size standard may have an impact on
contracting opportunities to small businesses.
Besides the impact on small business Federal contracting, SBA
evaluates the influence of a proposed size standard on SBA's loan
programs. For this, SBA examines the volume and number of SBA
guaranteed loans within an industry and the size of firms obtaining
those loans. This allows SBA to assess whether the existing or proposed
size standard for a particular industry may restrict the level of
financial assistance to small firms. If the analysis shows that the
current size standards have impeded financial assistance to small
businesses, higher size standards may be supportable. However, if small
businesses under current size standards have been receiving significant
amounts of financial assistance through SBA's loan programs, or if the
financial assistance has been provided mainly to businesses that are
much smaller than the existing size standard, this factor is not
considered for determining the size standard.
Sources of Industry and Program Data
SBA's primary source of industry data used in this proposed rule is
a special tabulation of the data from the 2007 Economic Census (see
http://www.census.gov/econ/census07/) prepared by the U.S. Bureau of
the Census (Census Bureau) for SBA. The special tabulation provides SBA
with industry-specific data on the number of firms, number of
establishments, number of employees, and annual receipts of companies
by the size of firm based on the 2007 Economic Census. The data reflect
the size classes of the company's overall enterprise size; however, the
data by NAICS industry within the particular size class represent the
company's total values for a specific industry only. The special
tabulation enables SBA to evaluate average firm size, the four-firm
concentration ratio, and distribution of firms by various receipts and
employment size classes.
In some cases, where data were not available due to disclosure
prohibitions in the Census Bureau's tabulation, SBA either estimated
missing values using available relevant data or examined data at a
higher level of industry aggregation, such as at the NAICS 2-digit
(Sector), 3-digit (Subsector), or 4-digit (Industry Group) level. In
some instances, SBA had to base its analysis only on those factors for
which data were available or on estimates of missing values were
possible.
To calculate average assets SBA used sales to total assets ratios
from the Risk Management Association's Annual Statement Studies, 2007-
2009.
To evaluate Federal contracting trends, SBA examined data on
Federal contract awards for fiscal years 2007 to 2009. These data are
available from the U.S. General Service Administration's Federal
Procurement Data System--Next Generation (FPDS-NG).
To assess the impact on financial assistance to small businesses,
SBA examined data on its own guaranteed loan programs for fiscal years
2008 to 2010.
Data sources and estimation procedures SBA uses in its size
standards analysis are documented in detail in the SBA's ``Size
Standards Methodology'' White Paper, which is available at http://www.sba.gov/size.
Dominance in Field of Operation
Section 3(a) of the Small Business Act (15 U.S.C. 632(a)) defines a
small business concern as one that is (1) independently owned and
operated, (2) not dominant in its field of operation, and (3) within a
specific small business definition or size standard established by the
SBA Administrator. SBA considers as part of its evaluation whether a
business concern at a proposed size standard would be dominant in its
field of operation. For this, SBA generally examines the industry's
market share of firms at the proposed standard. Market share and other
factors may indicate whether a firm can exercise a major controlling
influence on a national basis in an industry where a significant number
of business concerns are engaged. If a contemplated size standard would
include a dominant firm, SBA would consider a lower size standard to
exclude the dominant firm from being defined as small.
Selection of Size Standards
To simplify size standards, for the ongoing comprehensive review of
receipts based size standards, SBA has proposed to select size
standards for industries from a limited number of levels. For many
years, SBA has been concerned about the complexity of determining small
business status caused by a large number of varying receipts based size
standards (see 69 FR 13130 (March 4, 2004) and 57 FR 62515 (December
31, 1992)). At the start of the current comprehensive size standards
review, there were 31 different levels of receipts based size
standards. They ranged from $0.75 million to $35.5 million, and many of
them applied to one or only a few industries. SBA believes that size
standards with such a large number of small variations among them are
both unnecessary and difficult to justify analytically. To simplify
managing and using size standards, SBA proposes that there be fewer
size standard levels. This will produce more common size standards for
businesses operating in related industries. This will also result in
greater consistency among the size standards for industries that have
similar economic characteristics.
The SBA proposes, therefore, to apply one of eight receipts based
size standards to each industry in NAICS Sector 56 that has a receipts
based standard. In NAICS Sector 56, all size standards are based on
annual receipts,
[[Page 63514]]
except for Environmental Remediation Services, which is an
``exception'' to NAICS 562910. In 1994, SBA established a 500 employee
size standard for Federal contracts for Environmental Remediation
Services, provided they meet certain specific criteria (see 59 FR 47236
(September 15, 1994)). In this proposed rule, SBA has not reviewed this
employee based size standard for Environmental Remediation Services and
the current standard will remain in effect until SBA reviews industries
with employee based size standards. The eight ``fixed'' receipts based
size standard levels are $5 million, $7 million, $10 million, $14
million, $19 million, $25.5 million, $30.0 million, and $35.5 million.
To establish these eight receipts based size standard levels SBA
considered the current minimum, the current maximum, and the most
commonly used current receipts based size standards. At the start of
this comprehensive size standards review, the most commonly used
receipts based size standards clustered around the following: $2.5
million to $4.5 million, $7 million, $9.0 million to $10 million, $12.5
million to $14.0 million, $25.0 million to $25.5 million, and $33.5
million to $35.5 million. SBA selected $7 million as one of eight fixed
levels of receipts based size standards because it is also an anchor
standard for receipts based standards. The lowest or minimum receipts
based size level will be $5 million. Other than the standards for
agriculture and those based on commissions (such as real estate brokers
and travel agents), $5 million include those industries with the lowest
receipts based standards, which range from $2.0 million to $4.5
million, at the start of this comprehensive review. Among the higher
level size clusters, SBA selected four fixed levels: $10 million, $14
million, $25.5 million, and $35.5 million. Because there are large
intervals between the two of the fixed levels, SBA also established two
intermediate levels: $19 million between $14 million and $25.5 million,
and $30 million between $25.5 million and $35.5 million. These two
intermediate levels reflect roughly the same proportional differences
as between the other two successive levels.
To simplify size standards further, SBA may propose a common size
standard for closely related industries. Although the size standard
analysis may support a specific size standard level for each industry,
SBA believes that establishing different size standards for closely
related industries may not always be appropriate. For example, in cases
where many of the same businesses operate in the same multiple
industries, establishing a common size standard for those industries
might better reflect the Federal marketplace. This might also make size
standards among related industries more consistent than establishing
separate size standards for each of those industries. This led SBA to
establish a common size standard for the information technology (IT)
services (NAICS 541511, NAICS 541112, NAICS 541513, and NAICS 541519),
even though the industry data might support a distinct size standard
for each industry (see 57 FR 27906 (June 23, 1992)). Within NAICS
Sector 56, all industries in NAICS Industry Group 5614, Business
Support Services, and all industries in NAICS Industry Group 5619,
Other Support Services, have a common $7.0 million size standard.
Similarly, eight industries in NAICS Subsector 562, Waste Management
and Remediation Services, have a common $12.5 million size standard. In
this rule, SBA proposes to retain common size standards for those
industries and establish common size standards for similar industries
in other NAICS Industry Groups as well. Whenever SBA proposes a common
size standard for closely related industries, it will provide a
justification for that in the proposed rule.
Evaluation of Industry Structure
SBA evaluated the structure of the 44 industries in NAICS Sector
56, Administrative and Support, Waste Management and Remediation
Services, to assess the appropriateness of the current receipts based
size standards. As described above, SBA compared data on the economic
characteristics of each industry (except for the Environmental
Remediation Services exception to NAICS 562910) to the average
characteristics of industries in two comparison groups. The first
comparison group consists of all industries with $7.0 million size
standards and is referred to as the ``receipts based anchor comparison
group.'' Because the goal of SBA's size standards review is to assess
whether a specific industry's size standard should be the same as or
different from the anchor size standard, this is the most logical group
of industries to analyze. In addition, this group includes a sufficient
number of firms to provide a meaningful assessment and comparison of
industry characteristics.
If the characteristics of an industry under review are similar to
the average characteristics of industries in the anchor comparison
group, the anchor size standard is generally considered appropriate for
that industry. If an industry's structure is significantly different
from industries in the anchor group, a size standard lower or higher
than the anchor size standard might be appropriate. The level of the
new size standard is based on the difference between the
characteristics of the anchor comparison group and a second industry
comparison group. As described above, the second comparison group for
receipts based standards consists of industries with the highest
receipts based size standards, ranging from $23 million to $35.5
million. The average size standard for this group is $29 million. SBA
refers to this group of industries as the ``higher level receipts based
size standard comparison group.'' SBA determines differences in
industry structure between an industry under review and the industries
in the two comparison groups by comparing data on each of the industry
factors, including average firm size, average assets size, the four-
firm concentration ratio, and the Gini coefficient of distribution of
firms by size. Table 1 shows two measures of the average firm size
(simple and weighted), average assets size, the four-firm concentration
ratio, average receipts of the four largest firms, and the Gini
coefficient for both anchor level and higher level comparison groups
for receipts based size standards.
Table 1--Average Characteristics of Receipts Based Comparison Groups
----------------------------------------------------------------------------------------------------------------
Avg. Firm size ($ Avg.
million) receipts of
-------------------------- Avg. Assets Four-firm four
Receipts based comparison group size ($ concentration largest Gini
Simple Weighted million) ratio (%) firms ($ coefficient
average average million)
\*\
----------------------------------------------------------------------------------------------------------------
Anchor Level.................... 1.32 19.63 0.84 16.6 196.4 0.693
[[Page 63515]]
Higher Level.................... 5.07 116.84 3.20 32.1 1,376.0 0.830
----------------------------------------------------------------------------------------------------------------
* To be used for industries with a four-firm concentration ratio of 40% or greater.
Derivation of Size Standards Based on Industry Factors
For each industry factor in Table 1, SBA derives a separate size
standard based on the differences between the values for an industry
under review and the values for the two comparison groups. If the
industry value for a particular factor is near the corresponding factor
for the anchor comparison group, SBA will consider the $7.0 million
anchor size standard appropriate for that factor.
An industry factor with a value significantly above or below the
anchor comparison group will generally warrant, a size standard above
or below the $7.0 million anchor. The new size standard in these cases
is based on the proportional difference between the industry value and
the values for the two comparison groups.
For example, if an industry's simple average receipts are $3.3
million, that would support a $19 million size standard. The $3.3
million level is 52.8 percent between the average firm size of $1.32
million for the anchor comparison group and $5.07 million for the
higher level comparison group (($3.30 million-$1.32 million) / ($5.07
million-$1.32 million) = 0.528 or 52.8%). This proportional difference
is applied to the difference between the $7.0 million anchor size
standard and average size standard of $29 million for the higher level
size standard group and then added to $7.0 million to estimate a size
standard of $18.616 million ({$29.0 million-$7.0 million{time} *
0.528] + $7.0 million = $18.616 million). The final step is to round
the estimated $18.616 million size standard to the nearest fixed size
standard level, which in this example is $19 million.
SBA applies the above calculation to derive a size standard for
each industry factor. Detailed formulas involved in these calculations
are presented in the SBA's ``Size Standards Methodology,'' which is
available at http://www.sba.gov/size. (However, it should be noted that
figures in the ``SBA Size Standards Methodology'' White Paper are based
on 2002 Economic Census data and are different from those presented in
this proposed rule. That is because when SBA prepared its ``Size
Standards Methodology,'' the 2007 Economic Census data were not yet
available). Table 2 (below) shows ranges of values for each industry
factor and the levels of size standards supported by those values.
Table 2--Values of Industry Factors and Supported Size Standards
----------------------------------------------------------------------------------------------------------------
Or if avg.
Or if Weighted Or if avg. receipts of Then size
If Simple avg. receipts size avg. receipts assets size ($ largest four Or if gini standard is
($ million) size ($ million) million) firms ($ coefficient ($ million)
million)
----------------------------------------------------------------------------------------------------------------
< 1.15....................... < 15.22......... < 0.73.......... < 142.8........ < 0.686........ 5.0
1.15 to 1.57................. 15.22 to 26.26.. 0.73 to 1.00.... 142.8 to 276.9. 0.686 to 0.702. 7.0
1.58 to 2.17................. 26.27 to 41.73.. 1.01 to 1.37.... 277.0 to 464.5. 0.703 to 0.724. 10.0
2.18 to 2.94................. 41.74 to 61.61.. 1.38 to 1.86.... 464.6 to 705.8. 0.725 to 0.752. 14.0
2.95 to 3.92................. 61.62 to 87.02.. 1.87 to 2.48.... 705.9 to 0.753 to 0.788. 19.0
1,014.1.
3.93 to 4.86................. 87.03 to 111.32. 2.49 to 3.07.... 1,014.2 to 0.789 to 0.822. 25.5
1,309.0.
4.87 to 5.71................. 111.33 to 133.41 3.08 to 3.61.... 1,309.1 to 0.823 to 0.853. 30.0
1,577.1.
> 5.71....................... > 133.41........ > 3.61.......... > 1,577.1...... > 0.853........ 35.5
----------------------------------------------------------------------------------------------------------------
Derivation of Size Standard Based on Federal Contracting Factor
Besides industry structure, SBA also evaluates Federal contracting
data to assess how successful small businesses are in getting Federal
contracts under current size standards. For the current comprehensive
size standards review, SBA has decided to designate a size standard at
one level higher than the current size standard for industries where
the small business share of total Federal contracting dollars is
between 10 and 30 percentage points lower than the small business share
of total industry receipts, and at two levels higher than the current
size standard where the difference is more than 30 percentage points.
Because of the complex relationships among several variables
affecting small business participation in the Federal marketplace, SBA
has chosen not to designate a size standard for the Federal contracting
factor alone that is higher than two levels above the current size
standard. SBA believes that a larger adjustment to size standards based
on Federal contracting activity should be based on a more detailed
analysis of the impact of any subsequent revision to the current size
standard. In limited situations, however, SBA may conduct a more
extensive examination of Federal contracting experience. This may
enable SBA to support a different size standard than indicated by this
general rule and take into consideration significant and unique aspects
of small business competitiveness in the Federal contract market. SBA
welcomes comments on its methodology of incorporating the Federal
contracting factor in the size standard analysis and suggestions for
alternative methods and other relevant information on small business
experience in the Federal contract market.
Of the 44 industries reviewed in this proposed rule, 15 industries
averaged $100 million or more annually in Federal contracting during
fiscal years 2007 to 2009. The Federal contracting factor was
significant (i.e., the difference between the small business share of
total industry receipts and the small business share of Federal
contracting
[[Page 63516]]
dollars was 10 percentage points or more) in six of those 15
industries, and a separate size standard was derived for that factor
for each of them.
New Size Standards Based on Industry and Federal Contracting Factors
Table 3 shows the results of analyses of industry and Federal
contracting factors for each industry covered by this proposed rule.
Many of the NAICS industries in columns 2, 3, 4, 6, 7, and 8 show two
numbers. The upper number is the value for the industry or federal
contracting factor shown on the top of the column, and the lower number
is the size standard supported by that factor. For the four-firm
concentration ratio, SBA estimates a size standard if its value is 40
percent or more. If the four-firm concentration ratio for an industry
is less than 40 percent, there is no estimated size standard for that
factor. If the four-firm concentration ratio is more than 40 percent,
SBA indicates in column 6 the average size of the industry's top four
firms together with a size standard based on that average. Column 9
shows a calculated new size standard for each industry. This is the
average of the size standards supported by each factor and rounded to
the nearest fixed size level. Analytical details involved in the
averaging procedure are described in the SBA's ``Size Standard
Methodology.'' For comparison with the new standards, the current size
standards are in column 10 of Table 3.
Table 3--Size Standards Supported by Each Factor for Each Industry (millions of dollars)
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
(5) (9) (10)
(2) Simple (3) Weighted (4) Average Four- (6) Four-firm (8) Federal Calculated Current
(1) NAICS code/ NAICS industry title average firm average firm assets firm average size (7) Gini Co- contract size size
size ($ size ($ size ($ ratio ($ million) efficient factor (%) standard standard
million) million) million) (%) ($ million) ($ million)
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
561110 Office Administrative Services.............................. $1.4, 7.0 $7.0, 5.0 $0.6, 5.0 2.3 $225.8 0.694, $7.0 -10.1%, $7.0 $7.0
$10.0
561210 Facilities Support Services................................. 13.8, 35.5 98.7, 25.5 4.5, 35.5 27.6 1,777.3 0.835, $30.0 -2.8% 30.0 35.5
561311 Employment Placement Agencies............................... 1.5, 7.0 23.6, 7.0 ........... 22.1 652.4 0.759, $19.0 ........... 14.0 7.0
561312 Executive Search Services................................... 1.0, 5.0 28.8, 10.0 ........... 20.7 362.5 0.693, $7.0 ........... 7.0 7.0
561320 Temporary Help Services..................................... 7.6, 35.5 152.6, 35.5 1.4, 10.0 15.6 4,122.2 0.857, $35.5 43.8% 25.5 13.5
561330 Professional Employer Organizations......................... 21.4, 35.5 288.8, 35.5 3.0, 25.5 33.8 7,203.7 0.882, $35.5 ........... 30.0 13.5
561410 Document Preparation Services............................... 0.7, 5.0 10.0, 5.0 ........... 22.3 189.7 0.697, $7.0 ........... 7.0 7.0
561421 Telephone Answering Services................................ 1.4, 7.0 9.1, 5.0 ........... 15.1 86.6 0.690, $7.0 -35.5%, 10.0 7.0
$14.0
561422 Telemarketing Bureaus and Other contact Centers............. 5.6, 30.0 35.5, 10.0 ........... 24.8 910.6 0.807, $25.5 ........... 25.5 7.0
561431 Private Mail Centers........................................ 0.4, 5.0 2.9, 5.0 ........... 4.7 25.2 0.289, $5.0 ........... 5.0 7.0
561439 Other Business Service Centers (including Copy Shops)....... 2.6, 14.0 95.9, 25.5 1.0, 10.0 54.5 1,119.2, 25.5 0.832, $30.0 ........... 19.0 7.0
561440 Collection Agencies......................................... 2.7, 14.0 25.3, 7.0 1.0, 10.0 14.9 457.6 0.792, $25.5 ........... 14.0 7.0
561450 Credit Bureaus.............................................. 15.3, 35.5 379.2, 35.5 ........... 64.3 1,316.5, 30.0 0.935, $35.5 ........... 35.5 7.0
561491 Repossession Services....................................... 0.8, 5.0 4.3, 5.0 ........... 10.0 18.0 0.520, $5.0 ........... 5.0 7.0
561492 Court Reporting and Stenotype Services...................... 0.7, 5.0 16.5, 7.0 ........... 19.7 110.5 0.653, $5.0 ........... 7.0 7.0
561499 All Other Business Support Services......................... 2.5, 14.0 21.2, 7.0 1.0, 7.0 29.7 607.4 0.805, $25.5 -13.4%, 14.0 7.0
$10.0
561510 Travel Agencies \1\......................................... 1.4, 7.0 109.9, 25.5 0.5, 5.0 48.7 2,105.8, 35.5 0.806, $25.5 ........... 19.0 3.5
561520 Tour Operators.............................................. 1.6, 7.0 18.1, 7.0 0.6, 5.0 16.2 178.6 0.735, $14.0 ........... 10.0 7.0
561591 Convention and Visitors Bureaus............................. 1.3, 7.0 8.3, 5.0 ........... 13.2 49.6 0.674, $5.0 ........... 7.0 7.0
561599 All Other Travel Arrangement and Reservation Services....... 9.9, 35.5 150.5, 35.5 6.9, 35.5 42.2 1,468.2, 30.0 0.898, $35.5 ........... 35.5 7.0
561611 Investigation Services...................................... 0.8, 5.0 23.9, 7.0 ........... 27.0 261.9 0.719, $10.0 -27.6%, 14.0 12.5
$19.0
561612 Security Guards and Patrol Services......................... 3.2, 19.0 88.4, 25.5 0.7, 5.0 30.6 1,439.8 0.865, $35.5 -6.3% 19.0 18.5
561613 Armored Car Services........................................ 16.7, 35.5 253.3, 35.5 ........... 88.9 494.6, 14.0 0.906, $35.5 ........... 30.0 12.5
561621 Security Systems Services (except Locksmiths)............... 2.6, 14.0 108.2, 25.5 1.0, 7.0 34.4 1,233.3 0.819, $25.5 7.8 19.0 12.5
561622 Locksmiths.................................................. 0.4, 5.0 2.6, 5.0 ........... 5.9 24.1 0.377, $5.0 ........... 5.0 7.0
561710 Exterminating and Pest Control Services..................... 0.8, 5.0 112.7, 30.0 0.2, 5.0 27.3 592.5 0.681, $5.0 ........... 10.0 7.0
561720 Janitorial Services......................................... 0.6, 5.0 31.7, 10.0 0.2, 5.0 10.5 868.3 0.704, $10.0 -9.0 7.0 16.5
561730 Landscaping Services........................................ 0.6, 5.0 22.6, 7.0 0.2, 5.0 8.6 1,160.6 0.571, $5.0 0.7 5.0 7.0
561740 Carpet and Upholstery Cleaning Services..................... 0.4, 5.0 9.4, 5.0 0.1, 5.0 10.4 76.9 0.419, $5.0 ........... 5.0 4.5
[[Page 63517]]
561790 Other Services to Buildings and Dwellings................... 0.4, 5.0 5.4, 5.0 0.1, $5.0 11.2 133.7 0.479, 5.0 -38.5, 7.0 7.0
$14.0
561910 Packaging and Labeling Services............................. 2.8, 14.0 15.0, 5.0 1.2, 10.0 11.2 141.1 0.741, $14.0 ........... 10.0 7.0
561920 Convention and Trade Show Organizers........................ 2.6, 14.0 38.2, 10.0 ........... 19.8 555.5 0.802, $25.5 ........... 19.0 7.0
561990 All Other Support Services.................................. 1.6, 10.0 21.4, 7.0 0.7, 5.0 11.3 590.3 0.767, $19.0 -21.9, 10.0 7.0
$10.0
562111 Solid Waste Collection...................................... 5.4, 30.0 307.3, 35.5 3.1, 25.5 50.0 4,628.5, 35.5 0.878, $35.5 36.3 35.5 12.5
562112 Hazardous Waste Collection.................................. 5.0, 30.0 37.7, 10.0 ........... 45.8 212.8, 7.0 0.775, $19.0 ........... 14.0 12.5
562119 Other Waste Collection...................................... 1.9, 10.0 40.4, 10.0 1.2, 10.0 39.7 159.4 0.776, $19.0 ........... 14.0 12.5
562211 Hazardous Waste Treatment and Disposal...................... 13.4, 35.5 101.9, 25.5 7.5, 35.5 44.6 653.6, 14.0 0.834, $30.0 -4.9% 25.5 12.5
562212 Solid Waste Landfill........................................ 6.6, 35.5 85.5, 19.0 4.6, 35.5 56.1 791.8, 19.0 0.854, $35.5 ........... 30.0 12.5
562213 Solid Waste Combustors and Incinerators..................... 36.5, 35.5 270.0, 35.5 ........... 92.4 480.8, 14.0 0.856, $35.5 ........... 30.0 12.5
562219 Other Nonhazardous Waste Treatment and Disposal............. 3.8, 19.0 15.8, 7.0 ........... 34.7 58.2 0.689, $7.0 ........... 10.0 12.5
562910 Remediation Services........................................ 4.1, 25.5 29.3, 10.0 1.7, 14.0 14.7 455.1 0.770, $19.0 -4.4% 19.0 14.0
562920 Materials Recovery Facilities............................... 4.4, 25.5 26.7, 10.0 2.0, $19.0 33.3 338.8 0.749, $14.0 ........... 19.0 12.5
562991 Septic Tank and Related Services............................ 0.8, 5.0 8.9, 5.0 ........... 13.2 84.3 0.556, $5.0 ........... 5.0 7.0
562998 All Other Miscellaneous Waste Management Services........... 1.5, 7.0 14.2, 5.0 0.6, 5.0 27.8 98.3 0.679, $5.0 ........... 5.0 7.0
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
Common Size Standards
When many of the same businesses operate in multiple industries,
SBA believes that a common size standard can be appropriate for these
industries even if the industry and relevant program data support
different size standards. For instance, in past rules, SBA has
established a common size standard for Computer Systems Design and
Related Services industries (NAICS 541511, NAICS 541112, NAICS 541513,
NAICS 541519 (excluding the ``exception''), and NAICS 811212). Another
example is the common size standard for certain Architectural and
Engineering (A&E) and Related Services industries. These include NAICS
541310, NAICS 541330 (excluding the ``exceptions''), Map Drafting
(which is identified as ``exception'' under NAICS 541340), NAICS
541360, and NAICS 541370 (see 64 FR 28275 (May 25, 1999)). More
recently, SBA established a common size standard for some of the
industries in NAICS Sector 44-45, Retail Trade as well (see 75 FR 61597
(October 6, 2010)). Size standards for NAICS Sector 44-45 do not apply
to Federal Government contracting, but they do apply to all other
Federal Government programs that provide benefits for being a small
business concern.
In this rule, SBA proposes, as an alternative to a separate size
standard for each industry, common size standards for industries under
several NAICS Industry Groups as shown in Table 4. SBA evaluated
industry and Federal contracting factors and derived a common size
standard for each Industry Group using the same method as described
above. The results are in Table 5, which immediately follows Table 4,
below.
Table 4--Industry Groups for Common Size Standards
------------------------------------------------------------------------
Industry group Industries: 6-
Industry group: NAICS codes title digit NAICS codes
------------------------------------------------------------------------
5613............................ Employment 561311, 561312,
Services. 561320, 561330
5614............................ Business Support 561410, 561421,
Services. 561422, 561431,
561439, 561440,
561450, 561491,
561492, 561499
5615............................ Travel Arrangement 561510, 561520,
and Reservation 561591, 561599
Services.
5616............................ Investigation and 561611, 561612,
Security Services. 561613, 561621,
561622
5619............................ Other Support 561910, 561920,
Services. 591990
5621............................ Waste Collection.. 562111, 562112,
562119
5622............................ Waste Treatment 562211, 562212,
and Disposal. 562213, 562219
------------------------------------------------------------------------
[[Page 63518]]
Table 5 --Size Standards Supported by Each Factor for Each Industry Group
[millions of dollars]
--------------------------------------------------------------------------------------------------------------------------------------------------------
(3) (5) (9)
(2) Simple Weighted (4) Four- (6) Four- (7) Gini (8) Federal Calculated
(1) NAICS Code/industry title average average Average firm firm average co- contract factor size
firm size firm size assets size ratio size ($ efficient (%) standard ($
($ million) ($ million) ($ million) (%) million) million)
--------------------------------------------------------------------------------------------------------------------------------------------------------
5613 Employment Services....................... $6.5, 35.5 $198.8, $1.2, 10.0 14.8 $7,751.2 0.891, 15.8% $25.5
35.5 $35.5
5614 Business Support Services................. 2.1, 10.0 40.8, 10.0 0.8, 7.0 12.2 1,896.1 0.824, -11.7%, $10.0 14.0
$30.0
5615 Travel Arrangement and Reservation 2.2, 10.0 123.3, 30.0 0.9, 7.0 33.6 3,115.5 0.850, ............... 19.0
Services...................................... $30.0
5616 Investigation and Security Services....... 2.1, 10.0 94.4, 25.5 0.6, 5.0 22.9 2,343.2 0.834, 2.4% 19.0
$30.0
5619 Other support Services.................... 2.0, 10.0 23.7, 7.0 0.8, 7.0 8.6 795.1 0.781, -15.9%, $10.0 10.0
$19.0
5621 Waste Collection.......................... 5.0, 30.0 254.2, 35.5 2.9, 25.5 46.7 4,726.6, 0.872, 29.5% 35.5
$35.5 $35.5
5622 Waste Treatment and Disposal.............. 9.5, 35.5 123.0, 30.0 5.9, 35.5 37.0 1,319.2 0.869, -5.9% 33.5
$35.5
--------------------------------------------------------------------------------------------------------------------------------------------------------
Special Considerations
Environmental Remediation Services
The current size standard for Federal contracts for Environmental
Remediation Services (the ``exception'' to NAICS code 562910) is 500
employees. This size standard only applies to certain Federal
contracting opportunities that meet specific criteria. In short, the
contract must be for the remediation of a contaminated environment and
it must include at least three separate types of contract work. Each of
those contract activities must be identifiable by a different NAICS
code; however, no one of the activities may constitute 50 percent or
more of the total anticipated cost of the contract. The criteria that
constitute an Environmental Remediation Services contract or company
are detailed in 59 FR 47236 (September 15, 1994) and in Footnote 14 to
SBA's table of size standards (13 CFR 121.201).
In this proposed rule, SBA has not reviewed this employee based
size standard for Environmental Remediation Services and the current
standard will remain in effect until SBA reviews industries with
employee based size standards.
Evaluation of SBA Loan Data
Before deciding on an industry's size standard, SBA also considers
the impact of new or revised standards on SBA's loan programs.
Accordingly, SBA examined its 7(a) and 504 Loan Program data for fiscal
years 2008-2010 to assess whether the existing or proposed size
standards need further adjustments to ensure credit opportunities for
small businesses through those programs. For the industries reviewed in
this rule, the data show that it is mostly businesses much smaller than
the size standards that use the SBA's 7(a) and 504 loans. Therefore, no
size standard in NAICS Sector 56, Administrative and Support, Waste
Management and Remediation Services, needs an adjustment based on this
factor.
Proposed Changes to Size Standards
Table 6, below, summarizes the results of SBA analyses of industry
specific size standards from Table 3 and the results for common size
standards from Table 5. In terms of industry specific size standards,
the results in Table 3 support increases in size standards for 29
industries, decreases for nine industries, and no changes for six
industries. Similarly, based on common size standards for certain NAICS
Industry Groups, the results in Table 5 appear to support increases for
37 industries, decreases for five industries, and no changes for two
industries.
However, lowering small business size standards is not in the best
interest of small businesses in the current economic environment. The
U.S. economy was in recession from December 2007 to June 2009, the
longest and deepest of any recessions since World War II. The economy
lost more than eight million non-farm jobs during 2008-2009. In
response, Congress passed and the President signed into law the
American Recovery and Reinvestment Act of 2009 (Recovery Act) to
promote economic recovery and to preserve and create jobs. Although the
recession officially ended in June 2009, the unemployment rate was 9.4
percent or higher from May 2009 to December 2010. It moderated to 8.8
percent in March 2011, but it increased again to 9.2 percent in June
2011. The unemployment rate is forecast to remain around this elevated
level at least through the end of 2011. More recently, Congress passed
and the President signed the Jobs Act to promote small business job
creation. The Jobs Act puts more capital into the hands of
entrepreneurs and small business owners; strengthens small businesses'
ability to compete for contracts; includes recommendations from the
President's Task Force on Federal Contracting Opportunities for Small
Business; creates a better playing field for small businesses; promotes
small business exporting, building on the President's National Export
Initiative; expands training and counseling; and provides $12 billion
in tax relief to help small businesses invest in their firms and create
jobs.
[[Page 63519]]
Table 6--Summary of Size Standards Analysis
----------------------------------------------------------------------------------------------------------------
Calculated
industry Calculated Current size
NAICS Codes NAICS Industry title specific size common size standard ($
standard ($ standard ($ million)
million) million)
----------------------------------------------------------------------------------------------------------------
561110................................ Office Administrative $7.0 .............. $7.0
Services.
561210................................ Facilities Support 30.0 .............. 35.5
Services.
561311................................ Employment Placement 14.0 $25.5 7.0
Agencies.
561312................................ Executive Search 7.0 25.5 7.0
Services.
561320................................ Temporary Help Services. 25.5 25.5 13.5
561330................................ Professional Employer 30.0 25.5 13.5
Organizations.
561410................................ Document Preparation 7.0 14.0 7.0
Services.
561421................................ Telephone Answering 10.0 14.0 7.0
Services.
561422................................ Telemarketing Bureaus 25.5 14.0 7.0
and Other contact
Centers.
561431................................ Private Mail Centers.... 5.0 14.0 7.0
561439................................ Other Business Service 19.0 14.0 7.0
Centers (including Copy
Shops).
561440................................ Collection Agencies..... 14.0 14.0 7.0
561450................................ Credit Bureaus.......... 35.5 14.0 7.0
561491................................ Repossession Services... 5.0 14.0 7.0
561492................................ Court Reporting and 7.0 14.0 7.0
Stenotype Services.
561499................................ All Other Business 14.0 14.0 7.0
Support Services.
561510................................ Travel Agencies\10\..... 19.0 19.0 3.5
561520................................ Tour Operators\10\...... 10.0 19.0 7.0
561591................................ Convention and Visitors 7.0 19.0 7.0
Bureaus.
561599................................ All Other Travel 35.5 19.0 7.0
Arrangement and
Reservation Services.
561611................................ Investigation Services.. 14.0 19.0 12.5
561612................................ Security Guards and 19.0 19.0 18.5
Patrol Services.
561613................................ Armored Car Services.... 30.0 19.0 12.5
561621................................ Security Systems 19.0 19.0 12.5
Services (except
Locksmiths).
561622................................ Locksmiths.............. 5.0 19.0 7.0
561710................................ Exterminating and Pest 10.0 .............. 7.0
Control Services.
561720................................ Janitorial Services..... 7.0 .............. 16.5
561730................................ Landscaping Services.... 5.0 .............. 7.0
561740................................ Carpet and Upholstery 5.0 .............. 4.5
Cleaning Services.
561790................................ Other Services to 7.0 .............. 7.0
Buildings and Dwellings.
561910................................ Packaging and Labeling 10.0 10.0 7.0
Services.
561920................................ Convention and Trade 19.0 10.0 7.0
Show Organizers\10\.
561990................................ All Other Support 10.0 10.0 7.0
Services.
562111................................ Solid Waste Collection.. 35.5 35.5 12.5
562112................................ Hazardous Waste 14.0 35.5 12.5
Collection.
562119................................ Other Waste Collection.. 14.0 35.5 12.5
562211................................ Hazardous Waste 25.5 35.5 12.5
Treatment and Disposal.
562212................................ Solid Waste Landfill.... 30.0 35.5 12.5
562213................................ Solid Waste Combustors 30.0 35.5 12.5
and Incinerators.
562219................................ Other Nonhazardous Waste 10.0 35.5 12.5
Treatment and Disposal.
562910................................ Remediation Services.... 19.0 .............. 14.0
562920................................ Materials Recovery 19.0 .............. 12.5
Facilities.
562991................................ Septic Tank and Related 5.0 .............. 7.0
Services.
562998................................ All Other Miscellaneous 5.0 .............. 7.0
Waste Management
Services.
----------------------------------------------------------------------------------------------------------------
Lowering size standards would decrease the number of firms that can
participate in Federal financial and procurement assistance for small
businesses. Furthermore, size standards based solely on analytical
results without any other considerations would cut off more than 800
currently eligible small firms from those programs. That would run
counter to what SBA and the Federal government are doing to help small
businesses. Reducing size eligibility for Federal procurement
opportunities, especially under current economic conditions, would not
preserve or create more jobs; rather, it would have the opposite
effect. Therefore, in this proposed rule, SBA does not propose to
reduce size standards for any industries. For industries where analyses
might seem to support lowering size standards, SBA proposes to retain
the current size standards. As stated previously, the Small Business
Act requires the Administrator to ``* * * consider other factors deemed
to be relevant * * *'' to establishing small business size standards.
The current economic conditions and the impact on job creation are
quite relevant to establishing small business size standards. SBA
nevertheless invites comments and suggestions on whether it should
lower size standards as suggested by analyses of industry and program
data or retain the current standards for those industries in view of
current economic conditions.
Based on comparisons between industry specific size standards and
common size standards within each Industry Group, SBA finds that for
some industries common size standards are more appropriate for several
reasons. First, analyzing industries at a more aggregated Industry
Group level simplifies size standards analysis and the results are
likely to be more consistent among related industries. Second, in most
cases, industries within each Industry Group currently have the same
size standards and SBA believes it is better to keep the revised size
[[Page 63520]]
standards also the same. Third, within each Industry Group many of the
same businesses tend to operate in the same multiple industries. SBA
believes that common size standards reflect the Federal marketplace in
those industries better than do different size standards for each
industry. Fourth, for the majority of industries for which SBA has
proposed common size standards, industry specific size standards and
common size standards are within a reasonably close range.
For industries where both industry specific size standards and
common size standards have been calculated, for the above reasons, SBA
proposes to apply common size standards. For industries where common
size standards have not been estimated, SBA proposes to apply industry
specific size standards.
As discussed above, SBA has decided that lowering small business
size standards would be inconsistent with what the Federal government
is doing to stimulate the economy and encourage job growth through the
Recovery Act and Jobs Act. Therefore, for those industries for which
its analyses suggested decreasing their size standards, SBA proposes to
retain the current size standards. Thus, of the 44 industries in NAICS
Sector 56 that SBA reviewed for this proposed rule, the Agency proposes
to increase size standards for 37 industries and retain the current
standards for seven industries. Industries for which SBA has proposed
to increase their size standards and proposed standards are in Table 7
(below).
In addition, not lowering size standards is consistent with SBA's
prior actions for NAICS Sector 44-45 (Retail Trade), NAICS Sector 72
(Accommodation and Food Services), and NAICS Sector 81 (Other Services)
that the Agency proposed and adopted in its final rules (75 FR 61597,
75 FR 61604, and 75 FR 61591, (October 6, 2009)). It is also consistent
with the Agency's recently proposed rules for NAICS Sector 54,
Professional, Technical, and Scientific Services (76 FR 14323 (March
16, 2011)), NAICS Sector 48-49, Transportation and Warehousing (76 FR
27935 (May 13, 2011)), and NAICS Sector 51, Information, that is being
published elsewhere in this issue of the Federal Register. In each of
those final and proposed rules, SBA opted not to reduce small business
size standards for the same reasons it has provided above in this
proposed rule.
Table 7--Summary of Proposed Size Standard Revisions
----------------------------------------------------------------------------------------------------------------
Proposed size Current size
NAICS Codes NAICS Industry title standard ($ standard ($
million) million)
----------------------------------------------------------------------------------------------------------------
561311........................................ Employment Placement Agencies... $25.5 $7.0
561312........................................ Executive Search Services....... 25.5 7.0
561320........................................ Temporary Help Services......... 25.5 13.5
561330........................................ Professional Employer 25.5 13.5
Organizations.
561410........................................ Document Preparation Services... 14.0 7.0
561421........................................ Telephone Answering Services.... 14.0 7.0
561422........................................ Telemarketing Bureaus and Other 14.0 7.0
contact Centers.
561431........................................ Private Mail Centers............ 14.0 7.0
561439........................................ Other Business Service Centers 14.0 7.0
(including Copy Shops).
561440........................................ Collection Agencies............. 14.0 7.0
561450........................................ Credit Bureaus.................. 14.0 7.0
561491........................................ Repossession Services........... 14.0 7.0
561492........................................ Court Reporting and Stenotype 14.0 7.0
Services.
561499........................................ All Other Business Support 14.0 7.0
Services.
561510........................................ Travel Agencies \10\............ \10\ 19.0 \10\ 3.5
561520........................................ Tour Operators \10\............. \10\ 19.0 \10\ 7.0
561591........................................ Convention and Visitors Bureaus. 19.0 7.0
561599........................................ All Other Travel Arrangement and 19.0 7.0
Reservation Services.
561611........................................ Investigation Services.......... 19.0 12.5
561612........................................ Security Guards and Patrol 19.0 18.5
Services.
561613........................................ Armored Car Services............ 19.0 12.5
561621........................................ Security Systems Services 19.0 12.5
(except Locksmiths).
561622........................................ Locksmiths...................... 19.0 7.0
561710........................................ Exterminating and Pest Control 10.0 7.0
Services.
561740........................................ Carpet and Upholstery Cleaning 5.0 4.5
Services.
561910........................................ Packaging and Labeling Services. 10.0 7.0
561920........................................ Convention and Trade Show \10\ 10.0 \10\ 7.0
Organizers \10\.
561990........................................ All Other Support Services...... 10.0 7.0
562111........................................ Solid Waste Collection.......... 35.5 12.5
562112........................................ Hazardous Waste Collection...... 35.5 12.5
562119........................................ Other Waste Collection.......... 35.5 12.5
562211........................................ Hazardous Waste Treatment and 35.5 12.5
Disposal.
562212........................................ Solid Waste Landfill............ 35.5 12.5
562213........................................ Solid Waste Combustors and 35.5 12.5
Incinerators.
562219........................................ Other Nonhazardous Waste 35.5 12.5
Treatment and Disposal.
562910........................................ Remediation Services............ 19.0 14.0
562920........................................ Materials Recovery Facilities... 19.0 12.5
----------------------------------------------------------------------------------------------------------------
Footnote 10 to SBA's table of size standards states the following:
``As measured by total revenues, but excluding funds received in trust
for an unaffiliated third party, such as bookings or sales subject to
commissions. The commissions received are included as revenue.'' The
SBA does not propose to modify the calculation of receipts for these
industries.
[[Page 63521]]
Evaluation of Dominance in Field of Operation
SBA has determined that for the industries in NAICS Sector 56,
Administrative and Support, Waste Management and Remediation Services,
for which it has proposed to increase size standards, no firm at or
below the proposed size standard will be large enough to dominate its
field of operation. At the proposed size standards, if adopted, small
business shares of total industry receipts among those industries vary
from less than 0.1 percent to 5.3 percent, with an average of 0.6
percent. These levels of market share effectively preclude a firm at or
below the proposed size standards from exerting control on this
industry.
Request for Comments
SBA invites public comments on the proposed rule, especially on the
following issues.
1. To simplify size standards, SBA proposes eight fixed size levels
for receipts based size standards: $5.0 million, $7.0 million, $10.0
million, $14.0 million, $19.0 million, $25.5 million, $30.0 million and
$35.5 million. SBA invites comments on whether simplification of size
standards in this way is necessary and if these proposed fixed size
levels are appropriate. SBA welcomes suggestions on alternative
approaches to simplifying small business size standards.
2. SBA seeks feedback on whether the proposed levels of size
standards are appropriate given the economic characteristics of each
industry. SBA also seeks feedback and suggestions on alternative
standards, if they would be more appropriate, including whether an
employee based standard for certain industries is a more suitable
measure of size and if so, what that employee level should be.
3. SBA proposes that each of seven 4-digit NAICS Industry Groups
(see Table 4, above) have common size standards for the Industries that
make up their groups. SBA invites comments or suggestions along with
supporting information with respect to the following:
a. Whether SBA should adopt common size standards for those
industries or establish a separate size standard for each industry.
b. Whether the proposed common size standards for those industries
are at the correct levels, and if not, what are more appropriate size
standards.
4. SBA's proposed size standards are based on its evaluation of
five primary factors: Average firm size, average assets size (as a
proxy for startup costs and entry barriers), four-firm concentration
ratio, distribution of firms by size, and the level and small business
share of Federal contracting dollars. SBA welcomes comments on these
factors and/or suggestions on other factors that it should consider for
assessing industry characteristics when evaluating or revising size
standards. SBA also seeks information on relevant data sources, if
available.
5. SBA gives equal weight to each of the five primary factors in
all industries. SBA seeks feedback on whether it should continue giving
equal weight to each factor or whether it should give more weight to
one or more factors for certain industries. Recommendations to weigh
some factors more than others should include suggestions on specific
weights for each factor for those industries, along with supporting
information.
6. For some industries, based on analysis of industry and program
data, SBA proposes to increase the existing size standards by a large
amount (such as NAICS 561311, NAICS 561312, and NAICS Industry Groups
5615, 5621 and 5622), while for others the proposed increases are
modest. SBA seeks feedback on whether it should, as a policy, limit the
increase to a size standard and/or whether it should, as a policy,
establish minimum or maximum values for its size standards. SBA seeks
suggestions on appropriate levels of changes to size standards and on
their minimum or maximum levels.
7. Based on the analysis of industry and program data and common
size standards, SBA has proposed to increase the size standards for
NAICS 561510 (Travel Agencies) from $3.5 million to $19 million and for
NAICS 561520 (Tour Operators) from $7.0 million to $19.0 million. SBA
requests comments on the proposed size standards for these two
industries because to determine if a company meets the size standard
for either of these industries, firms may exclude ``* * * funds
received in trust for an unaffiliated third party, such as bookings or
sales subject to commissions. The commissions received are included as
revenue'' (see Footnote 10 to SBA's table of size standards). SBA seeks
feedback on whether it should continue or terminate the exclusion of
funds received in trust for an unaffiliated third party from receipts
if it adopts its proposed standard or any other standard considerably
higher than the existing standards for these industries. SBA also
welcomes information and data on how businesses in these industries
collect and report income for Federal Income Tax Returns, and what they
recognize as business receipts (see 13 CFR 121.104 for SBA's definition
of ``receipts'').
8. For analytical simplicity and efficiency, in this proposed rule,
SBA has refined its size standard methodology to obtain a single value
as a proposed size standard instead of a range of values, as seen in
its past size regulations. SBA welcomes any comments on this procedure
and suggestions on alternative methods.
Public comments on the above issues are very valuable to SBA for
validating its size standard methodology and proposed revisions to size
standards in this proposed rule. This will help SBA to move forward
with its review of size standards for other NAICS Sectors. Commenters
addressing size standards for a specific industry or a group of
industries should include relevant data and/or other information
supporting their comments. If comments relate to using size standards
for Federal procurement programs, SBA suggests that commenters provide
information on the size of contracts awarded, the size of businesses
that can undertake the contracts, start-up costs, equipment and other
asset requirements, the amount of subcontracting, other direct and
indirect costs associated with the contracts, the use of mandatory
sources of supply for products and services and the degree to which
contractors can mark up those costs.
Compliance With Executive Orders 12866, 13563, 12988 and 13132, the
Paperwork Reduction Act (44 U.S.C. Ch. 35) and the Regulatory
Flexibility Act (5 U.S.C. 601-612)
Executive Order 12866
The Office of Management and Budget (OMB) has determined that this
proposed rule is a ``significant'' regulatory action for purposes of
Executive Order 12866. Accordingly, the next section contains SBA's
Regulatory Impact Analysis. This is not a major rule, however, under
the Congressional Review Act, 5 U.S.C. 800.
Regulatory Impact Analysis
1. Is there a need for the regulatory action?
SBA believes that proposed size standards revisions for a number of
industries in NAICS Sector 56, Administrative and Support, Waste
Management and Remediation Services, will better reflect the economic
characteristics of small businesses and the Federal government
marketplace. SBA's mission is to aid and assist small businesses
through a variety of financial, procurement, business development, and
advocacy programs.
[[Page 63522]]
To assist the intended beneficiaries of these programs, SBA must
establish distinct definitions of which businesses are deemed small
businesses. The Small Business Act (15 U.S.C. 632(a)) delegates to
SBA's Administrator the responsibility for establishing small business
definitions. The Act also requires that small business definitions vary
to reflect industry differences. The recently enacted Small Business
Jobs Act also requires SBA to review all size standards and make
necessary adjustments to reflect market conditions. The supplementary
information section of this proposed rule explains SBA's methodology
for analyzing a size standard for a particular industry.
2. What are the potential benefits and costs of this regulatory action?
The most significant benefit to businesses obtaining small business
status because of this rule is gaining eligibility for Federal small
business assistance programs. These include SBA's financial assistance
programs, economic injury disaster loans, and Federal procurement
programs intended for small businesses. Federal procurement programs
provide targeted opportunities for small businesses under SBA's
business development programs, such as 8(a), Small Disadvantaged
Businesses (SDB), small businesses located in Historically
Underutilized Business Zones (HUBZone), women-owned small businesses
(WOSB), and service-disabled veteran-owned small business concerns
(SDVO SBC). Federal agencies may also use SBA size standards for a
variety of other regulatory and program purposes. These programs assist
small businesses to become more knowledgeable, stable, and competitive.
In 37 industries for which SBA has proposed increasing size standards,
SBA estimates that about 2,700 additional firms will obtain small
business status and become eligible for these programs. That number is
nearly 1.0 percent of the total number of firms that are classified as
small under the current standards in all industries within NAICS Sector
56. If adopted as proposed, this would increase the small business
share of total industry receipts in those industries from about 32
percent under the current size standards to nearly 37 percent.
Three groups will benefit from these proposed size standards, if
they are adopted as proposed: (1) Some businesses that are above the
current size standards may gain small business status under the higher
size standards, thereby enabling them to participate in Federal small
business assistance programs; (2) growing small businesses that are
close to exceeding the current size standards will be able to retain
their small business status under the higher size standards, thereby
enabling them to continue their participation in the programs; and (3)
Federal agencies will have larger pools of small businesses from which
to draw for their small business procurement programs.
During fiscal years 2007 to 2009, 35 percent of Federal contracting
dollars spent in industries reviewed in this proposed rule were
accounted for by the 37 industries for which SBA has proposed to
increase size standards. SBA estimates that additional firms gaining
small business status in those industries under the proposed size
standards could potentially obtain Federal contracts totaling up to $60
million to $75 million annually under SBA's small business, 8(a), SDB,
HUBZone, WOSB, and SDVO SBC Programs, and other unrestricted
procurements. The added competition for many of these procurements
could also result in lower prices to the Government for procurements
reserved for small businesses, although SBA cannot quantify this
benefit.
Under SBA's 7(a) Business Loan and 504 Programs, based on the 2008-
2010 data, SBA estimates that about 20 to 30 additional loans totaling
about $3 million to $5 million in Federal loan guarantees could be made
to these newly defined small businesses under the proposed standards.
Increasing the size standards will likely result in more small business
guaranteed loans to businesses in these industries, but it would be
impractical to try to estimate exactly the extent of their number and
the total amount loaned. Under the Jobs Act, SBA can now guarantee
substantially larger loans than in the past. In addition, the Jobs Act
established an alternative size standard ($15 million in tangible net
worth and $5 million in net income after income taxes) for business
concerns that do not meet the size standards for their industry.
Therefore, SBA finds it similarly difficult to quantify the impact of
these proposed standards on its 7(a) and 504 Loan Programs.
Newly defined small businesses will also benefit from SBA's
Economic Injury Disaster Loan (EIDL) Program. Since this program is
contingent on the occurrence and severity of a disaster, SBA cannot
make a meaningful estimate of benefits for future disasters.
To the extent that 2,700 newly defined additional small firms could
become active in Federal procurement programs, the proposed changes, if
adopted, may entail some additional administrative costs to the Federal
Government, including those associated with additional bidders for
Federal small business procurement opportunities, additional firms
seeking SBA guaranteed lending programs, additional firms eligible for
enrollment in the Central Contractor Registration's (CCR) Dynamic Small
Business Search database, and additional firms seeking certification as
8(a) or HUBZone firms or qualifying for small business, WOSB, SDVO SBC,
and SDB status. Among those newly defined small businesses seeking SBA
assistance, there could be some additional costs associated with
compliance and verification of small business status and protests of
small business status. These added costs will be minimal because
mechanisms are already in place to handle these administrative
requirements.
Additionally, the costs to the Federal Government may be higher on
some Federal contracts. With a greater number of businesses defined as
small, Federal agencies may choose to set aside more contracts for
competition among small businesses rather than using full and open
competition. The movement from unrestricted to small business set-aside
contracting might result in competition among fewer total bidders,
although there will be more small businesses eligible to submit offers.
In addition, higher costs may result when more full and open contracts
are awarded to HUBZone and SDB businesses that receive price evaluation
preferences. However, the additional costs associated with fewer
bidders are expected to be minor since, as a matter of law,
procurements may be set aside for small businesses or reserved for the
8(a), HUBZone, WOSB, or SDVO SBC Programs only if awards are expected
to be made at fair and reasonable prices. In addition, higher costs may
result when more full and open contracts are awarded to HUBZone and SDB
businesses that receive price evaluation preferences.
The proposed size standards may have distributional effects among
large and small businesses. Although SBA cannot estimate with certainty
the actual outcome of the gains and losses among small and large
businesses, it can identify several probable impacts. There may be a
transfer of some Federal contracts to small businesses from large
businesses. Large businesses may have fewer Federal contract
opportunities as Federal agencies decide to set aside more Federal
contracts for small businesses. In addition, some Federal contracts may
be awarded to HUBZone or SDB concerns instead of large
[[Page 63523]]
businesses since those two categories of small businesses may be
eligible for an evaluation adjustment for contracts when they compete
on a full and open basis. Similarly, currently defined small businesses
may obtain fewer Federal contracts due to the increased competition
from more businesses defined as small. This transfer may be offset by a
greater number of Federal procurements set aside for all small
businesses. The number of newly defined and expanding small businesses
that are willing and able to sell to the Federal Government will limit
the potential transfer of contracts away from large and currently
defined small businesses. SBA cannot estimate the potential
distributional impacts of these transfers with any degree of precision
because FPDS-NG data only identify the size of businesses receiving
Federal contracts as ``small business'' or ``other than small
business''; FPDS-NG does not provide the exact size of the businesses.
The proposed revisions to the existing size standards for
Industries in NAICS Sector 56, Administrative and Support, Waste
Management and Remediation Services, are consistent with SBA's
statutory mandate to assist small business. This regulatory action
promotes the Administration's objectives. One of SBA's goals in support
of the Administration's objectives is to help individual small
businesses succeed through fair and equitable access to capital and
credit, Government contracts, and management and technical assistance.
Reviewing and modifying size standards, when appropriate, ensures that
intended beneficiaries have access to small business programs designed
to assist them.
Executive Order 13563
A description of the need for this regulatory action and the
benefits and costs associated with this action, including possible
distributional impacts that relate to Executive Order 13563, are
included above in the Regulatory Impact Analysis under Executive Order
12866.
In an effort to engage interested parties in this action, SBA has
presented its methodology (discussed above under Supplementary
Information) to various industry associations and trade groups. SBA
also met with various industry groups to obtain their feedback on its
methodology and other size standards issues. SBA also presented its
size standards methodology to businesses in 13 cities in the U.S. and
sought their input as part of the Jobs Act tours.
Additionally, SBA sent letters to the Directors of the Offices of
Small and Disadvantaged Business Utilization (OSDBU) at several Federal
agencies with considerable procurement responsibilities requesting
their feedback on how the agencies use SBA size standards and whether
current standards meet their programmatic needs (both procurement and
non-procurement). SBA gave appropriate consideration to all input,
suggestions, recommendations, and relevant information obtained from
industry groups, individual businesses, and Federal agencies in
preparing this proposed rule.
The review of size standards in NAICS Sector 56, Administrative and
Support, Waste Management and Remediation Services, is consistent with
EO 13563, Sec. 6, calling for retrospective analyses of existing rules.
As discussed previously, the last overall review of size standards
occurred during the late 1970s and early 1980s. Since then, except for
periodic adjustments for monetary based size standards, most reviews of
size standards were limited to a few specific industries in response to
requests from the public and Federal agencies. SBA recognizes that
changes in industry structure and the Federal marketplace over time
have rendered existing size standards for some industries no longer
supportable by current data. Accordingly, SBA has begun a comprehensive
review of its size standards to ensure that existing size standards
have supportable bases and to revise them when necessary. In addition,
on September 27, 2010 the President of the United States signed the
Jobs Act. The Jobs Act directs SBA to conduct a detailed review of all
size standards and to make appropriate adjustments to reflect market
conditions. Specifically, the Jobs Act requires SBA to conduct a
detailed review of at least one-third of all size standards during
every 18-month period from the date of its enactment and do a complete
review of all size standards not less frequently than once every five
years thereafter.
Executive Order 12988
This action meets applicable standards set forth in Sections 3(a)
and 3(b)(2) of Executive Order 12988, Civil Justice Reform, to minimize
litigation, eliminate ambiguity, and reduce burden. The action does not
have retroactive or preemptive effect.
Executive Order 13132
For purposes of Executive Order 13132, SBA has determined that this
proposed rule will not have substantial, direct effects on the States,
on the relationship between the national government and the States, or
on the distribution of power and responsibilities among the various
levels of government. Therefore, SBA has determined that this proposed
rule has no federalism implications warranting preparation of a
federalism assessment.
Paperwork Reduction Act
For the purpose of the Paperwork Reduction Act, 44 U.S.C. Ch. 35,
SBA has determined that this rule would not impose any new reporting or
record keeping requirements.
Initial Regulatory Flexibility Analysis
Under the Regulatory Flexibility Act (RFA), this rule, if
finalized, may have a significant impact on a substantial number of
small businesses in NAICS Sector 56, Administrative and Support, Waste
Management and Remediation Services. As described above, this rule may
affect small businesses seeking Federal contracts, loans under SBA's
(7a), 504 Guaranteed Loan and Economic Injury Disaster Loan Programs,
and assistance under other Federal small business programs.
Immediately below, SBA sets forth an initial regulatory flexibility
analysis (IRFA) of this proposed rule addressing the following
questions: (1) What are the need for and objective of the rule? (2)
What are SBA's description and estimate of the number of small entities
to which the rule will apply? (3) What are the projected reporting,
record keeping, and other compliance requirements of the rule? (4) What
are the relevant Federal rules that may duplicate, overlap, or conflict
with the rule?, and (5) What alternatives will allow the Agency to
accomplish its regulatory objectives while minimizing the impact on
small entities?
1. What are the need for and objective of the rule?
Most of the size standards in NAICS Sector 56, Administrative and
Support, Remediation and Support Services, have not been reviewed since
the early 1980s. Technology, productivity growth, international
competition, mergers and acquisitions, and updated industry definitions
may have changed the structure of many industries in the Sector. Such
changes can be sufficient to support revisions to current size
standards for some industries. Based on its analysis of the latest data
available, SBA believes that the revised standards in this proposed
rule more appropriately reflect the size of
[[Page 63524]]
businesses in those industries that need Federal assistance. The
recently enacted Small Business Jobs Act also requires SBA to review
all size standards and make necessary adjustments to reflect market
conditions.
2. What is SBA's description and estimate of the number of small
entities to which the rule will apply?
If the proposed rule is adopted in its present form, SBA estimates
that about 2,700 additional firms will become small because of
increases in size standards in 37 industries and one sub-industry. That
represents about 1.0 percent of total firms that are small under
current size standards in all industries within NAICS Sector 56. This
will result in an increase in the small business share of total
industry receipts for this Sector from about 32 percent under the
current size standard to nearly 37 percent under the proposed
standards. SBA does not anticipate a significant competitive impact on
smaller businesses in these industries because businesses in this
Sector have been requesting SBA to increase these standards. The
proposed standards, if adopted, will enable more small businesses to
retain their small business status for a longer period. Many have lost
their eligibility and find it difficult to compete at such low levels
with companies that are significantly larger than they are. SBA
believes the competitive impact will be positive for existing small
businesses and for those that exceed the size standards but are on the
very low end of those that are not small. They might otherwise be
called or referred to as mid-sized businesses, although SBA only
defines what is small; other entities are other than small.
3. What are the projected reporting, record keeping and other
compliance requirements of the rule and an estimate of the classes of
small entities, which will be subject to the requirements?
Proposed size standards changes do not impose any additional
reporting or record keeping requirements on small entities. However,
qualifying for Federal procurement and a number of other programs
requires that entities register in the CCR database and certify at
least annually that they are small in the Online Representations and
Certifications Application (ORCA). Therefore, businesses opting to
participate in those programs must comply with CCR and ORCA
requirements. There are no costs associated with either CCR
registration or ORCA certification. Changing size standards alters the
access to SBA programs that assist small businesses but does not impose
a regulatory burden as they neither regulate nor control business
behavior.
4. What are the relevant Federal rules, which may duplicate, overlap,
or conflict with the rule?
Under Sec. 3(a)(2)(C) of the Small Business Act, 15 U.S.C.
632(a)(2)(c), Federal agencies must use SBA's size standards to define
a small business, unless specifically authorized by statute to do
otherwise. In 1995, SBA published in the Federal Register a list of
statutory and regulatory size standards that identified the application
of SBA's size standards as well as other size standards used by Federal
agencies (60 FR 57988 (November 24, 1995)). SBA is not aware of any
Federal rule that would duplicate or conflict with establishing size
standards.
However, the Small Business Act and SBA's regulations allow Federal
agencies to develop different size standards if they believe that SBA's
size standards are not appropriate for their programs, with the
approval of SBA's Administrator (13 CFR 121.903). The Regulatory
Flexibility Act authorizes an Agency to establish an alternative small
business definition after consultation with the Office of Advocacy of
the U.S. Small Business Administration (5 U.S.C. 601(3)).
5. What alternatives will allow the Agency to accomplish its regulatory
objectives while minimizing the impact on small entities?
By law, SBA is required to develop numerical size standards for
establishing eligibility for Federal small business assistance
programs. Other than varying size standards by industry and changing
the size measures, no practical alternative exists to the systems of
numerical size standards.
List of Subjects in 13 CFR Part 121
Administrative practice and procedure, Government procurement,
Government property, Grant programs--business, Individuals with
disabilities, Loan programs--business, Reporting and recordkeeping
requirements, Small businesses.
For the reasons set forth in the preamble, SBA proposes to amend
part 13 CFR Part 121 as follows:
PART 121--SMALL BUSINESS SIZE REGULATIONS
1. The authority citation for part 121 continues to read as
follows:
Authority: 15 U.S.C. 632, 634(b)(6), 636(b), 637(a), 644 and
662(5); and Pub. L. 105-135, sec. 401 et seq., 111 Stat. 2592.
2. In Sec. 121.201, in the table, revise the entries for
``561311,'' ``561312,'' ``561320,'' ``561330,'' ``561410,'' ``561421,''
``561422,'' ``561431,'' ``561439,'' ``561440,'' ``561450,'' ``561491,''
``561492,'' ``561499,'' ``561510,'' ``561520,'' ``561591,'' ``561599,''
``561611,'' ``561612,'' ``561613,'' ``561621,'' ``561622,'' ``561710,''
``561740,'' ``561910,'' ``561920,'' ``561990,'' ``562111,'' ``562112,''
``562119,'' ``562211,'' ``562212,'' ``562213,'' ``562219,''
``562910,''and ``562920'' to read as follows:
Sec. 121.201 What size standards has SBA identified by North American
Industry Classification System codes?
* * * * *
----------------------------------------------------------------------------------------------------------------
Size standards Size standards
NAICS Codes NAICS U.S. industry title in millions of in number of
dollars employees
----------------------------------------------------------------------------------------------------------------
* * * * * * *
561311........................................ Employment Placement Agencies... $25.5
561312........................................ Executive Search Services....... 25.5
561320........................................ Temporary Help Services......... 25.5
561330........................................ Professional Employer 25.5
Organizations.
561410........................................ Document Preparation Services... 14.0
561421........................................ Telephone Answering Services.... 14.0
561422........................................ Telemarketing Bureaus and Other 14.0
Contact Centers.
561431........................................ Private Mail Centers............ 14.0
561439........................................ Other Business Service Centers 14.0
(including Copy Shops).
561440........................................ Collection Agencies............. 14.0
[[Page 63525]]
561450........................................ Credit Bureaus.................. 14.0
561491........................................ Repossession Services........... 14.0
561492........................................ Court Reporting and Stenotype 14.0
Services.
561499........................................ All Other Business Support 14.0
Services.
561510........................................ Travel Agencies \10\............ \10\ 19.0
561520........................................ Tour Operators \10\............. \10\ 19.0
561591........................................ Convention and Visitors Bureaus. 19.0
561599........................................ All Other Travel Arrangement and 19.0
Reservation Services.
561611........................................ Investigation Services.......... 19.0
561612........................................ Security Guards and Patrol 19.0
Services.
561613........................................ Armored Car Services............ 19.0
561621........................................ Security Systems Services 19.0
(except Locksmiths).
561622........................................ Locksmiths...................... 19.0
561710........................................ Exterminating and Pest Control 10.0
Services.
* * * * * * *
561740........................................ Carpet and Upholstery Cleaning 5.0
Services.
* * * * * * *
561910........................................ Packaging and Labeling Services. 10.0
561920........................................ Convention and Trade Show \10\ 10.0
Organizers\10\.
561990........................................ All Other Support Services...... 10.0
* * * * * * *
562111........................................ Solid Waste Collection.......... 35.5
562112........................................ Hazardous Waste Collection...... 35.5
562119........................................ Other Waste Collection.......... 35.5
562211........................................ Hazardous Waste Treatment and 35.5
Disposal.
562212........................................ Solid Waste Landfill............ 35.5
562213........................................ Solid Waste Combustors and 35.5
Incinerators.
562219........................................ Other Nonhazardous Waste 35.5
Treatment and Disposal.
562910........................................ Remediation Services............ 19.0
* * * * * * *
562920........................................ Materials Recovery Facilities... 19.0
* * * * * * *
----------------------------------------------------------------------------------------------------------------
Dated: July 22, 2011.
Karen G. Mills,
Administrator.
[FR Doc. 2011-26207 Filed 10-11-11; 8:45 am]
BILLING CODE 8025-01-P