[Federal Register Volume 77, Number 235 (Thursday, December 6, 2012)]
[Proposed Rules]
[Pages 72766-72776]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2012-29353]


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SMALL BUSINESS ADMINISTRATION

13 CFR Part 121

RIN 3245-AG44


Small Business Size Standards: Support Activities for Mining

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 three industries in North 
American Industry Classification System (NAICS) Subsector 213, Support 
Activities for Mining, within NAICS Sector 21, Mining, Quarrying, and 
Oil and Gas Extraction. NAICS Sector 21 contains four industries with 
receipts based standards and 19 industries with employee based size 
standards. As part of its ongoing comprehensive review of all size 
standards, in this proposed rule, SBA has evaluated the four industries 
that have the receipts based size standards in NAICS Sector 21 to 
determine whether they should be retained or revised. SBA will review 
the 19 industries that have the employee based standards in NAICS 
Sector 21 at a later date. This proposed rule is one of a series of 
proposed rules that will review size standards of industries grouped by 
NAICS Sector. SBA has issued a White Paper entitled ``Size Standards 
Methodology'' and published a notice in the October 21, 2009 issue of 
the Federal Register to advise the public that ``Size Standards 
Methodology'' is available on its Web site at 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 in determining changes 
to receipts based size standards in NAICS Sector 21, Mining, Quarrying, 
and Oil and Gas Extraction.

DATES: SBA must receive comments to this proposed rule on or before 
February 4, 2013.

ADDRESSES: Identify your comments by RIN 3245-AG44 and submit them by 
one of the following methods: (1) Federal eRulemaking Portal: 
www.regulations.gov, 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. SBA will not accept comments to this proposed 
rule submitted by email.
    SBA will post all comments to this proposed rule on 
www.regulations.gov. If you wish to submit confidential business 
information (CBI) as defined in the User Notice at www.regulations.gov, 
you must submit such information to U.S. Small Business Administration, 
Khem R. Sharma, Ph.D., Chief, Size Standards Division, 409 Third Street 
SW., Mail Code 6530, Washington, DC 20416, or send an email to 
sizestandards@sba.gov. 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, Ph.D., Chief, Size 
Standards Division, phone: (202) 205-6618 or sizestandards@sba.gov.

SUPPLEMENTARY INFORMATION: To determine eligibility for Federal small 
business assistance, SBA establishes small business size 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 beginning 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.
    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 a few specific industries in response to 
requests from the public and Federal agencies. At least once every five 
years, SBA also reviews the effect of inflation on its size standards 
and makes necessary adjustments to its monetary based size standards. 
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 comprehensive size standards review, SBA 
recognizes that current data may no longer support some of its existing 
size standards. Accordingly, in 2007, SBA began a

[[Page 72767]]

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 conduct a 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 is reviewing 
size standards on a Sector by Sector basis. An NAICS Sector generally 
includes 25 to 75 industries, except for NAICS Sector 31-33, 
Manufacturing, which has considerably more industries. Once SBA 
completes its review of size standards for industries in an NAICS 
Sector, it issues a proposed rule to revise size standards for those 
industries for which it believes 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 that SBA applied to this 
proposed rule, including analyses of industry structure, Federal 
procurement trends and other relevant factors, the impact of the 
proposed revisions to size standards on Federal small business 
assistance, and SBA's evaluation of whether a revised size standard 
would exclude dominant firms from being considered small.

Size Standards Methodology

    SBA has developed a ``Size Standards Methodology'' for developing, 
reviewing, and modifying size standards when necessary. SBA has 
published the document on its Web site at www.sba.gov/size for public 
review and comments, and has included it as a supporting document in 
the electronic docket of this proposed rule at www.regulations.gov. SBA 
does not apply all features of its ``Size Standards Methodology'' to 
all industries because not all features are appropriate for every 
industry. For example, since all four industries in NAICS Sector 21 
that are covered by this proposed rule have receipts based size 
standards, the methodology described here applies only to establishing 
a receipts based size standard. However, the methodology is available 
for review and comments 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 whether there 
are other 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; whether there are gaps in SBA's 
methodology because the data it uses are not current or sufficiently 
comprehensive; and whether there are other data, facts, and/or issues 
that SBA should consider. Comments on SBA's methodology should be 
submitted via (1) the Federal eRulemaking Portal: www.regulations.gov, 
following the instructions for submitting comments; the docket number 
is SBA-2009-0008, 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 it will do with comments to this and 
other proposed rules, SBA will post all comments on its methodology on 
www.regulations.gov. As of January 1, 2012, SBA has received 13 
comments to its ``Size Standards Methodology.'' The comments are 
available to the public at www.regulations.gov, Docket ID: SBA-2009-
0008. SBA continues to welcome comments on its methodology from 
interested parties. SBA will not accept comments to its ``Size 
Standards Methodology'' submitted by email.
    Congress granted SBA's Administrator discretion to establish 
detailed small business size standards. 15 U.S.C. 632(a)(2). 
Specifically, 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 
(as described below). In addition, SBA considers current economic 
conditions, its mission and program objectives, the Administration's 
current policies, suggestions from industry groups and Federal 
agencies, and public comments on the proposed rule. 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 adjustments to receipts 
based size standards in NAICS Sector 21. This proposed rule affords the 
public an opportunity to review and to comment on SBA's proposals to 
revise size standards in NAICS Sector 21, as well as on the data and 
methodology it used to evaluate and revise the size standards.

Industry Analysis

    For the current comprehensive size standards review, SBA 
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 today it is $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, the Wholesale Trade 
NAICs Codes and their100 employee size standards do not apply to 
Federal procurement programs. Rather, for Federal procurement the size 
standard for all industries in Wholesale Trade (NAICS Sector 42) 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 is neither a minimum nor a

[[Page 72768]]

maximum size standard. It is a common size standard for a large number 
of industries that have similar economic characteristics and serves as 
a reference point in evaluating size standards for individual 
industries. SBA uses the anchor in lieu of trying to establish precise 
small business size standards for each industry. Otherwise, 
theoretically, 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, while the U.S. economy 
is not. Hence, absolute precision is impossible. SBA presumes an anchor 
size standard is appropriate for a particular industry unless that 
industry displays economic characteristics that are considerably 
different from other industries with the same anchor size standard.
    When evaluating a size standard, SBA compares the economic 
characteristics of the 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 generally 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 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 in the 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 21, SBA developed a second comparison group 
consisting of industries that have the highest of receipts based size 
standards. To determine 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; the weighted average size 
standard for the group is $29 million. SBA refers to this comparison 
group as the ``higher level receipts based size standard group.''
    The primary industry factors that SBA evaluates include average 
firm size, startup costs and entry barriers, industry competition, and 
distribution of firms by size. SBA evaluates, as an additional primary 
factor, the impact that revised 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, and other program factors). 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 standards. Below are brief 
descriptions of each of the five primary factors that SBA has evaluated 
for each industry in NAICS Sector 21. A more detailed description of 
this analysis is provided in SBA's ``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 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 size standard. In lieu of actual startup cost data, SBA uses 
average assets as a proxy to measure the 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 average assets 
that are significantly higher than those 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, an industry with 
average assets that are similar to or lower than those of the anchor 
comparison group is likely to have lower startup costs; this will 
support the anchor standard or one lower than the anchor.
    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 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 share of economic activity within the 
industry is less than 40 percent. For an industry with a four-firm 
concentration ratio of 40 percent or more, SBA

[[Page 72769]]

examines the average size of the four largest firms to determine 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 in assessing industry competition. If most of an industry's 
economic activity is attributable to smaller firms, this generally 
indicates that small businesses are competitive in that industry. This 
can 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 can support 
adopting a size standard above the anchor.
    Concentration is a measure of inequality of distribution. To 
determine the degree of inequality of distribution in an industry, SBA 
computes the Gini coefficient, using 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 
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 with that 
for industries in the anchor comparison group. If the Gini coefficient 
value for an industry is higher than it is for industries in the anchor 
comparison industry group this may, all else being equal, warrant a 
size standard higher than the anchor. Conversely, if an industry's Gini 
coefficient is similar to 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, this could justify considering a size standard higher than 
the existing size standard. The disparity between the small business 
Federal market share and industry-wide small business 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 support a size standard 
larger than the current size 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 significant levels 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 also 
evaluates the impact of a proposed size standard revision on SBA's loan 
programs. SBA examines the volume and number of SBA's guaranteed loans 
within an industry and the size of firms obtaining those loans. This 
allows SBA to assess whether the existing or the proposed size standard 
for a particular industry may restrict the level of financial 
assistance to small firms. If 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 
standards, SBA does not consider this factor when 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 2007 Economic Census (see www.census.gov/econ/census07/) prepared by the U.S. Bureau of the Census (Census 
Bureau) for SBA. The 2007 Economic Census data are the latest 
available. The special tabulation provides SBA with data on the number 
of firms, number of establishments, number of employees, annual 
payroll, and annual receipts of companies by, Industry (6-digit level), 
Industry Group (4-digit level), Subsector (3-digit level), and Sector 
(2-digit level). These data are arrayed by various classes of firms' 
size based on the overall number of employees and receipts of the 
entire enterprise (all establishments and affiliated firms) from all 
industries. 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's analysis was based only on those factors for 
which data were available or 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, 2008-
2010.
    To evaluate Federal contracting trends, SBA examined data on 
Federal contract awards for fiscal years 2008-2010. The 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 
2009-2011.
    Data sources and estimation procedures SBA uses in its size 
standards analysis are documented in detail in SBA's ``Size Standards 
Methodology'' White Paper, which is available at 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 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

[[Page 72770]]

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 includes a dominant firm, SBA will consider 
a lower size standard to exclude the dominant firm from being defined 
as small.

Selection of Size Standards

    To simplify receipts based size standards, SBA has proposed to 
select 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 beginning 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 such a large number of 
different small business size standards are 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.
    Therefore, SBA proposes to apply one of eight receipts based size 
standards to each industry in NAICS Sector 21 reviewed in this rule. 
The eight ``fixed'' receipts based size standard levels are $5 million, 
$7 million, $10 million, $14 million, $19 million, $25.5 million, $30 
million, and $35.5 million. SBA established these eight receipts based 
size standard based on the current minimum, the current maximum, and 
the most commonly used current receipts based size standards. At the 
start of the current comprehensive review, the most commonly used 
receipts based size standards clustered around the following--$2.5 
million to $4.5 million, $7 million, $9 million to $10 million, $12.5 
million to $14 million, $25 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 an anchor standard. 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 includes those 
industries with the lowest receipts based standards, which ranged from 
$2 million to $4.5 million. Among the higher level size clusters, SBA 
has set four fixed levels: $10 million, $14 million, $25.5 million, and 
$35.5 million. Because of the large intervals between some of the fixed 
levels, SBA established two intermediate levels, namely $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 separate size standard 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, 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 separate size standards for each of 
those industries. In NAICS Sector 21, the characteristics of the four 
industries with receipts based standards reviewed in this rule are not 
sufficiently alike to warrant a common size standard for all. 
Therefore, SBA is proposing to increase three of the size standards and 
retain the $7 million anchor for NAICS 213115, Support Activities for 
Nonmetallic Minerals (except Fuels).

Evaluation of Industry Structure

    SBA evaluated the four industries in NAICS Sector 21, Mining, 
Quarrying, and Oil and Gas Extraction, to assess the appropriateness of 
the current receipts based size standards. As described above, SBA 
compared data on the economic characteristics of each industry to the 
average characteristics of industries in two comparison groups. The 
first comparison group consists of all industries with $7 million size 
standards and is referred to as the ``receipts based anchor comparison 
group.'' Because the goal of SBA's 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 are similar to the average 
characteristics of industries in the anchor comparison group, the 
anchor size standard is generally 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 proposed 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, Average Characteristics of 
Receipts Based Comparison Groups, shows the average firm size (both 
simple and weighted), average assets size, four-firm concentration 
ratio, average receipts of the four largest firms, and the Gini 
coefficient for both anchor level and higher level comparison groups 
for receipts based size standards.

[[Page 72771]]



                                          Table 1--Average Characteristics of Receipts Based Comparison Groups
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                Average firm size  ($ million)                                        Average receipts
                                             ------------------------------------  Average assets    Four[dash]firm    of four largest
      Receipts based  comparison group                              Weighted          size  ($        concentration       firms  ($     Gini coefficient
                                               Simple average        average          million)         ratio  (%)        million) *
--------------------------------------------------------------------------------------------------------------------------------------------------------
Anchor Level................................              1.32             19.63              0.84              16.6             196.4             0.693
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, Average Characteristics of 
Receipts Based Comparison Groups, 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, the $7 million anchor size standard is 
appropriate for that factor.
    An industry factor significantly above or below the anchor 
comparison group will generally imply a size standard for that industry 
above or below the $7 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 can support a $19 million size standard. The $3.3 million 
level is 52.8 percent between $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 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 $18.61 million ([{$29.0 
million - $7.0 million{time}  * 0.528] + $7.0 million = $18.61 
million). The final step is to round the estimated $18.61 million size 
standard to the nearest fixed size standard, 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 SBA's ``Size Standards Methodology'' which is 
available on its Web site at www.sba.gov/size. (However, it should be 
noted that figures in the ``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, Values of Industry Factors and Supported Size 
Standards, (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 average
 If simple average  receipts size   Or if weighted average  Or if average  assets   receipts of largest         Or if Gini          Then implied size
            ($ million)                receipts size  ($      size  ($ million)        four firms  ($          coefficient       standard is ($ million)
                                           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 1,014.1.....  0.753 to 0.788.......                     19.0
3.93 to 4.86......................  87.03 to 111.32.......  2.49 to 3.07.........  1,014.2 to 1,309.0...  0.789 to 0.822.......                     25.5
4.87 to 5.71......................  111.33 to 133.41......  3.08 to 3.61.........  1,309.1 to 1,577.1...  0.823 to 0.853.......                     30.0
>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 the success of small businesses in getting Federal 
contracts under the existing size standards. For industries where the 
small business share of total Federal contracting dollars is 10 to 30 
percent lower than the small business share of total industry receipts, 
SBA has designated a size standard one level higher than their current 
size standard. For industries where the small business share of total 
Federal contracting dollars is more than 30 percent lower than the 
small business share of total industry receipts, SBA has designated a 
size standard two levels higher than the current size standard.
    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 more 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 
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 for 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.
    None of the four industries in NAICS Sector 21 with receipts based 
size

[[Page 72772]]

standards averaged more than $100 million annually in Federal 
contracting during fiscal years 2008-2010. Therefore the Federal 
contracting factor was not considered in calculating the new size 
standard for them.

New Size Standards Based on Industry Factors

    Table 3, Size Standards Supported by Each Factor for Each Industry 
(millions of dollars), below, shows the results of analyses of industry 
factors for each industry covered by this proposed rule. A number of 
NAICS industries in columns 2, 3, 4, 6, and 7 show two numbers. The 
upper number is the value for the industry factor shown on the top of 
the column and the lower number is the size standard supported by that 
factor. For the four-firm concentration ratio, SBA estimates a size 
standard only if its value is 40 percent or more. If the four-firm 
concentration ratio for an industry is less than 40 percent, SBA does 
not estimate a 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 8 shows a calculated new size standard 
for each industry. This is the average of the size standards supported 
by each factor, rounded to the nearest fixed size level. Analytical 
details involved in the averaging procedure are described in SBA's 
``Size Standard Methodology.'' For comparison with the new standards, 
the current size standards are in column 9 of Table 3, Size Standards 
Supported by Each Factor for Each Industry (millions of dollars).

                                           Table 3--Size Standards Supported by Each Factor for Each Industry
                                                                  [Millions of dollars]
--------------------------------------------------------------------------------------------------------------------------------------------------------
                       (1)                            (2)          (3)          (4)          (5)          (6)          (7)          (8)          (9)
NAICS code and NAICS industry title                    Simple     Weighted      Average    Four-firm    Four-firm         Gini   Calculated      Current
                                                      average      average  assets size    ratio (%)      average  coefficient         size         size
                                                    firm size    firm size  ($ million)                      size                  standard     standard
                                                  ($ million)  ($ million)                            ($ million)               ($ million)  ($ million)
--------------------------------------------------------------------------------------------------------------------------------------------------------
213112 Support Activities for Oil and Gas                $7.9       $197.8         $5.2         27.9     $3,246.0        0.892        $35.5         $7.0
 Operations.....................................         35.5         35.5         35.5                                  $35.5
213113 Support Activities for Coal Mining.......          7.7         47.9  ...........         44.4        219.2        0.786         19.0          7.0
                                                         35.5         14.0                                    7.0         19.0
213114 Support Activities for Metal Mining......         11.7         63.0  ...........         57.9        205.8        0.790         19.0          7.0
                                                         35.5         19.0                                    7.0         25.5
213115 Support Activities for Nonmetallic                 2.2         12.2  ...........         24.4         30.9        0.622          7.0          7.0
 Minerals (except Fuels)........................         14.0          5.0                                                 5.0
--------------------------------------------------------------------------------------------------------------------------------------------------------

Evaluation of SBA Loan Data

    Before deciding on an industry's size standard, SBA also considers 
the impact of new or revised size standards on SBA's loan programs. 
Accordingly, SBA examined its 7(a) and 504 Loan Program data for fiscal 
years 2009-2011 to assess whether the 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 current 
size standards that use SBA's 7(a) and 504 loans.
    Furthermore, the Jobs Act established an alternative size standard 
for SBA's 7(a) and 504 applicants. Specifically, an applicant exceeding 
an NAICS industry size standard may still be eligible if its maximum 
tangible net worth does not exceed $15 million and its average net 
income after Federal income taxes (excluding any carry-over losses) for 
the 2 full fiscal years before the date of the application is not more 
than $5 million.
    Therefore, no size standard in NAICS 21, Mining, Quarrying, and Oil 
and Gas Extraction, needs an adjustment based on this factor.

Proposed Changes to Size Standards

    Based on the analyses of industry and program data as discussed 
above, of the four industries in NAICS Sector 21 reviewed in this rule, 
SBA proposes to increase the size standard for three and retain the 
current size standard for one. SBA's proposed changes are summarized in 
Table 4, Summary of Proposed Size Standards Revisions, below.

                              Table 4--Summary of Proposed Size Standards Revisions
----------------------------------------------------------------------------------------------------------------
                                                                                   Current size    Proposed size
              NAICS code                          NAICS industry title             standard  ($    standard  ($
                                                                                     million)        million)
----------------------------------------------------------------------------------------------------------------
213112................................  Support Activities for Oil and Gas                  $7.0           $35.5
                                         Operations.
213113................................  Support Activities for Coal Mining......             7.0            19.0
213114................................  Support Activities for Metal Mining.....             7.0            19.0
213115................................  Support Activities for Nonmetallic                   7.0             7.0
                                         Minerals (except Fuels).
----------------------------------------------------------------------------------------------------------------

Evaluation of Dominance in Field of Operation

    SBA has determined that for the industries in NAICS Sector 21, 
Mining, Quarrying, and Oil and Gas Extraction, for which it has 
proposed to increase size standards, no individual firm at or below the 
proposed size standard will be large enough to dominate its field of 
operation. At the proposed individual size standards, if adopted, small 
business shares of total industry receipts among those industries vary 
from less than 0.1 percent to 2.8 percent, with an average of 1.1 
percent. These market shares effectively preclude a firm at or below 
the proposed size standards from exerting control on any of the 
industries.

[[Page 72773]]

Request for Comments

    SBA invites public comments on this proposed rule, especially on 
the following issues:
    1. To simplify size standards, SBA proposes eight fixed levels for 
receipts based size standards: $5 million, $7 million, $10 million, $14 
million, $19 million, $25.5 million, $30 million, and $35.5 million. 
SBA invites comments on whether this is necessary and whether the 
proposed fixed size levels are appropriate. SBA welcomes suggestions on 
alternative approaches to simplifying small business size standards.
    2. SBA seeks comment on whether the proposed size standards for 
NAICS Sector 21 are appropriate given the economic characteristics of 
each industry reviewed in this proposed rule. SBA also seeks comment 
and suggestions on alternative standards, if they would be more 
appropriate, including whether the number of employees is a more 
suitable measure of size for certain industries and what that employee 
level should be.
    3. SBA's proposed size standards are based on five primary 
factors--average firm size, average assets size (as a proxy of startup 
costs and entry barriers), four-firm concentration ratio, distribution 
of firms by size and the level, and small business share of Federal 
contracting dollars. SBA welcomes comments on these factors and/or 
suggestions of other factors that it should consider when evaluating or 
revising size standards. SBA also seeks information on relevant data 
sources, other than what it uses, if available.
    4. 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 suggested weights for each 
factor along with supporting information.
    5. For NAICS 213112, Support Activities for Oil and Gas Operations, 
based on its analysis of industry and program data alone, SBA proposes 
to increase the existing size standards by a large amount, while for 
NAICS 213113 and NAICS 213114 the proposed increases are modest. SBA 
seeks comment on whether, as a policy, it should limit the increase to 
a size standard or 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.
    6. 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 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 size standards 
revisions 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, 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, Regulatory Planning and Review. 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 the proposed revisions to receipts based size 
standards for three industries in NAICS Sector 21, Mining, Quarrying, 
and Oil and Gas Extraction, will better reflect the economic 
characteristics of small businesses in those industries 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. 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 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. 
SBA estimates that about 475 firms in the three industries for which it 
has proposed to increase size standards will become small and therefore 
eligible for these programs. That is about 8.5 percent of all firms 
classified as small under the current size standards in those 
industries. If adopted as proposed, this will also increase the small 
business share of total industry receipts in those industries within 
NAICS Sector 21 from about 13 percent to nearly 25 percent.
    Three groups will benefit from the proposed size standards 
revisions in this rule, 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

[[Page 72774]]

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.
    Because of limited Federal contracting activities in those 
industries, proposed increases will cause very minimal impact on 
Federal contracting programs under SBA's small business, 8(a), SDB, 
HUBZone, WOSB, and SDVO SBC Programs, and other unrestricted 
procurements.
    Under SBA's 7(a) and 504 Loan Programs, based on the 2009-2011 
data, SBA estimates about five additional loans totaling about $2 
million to $3 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 is be impractical to 
try to estimate exactly the number and total amount of loans. There are 
two reasons for this: (1) Under the Jobs Act, SBA can now guarantee 
substantially larger loans than in the past; and, (2) as described 
above, 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 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 one or more disasters, SBA 
cannot make a meaningful estimate of this impact.
    In addition, newly eligible small businesses will also benefit 
through reduced fees, less paperwork, and fewer compliance 
requirements.
    The proposed revisions to the existing size standards for three 
industries in NAICS Sector 21, Mining, Quarrying, and Oil and Gas 
Extraction, 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 benefits 
and costs associated with this action, including possible 
distributional impacts that relate to Executive Order 13563, Improving 
Regulation and Regulatory Review, 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 a number of industry groups to get their feedback on its 
methodology and other size standards issues. In addition, SBA presented 
its size standards methodology to businesses in 13 cities in the U.S. 
and sought their input as part of Jobs Act tours. The presentation also 
included information on the latest status of the comprehensive size 
standards review and on how interested parties can provide SBA with 
input and feedback on size standards review.
    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 21, Mining, Quarrying, 
and Oil and Gas Extraction, is consistent with Executive Order 13563, 
Sec 6, calling for retrospective analyses of existing rules. The last 
comprehensive 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, in 2007, SBA began a comprehensive review of its 
size standards to ensure that existing size standards have supportable 
bases. It will revise them when necessary. In addition, the Jobs Act 
requires 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 5 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, Federalism, 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 proposed rule will not impose any new 
reporting or recordkeeping requirements.

Initial Regulatory Flexibility Analysis

    Under the Regulatory Flexibility Act (RFA), this proposed rule, if 
adopted, may have a significant impact on a substantial number of small 
businesses in NAICS Sector 21, Mining, Quarrying, and Oil and Gas 
Extraction. As described above, this proposed rule may affect small 
businesses seeking Federal contracts, loans under SBA's 7(a), 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 
businesses to which the rule will

[[Page 72775]]

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 businesses?
1. What are the need for and objective of the rule?
    SBA has not reviewed the size standards for industries in NAICS 
Sector 21, Mining, Quarrying, and Oil and Gas Extraction, since the 
early 1980s. Changes in industry structure, technological changes, 
productivity growth, mergers and acquisitions, and updated industry 
definitions have changed the structure of many industries in NAICS 
Sector 21. Such changes can be sufficient to support revisions to 
current size standards for some industries. Based on the analysis of 
the latest data available, SBA believes that the revised standards in 
this proposed rule more appropriately reflect the size of businesses 
that need Federal assistance. The recently enacted Jobs Act also 
requires SBA to review all size standards and make necessary 
adjustments to reflect market conditions.
2. What are SBA's description and estimate of the number of small 
businesses to which the rule will apply?
    If the proposed rule is adopted in its present form, SBA estimates 
that about 475 additional firms will become small because of increased 
size standards in three industries NAICS Sector 21. That represents 8.5 
percent of total firms that are small under current size standards in 
those industries. This will result in an increase in the small business 
share of total industry receipts for the Sector from about 13 percent 
under the current size standard to nearly 25 percent under the proposed 
size standards. The proposed size standards, if adopted, will enable 
more small businesses to retain their small business status for a 
longer period. Many may have lost their eligibility and find it 
difficult to compete at current size standards 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?
    The proposed size standard changes impose no additional reporting 
or record keeping requirements on small businesses. However, qualifying 
for Federal procurement and a number of other programs requires that 
businesses register in the CCR database and certify in the Online 
Representations and Certifications Application (ORCA) that they are 
small at least once annually. 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 because 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), 662, and 694a(9).

    2. In Sec.  121.201, in the table, revise the entries for 
``213112'', ``213113'', and ``213114'' to read as follows:


Sec.  121.201  What size standards has SBA identified by North American 
Industry Classification System codes?

* * * * *

                                 Small Business Size Standards by Naics Industry
----------------------------------------------------------------------------------------------------------------
                                                                                  Size standards  Size standards
         NAICS Codes                       NAICS U.S. industry title              in millions of   in number of
                                                                                      dollars        employees
----------------------------------------------------------------------------------------------------------------
 
                                                  * * * * * * *
213112.......................  Support Activities for Oil and Gas Operations....           $35.5
213113.......................  Support Activities for Coal Mining...............            19.0
213114.......................  Support Activities for Metal Mining..............            19.0
 
                                                  * * * * * * *
----------------------------------------------------------------------------------------------------------------



[[Page 72776]]

    Dated: April 25, 2012.
Karen G. Mills,
Administrator.
[FR Doc. 2012-29353 Filed 12-5-12; 8:45 am]
BILLING CODE 8025-01-P