Small Business Size Standards; Air Traffic Control, Other Airport Operations, and Other Support Activities for Air Transportation, 28604-28611 [06-4619]
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Federal Register / Vol. 71, No. 95 / Wednesday, May 17, 2006 / Proposed Rules
use is comparable to the products
contained in paragraph (a)(1) of this
section; and
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§ 1000.40
[Amended]
3. Section 1000.40 is amended by
revising paragraphs (b)(2)(iii) and
(b)(2)(vi) to read as follows:
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(b) * * *
(2) * * *
(iii) Aerated cream, frozen cream, sour
cream, sour half-and-half, sour cream
mixtures containing nonmilk items,
yogurt, including yogurt containing
beverages with more than 20 percent
yogurt by weight, Kefir, and any other
semi-solid product resembling a Class II
product;
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(vi) Formulas especially prepared for
infant feeding or dietary use (meal
replacement) that are sold to the health
care industry;
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Dated: May 12, 2006.
Lloyd C. Day,
Administrator, Agricultural Marketing
Service.
[FR Doc. 06–4591 Filed 5–16–06; 8:45 am]
BILLING CODE 3410–02–P
SMALL BUSINESS ADMINISTRATION
13 CFR Part 121
RIN 3245–AF29
Small Business Size Standards; Air
Traffic Control, Other Airport
Operations, and Other Support
Activities for Air Transportation
U.S. Small Business
Administration.
ACTION: Proposed rule.
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AGENCY:
SUMMARY: The U.S. Small Business
Administration (SBA) proposes to
increase the size standard for the Air
Traffic Control (North American
Classification Systems (NAICS) 488111),
Other Airport Operations (NAICS
488119), and Other Support Activities
for Air Transportation (NAICS 488190)
industries from $6.5 million in average
annual receipts to $21 million. The
proposed revisions are being made to
better define the size of a small business
in these industries based on a review of
industry characteristics.
DATES: Comments must be received by
SBA on or before June 16, 2006.
ADDRESSES: You may submit comments,
identified by RIN 3245–AF29, by one of
the following methods: (1) Federal
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eRulemaking Portal: https://
www.regulations.gov. Follow the
instructions for submitting comments;
(2) Fax: (202) 205–6390; or (3) Mail/
Hand Delivery/Courier: Gary M.
Jackson, Assistant Administrator for
Size Standards, 409 Third Street, SW.,
Mail Code 6530, Washington, DC 20416.
FOR FURTHER INFORMATION CONTACT:
Diane Heal, Office of Size Standards,
(202) 205–6618 or
sizestandards@sba.gov.
SUPPLEMENTARY INFORMATION: SBA has
received a request from a Federal agency
that contracts for services in the Other
Airport Operations Industry to review
this industry’s existing $6.5 million size
standard. This size standard was last
revised in 2005 to incorporate an
inflation adjustment to receipt-based
size standards (70 FR 72577, December
19, 2005). SBA has not conducted a
review of this industry’s characteristics
since the early 1980’s. This agency
believes that SBA should create a
special size standard under NAICS
488119 for Federal contracts consisting
of processing passengers and servicing
aircraft for long range or international
flights. Many of these contracts involve
coordinating all aspects of passenger
service (including customs clearances,
security requirements) as well as
aviation services (such as food service,
janitorial services, and aircraft fueling
services). The agency also pointed some
of these activities individually have
higher size standards (i.e., the Food
Service Contractors Industry and the
Janitorial Services Industry have size
standards of $19 million and $15
million, respectively, while the Aircraft
Fueling Industry carries a 500-employee
size standard). Although the Federal
agency requested a review of the Air
Airport Operations Industry, SBA
decided to review also the Air Traffic
Control Industry and Other Support
Activities for Air Transportation
Industries because many firms that
perform Other Airport Operation
Services also are active in these two
industries.
Below is a discussion of the
methodology used by SBA to review its
size standards, and the analysis leading
to the proposal to increase the size
standard for the three industries
comprising air transportation support
activities from $6.5 million to $21
million in average annual receipts.
Size Standards Methodology:
Congress granted SBA discretion to
establish detailed size standards (15
U.S.C. 632(a)(2)). SBA’s Standard
Operating Procedure (SOP) 90 01 3,
‘‘Size Determination Program’’
(available on SBA’s Web site at https://
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www.sba.gov/library/soproom.html)
describes four factors SBA considers for
establishing and evaluating size
standards: (1) The structure of the
industry and its various economic
characteristics; (2) SBA program
objectives and the impact of different
size standards on these programs; (3)
whether a size standard successfully
excludes those businesses which are
dominant in the industry; and (4) other
factors if applicable. Other factors,
including the impact on other Federal
agencies’ programs, may come to the
attention of SBA during the public
comment period or from SBA’s own
research on the industry. No formula or
weighting has been adopted so that the
factors may be evaluated in the context
of a specific industry. Below is a
discussion of SBA’s analysis of the
economic characteristics of an industry,
the impact of a proposed size standard
on SBA programs, and the evaluation of
whether a firm at or below a size
standard could be considered dominant
in the industry.
Industry Analysis: Section 3(a)(3) of
the Small Business Act (15 U.S.C. 632
(a)(3)) requires that size standards vary
by industry to the extent necessary to
reflect differing industry characteristics.
SBA has two ‘‘base’’ or ‘‘anchor’’ size
standards that apply to most
industries—500 employees for
manufacturing industries and $6.5
million in average annual receipts for
nonmanufacturing industries. SBA
established 500 employees as the anchor
size standard for the manufacturing
industries at SBA’s inception in 1953
and shortly thereafter established a $1
million average annual receipts size
standard for the nonmanufacturing
industries. The receipts-based anchor
size standard for the nonmanufacturing
industries has been adjusted
periodically for inflation so that,
currently, the anchor size standard is
$6.5 million. Anchor size standards are
presumed to be appropriate for an
industry unless its characteristics
indicate that larger firms have a much
greater significance within that industry
than the ‘‘typical industry.’’
When evaluating a size standard, the
characteristics of the specific industry
under review are compared to the
characteristics of a group of industries,
referred to as a ‘‘comparison group.’’ A
comparison group is a large number of
industries grouped together to represent
the typical industry. It can be comprised
of all industries, all manufacturing
industries, all industries with receiptbased size standards, or some other
logical grouping. For purposes of this
proposed rule, one comparison group
comprises industries with the
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nonmanufacturer anchor size standard
of $6.5 million to assess whether the
presumed anchor size standard is
appropriate for the industry under
review. SBA’s analysis may also
examine a second comparison group to
evaluate thoroughly an appropriate size
standard for an industry (which is the
case for this proposed rule).
If the characteristics of a specific
industry are similar to the average
characteristics of the nonmanufacturer
anchor comparison group, then the
anchor size standard is considered
appropriate for the industry. If the
specific industry’s characteristics are
significantly different from the
characteristics of the nonmanufacturer
anchor comparison group, a size
standard higher or, in rare cases, lower
than the anchor size standard may be
considered appropriate. The larger the
differences between the specific
industry’s characteristics and the
nonmanufacturer anchor comparison
group’s characteristics, the larger the
difference between the appropriate
industry size standard and the anchor
size standard. SBA will consider
adopting a size standard below the
anchor size standard only when (1) All
or most of the industry characteristics
are significantly smaller than the
average characteristics of the
comparison group, or (2) other industry
considerations strongly suggest that the
anchor size standard would be an
unreasonably high size standard for the
industry under review.
The primary evaluation factors that
SBA considers in analyzing the
structural characteristics of an industry
include average firm size, distribution of
firms by size, start-up costs, and
industry competition (13 CFR 121.102
(a) and (b)). SBA also examines the
possible impact of a size standard
revision on SBA’s programs as an
evaluation factor. SBA generally
considers these five factors to be the
most important evaluation factors in
establishing or revising a size standard
for an industry. However, it will also
consider and evaluate other information
that it believes relevant to the decision
on a size standard for a particular
industry. Public comments submitted
on proposed size standards are also an
important source of additional
information that SBA closely reviews
before making a final decision on a size
standard. Below is a brief description of
each of the five evaluation factors.
1. ‘‘Average firm size’’ is simply total
industry receipts (or number of
employees) divided by the number of
firms in the industry. If the average firm
size of an industry were significantly
higher than the average firm size of the
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nonmanufacturer anchor comparison
industry group, this fact would be
viewed as supporting 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 nonmanufacturer
anchor comparison industry group, it
would be a basis to adopt the anchor
size standard or, in rare cases, a lower
size standard.
2. ‘‘Distribution of firms by size’’ is
the proportion of industry receipts,
employment, or other economic activity
accounted for by firms of different sizes
in an industry. If the preponderance of
an industry’s economic activity is
attributable to smaller firms, this tends
to support adopting the anchor size
standard. A size standard higher than
the anchor size standard is supported
for an industry in which the distribution
of firms indicates that economic activity
is concentrated among the largest firms
in an industry.
In this proposed rule, SBA examines
the percent of total industry sales
cumulatively generated by firms up to a
certain level of sales. For example,
assume for the industry under review
that 30 percent of total industry sales
are generated by firms of less than $10
million in sales. This statistic is
compared to a comparison group. For
the nonmanufacturer anchor
comparison group used in this proposed
rule, firms of less than $10 million in
sales cumulatively generated 49.4
percent of total industry sales. Viewed
in isolation, the lower figure for the
industry under review indicates a more
significant presence of larger-sized firms
in this industry than firms in the
industries comprising the
nonmanufacturing anchor comparison
group and, therefore, a higher size
standard may be warranted.
3. ‘‘Start-up costs’’ affect a firm’s
initial size because entrants into an
industry must have sufficient capital to
start and maintain a viable business. To
the extent that firms entering into one
industry have greater financial
requirements than firms do in other
industries, SBA is justified in
considering a higher size standard. In
lieu of direct data on start-up costs, SBA
uses a proxy measure to assess the
financial burden for entry-level firms.
For this analysis, SBA has calculated
average firm assets within an industry.
Data from the Risk Management
Association’s Annual Statement
Studies, 2000–2001, provide average
sales to total assets ratios. These were
applied to the average receipts size of
firms in an industry to estimate average
firm assets. An industry with a
significantly higher level of average firm
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assets than that of the nonmanufacturer
anchor comparison group is likely to
have higher start-up costs, which would
tend to support a size standard higher
than the anchor size standard.
Conversely, if the industry showed a
significantly lower level of average firm
assets when compared to the
nonmanufacturer anchor comparison
group, the anchor size standard would
be considered the appropriate size
standard or in rare cases, a lower size
standard.
4. ‘‘Industry competition’’ is assessed
by measuring the proportion or share of
industry receipts obtained by firms that
are among the largest firms in an
industry. In this proposed rule, SBA
compares the proportion of industry
receipts generated by the four largest
firms in the industry—generally referred
to as the ‘‘four-firm concentration
ratio’’—to the average four-firm
concentration ratio for industries in the
comparison groups. If a significant
proportion of economic activity within
the industry is concentrated among a
few relatively large companies, SBA
tends to set a size standard relatively
higher than the anchor size standard in
order to assist firms in a broader size
range to compete with firms that are
larger and more dominant in the
industry. In general, however, SBA does
not consider this an important factor in
assessing a size standard if the four-firm
concentration ratio falls below 40
percent for an industry under review.
5. ‘‘Impact of a size standard revision
on SBA programs’’ refers to the possible
impact a size standard change may have
on the level of small business
assistance. This assessment most often
focuses on the proportion or share of
Federal contract dollars awarded to
small businesses in the industry in
question. In general, the lower the share
of Federal contract dollars awarded to
small businesses in an industry which
receives significant Federal contracting
receipts, the greater is the justification
for a size standard higher than the
existing one.
Another factor to evaluate the impact
of a proposed size standard on SBA’s
programs is the volume of guaranteed
loans within an industry and the size of
firms obtaining those loans. This factor
is sometimes examined to assess
whether the current size standard may
be restricting the level of financial
assistance to firms in that industry. If
small businesses receive significant
amounts of assistance through these
programs, or if the financial assistance
is provided mainly to small businesses
much lower than the size standard, a
change to the size standard (especially
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if it is already above the anchor size
standard) may not be necessary.
Evaluation of Industry Size Standard:
The two tables below show the industry
structure characteristics for the
industries of Air Traffic Control, Other
Airport Operations, and Other Support
Activities for Air Transportation, and
for two comparison groups. The first
comparison group is comprised of all
industries with a $6.5 million receiptsbased size standard referred to as the
nonmanufacturing anchor group.
Because SBA’s size standards analysis is
assessing whether the Air Traffic
Control, the Other Airport Operations,
and the Other Support Activities for Air
Transportation Industries’ size standard
should be moderately higher, or much
higher than the nonmanufacturing
anchor size standard, this is the most
logical set of industries to group
together for the industry analysis. In
addition, this group includes a
sufficient number of firms to afford a
meaningful assessment and comparison
of industry characteristics. The second
comparison group consists of the
nonmanufacturing industries with the
highest receipt-based size standards
established by SBA. SBA refers to this
comparison group as the
‘‘nonmanufacturing higher-level size
standard group.’’ This group’s size
standards range from $23 million to
$32.5 million. If an industry’s
characteristics are significantly larger
than those of the nonmanufacturing
anchor group, SBA will compare them
to the characteristics of the higher-level
size standards group. By doing so, SBA
can assess whether a size standard
should be among the highest size
standards or somewhere between the
anchor size standard and the highest
receipts-based size standards.
SBA examined 2002 industry data
prepared for SBA’s Office of Advocacy
by the U.S. Bureau of the Census (https://
www.sba.gov/advo/research/
us_rec02.txt), data from a U.S. Bureau of
the Census report entitled ‘‘U.S. All
Industries Data by Receipt: 2002,’’ and
data from the Risk Management
Association’s Annual Statement
Studies, 2000–2001. SBA also examined
Federal contract award data for fiscal
years 2003–2004 from the U.S. General
Service Administration’s Federal
Procurement Data Center, and SBA’s
internal loan database on SBA
guaranteed loans.
Industry Structure Considerations:
Table 1 shows data on three evaluation
factors for the Air Traffic Control
Industry, the Other Airport Operations
Industry, the Other Support Activities
for Air Transportation Industry, and the
two comparison groups. These factors
are average firm size, average firm
assets, and the four-firm concentration
ratio.
TABLE 1.—SELECTED INDUSTRY CHARACTERISTICS BY INDUSTRY CATEGORY
Average firm size
receipts
(million)
Industry category
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Air Traffic Control .............................................................................................................
Other Airport Operations .................................................................................................
Other Support Activities for Air Transportation ...............................................................
Nonmanufacturing Anchor Group ....................................................................................
Higher-level Size Standard Group ...................................................................................
For the Air Traffic Control Industry,
its average firm size in receipts is almost
twice that of the average firm size in the
nonmanufacturer anchor group, but it is
significantly lower than the average firm
size in the higher-level size standards
group. This factor indicates a size
standard within a range of $12 million
to $14 million, which is approximately
double the $6.5 million anchor size
standard, may be warranted. The
average firm assets factor is above the
higher-level size standard group and
provides a basis for increasing the
current size standard within the $23
million to $32.5 million range. The fourfirm concentration ratio provides
support for a change to the current size
standard. The factor is appreciably
higher than the higher-level size
standard group and it is at a sufficient
level to suggest that the largest firms in
the industry may have the ability to
control the industry. To encourage
competition, a very substantial increase
to the size standard should be
considered. In relation to the higherlevel size standards group, the four-firm
concentration ratio suggests a standard
higher than $23 million is reasonable.
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For the Other Airport Operations
Industry, its average firm size is almost
that of the higher-level size standards
group. This factor indicates a size
standard in the lower range of $23
million to $32.5 million may be
warranted. The average firm assets
factor is above the nonmanufacturing
anchor group, but below the higherlevel size standard group, and provides
a basis for increasing the current size
standard to a $14 million to $16 million
range. The four-firm concentration ratio
provides some support for a change to
the current size standard, but is below
the 40 percent level that would suggest
the size standard should be changed
because of this factor (see previous
discussion of SBA’s ‘‘Size Standards
Methodology’’). While the factor is
appreciably higher than the average
industry in the two comparison groups,
the level of the size standard, however,
should be based on the consideration of
the other factors.
For the Other Support Activities for
Air Transportation Industry, its average
firm size in receipts is more than twice
that of the average firm size in the
nonmanufacturer anchor. This factor
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Average firm
assets
(millions)
$2.44
$4.61
$2.97
$1.29
$4.73
$2.47
$1.49
$0.66
$0.60
$2.00
Four-firm
concentration
ratio
(percent)
88.7
34.3
22.4
14.4
26.4
indicates a size standard within a range
of $15 to $16 million, which is slightly
more than double the $6.5 million
anchor size standard, may be warranted.
The average firm assets factor is almost
equal to the nonmanufacturing anchor
group and does not provide a basis for
increasing the existing size standard.
The four-firm concentration ratio
provides some support for a change to
the current size standard, but is below
the 40 percent level that would suggest
the size standard should be changed
because of this factor (see previous
discussion of SBA’s ‘‘Size Standards
Methodology’’). While the factor is
appreciably higher than the average
industry in the nonmanufacturing
anchor group, the level of the size
standard, however, should be based on
the consideration of the other evaluation
factors.
Table 2 below examines the size
distribution of firms. For this factor,
SBA evaluates the percent of total sales
cumulatively generated by firms at or
below specific receipts sizes. For
example, firms in the Air Traffic
Control, Other Airport Operations, and
Other Support Activities for Air
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Transportation Industries with $10
million or less in receipts cumulatively
obtained 24.4 percent, 21.4 percent, and
24.8 percent, respectively, of total
industry sales. Within the
nonmanufacturing anchor group, these
size firms captured 49.4 percent of total
industry sales while similar firms in the
higher-level size standards group
captured 21.1 percent.
TABLE 2.—PERCENTAGE DISTRIBUTION OF FIRMS BY RECEIPTS SIZE
Percent of industry sales by firm
Industry category
< $1
million
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Air Traffic Control .............................................................................................................................
Other Airport Operations .................................................................................................................
Other Support Activities for Air Transportation ...............................................................................
Nonmanufacturing Anchor Group ....................................................................................................
Higher-level Size Standard Group ...................................................................................................
Considering the overall distributions
across size classes, an appropriate size
standard for all three industries appears
to be near or just above the higher-level
size standards group, such as between
$22 million to $24 million. The data for
each industry is discussed below.
For the Air Traffic Control Industry,
the data for three of the four size classes
support a size standard well above the
anchor size standard and at the lower
range of the higher-level size standards.
The size class of less than $50 million
size class supports only a size standard
at the anchor level. Overall, the size
distribution factor supports a size
standard in the at or near the lower
range of the higher-level size standard
group levels of $21 million to $23
million.
For the Other Airport Operations
Industry, the data generally support a
size standard that is well above the
nonmanufacturing anchor group and
within the higher-level size standard
group. The three size classes, less than
$1 million, $10 million, and $50
million, support a size standard around
the higher-level size standard group.
The less than $5 million size class
supports a size standard well above the
anchor size standard, but at or below the
higher-level size standard. Overall, the
size distribution factor supports a size
standard between the lower range of the
higher size standards group levels of
$23 million to $25 million.
For the Other Support Activities for
Air Transportation industry, the data for
three percentage groups support a size
standard that is well above the
nonmanufacturing anchor group, but at
or slightly below the higher-level size
standard group. The data for the size
class less than $50 million support a
size standard well above the
nonmanufacturing anchor group and
within the higher-level size standard
group. Overall, the size distribution
factor supports a size standard at or just
below the range of the higher-level size
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standard group levels of $21 million to
$24 million.
SBA Program Considerations: SBA
also considers the potential impact of
changing a size standard on its
programs. Because SBA’s review of the
Air Traffic Control, the Other Airport
Operations, and the Other Support
Activities for Air Transportation
Industries’ size standards was prompted
by concerns about the application of the
size standard to Federal contracting,
SBA examines the pattern of Federal
contract awards to small businesses as
one of the factors in evaluating whether
the existing size standard should be
revised.
In the case of Federal contracts to
firms in the Air Traffic Control, Other
Airport Operations, and Other Support
Activities for Air Transportation
Industries, the share of Federal contracts
awarded to small businesses provide a
basis for revising the size standard. In
fiscal years 2003 and 2004, small
businesses in the Air Traffic Control
industry received 11.5 percent of the
total dollar value of Federal contracts,
while small business in the Other
Airport Operations industry received an
average of 12 percent, and the Other
Support Activities for Air
Transportation industry received 4
percent. In addition, a cumulative
average of 25 percent of the award
actions went to small businesses in
these three industries.
By comparison, the percentage of total
industry sales cumulatively generated at
or below the existing $6.5 million size
standard, is 15.5 percent for the Air
Traffic Control industry and 18.3
percent for the Other Airport Operations
industry. The respective 11.5 percent
and 12 percent of Federal contract
dollars to small businesses are relatively
low for the Air Traffic Control and
Other Airport Operations. For the Other
Support Activities for Air
Transportation industry, the 4 percent
small business Federal contract dollars
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< $5
million
6.6
3.9
7.5
16.8
3.8
13.3
17.5
18.9
39.9
13.3
< $10
million
24.4
21.4
24.8
49.4
21.1
< $50
million
62.2
33.5
35.8
63.7
40.4
share is extremely lower than the 20.1
percent of total industry sales
cumulative generated by firms at or
below the current $6.5 million size
standard. These comparisons between
industry-wide small business market
share and the proportion of Federal
contracting dollars to small business
indicate that small businesses in these
industries may have encountered
difficulties in obtaining Federal
contracts, and that a size standard much
higher than $6.5 million may be
warranted.
SBA also reviewed its financial
assistance to small businesses in the air
transportation support activities
industries. In fiscal years 2003, 2004,
and 2005, SBA guaranteed no loans for
the Air Traffic Control industry; an
average of nine loans totaling $2.4
million in the Other Airport Operations
industry; and an average of 37 loans
totaling $5.1 million for the Other
Support Activities for Air
Transportation industry. Almost 90
percent of the loans for the Other
Airport Operations industry and the
Other Support Activities for Air
Transportation industry were made to
firms less than half the current size
standard. It is unlikely that an increase
to the size standard would have an
appreciable impact on the financial
programs, and therefore, this factor is
not part of the assessment of this
industry’s size standard.
SBA’s Proposal: The analysis of each
evaluation factor supports SBA
proposing a $21 million size standard
for each industry. SBA believes the
presence of larger-sized firms in the
industry, as evidenced by the factors of
average size firm, the distribution of
firms by size, and four-firm
concentration ratio, is sufficiently strong
to support a substantial change to the
existing size standard. For the Air
Traffic Control and the Other Airport
Operations industries, most of the five
evaluation factors support a size
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standard at or near the lower range of
the higher-level size standards. For both
industries, one factor supports a size
standard about double the $6.5
nonmanufacturer anchor size standard.
Accordingly, SBA believes the data
support a $21 million size standard that
is near the lower range of the higherlevel size standards. For the Other
Support Activities for Air
Transportation Industry, three of the
five factors support a size standard
significantly higher than the current
$6.5 million size standard, with one
factor supporting a size standard at or
near the range of the lower range of the
higher-level size standards. In
consideration that many firms operate
in each of the three air transportation
support activities industries, SBA has
decided to also propose a $21 million
size standard for this industry to have
a common size standard for closely
related industries.
Dominant in Field of Operation:
Section 3(a) of the Small Business Act
defines a small concern as one that is (1)
Independently owned and operated, (2)
not dominant in its field of operations
and (3) within detailed definitions or
size standards established by the SBA
Administrator. SBA considers as part of
its evaluation of a size standard whether
a business concern at or below a size
standard would be considered dominant
in its field of operation. This assessment
generally considers the market share of
firms at the proposed or final size
standard, or other factors that may show
whether a firm can exercise a major
controlling influence on a national basis
in which significant numbers of
business concerns are engaged.
SBA has determined that for the Air
Traffic Control, the Other Airport
Operations, and the Other Support
Activities for Air Transportation
industries no firm at or below the
proposed size standard would be of a
sufficient size to dominate its field of
operation. The largest firm within the
Air Traffic Control, the Other Airport
Operations, and the Other Support
Activities for Airport Transportation
industries at the proposed size standard
level generates less than 0.30, 0.25 and
0.20 percent, respectively, of total
industry receipts. This level of market
share effectively precludes any ability
for a firm at or below the proposed size
standard from exerting a controlling
effect on this industry.
Alternative Size Standards: SBA
considered an alternative size standard
based on average number of employees
instead of average annual receipts. This
approach was considered in a proposed
rule of March 19, 2004 (69 FR 13130) as
part of proposal to restructure all of
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SBA’s size standards. For the Air Traffic
Control industry, a size standard in
number of employees would not be
appropriate. The average number of
employees for this industry is 30, and
for all firms with receipts below the
proposed $21 million level, the average
number of employees is 11. SBA is
currently studying how to simplify its
size standards. SBA proposed to
establish a minimum employee size
standard of 50, to reduce the number of
size standards from 37 levels to 11, and
to establish common size standards for
related industries. If SBA had adopted
the proposed minimum 50-employee
size standard, potentially one or two of
the largest four firms might qualify as a
small business. If SBA established an
employee size standard for the Air
Traffic Control industry between 15 and
20 employees, it would be contrary to
SBA’s measures to simplify its size
standards by increasing the number of
size standard levels, and not
establishing common size standards for
related industries. For this reason, SBA
has determined that a receipt-based size
standard of $21 million for the Air
Traffic Control industry is more
appropriate.
In addition, concerns in the Other
Airport Operations Industry perform
their services with the use of
subcontractors and part-time employees,
i.e., janitorial, aircraft fueling, and food
services. Because of the large proportion
of part-time employees in this industry,
SBA has decided to retain average
annual receipts as the size standard
measure. A receipts-based size standard
will treat firms more equitably since
firms will vary on the use of part-time
employees and subcontractors. An
employee-based size standard could
unintentionally influence decisions of
some firms to alter the use of part-time
employees and subcontractors to remain
eligible as small businesses.
Firms in the Other Support Activities
for Air Transportation Industry provide
specialized services for the air
transportation industry, such as aircraft
testing, repair, maintenance, and
inspection. SBA considered converting
this size standard from receipts to
employees as activities in this industry
tend to have a more stable workforce. A
comparable size standard for this
industry would be in the range of 100
to 125 employees. However, SBA
decided to keep the size standard as one
based on receipts because the emphasis
on its restructuring effort is
simplification. Many firms in this
industry are also active in the Other
Airport Operations industry, which
does not lend itself to an employeebased size standard. If SBA decided to
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establish an employee-based size
standard for Other Support Activities
for Air Transportation, firms that are
active in both industries could find
themselves small in the Other Support
Activities for Air Transportation
industry, yet large in the Other Airport
Operations industry, or vice-a-versa.
The analysis provided above indicates
that both industries require a similar
receipts-based size standard.
SBA welcomes public comments on
its proposed size standard for the Air
Traffic Control, Other Airport
Operations, and Other Support
Activities for Aircraft Industries.
Comments on alternatives, including the
option of retaining the size standards at
$6.5 million or establishing employeebased size standards as discussed above,
should explain why the alternative
would be preferable to the proposed size
standards.
Compliance With Executive Orders
12866, 12988, and 13132, the
Paperwork Reduction Act (44 U.S.C.
Ch. 35), and the Regulatory Flexibility
Act (5 U.S.C. 601–612)
The Office of Management and Budget
(OMB) has determined that 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.
For purposes of Executive Order
12988, SBA has determined that this
rule is drafted, to the extent practicable,
in accordance with the standards set
forth in that Order.
For purposes of Executive Order
13132, SBA has determined that this
rule does not have any Federalism
implications warranting the preparation
of a federalism assessment.
For the purpose of the Paperwork
Reduction Act, 44 U.S.C. Ch. 35, SBA
has determined that this rule would not
impose new reporting or record keeping
requirements, other than those required
of SBA.
Regulatory Impact Analysis
1. Is there a need for the regulatory
action?
SBA’s mission is to aid and assist
small businesses through a variety of
financial, procurement, business
development, and advocacy programs.
To assist effectively the intended
beneficiaries of these programs, SBA
must establish distinct definitions of
which businesses are deemed small
businesses. The Small Business Act (15
U.S.C. 632(a)) delegates to SBA’s
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Administrator the responsibility for
establishing small business definitions.
The Act also requires that small
business definitions vary to reflect
industry differences. The
supplementary information section of
this proposed rule explains SBA’s
methodology for analyzing a size
standard for a particular industry. Based
on that analysis, SBA believes that an
adjustment in the size standard of the
Air Traffic Control, Other Airport
Operations, and Other Support
Activities for Air Transportation
Industries is needed to better reflect the
economic characteristics of small
businesses in this industry.
2. What are the potential benefits and
costs of this regulatory action?
The most significant benefit to
businesses obtaining small business
status as a result of this rule is eligibility
for Federal small business assistance
programs, including SBA’s financial
assistance programs, economic injury
disaster loans, and Federal procurement
preference programs for small
businesses, such as 8(a) firms, small
disadvantaged businesses (SDB), small
businesses located in Historically
Underutilized Business Zones
(HUBZone), women-owned small
businesses, and veteran-owned and
service disabled veteran-owned small
businesses. HUBZone and SDB small
businesses are also for Federal contracts
awarded through full and open
competition after application of the
HUBZone or SDB price evaluation
preference or adjustment. Other Federal
agencies also may use SBA size
standards for a variety of regulatory and
program purposes. Through the
assistance of these programs, small
businesses become more
knowledgeable, stable, and competitive
businesses. Under this proposed rule,
150 additional firms generating an
average of 8 percent of sales in the three
industries will obtain small business
status and become eligible for these
programs.
The benefits of a size standard
increase to a more appropriate level
would accrue to three groups: (1)
Businesses that benefit by gaining small
business status from the higher size
standard that also use small business
assistance programs; (2) growing small
businesses that may exceed the current
size standards in the near future and
that will retain small business status
from the higher size standard; and (3)
Federal agencies that award contracts
under procurement programs that
require small business status.
SBA estimates that firms gaining
small business status could potentially
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obtain Federal contracts worth $129
million per year under the small
business set-aside program, the 8(a) and
HUBZone Programs, or unrestricted
procurements. This represents 8 percent
of the $1.6 billion in average Federal
contracts awarded under NAICS
488111, 488119, 488190 during fiscal
years 2003 and 2004. The added
competition for many of these
procurements also would likely result in
a lower price to the Government for
procurements reserved for small
businesses, but SBA is not able to
quantify this benefit.
Under SBA’s 7(a) Guaranteed Loan
Program and Certified Development
Company (504) Program, SBA estimates
that one or two additional loans totaling
$500,000 to $600,000 in new Federal
loan guarantees could be made to these
newly defined small businesses. This
assumes that only one to two percent of
the newly eligible small businesses will
seek SBA financial assistance. Because
of the size of the loan guarantees,
however, most loans are made to small
businesses well below the size standard.
Thus, increasing the size standard will
likely result in only a small increase in
small business guaranteed loans to
businesses in this industry, if any.
The newly defined small businesses
would also benefit from SBA’s
Economic Injury Disaster Loan (EIDL)
Program. Since this program is
contingent upon the occurrence and
severity of a disaster, no meaningful
estimate of benefits can be projected for
future disasters.
To the extent that up to 150
additional firms could become active in
Federal small business programs, this
may entail some additional
administrative costs to the Federal
Government associated with additional
bidders for Federal small business
procurement programs, additional firms
seeking SBA guaranteed lending
programs, additional firms eligible for
enrollment in Central Contractor
Registration’s Dynamic Small Business
Search database, and additional firms
seeking certification as 8(a), SDB, or
HUBZone firms. Among businesses in
this group seeking SBA assistance, there
could be some additional costs
associated with compliance and
verification of small business status and
protests of small business status. These
costs are likely to generate minimal
incremental administrative costs
because mechanisms are currently in
place to handle these additional
administrative requirements.
The costs to the Federal Government
may be higher on some Federal
contracts. With greater number of
businesses defined as small, Federal
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28609
agencies may choose to set-aside more
contracts for competition among small
businesses rather than using full and
open competition. The movement from
unrestricted to set-aside contracting is
likely to result in competition among
fewer bidders. In addition, higher costs
may result if additional full and open
contracts are awarded to HUBZone and
SDB businesses because of a price
evaluation preference. The additional
costs associated with fewer bidders,
however, are likely to be minor since, as
a matter of policy, procurements may be
set aside for small businesses or
reserved for the 8(a) or HUBZone
Programs only if awards are expected to
be made at fair and reasonable prices.
The proposed size standard may have
distributional effects among large and
small businesses. Although the actual
outcome of the gains and losses among
small and large businesses cannot be
estimated with certainty, several trends
are likely to emerge. First, there will
likely be a transfer of some Federal
contracts to small businesses from large
businesses. Large businesses may have
fewer Federal contract opportunities as
Federal agencies decide to set aside
more Federal procurements for small
businesses. Also, some Federal contracts
may be awarded to HUBZone or SDB
concerns instead of large businesses
since those two categories of small
businesses may be eligible for a price
evaluation adjustment for contracts
competed on a full and open basis.
Similarly, currently defined small
businesses may obtain fewer Federal
contracts due to the increased
competition from more businesses
defined as small. This transfer may be
offset by a greater number of Federal
procurements set aside for all small
businesses. The number of newly
defined and expanding small businesses
that are willing and able to sell to the
Federal Government will limit the
potential transfer of contracts away from
large and currently defined small
businesses. The potential distributional
impacts of these transfers may not be
estimated with any degree of precision
because the data on the size of business
receiving a Federal contract are limited
to identifying small or other-than-small
businesses, without regard to the exact
size of the business.
The revision to the current size
standards for the Air Traffic Control,
Other Airport Operations, and Other
Support for Air Transportation
Industries is consistent with SBA’s
statutory mandate to assist small
business. This regulatory action
promotes the Administration’s
objectives. One of SBA’s goals in
support of the Administration’s
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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.
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Initial Regulatory Flexibility Analysis
Under the Regulatory Flexibility Act
(RFA), this rule, if finalized, may have
a significant impact on a substantial
number of small entities engaged in Air
Traffic Control, Other Airport
Operations, and Other Support
Activities for Air Transportation. As
described above, this rule may affect
small entities seeking Federal contracts,
SBA (7a) and 504 Guaranteed Loan
Programs, SBA Economic Impact
Disaster Loans, and other Federal small
business programs.
Immediately below, SBA sets forth an
initial regulatory flexibility analysis
(IRFA) of this proposed rule on the Air
Traffic Control, Other Airport
Operations, and Other Support
Activities for Air Transportation
industries addressing the following
questions: (1) What is the need for and
objective of the rule, (2) what is SBA’s
description and estimate of the number
of small entities to which the rule will
apply, (3) what is the projected
reporting, recordkeeping, and other
compliance requirements of the rule, (4)
what are the relevant Federal rules
which may duplicate, overlap or
conflict with the rule, and (5) what
alternatives will allow the Agency to
accomplish its regulatory objectives
while minimizing the impact on small
entities?
(1) What is the need for and objective of
the rule?
The revision to the size standard for
the Air Traffic Control, Other Airport
Operations, and Other Support for Air
Transportation Industries more
appropriately defines the size of
businesses in this industry that SBA
believes should be eligible for Federal
small business assistance programs.
SBA reviewed the structure of these
industries using five factors that were
compared with averages for two groups
of industries. A review of the latest
available data supports a change to the
existing size standard.
(2) What is SBA’s description and
estimate of the number of small entities
to which the rule will apply?
SBA estimates that 150 additional
firms out of 3,607 firms in all three
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industries would be considered small
because of this rule, if adopted. These
firms would be eligible to seek available
SBA assistance provided that they meet
other program requirements. Firms
becoming eligible for SBA assistance as
a result of this rule, if finalized,
cumulatively generate $1 billion in this
industry out of a total of $12.7 billion
in annual receipts. The small business
coverage in this industry would increase
by approximately eight percent of total
receipts.
(3) What are the projected reporting,
record keeping, and other compliance
requirements of the rule and an estimate
of the classes of small entities which
will be subject to the requirements?
A new size standard does not impose
any additional reporting, record keeping
or compliance requirements on small
entities. Increasing size standards
expands access to SBA programs that
assist small businesses, but does not
impose a regulatory burden as they
neither regulate nor control business
behavior.
(4) What are the relevant Federal rules
which may duplicate, overlap or conflict
with the rule?
This proposed rule overlaps with
other Federal rules that use SBA’s size
standards to define a small business.
Under section 3(a)(2)(C) of the Small
Business Act, 15 U.S.C. 632(a)(2)(c),
Federal agencies must use SBA’s size
standards to define a small business,
unless specifically authorized by
statute. In 1995, SBA published in the
Federal Register a list of statutory and
regulatory size standards that identified
the application of SBA’s size standards
as well as other size standards used by
Federal agencies (60 FR 57988–57991,
dated November 24, 1995). SBA is not
aware of any Federal rule that would
duplicate or conflict with establishing
size standards.
The size standard may also affect
small businesses participating in
programs of other agencies that use SBA
size standards. As a practical matter,
however, SBA cannot estimate the
impact of a size standard change on
each Federal program that uses its size
standards. In cases where an SBA size
standard is not appropriate, the Small
Business Act and SBA’s regulations
allow Federal agencies to develop
different size standards with the
approval of SBA Administrator (13 CFR
121.902). For purposes of a regulatory
flexibility analysis, agencies must
consult with SBA’s Office of Advocacy
when developing different size
standards for their programs (13 CFR
121.902(b)(4)).
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(5) What alternatives will allow the
Agency to accomplish its regulatory
objectives while minimizing the impact
on small entities?
SBA considered an alternative size
standards based on average number of
employees instead of average annual
receipts. This approach was considered
in a proposed rule of March 19, 2004 (69
FR 13130) as part of restructuring of size
standards. For the Air Traffic Control
industry, a size standard in number of
employees would not be appropriate.
The average number of employees for
this industry is 30, and for all firms with
receipts below the proposed $21 million
level, the average number of employees
is 11. SBA is currently studying how to
simplify its size standards. In its March
19, 2004 rule, SBA proposed to establish
a minimum employee size standard of
50, to reduce the number of size
standards from 37 levels to 11, and to
establish common size standards for
related industries. If SBA had adopted
the proposed minimum 50-employee
size standard, potentially one or two of
the largest four firms might qualify as a
small business. If SBA established an
employee size standard for the Air
Traffic Control industry between 15 and
20 employees, it would be contrary to
SBA’s measures to simplify its size
standards by increasing the number of
size standard levels, and not
establishing common size standards for
related industries. For this reason, SBA
has determined that a receipt based size
standard of $21 million for the Air
Traffic Control industry is more
appropriate.
In addition, concerns in the Other
Airport Operations industry perform
their services with the use of
subcontractors and part-time employees,
i.e., janitorial, aircraft fueling, and food
services. Because of the large proportion
of part-time employees in this industry,
SBA has decided to retain average
annual receipts as the size standard
measure. A receipts-based size standard
will treat firms more equitably since
firms will vary on the use of part-time
employees and subcontractors. An
employee size standard could
unintentionally influence decisions of
some firms to alter the use of part-time
employees and subcontractors to remain
as small businesses.
Firms in the Other Support Activities
for Air Transportation industry provide
specialized services for the air
transportation industry like aircraft
testing, repair, maintenance, and
inspection. SBA considered converting
this size standard from receipts to
employees as activities in this industry
tend to have a more stable workforce. A
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comparable size standard for this
industry would be in the range of 100
to 125 employees. However, SBA
decided to keep the size standard
receipts-based because of its emphasis
on its restructuring effort is
simplification. Many firms in this
industry are also active in the Other
Airport Operations industry, which
does not lend itself to an employeebased size standard. If SBA decided to
establish an employee-based size
standard for Other Support Activities
for Air Transportation, firms that are
active in both industries could find
themselves small in the Other Support
Activities for Air Transportation
industry, yet large in the Other Airport
Operations industry, or vice-a-versa.
The analysis provided above indicates
that both industries require a similar
receipts-based size standard.
SBA welcomes comments on other
alternatives that minimize the impact of
this rule on small businesses and
achieve the objectives of this rule. These
comments should describe the
alternative and explain why it is
preferable to this proposed rule.
PART 121—SMALL BUSINESS SIZE
REGULATIONS
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.
2. In § 121.201, in the table ‘‘Small
Business Size Standards by NAICS
Industry,’’ under the heading
‘‘Subsector 488’Support Activities for
Transportation,’’ revise the entries for
488111, 488119, and 488190 to read as
follows:
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.
§ 121.201 What size standards has SBA
identified by North American Industry
Classification System codes?
SMALL BUSINESS SIZE STANDARDS BY NAICS INDUSTRY
NAICS
codes
Size standards
in millions of
dollars
NAICS U.S. industry title
*
*
*
*
*
*
Size standards
in number of
employees
*
Subsector 488—Support Activities for Transportation
488111 .....
488119 .....
488190 .....
Air Traffic Control ..............................................................................................................................
Other Airport Operations ...................................................................................................................
Other Support Activities for Air Transportation .................................................................................
*
*
*
Dated: March 17, 2006.
Hector V. Barreto,
Administrator.
[FR Doc. 06–4619 Filed 5–16–06; 8:45 am]
Notice of proposed rulemaking
(NPRM).
DEPARTMENT OF TRANSPORTATION
Federal Aviation Administration
14 CFR Part 39
[Docket No. FAA–2006–24779; Directorate
Identifier 2006–NM–044–AD]
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RIN 2120–AA64
Airworthiness Directives; Airbus Model
A300 Airplanes; Model A310 Airplanes;
and Model A300 B4–600, B4–600R, and
F4–600R Series Airplanes and Model
C4–605R Variant F Airplanes
(Collectively Called A300–600 Series
Airplanes)
Federal Aviation
Administration (FAA), Department of
Transportation (DOT).
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*
ACTION:
BILLING CODE 8025–01–P
AGENCY:
*
SUMMARY: The FAA proposes to adopt a
new airworthiness directive (AD) for all
Airbus Model A300 airplanes and
Model A310 airplanes and for certain
Airbus Model A300–600 series
airplanes. This proposed AD would
require an inspection of the wing and
center fuel tanks to determine if certain
P-clips are installed and corrective
action if necessary. This proposed AD
also would require an inspection of
electrical bonding points of certain
equipment in the center fuel tank for the
presence of a blue coat and related
investigative and corrective actions if
necessary. This proposed AD also
would require installation of new
bonding leads and electrical bonding
points on certain equipment in the
wing, center, and trim fuel tanks, as
necessary. This proposed AD results
from fuel system reviews conducted by
the manufacturer. We are proposing this
AD to ensure continuous electrical
bonding protection of equipment in the
wing, center, and trim fuel tanks and to
prevent damage to wiring in the wing
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$21.0
21.0
21.0
*
........................
........................
........................
*
and center fuel tanks, due to failed Pclips used for retaining the wiring and
pipes, which could result in a possible
fuel ignition source in the fuel tanks.
DATES: We must receive comments on
this proposed AD by June 16, 2006.
ADDRESSES: Use one of the following
addresses to submit comments on this
proposed AD.
• DOT Docket Web site: Go to
https://dms.dot.gov and follow the
instructions for sending your comments
electronically.
• Government-wide rulemaking web
site: Go to https://www.regulations.gov
and follow the instructions for sending
your comments electronically.
• Mail: Docket Management Facility,
U.S. Department of Transportation, 400
Seventh Street, SW., Nassif Building,
room PL–401, Washington, DC 20590.
• Fax: (202) 493–2251.
• Hand Delivery: Room PL–401 on
the plaza level of the Nassif Building,
400 Seventh Street, SW., Washington,
DC, between 9 a.m. and 5 p.m., Monday
through Friday, except Federal holidays.
Contact Airbus, 1 Rond Point Maurice
Bellonte, 31707 Blagnac Cedex, France,
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Agencies
[Federal Register Volume 71, Number 95 (Wednesday, May 17, 2006)]
[Proposed Rules]
[Pages 28604-28611]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 06-4619]
=======================================================================
-----------------------------------------------------------------------
SMALL BUSINESS ADMINISTRATION
13 CFR Part 121
RIN 3245-AF29
Small Business Size Standards; Air Traffic Control, Other Airport
Operations, and Other Support Activities for Air Transportation
AGENCY: U.S. Small Business Administration.
ACTION: Proposed rule.
-----------------------------------------------------------------------
SUMMARY: The U.S. Small Business Administration (SBA) proposes to
increase the size standard for the Air Traffic Control (North American
Classification Systems (NAICS) 488111), Other Airport Operations (NAICS
488119), and Other Support Activities for Air Transportation (NAICS
488190) industries from $6.5 million in average annual receipts to $21
million. The proposed revisions are being made to better define the
size of a small business in these industries based on a review of
industry characteristics.
DATES: Comments must be received by SBA on or before June 16, 2006.
ADDRESSES: You may submit comments, identified by RIN 3245-AF29, by one
of the following methods: (1) Federal eRulemaking Portal: https://
www.regulations.gov. Follow the instructions for submitting comments;
(2) Fax: (202) 205-6390; or (3) Mail/Hand Delivery/Courier: Gary M.
Jackson, Assistant Administrator for Size Standards, 409 Third Street,
SW., Mail Code 6530, Washington, DC 20416.
FOR FURTHER INFORMATION CONTACT: Diane Heal, Office of Size Standards,
(202) 205-6618 or sizestandards@sba.gov.
SUPPLEMENTARY INFORMATION: SBA has received a request from a Federal
agency that contracts for services in the Other Airport Operations
Industry to review this industry's existing $6.5 million size standard.
This size standard was last revised in 2005 to incorporate an inflation
adjustment to receipt-based size standards (70 FR 72577, December 19,
2005). SBA has not conducted a review of this industry's
characteristics since the early 1980's. This agency believes that SBA
should create a special size standard under NAICS 488119 for Federal
contracts consisting of processing passengers and servicing aircraft
for long range or international flights. Many of these contracts
involve coordinating all aspects of passenger service (including
customs clearances, security requirements) as well as aviation services
(such as food service, janitorial services, and aircraft fueling
services). The agency also pointed some of these activities
individually have higher size standards (i.e., the Food Service
Contractors Industry and the Janitorial Services Industry have size
standards of $19 million and $15 million, respectively, while the
Aircraft Fueling Industry carries a 500-employee size standard).
Although the Federal agency requested a review of the Air Airport
Operations Industry, SBA decided to review also the Air Traffic Control
Industry and Other Support Activities for Air Transportation Industries
because many firms that perform Other Airport Operation Services also
are active in these two industries.
Below is a discussion of the methodology used by SBA to review its
size standards, and the analysis leading to the proposal to increase
the size standard for the three industries comprising air
transportation support activities from $6.5 million to $21 million in
average annual receipts.
Size Standards Methodology: Congress granted SBA discretion to
establish detailed size standards (15 U.S.C. 632(a)(2)). SBA's Standard
Operating Procedure (SOP) 90 01 3, ``Size Determination Program''
(available on SBA's Web site at https://www.sba.gov/library/
soproom.html) describes four factors SBA considers for establishing and
evaluating size standards: (1) The structure of the industry and its
various economic characteristics; (2) SBA program objectives and the
impact of different size standards on these programs; (3) whether a
size standard successfully excludes those businesses which are dominant
in the industry; and (4) other factors if applicable. Other factors,
including the impact on other Federal agencies' programs, may come to
the attention of SBA during the public comment period or from SBA's own
research on the industry. No formula or weighting has been adopted so
that the factors may be evaluated in the context of a specific
industry. Below is a discussion of SBA's analysis of the economic
characteristics of an industry, the impact of a proposed size standard
on SBA programs, and the evaluation of whether a firm at or below a
size standard could be considered dominant in the industry.
Industry Analysis: Section 3(a)(3) of the Small Business Act (15
U.S.C. 632 (a)(3)) requires that size standards vary by industry to the
extent necessary to reflect differing industry characteristics. SBA has
two ``base'' or ``anchor'' size standards that apply to most
industries--500 employees for manufacturing industries and $6.5 million
in average annual receipts for nonmanufacturing industries. SBA
established 500 employees as the anchor size standard for the
manufacturing industries at SBA's inception in 1953 and shortly
thereafter established a $1 million average annual receipts size
standard for the nonmanufacturing industries. The receipts-based anchor
size standard for the nonmanufacturing industries has been adjusted
periodically for inflation so that, currently, the anchor size standard
is $6.5 million. Anchor size standards are presumed to be appropriate
for an industry unless its characteristics indicate that larger firms
have a much greater significance within that industry than the
``typical industry.''
When evaluating a size standard, the characteristics of the
specific industry under review are compared to the characteristics of a
group of industries, referred to as a ``comparison group.'' A
comparison group is a large number of industries grouped together to
represent the typical industry. It can be comprised of all industries,
all manufacturing industries, all industries with receipt-based size
standards, or some other logical grouping. For purposes of this
proposed rule, one comparison group comprises industries with the
[[Page 28605]]
nonmanufacturer anchor size standard of $6.5 million to assess whether
the presumed anchor size standard is appropriate for the industry under
review. SBA's analysis may also examine a second comparison group to
evaluate thoroughly an appropriate size standard for an industry (which
is the case for this proposed rule).
If the characteristics of a specific industry are similar to the
average characteristics of the nonmanufacturer anchor comparison group,
then the anchor size standard is considered appropriate for the
industry. If the specific industry's characteristics are significantly
different from the characteristics of the nonmanufacturer anchor
comparison group, a size standard higher or, in rare cases, lower than
the anchor size standard may be considered appropriate. The larger the
differences between the specific industry's characteristics and the
nonmanufacturer anchor comparison group's characteristics, the larger
the difference between the appropriate industry size standard and the
anchor size standard. SBA will consider adopting a size standard below
the anchor size standard only when (1) All or most of the industry
characteristics are significantly smaller than the average
characteristics of the comparison group, or (2) other industry
considerations strongly suggest that the anchor size standard would be
an unreasonably high size standard for the industry under review.
The primary evaluation factors that SBA considers in analyzing the
structural characteristics of an industry include average firm size,
distribution of firms by size, start-up costs, and industry competition
(13 CFR 121.102 (a) and (b)). SBA also examines the possible impact of
a size standard revision on SBA's programs as an evaluation factor. SBA
generally considers these five factors to be the most important
evaluation factors in establishing or revising a size standard for an
industry. However, it will also consider and evaluate other information
that it believes relevant to the decision on a size standard for a
particular industry. Public comments submitted on proposed size
standards are also an important source of additional information that
SBA closely reviews before making a final decision on a size standard.
Below is a brief description of each of the five evaluation factors.
1. ``Average firm size'' is simply total industry receipts (or
number of employees) divided by the number of firms in the industry. If
the average firm size of an industry were significantly higher than the
average firm size of the nonmanufacturer anchor comparison industry
group, this fact would be viewed as supporting 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
nonmanufacturer anchor comparison industry group, it would be a basis
to adopt the anchor size standard or, in rare cases, a lower size
standard.
2. ``Distribution of firms by size'' is the proportion of industry
receipts, employment, or other economic activity accounted for by firms
of different sizes in an industry. If the preponderance of an
industry's economic activity is attributable to smaller firms, this
tends to support adopting the anchor size standard. A size standard
higher than the anchor size standard is supported for an industry in
which the distribution of firms indicates that economic activity is
concentrated among the largest firms in an industry.
In this proposed rule, SBA examines the percent of total industry
sales cumulatively generated by firms up to a certain level of sales.
For example, assume for the industry under review that 30 percent of
total industry sales are generated by firms of less than $10 million in
sales. This statistic is compared to a comparison group. For the
nonmanufacturer anchor comparison group used in this proposed rule,
firms of less than $10 million in sales cumulatively generated 49.4
percent of total industry sales. Viewed in isolation, the lower figure
for the industry under review indicates a more significant presence of
larger-sized firms in this industry than firms in the industries
comprising the nonmanufacturing anchor comparison group and, therefore,
a higher size standard may be warranted.
3. ``Start-up costs'' affect a firm's initial size because entrants
into an industry must have sufficient capital to start and maintain a
viable business. To the extent that firms entering into one industry
have greater financial requirements than firms do in other industries,
SBA is justified in considering a higher size standard. In lieu of
direct data on start-up costs, SBA uses a proxy measure to assess the
financial burden for entry-level firms. For this analysis, SBA has
calculated average firm assets within an industry. Data from the Risk
Management Association's Annual Statement Studies, 2000-2001, provide
average sales to total assets ratios. These were applied to the average
receipts size of firms in an industry to estimate average firm assets.
An industry with a significantly higher level of average firm assets
than that of the nonmanufacturer anchor comparison group is likely to
have higher start-up costs, which would tend to support a size standard
higher than the anchor size standard. Conversely, if the industry
showed a significantly lower level of average firm assets when compared
to the nonmanufacturer anchor comparison group, the anchor size
standard would be considered the appropriate size standard or in rare
cases, a lower size standard.
4. ``Industry competition'' is assessed by measuring the proportion
or share of industry receipts obtained by firms that are among the
largest firms in an industry. In this proposed rule, SBA compares the
proportion of industry receipts generated by the four largest firms in
the industry--generally referred to as the ``four-firm concentration
ratio''--to the average four-firm concentration ratio for industries in
the comparison groups. If a significant proportion of economic activity
within the industry is concentrated among a few relatively large
companies, SBA tends to set a size standard relatively higher than the
anchor size standard in order to assist firms in a broader size range
to compete with firms that are larger and more dominant in the
industry. In general, however, SBA does not consider this an important
factor in assessing a size standard if the four-firm concentration
ratio falls below 40 percent for an industry under review.
5. ``Impact of a size standard revision on SBA programs'' refers to
the possible impact a size standard change may have on the level of
small business assistance. This assessment most often focuses on the
proportion or share of Federal contract dollars awarded to small
businesses in the industry in question. In general, the lower the share
of Federal contract dollars awarded to small businesses in an industry
which receives significant Federal contracting receipts, the greater is
the justification for a size standard higher than the existing one.
Another factor to evaluate the impact of a proposed size standard
on SBA's programs is the volume of guaranteed loans within an industry
and the size of firms obtaining those loans. This factor is sometimes
examined to assess whether the current size standard may be restricting
the level of financial assistance to firms in that industry. If small
businesses receive significant amounts of assistance through these
programs, or if the financial assistance is provided mainly to small
businesses much lower than the size standard, a change to the size
standard (especially
[[Page 28606]]
if it is already above the anchor size standard) may not be necessary.
Evaluation of Industry Size Standard: The two tables below show the
industry structure characteristics for the industries of Air Traffic
Control, Other Airport Operations, and Other Support Activities for Air
Transportation, and for two comparison groups. The first comparison
group is comprised of all industries with a $6.5 million receipts-based
size standard referred to as the nonmanufacturing anchor group. Because
SBA's size standards analysis is assessing whether the Air Traffic
Control, the Other Airport Operations, and the Other Support Activities
for Air Transportation Industries' size standard should be moderately
higher, or much higher than the nonmanufacturing anchor size standard,
this is the most logical set of industries to group together for the
industry analysis. In addition, this group includes a sufficient number
of firms to afford a meaningful assessment and comparison of industry
characteristics. The second comparison group consists of the
nonmanufacturing industries with the highest receipt-based size
standards established by SBA. SBA refers to this comparison group as
the ``nonmanufacturing higher-level size standard group.'' This group's
size standards range from $23 million to $32.5 million. If an
industry's characteristics are significantly larger than those of the
nonmanufacturing anchor group, SBA will compare them to the
characteristics of the higher-level size standards group. By doing so,
SBA can assess whether a size standard should be among the highest size
standards or somewhere between the anchor size standard and the highest
receipts-based size standards.
SBA examined 2002 industry data prepared for SBA's Office of
Advocacy by the U.S. Bureau of the Census (https://www.sba.gov/advo/
research/us_rec02.txt), data from a U.S. Bureau of the Census report
entitled ``U.S. All Industries Data by Receipt: 2002,'' and data from
the Risk Management Association's Annual Statement Studies, 2000-2001.
SBA also examined Federal contract award data for fiscal years 2003-
2004 from the U.S. General Service Administration's Federal Procurement
Data Center, and SBA's internal loan database on SBA guaranteed loans.
Industry Structure Considerations: Table 1 shows data on three
evaluation factors for the Air Traffic Control Industry, the Other
Airport Operations Industry, the Other Support Activities for Air
Transportation Industry, and the two comparison groups. These factors
are average firm size, average firm assets, and the four-firm
concentration ratio.
Table 1.--Selected Industry Characteristics by Industry Category
----------------------------------------------------------------------------------------------------------------
Average firm Average firm Four-firm
Industry category size receipts assets concentration
(million) (millions) ratio (percent)
----------------------------------------------------------------------------------------------------------------
Air Traffic Control....................................... $2.44 $2.47 88.7
Other Airport Operations.................................. $4.61 $1.49 34.3
Other Support Activities for Air Transportation........... $2.97 $0.66 22.4
Nonmanufacturing Anchor Group............................. $1.29 $0.60 14.4
Higher-level Size Standard Group.......................... $4.73 $2.00 26.4
----------------------------------------------------------------------------------------------------------------
For the Air Traffic Control Industry, its average firm size in
receipts is almost twice that of the average firm size in the
nonmanufacturer anchor group, but it is significantly lower than the
average firm size in the higher-level size standards group. This factor
indicates a size standard within a range of $12 million to $14 million,
which is approximately double the $6.5 million anchor size standard,
may be warranted. The average firm assets factor is above the higher-
level size standard group and provides a basis for increasing the
current size standard within the $23 million to $32.5 million range.
The four-firm concentration ratio provides support for a change to the
current size standard. The factor is appreciably higher than the
higher-level size standard group and it is at a sufficient level to
suggest that the largest firms in the industry may have the ability to
control the industry. To encourage competition, a very substantial
increase to the size standard should be considered. In relation to the
higher-level size standards group, the four-firm concentration ratio
suggests a standard higher than $23 million is reasonable.
For the Other Airport Operations Industry, its average firm size is
almost that of the higher-level size standards group. This factor
indicates a size standard in the lower range of $23 million to $32.5
million may be warranted. The average firm assets factor is above the
nonmanufacturing anchor group, but below the higher-level size standard
group, and provides a basis for increasing the current size standard to
a $14 million to $16 million range. The four-firm concentration ratio
provides some support for a change to the current size standard, but is
below the 40 percent level that would suggest the size standard should
be changed because of this factor (see previous discussion of SBA's
``Size Standards Methodology''). While the factor is appreciably higher
than the average industry in the two comparison groups, the level of
the size standard, however, should be based on the consideration of the
other factors.
For the Other Support Activities for Air Transportation Industry,
its average firm size in receipts is more than twice that of the
average firm size in the nonmanufacturer anchor. This factor indicates
a size standard within a range of $15 to $16 million, which is slightly
more than double the $6.5 million anchor size standard, may be
warranted. The average firm assets factor is almost equal to the
nonmanufacturing anchor group and does not provide a basis for
increasing the existing size standard. The four-firm concentration
ratio provides some support for a change to the current size standard,
but is below the 40 percent level that would suggest the size standard
should be changed because of this factor (see previous discussion of
SBA's ``Size Standards Methodology''). While the factor is appreciably
higher than the average industry in the nonmanufacturing anchor group,
the level of the size standard, however, should be based on the
consideration of the other evaluation factors.
Table 2 below examines the size distribution of firms. For this
factor, SBA evaluates the percent of total sales cumulatively generated
by firms at or below specific receipts sizes. For example, firms in the
Air Traffic Control, Other Airport Operations, and Other Support
Activities for Air
[[Page 28607]]
Transportation Industries with $10 million or less in receipts
cumulatively obtained 24.4 percent, 21.4 percent, and 24.8 percent,
respectively, of total industry sales. Within the nonmanufacturing
anchor group, these size firms captured 49.4 percent of total industry
sales while similar firms in the higher-level size standards group
captured 21.1 percent.
Table 2.--Percentage Distribution of Firms by Receipts Size
------------------------------------------------------------------------
Percent of industry sales by firm
-------------------------------------------
Industry category < $1 < $5 < $10 < $50
million million million million
------------------------------------------------------------------------
Air Traffic Control......... 6.6 13.3 24.4 62.2
Other Airport Operations.... 3.9 17.5 21.4 33.5
Other Support Activities for 7.5 18.9 24.8 35.8
Air Transportation.........
Nonmanufacturing Anchor 16.8 39.9 49.4 63.7
Group......................
Higher-level Size Standard 3.8 13.3 21.1 40.4
Group......................
------------------------------------------------------------------------
Considering the overall distributions across size classes, an
appropriate size standard for all three industries appears to be near
or just above the higher-level size standards group, such as between
$22 million to $24 million. The data for each industry is discussed
below.
For the Air Traffic Control Industry, the data for three of the
four size classes support a size standard well above the anchor size
standard and at the lower range of the higher-level size standards. The
size class of less than $50 million size class supports only a size
standard at the anchor level. Overall, the size distribution factor
supports a size standard in the at or near the lower range of the
higher-level size standard group levels of $21 million to $23 million.
For the Other Airport Operations Industry, the data generally
support a size standard that is well above the nonmanufacturing anchor
group and within the higher-level size standard group. The three size
classes, less than $1 million, $10 million, and $50 million, support a
size standard around the higher-level size standard group. The less
than $5 million size class supports a size standard well above the
anchor size standard, but at or below the higher-level size standard.
Overall, the size distribution factor supports a size standard between
the lower range of the higher size standards group levels of $23
million to $25 million.
For the Other Support Activities for Air Transportation industry,
the data for three percentage groups support a size standard that is
well above the nonmanufacturing anchor group, but at or slightly below
the higher-level size standard group. The data for the size class less
than $50 million support a size standard well above the
nonmanufacturing anchor group and within the higher-level size standard
group. Overall, the size distribution factor supports a size standard
at or just below the range of the higher-level size standard group
levels of $21 million to $24 million.
SBA Program Considerations: SBA also considers the potential impact
of changing a size standard on its programs. Because SBA's review of
the Air Traffic Control, the Other Airport Operations, and the Other
Support Activities for Air Transportation Industries' size standards
was prompted by concerns about the application of the size standard to
Federal contracting, SBA examines the pattern of Federal contract
awards to small businesses as one of the factors in evaluating whether
the existing size standard should be revised.
In the case of Federal contracts to firms in the Air Traffic
Control, Other Airport Operations, and Other Support Activities for Air
Transportation Industries, the share of Federal contracts awarded to
small businesses provide a basis for revising the size standard. In
fiscal years 2003 and 2004, small businesses in the Air Traffic Control
industry received 11.5 percent of the total dollar value of Federal
contracts, while small business in the Other Airport Operations
industry received an average of 12 percent, and the Other Support
Activities for Air Transportation industry received 4 percent. In
addition, a cumulative average of 25 percent of the award actions went
to small businesses in these three industries.
By comparison, the percentage of total industry sales cumulatively
generated at or below the existing $6.5 million size standard, is 15.5
percent for the Air Traffic Control industry and 18.3 percent for the
Other Airport Operations industry. The respective 11.5 percent and 12
percent of Federal contract dollars to small businesses are relatively
low for the Air Traffic Control and Other Airport Operations. For the
Other Support Activities for Air Transportation industry, the 4 percent
small business Federal contract dollars share is extremely lower than
the 20.1 percent of total industry sales cumulative generated by firms
at or below the current $6.5 million size standard. These comparisons
between industry-wide small business market share and the proportion of
Federal contracting dollars to small business indicate that small
businesses in these industries may have encountered difficulties in
obtaining Federal contracts, and that a size standard much higher than
$6.5 million may be warranted.
SBA also reviewed its financial assistance to small businesses in
the air transportation support activities industries. In fiscal years
2003, 2004, and 2005, SBA guaranteed no loans for the Air Traffic
Control industry; an average of nine loans totaling $2.4 million in the
Other Airport Operations industry; and an average of 37 loans totaling
$5.1 million for the Other Support Activities for Air Transportation
industry. Almost 90 percent of the loans for the Other Airport
Operations industry and the Other Support Activities for Air
Transportation industry were made to firms less than half the current
size standard. It is unlikely that an increase to the size standard
would have an appreciable impact on the financial programs, and
therefore, this factor is not part of the assessment of this industry's
size standard.
SBA's Proposal: The analysis of each evaluation factor supports SBA
proposing a $21 million size standard for each industry. SBA believes
the presence of larger-sized firms in the industry, as evidenced by the
factors of average size firm, the distribution of firms by size, and
four-firm concentration ratio, is sufficiently strong to support a
substantial change to the existing size standard. For the Air Traffic
Control and the Other Airport Operations industries, most of the five
evaluation factors support a size
[[Page 28608]]
standard at or near the lower range of the higher-level size standards.
For both industries, one factor supports a size standard about double
the $6.5 nonmanufacturer anchor size standard. Accordingly, SBA
believes the data support a $21 million size standard that is near the
lower range of the higher-level size standards. For the Other Support
Activities for Air Transportation Industry, three of the five factors
support a size standard significantly higher than the current $6.5
million size standard, with one factor supporting a size standard at or
near the range of the lower range of the higher-level size standards.
In consideration that many firms operate in each of the three air
transportation support activities industries, SBA has decided to also
propose a $21 million size standard for this industry to have a common
size standard for closely related industries.
Dominant in Field of Operation: Section 3(a) of the Small Business
Act defines a small concern as one that is (1) Independently owned and
operated, (2) not dominant in its field of operations and (3) within
detailed definitions or size standards established by the SBA
Administrator. SBA considers as part of its evaluation of a size
standard whether a business concern at or below a size standard would
be considered dominant in its field of operation. This assessment
generally considers the market share of firms at the proposed or final
size standard, or other factors that may show whether a firm can
exercise a major controlling influence on a national basis in which
significant numbers of business concerns are engaged.
SBA has determined that for the Air Traffic Control, the Other
Airport Operations, and the Other Support Activities for Air
Transportation industries no firm at or below the proposed size
standard would be of a sufficient size to dominate its field of
operation. The largest firm within the Air Traffic Control, the Other
Airport Operations, and the Other Support Activities for Airport
Transportation industries at the proposed size standard level generates
less than 0.30, 0.25 and 0.20 percent, respectively, of total industry
receipts. This level of market share effectively precludes any ability
for a firm at or below the proposed size standard from exerting a
controlling effect on this industry.
Alternative Size Standards: SBA considered an alternative size
standard based on average number of employees instead of average annual
receipts. This approach was considered in a proposed rule of March 19,
2004 (69 FR 13130) as part of proposal to restructure all of SBA's size
standards. For the Air Traffic Control industry, a size standard in
number of employees would not be appropriate. The average number of
employees for this industry is 30, and for all firms with receipts
below the proposed $21 million level, the average number of employees
is 11. SBA is currently studying how to simplify its size standards.
SBA proposed to establish a minimum employee size standard of 50, to
reduce the number of size standards from 37 levels to 11, and to
establish common size standards for related industries. If SBA had
adopted the proposed minimum 50-employee size standard, potentially one
or two of the largest four firms might qualify as a small business. If
SBA established an employee size standard for the Air Traffic Control
industry between 15 and 20 employees, it would be contrary to SBA's
measures to simplify its size standards by increasing the number of
size standard levels, and not establishing common size standards for
related industries. For this reason, SBA has determined that a receipt-
based size standard of $21 million for the Air Traffic Control industry
is more appropriate.
In addition, concerns in the Other Airport Operations Industry
perform their services with the use of subcontractors and part-time
employees, i.e., janitorial, aircraft fueling, and food services.
Because of the large proportion of part-time employees in this
industry, SBA has decided to retain average annual receipts as the size
standard measure. A receipts-based size standard will treat firms more
equitably since firms will vary on the use of part-time employees and
subcontractors. An employee-based size standard could unintentionally
influence decisions of some firms to alter the use of part-time
employees and subcontractors to remain eligible as small businesses.
Firms in the Other Support Activities for Air Transportation
Industry provide specialized services for the air transportation
industry, such as aircraft testing, repair, maintenance, and
inspection. SBA considered converting this size standard from receipts
to employees as activities in this industry tend to have a more stable
workforce. A comparable size standard for this industry would be in the
range of 100 to 125 employees. However, SBA decided to keep the size
standard as one based on receipts because the emphasis on its
restructuring effort is simplification. Many firms in this industry are
also active in the Other Airport Operations industry, which does not
lend itself to an employee-based size standard. If SBA decided to
establish an employee-based size standard for Other Support Activities
for Air Transportation, firms that are active in both industries could
find themselves small in the Other Support Activities for Air
Transportation industry, yet large in the Other Airport Operations
industry, or vice-a-versa. The analysis provided above indicates that
both industries require a similar receipts-based size standard.
SBA welcomes public comments on its proposed size standard for the
Air Traffic Control, Other Airport Operations, and Other Support
Activities for Aircraft Industries. Comments on alternatives, including
the option of retaining the size standards at $6.5 million or
establishing employee-based size standards as discussed above, should
explain why the alternative would be preferable to the proposed size
standards.
Compliance With Executive Orders 12866, 12988, and 13132, the Paperwork
Reduction Act (44 U.S.C. Ch. 35), and the Regulatory Flexibility Act (5
U.S.C. 601-612)
The Office of Management and Budget (OMB) has determined that 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.
For purposes of Executive Order 12988, SBA has determined that this
rule is drafted, to the extent practicable, in accordance with the
standards set forth in that Order.
For purposes of Executive Order 13132, SBA has determined that this
rule does not have any Federalism implications warranting the
preparation of a federalism assessment.
For the purpose of the Paperwork Reduction Act, 44 U.S.C. Ch. 35,
SBA has determined that this rule would not impose new reporting or
record keeping requirements, other than those required of SBA.
Regulatory Impact Analysis
1. Is there a need for the regulatory action?
SBA's mission is to aid and assist small businesses through a
variety of financial, procurement, business development, and advocacy
programs. To assist effectively the intended beneficiaries of these
programs, SBA must establish distinct definitions of which businesses
are deemed small businesses. The Small Business Act (15 U.S.C. 632(a))
delegates to SBA's
[[Page 28609]]
Administrator the responsibility for establishing small business
definitions. The Act also requires that small business definitions vary
to reflect industry differences. The supplementary information section
of this proposed rule explains SBA's methodology for analyzing a size
standard for a particular industry. Based on that analysis, SBA
believes that an adjustment in the size standard of the Air Traffic
Control, Other Airport Operations, and Other Support Activities for Air
Transportation Industries is needed to better reflect the economic
characteristics of small businesses in this industry.
2. What are the potential benefits and costs of this regulatory action?
The most significant benefit to businesses obtaining small business
status as a result of this rule is eligibility for Federal small
business assistance programs, including SBA's financial assistance
programs, economic injury disaster loans, and Federal procurement
preference programs for small businesses, such as 8(a) firms, small
disadvantaged businesses (SDB), small businesses located in
Historically Underutilized Business Zones (HUBZone), women-owned small
businesses, and veteran-owned and service disabled veteran-owned small
businesses. HUBZone and SDB small businesses are also for Federal
contracts awarded through full and open competition after application
of the HUBZone or SDB price evaluation preference or adjustment. Other
Federal agencies also may use SBA size standards for a variety of
regulatory and program purposes. Through the assistance of these
programs, small businesses become more knowledgeable, stable, and
competitive businesses. Under this proposed rule, 150 additional firms
generating an average of 8 percent of sales in the three industries
will obtain small business status and become eligible for these
programs.
The benefits of a size standard increase to a more appropriate
level would accrue to three groups: (1) Businesses that benefit by
gaining small business status from the higher size standard that also
use small business assistance programs; (2) growing small businesses
that may exceed the current size standards in the near future and that
will retain small business status from the higher size standard; and
(3) Federal agencies that award contracts under procurement programs
that require small business status.
SBA estimates that firms gaining small business status could
potentially obtain Federal contracts worth $129 million per year under
the small business set-aside program, the 8(a) and HUBZone Programs, or
unrestricted procurements. This represents 8 percent of the $1.6
billion in average Federal contracts awarded under NAICS 488111,
488119, 488190 during fiscal years 2003 and 2004. The added competition
for many of these procurements also would likely result in a lower
price to the Government for procurements reserved for small businesses,
but SBA is not able to quantify this benefit.
Under SBA's 7(a) Guaranteed Loan Program and Certified Development
Company (504) Program, SBA estimates that one or two additional loans
totaling $500,000 to $600,000 in new Federal loan guarantees could be
made to these newly defined small businesses. This assumes that only
one to two percent of the newly eligible small businesses will seek SBA
financial assistance. Because of the size of the loan guarantees,
however, most loans are made to small businesses well below the size
standard. Thus, increasing the size standard will likely result in only
a small increase in small business guaranteed loans to businesses in
this industry, if any.
The newly defined small businesses would also benefit from SBA's
Economic Injury Disaster Loan (EIDL) Program. Since this program is
contingent upon the occurrence and severity of a disaster, no
meaningful estimate of benefits can be projected for future disasters.
To the extent that up to 150 additional firms could become active
in Federal small business programs, this may entail some additional
administrative costs to the Federal Government associated with
additional bidders for Federal small business procurement programs,
additional firms seeking SBA guaranteed lending programs, additional
firms eligible for enrollment in Central Contractor Registration's
Dynamic Small Business Search database, and additional firms seeking
certification as 8(a), SDB, or HUBZone firms. Among businesses in this
group seeking SBA assistance, there could be some additional costs
associated with compliance and verification of small business status
and protests of small business status. These costs are likely to
generate minimal incremental administrative costs because mechanisms
are currently in place to handle these additional administrative
requirements.
The costs to the Federal Government may be higher on some Federal
contracts. With greater number of businesses defined as small, Federal
agencies may choose to set-aside more contracts for competition among
small businesses rather than using full and open competition. The
movement from unrestricted to set-aside contracting is likely to result
in competition among fewer bidders. In addition, higher costs may
result if additional full and open contracts are awarded to HUBZone and
SDB businesses because of a price evaluation preference. The additional
costs associated with fewer bidders, however, are likely to be minor
since, as a matter of policy, procurements may be set aside for small
businesses or reserved for the 8(a) or HUBZone Programs only if awards
are expected to be made at fair and reasonable prices.
The proposed size standard may have distributional effects among
large and small businesses. Although the actual outcome of the gains
and losses among small and large businesses cannot be estimated with
certainty, several trends are likely to emerge. First, there will
likely be a transfer of some Federal contracts to small businesses from
large businesses. Large businesses may have fewer Federal contract
opportunities as Federal agencies decide to set aside more Federal
procurements for small businesses. Also, some Federal contracts may be
awarded to HUBZone or SDB concerns instead of large businesses since
those two categories of small businesses may be eligible for a price
evaluation adjustment for contracts competed on a full and open basis.
Similarly, currently defined small businesses may obtain fewer Federal
contracts due to the increased competition from more businesses defined
as small. This transfer may be offset by a greater number of Federal
procurements set aside for all small businesses. The number of newly
defined and expanding small businesses that are willing and able to
sell to the Federal Government will limit the potential transfer of
contracts away from large and currently defined small businesses. The
potential distributional impacts of these transfers may not be
estimated with any degree of precision because the data on the size of
business receiving a Federal contract are limited to identifying small
or other-than-small businesses, without regard to the exact size of the
business.
The revision to the current size standards for the Air Traffic
Control, Other Airport Operations, and Other Support for Air
Transportation Industries is consistent with SBA's statutory mandate to
assist small business. This regulatory action promotes the
Administration's objectives. One of SBA's goals in support of the
Administration's
[[Page 28610]]
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.
Initial Regulatory Flexibility Analysis
Under the Regulatory Flexibility Act (RFA), this rule, if
finalized, may have a significant impact on a substantial number of
small entities engaged in Air Traffic Control, Other Airport
Operations, and Other Support Activities for Air Transportation. As
described above, this rule may affect small entities seeking Federal
contracts, SBA (7a) and 504 Guaranteed Loan Programs, SBA Economic
Impact Disaster Loans, and other Federal small business programs.
Immediately below, SBA sets forth an initial regulatory flexibility
analysis (IRFA) of this proposed rule on the Air Traffic Control, Other
Airport Operations, and Other Support Activities for Air Transportation
industries addressing the following questions: (1) What is the need for
and objective of the rule, (2) what is SBA's description and estimate
of the number of small entities to which the rule will apply, (3) what
is the projected reporting, recordkeeping, and other compliance
requirements of the rule, (4) what are the relevant Federal rules which
may duplicate, overlap or conflict with the rule, and (5) what
alternatives will allow the Agency to accomplish its regulatory
objectives while minimizing the impact on small entities?
(1) What is the need for and objective of the rule?
The revision to the size standard for the Air Traffic Control,
Other Airport Operations, and Other Support for Air Transportation
Industries more appropriately defines the size of businesses in this
industry that SBA believes should be eligible for Federal small
business assistance programs. SBA reviewed the structure of these
industries using five factors that were compared with averages for two
groups of industries. A review of the latest available data supports a
change to the existing size standard.
(2) What is SBA's description and estimate of the number of small
entities to which the rule will apply?
SBA estimates that 150 additional firms out of 3,607 firms in all
three industries would be considered small because of this rule, if
adopted. These firms would be eligible to seek available SBA assistance
provided that they meet other program requirements. Firms becoming
eligible for SBA assistance as a result of this rule, if finalized,
cumulatively generate $1 billion in this industry out of a total of
$12.7 billion in annual receipts. The small business coverage in this
industry would increase by approximately eight percent of total
receipts.
(3) What are the projected reporting, record keeping, and other
compliance requirements of the rule and an estimate of the classes of
small entities which will be subject to the requirements?
A new size standard does not impose any additional reporting,
record keeping or compliance requirements on small entities. Increasing
size standards expands access to SBA programs that assist small
businesses, but does not impose a regulatory burden as they neither
regulate nor control business behavior.
(4) What are the relevant Federal rules which may duplicate, overlap or
conflict with the rule?
This proposed rule overlaps with other Federal rules that use SBA's
size standards to define a small business. Under section 3(a)(2)(C) of
the Small Business Act, 15 U.S.C. 632(a)(2)(c), Federal agencies must
use SBA's size standards to define a small business, unless
specifically authorized by statute. In 1995, SBA published in the
Federal Register a list of statutory and regulatory size standards that
identified the application of SBA's size standards as well as other
size standards used by Federal agencies (60 FR 57988-57991, dated
November 24, 1995). SBA is not aware of any Federal rule that would
duplicate or conflict with establishing size standards.
The size standard may also affect small businesses participating in
programs of other agencies that use SBA size standards. As a practical
matter, however, SBA cannot estimate the impact of a size standard
change on each Federal program that uses its size standards. In cases
where an SBA size standard is not appropriate, the Small Business Act
and SBA's regulations allow Federal agencies to develop different size
standards with the approval of SBA Administrator (13 CFR 121.902). For
purposes of a regulatory flexibility analysis, agencies must consult
with SBA's Office of Advocacy when developing different size standards
for their programs (13 CFR 121.902(b)(4)).
(5) What alternatives will allow the Agency to accomplish its
regulatory objectives while minimizing the impact on small entities?
SBA considered an alternative size standards based on average
number of employees instead of average annual receipts. This approach
was considered in a proposed rule of March 19, 2004 (69 FR 13130) as
part of restructuring of size standards. For the Air Traffic Control
industry, a size standard in number of employees would not be
appropriate. The average number of employees for this industry is 30,
and for all firms with receipts below the proposed $21 million level,
the average number of employees is 11. SBA is currently studying how to
simplify its size standards. In its March 19, 2004 rule, SBA proposed
to establish a minimum employee size standard of 50, to reduce the
number of size standards from 37 levels to 11, and to establish common
size standards for related industries. If SBA had adopted the proposed
minimum 50-employee size standard, potentially one or two of the
largest four firms might qualify as a small business. If SBA
established an employee size standard for the Air Traffic Control
industry between 15 and 20 employees, it would be contrary to SBA's
measures to simplify its size standards by increasing the number of
size standard levels, and not establishing common size standards for
related industries. For this reason, SBA has determined that a receipt
based size standard of $21 million for the Air Traffic Control industry
is more appropriate.
In addition, concerns in the Other Airport Operations industry
perform their services with the use of subcontractors and part-time
employees, i.e., janitorial, aircraft fueling, and food services.
Because of the large proportion of part-time employees in this
industry, SBA has decided to retain average annual receipts as the size
standard measure. A receipts-based size standard will treat firms more
equitably since firms will vary on the use of part-time employees and
subcontractors. An employee size standard could unintentionally
influence decisions of some firms to alter the use of part-time
employees and subcontractors to remain as small businesses.
Firms in the Other Support Activities for Air Transportation
industry provide specialized services for the air transportation
industry like aircraft testing, repair, maintenance, and inspection.
SBA considered converting this size standard from receipts to employees
as activities in this industry tend to have a more stable workforce. A
[[Page 28611]]
comparable size standard for this industry would be in the range of 100
to 125 employees. However, SBA decided to keep the size standard
receipts-based because of its emphasis on its restructuring effort is
simplification. Many firms in this industry are also active in the
Other Airport Operations industry, which does not lend itself to an
employee-based size standard. If SBA decided to establish an employee-
based size standard for Other Support Activities for Air
Transportation, firms that are active in both industries could find
themselves small in the Other Support Activities for Air Transportation
industry, yet large in the Other Airport Operations industry, or vice-
a-versa. The analysis provided above indicates that both industries
require a similar receipts-based size standard.
SBA welcomes comments on other alternatives that minimize the
impact of this rule on small businesses and achieve the objectives of
this rule. These comments should describe the alternative and explain
why it is preferable to this proposed rule.
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 ``Small Business Size Standards
by NAICS Industry,'' under the heading ``Subsector 488'Support
Activities for Transportation,'' revise the entries for 488111, 488119,
and 488190 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 in millions of in number of
title dollars employees
------------------------------------------------------------------------
* * * * * * *
------------------------------------------------------------------------
Subsector 488--Support Activities for Transportation
------------------------------------------------------------------------
488111............. Air Traffic Control $21.0 ..............
488119............. Other Airport 21.0 ..............
Operations.
488190............. Other Support 21.0 ..............
Activities for Air
Transportation.
------------------------------------------------------------------------
* * * * * * *
------------------------------------------------------------------------
Dated: March 17, 2006.
Hector V. Barreto,
Administrator.
[FR Doc. 06-4619 Filed 5-16-06; 8:45 am]
BILLING CODE 8025-01-P