Small Business Size Standards; Surety Bond Guarantee Program, 62204-62208 [E6-17682]

Agencies

• SMALL BUSINESS ADMINISTRATION

[Federal Register Volume 71, Number 205 (Tuesday, October 24, 2006)]
[Rules and Regulations]
[Pages 62204-62208]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: E6-17682]


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SMALL BUSINESS ADMINISTRATION

13 CFR Part 121

RIN: 3245-AE81


Small Business Size Standards; Surety Bond Guarantee Program

AGENCY: U.S. Small Business Administration.

ACTION: Final rule.

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SUMMARY: This rule finalizes the U.S. Small Business Administration's 
(SBA) November 14, 2005 interim final rule that amended the small 
business size standard for its Surety Bond Guarantee (SBG) Program for 
construction (general or special trades) or service concerns performing 
contracts in the Presidentially-declared disaster areas resulting from 
the 2005 Hurricanes Katrina, Rita, and Wilma by allowing them to meet 
either the size standard for the primary industry in which it, together 
with its affiliates, is engaged, or the current $6.5 million standard 
for the SBG Program, whichever is higher. The size standard under this 
rule will remain in effect until SBA determines it is no longer 
necessary.

DATES: Effective Date: This regulation becomes effective on November 
24, 2006.

FOR FURTHER INFORMATION CONTACT: Carl Jordan, Office of Size Standards, 
(202) 205-6618 or sizestandards@sba.gov.

SUPPLEMENTARY INFORMATION: 

SBA's Surety Bond Guarantee Program and Size Standards

    SBA, through its SBG Program, can guarantee bid, performance, 
payment and ancillary bonds for contracts up to $2 million for small 
contractors who otherwise cannot obtain surety bonds without SBA's 
guarantee. SBA's guarantee gives sureties an incentive to provide 
bonding for eligible contractors; it strengthens a contractor's ability 
to obtain bonding and provides greater access to contracting 
opportunities. A contractor applying for an SBA bond guarantee must 
qualify as a small business concern, in addition to meeting the surety 
company's underwriting requirements. Generally, except as modified by 
the November 14, 2005 interim final rule, businesses in construction 
and service industries can qualify as small for the SBG Program on 
commercial, local or State contracts, if their average annual receipts, 
including those of their affiliates, for the last 3 fiscal years do not 
exceed $6.5 million (13 CFR 121.301(d)(1) and 13 CFR 121.104(c)).
    In addition, a concern that qualifies as small for a prime contract 
with the Federal Government is qualified as ``small for financial 
assistance that is directly and primarily related to the performance of 
that particular contract'' (13 CFR 121.305). Therefore, if the concern 
meets the small business size standard for the North American Industry 
Classification System (NAICS) code designated by the contracting 
officer for a specific procurement, the concern is eligible for SBA's 
financial assistance programs, including the SBG Program, even when its 
annual receipts exceed $6.5 million.

What This Final Rule Accomplishes

    On November 14, 2005, SBA published an interim final rule (70 FR 
69048) revising the size standards for the SBG Program applicable to 
construction (general or special trades) and service concerns 
performing contracts in the Gulf Coast Region of the United States and 
in Florida that the President declared disaster areas following 
Hurricanes Katrina, Rita and Wilma in 2005. When the contract meets the 
performance location requirement, that interim final rule established 
that an SBG Program applicant concern is small when it meets the small 
business size standard for either the primary industry in which it, 
together with its affiliates, is engaged, or the then current SBG $6.0 
million size standard, whichever is higher. On December 6, 2005, SBA 
issued an interim final rule (70 FR 72577) adjusting its monetary based 
size standards for inflation. In that interim final rule, SBA changed 
the surety bond guarantee size standard from $6.0 million to $6.5 
million. Today's final rule adopts the November 14, 2005 interim final 
rule, with the inflation adjusted size standard of $6.5 million. Surety 
companies with whom SBA has executed a Preferred Surety Bond (PSB) 
Agreement under 13 CFR part 115 are responsible for determining 
eligibility under this regulation. SBA surety bond personnel are 
responsible for determining eligibility under this regulation for those 
surety guarantees that require SBA's prior approval.
    This final rule also states in section 121.301(d)(3) that the 
concern is small if, together with its affiliates, it meets the 
requisite size standard. This merely clarifies that the concern must 
include the annual receipts or number of employees of its affiliates 
when determining if it is small. This language is the same as in 
section 121.301(d)(1). In addition, under SBA's small business size 
regulations and for all SBA programs, concerns must always include the 
annual receipts or number of employees of affiliates to determine if 
they are small (13 CFR 121.103, 121.104 and 121.106).
    In the Supplementary Information in the November 14, 2005 interim 
final rule, SBA stated that the amended size standards under the 
interim final rule are applicable until SBA determines that it is no 
longer necessary to expand the availability of SBG Program assistance 
for reconstruction and recovery of the Gulf Coast Region of the United 
States and in Florida that the President declared disaster areas 
following Hurricanes Katrina, Rita and Wilma in 2005. SBA further 
stated that the interim final rule was a specific response to those 
natural disasters. SBA recognizes that small construction and service 
contractors need this assistance now and in the very near future.
    The need for this size standard for the SBG Program should be no 
longer necessary when expanded contractor participation has ceased or 
declined significantly relative to past experience. Because of ongoing 
major recovery efforts in the disaster areas where this size standard 
is valid, SBA cannot foresee precisely when the need for expanded SBG 
assistance in the disaster areas will end. Construction contracts can 
be long term, and subcontracts are sometimes not awarded or begun until 
well into the overall general contract. SBA does believe, however, that 
this could take at least three more years.
    SBA will monitor the SBG Program, particularly the use of this 
modified size standard for work in the disaster areas. SBA's Office of 
Surety Guarantees will monitor annual Federal and State spending for 
rebuilding efforts, and as rebuilding approaches the desired end state, 
the office will continue to scrutinize the size and location of 
contracts bonded and the size of the small businesses that receive 
them. If SBA determines that this amended size standard causes an 
adverse effect on local small businesses or that the modified size 
standard is no longer needed, it will terminate or otherwise modify 13 
CFR 121.301(d)(3).
    However, SBA will not terminate this special size standard without 
first proposing to do so by publishing a proposed rule in the Federal 
Register. The proposed rule will seek public comment on discontinuing 
the size

[[Page 62205]]

standard, and it will propose a date on which it would cease to apply.
    Cessation or withdrawal of this size standard will have no affect 
on outstanding surety bonds that SBA has guaranteed. Contractors for 
whom SBA has guaranteed their bid bonds will remain eligible for 
performance, payment, maintenance and other required ancillary bonds, 
regardless of when they are needed. Similarly, contractors for whom SBA 
has guaranteed performance and payment bonds, will remain eligible for 
guaranteed maintenance and the other ancillary bonds required by the 
contract.

Summary of Comments to the November 14, 2005 Interim Final Rule

    In the November 14, 2005 interim final rule, SBA requested comments 
on how long the amended size standards should apply to construction and 
service concerns performing contracts or subcontracts in the specified 
disaster areas, factors SBA should consider before determining that the 
size standards are no longer necessary, and the appropriate Agency 
action after SBA makes that determination. SBA received three comments 
to the interim final rule: (1) Two surety associations and an insurance 
association filed joint comments on behalf of their member companies 
and their producers; (2) an association of small minority contractors 
filed comments on behalf of its members; and (3) an independent 
business submitted comments.
    The surety and insurance associations' comments reflected their 
concern that expanding SBG assistance to more and larger construction 
and service concerns might dilute SBA financial resources and services 
available to the truly small and emerging contractor. However, as the 
association also noted, ``the SBA program currently is operating at 
only one-third of its capacity''. SBA believes that its financial 
resources are sufficient to absorb the additional obligations it may 
undertake under this regulation without adversely affecting other small 
businesses.
    The surety and insurance industries also expressed concern that the 
rule could create added administrative burdens for surety companies 
participating in the PSB Program. The new burdens could involve 
determining that an applicant company is within its industry size 
standard and assuring the contractor performs the construction work 
within the designated disaster areas. SBA believes any additional 
burden will be minimal. Surety companies already collect substantial 
information on their clients before they extend surety credit, such as 
annual and interim financial statements, company location, past 
contract performance information, and contract performance location.
    Furthermore, sureties already review an applicant's size. 
Determining whether a company meets a size standard is similar 
regardless of what the size standard is--$6.5 million or its industry 
standard, expressed in annual receipts or number of employees. Sureties 
collect and report to SBA the NAICS codes for their clients. SBA does 
not believe matching NAICS industry codes to their small business size 
standard constitutes a substantially increased burden. For 
construction, there are few size standards: $31 million for heavy and 
civil construction; $13 million for special trades; and $18.5 million 
for dredging. Size standards for service industries range from $3.5 
million to $32.5 million in average annual receipts. SBA is not 
changing how to calculate whether a business concern is small. For 
receipts-based size standards, the calculation is still based upon the 
average annual receipts for the concern's 3 immediately preceding 
fiscal years. This is the same calculation used for the current $6.5 
million size standard, and for those concerns and/or contracts that do 
not meet the location of contract performance criterion of this 
regulation. Thus, SBA does not believe there are substantial new 
burdens placed on the surety companies in this rule.
    The surety and insurance industries also expressed concern that SBA 
would not honor a surety bond guarantee if a surety did not properly 
document that the bond the company issued and SBA guaranteed met the 
criteria required by this rule. However, the information that surety 
companies collect and maintain for this amended size standard is what 
they now collect to support SBA guaranteed surety bonds. SBA has 
specified in this rule that the place of performance must be within 
certain geographical areas in order to use the amended size standards. 
SBA expects that sureties know the place of performance when they issue 
surety bonds. So long as they retain that information in their 
underwriting files, and the place of contract performance is in fact 
within the declared disaster areas, SBA does not see this as 
jeopardizing its guarantee on those bonds.
    Moreover, SBA's small business size regulations at 13 CFR 121.305 
have permitted a small construction or service contractor with annual 
receipts greater than $6.5 million to qualify for its SBG Program when 
a concern is a prime contractor with the Federal Government and it 
meets the size standard corresponding to the NAICS code assigned to the 
procurement. Under such circumstances, the surety has been determining 
whether a construction or service concern meets the size standard for 
the Federal procurement for which it submits an offer as a prime 
contractor, regardless of whether or not the concern has receipts in 
excess of $6.5 million. Thus, SBA believes that this final rule creates 
no additional burdens on the surety companies, since they now use the 
same criteria under section 121.305. Because a surety must now 
determine a contractor's eligibility based on the NAICS code that the 
contracting officer specified, SBA does not believe there is a 
substantially increased burden under this final rule.
    SBA also received comments from an association of small minority 
contractors. The association opposed the new SBG Program size standard 
and requested an immediate return to the prior size standard. In lieu 
of an immediate return, the association suggested terminating it 90 
days from its effective date, which was November 14, 2005. The 
association expressed concern that increasing the size standard for 
these contracts unfairly increases competition for smaller businesses, 
specifically those below the current $6.5 million SBG size standard. 
The association was also concerned that the interim final rule rendered 
any construction or services concern eligible for SBG assistance, 
regardless of its principal place of business, so long as it performs 
its contract in the disaster area and meets the modified size standard. 
This would, according to the association, unnecessarily increase 
competition for contractors located in the disaster areas. The 
association believed these factors would negatively affect small 
minority contractors, who most need bond guarantees.
    SBA takes very seriously the possibility of negative effects on 
smaller contractors. In this case, however, SBA does not believe that 
companies not located in the disaster areas, if they perform contracts 
in the disaster areas and meet the modified standard, will adversely 
affect local small businesses. Because of the extreme demand for 
construction and services in the disaster areas, SBA expects there will 
be more contracts. SBA believes that the priority should be to help 
restore and reconstruct the disaster areas, and all small businesses 
should have greater opportunities to participate in this effort. As SBA 
states above, it will monitor these bonded contracts. If SBA

[[Page 62206]]

finds that this rule has adversely affected local smaller businesses, 
then it will consider withdrawing or otherwise modifying this 
subsection.
    The third commenter was a small business that fully supported this 
regulation. Based on the commenter's remarks, it would appear that this 
size standard would not apply to its businesses. As the commenter 
describes his company, it is a supplier of telecommunications 
equipment. Therefore, it is not subject to a receipts-based size 
standard. The company would not be categorized as a construction or 
services firm. Rather, it would be classified as a manufacturer or 
dealer subject to a size standard based on the number of employees. The 
SBG size standard that applies is the same as this rule establishes; 
that is, it must meet the size standards for the industry in which it, 
together with its affiliates, is engaged (13 CFR 121.301(d)(2)). The 
commenter included additional comments that were not germane to the 
specifics of this regulation, but rather related to the size standard 
for the SBG Program itself.

Compliance With Executive Orders 12866, 12988, and 13132, the 
Regulatory Flexibility Act (5 U.S.C. 601-612) and the Paperwork 
Reduction Act (44 U.S.C. Ch. 35)

    The Office of Management and Budget has determined that this rule 
is a significant regulatory action under section 3(f) of Executive 
Order 12866. A general discussion of the need for this regulatory 
action and its potential costs and benefits follows.

1. Is there a need for the regulatory action?

    As discussed in the November 14, 2005 interim final rule, this rule 
is necessary to extend the Agency's SBG Program to certain construction 
and service contractors when they undertake contracts in the disaster 
areas. The amended SBG Program size standard has limited applicability; 
that is, to contracts in the areas that the President declared a 
disaster in the Gulf Coast Region of the United States and in Florida, 
following Hurricanes Katrina, Rita and Wilma in 2005.
    The amended size standard enables as many small construction and 
service concerns as possible to help in the enormous task of renewing 
and reconstructing the disaster areas. This rule will increase 
available resources toward that end.
    SBA's statutory mission is to aid and assist small businesses 
through a variety of financial, procurement, business development and 
advocacy programs. To assist intended beneficiaries of these programs 
effectively, SBA must establish distinct standards to define small 
businesses. The Small Business Act (Act) delegates responsibility for 
establishing small business definitions to the SBA Administrator (15 
U.S.C. 632(a)). The Act also requires that small business definitions 
vary to reflect industry differences, as necessary. This modified size 
standard provides financial assistance to small businesses, a part of 
SBA's statutory mission.

2. What are the potential benefits and costs of this regulatory action?

    Anticipated total recovery and reconstruction costs for the Gulf 
Coast and Florida will be in the billions of dollars. SBA cannot 
estimate the number or value of contracts, whether Federal or non-
Federal, that small construction and service concerns will receive in 
this undertaking. SBA also cannot estimate the number or value of 
contracts that will require surety bonds or the number or value of 
surety bonds that SBA will guarantee. Nor can it estimate the number of 
small businesses that will participate in the SBG Program under the 
expanded eligibility this rule provides.
    SBA can say, however, that given the possible volume and size of 
awards, it is probable that the needs of the disaster area exceed local 
available resources, at least to the extent necessary to accomplish the 
necessary work within a suitable time. SBA believes it is important to 
have as many small businesses as possible participating in renewing and 
reconstructing the disaster areas.
    Broadening eligibility for its SBG Program will provide disaster 
victims with significant and timely benefits when and where the 
greatest needs exist. For example, disaster affected small business 
concerns can receive SBG Program assistance to restart their 
businesses. Small businesses eligible under this modified size standard 
will also participate, as either general contractors or subcontractors, 
in the reconstruction of the areas' infrastructure. More small business 
concerns may now qualify for surety bonds with SBA's guarantee, and 
recover from and help others recover from the hurricanes' effects.
    SBA expects the number of SBA guaranteed bonds to increase under 
this regulation. Although SBA does not anticipate loss rates changing 
significantly, the Government may incur additional costs to honor its 
guarantee on a greater volume of (but stable percentage of) defaulted 
bonds. SBA must honor its guarantees to the sureties on defaulted bonds 
for the percentage of loss that it guaranteed. Guaranteed amounts vary 
as follows: (1) Under the PSB Program, 70 percent; and (2) under the 
prior approval program, contracts valued at $100,000 or less, or on 
behalf of a concern owned by a socially and economically disadvantaged 
individual, or a HUBZone qualified small business, 80 percent to 90 
percent (13 CFR 115.31 and 115.68). For fiscal years 2003, 2004 and 
2005, SBA's loss rates were 1.8 percent, 1.3 percent and 1.6 percent, 
respectively. SBA expects these rates to remain stable even though the 
volume of SBA guaranteed surety bonds may increase.
    Among businesses seeking SBA's assistance through the SBG Program, 
there could be additional costs for professional time required to 
complete applications for the surety and the SBA guarantee. Businesses 
also incur costs through payment of fees to participate in the SBG 
Program. Surety companies pay SBA 26 percent of the bond premium they 
collect and contractors pay $7.29 per $1,000 of the contract value, 
which the surety companies remit to SBA (71 FR 9632, dated April 3, 
2006). This rule does not affect these fees. Total fees will increase 
because aggregate contract values will increase as a result of greater 
usage of the SBG Program.
    Although there have been no protests of an SBG Program 
participant's small business status in at least the last 5 years, 
businesses might also incur legal costs associated with defending 
themselves against size protests. Businesses may also incur legal costs 
associated with compliance.
    Both surety companies and SBA could incur additional administrative 
costs associated with processing the anticipated increased volume of 
surety bond applications and applications for the SBA guarantee. There 
may be additional administrative costs for PSB surety bond companies 
because they must document the contractors' eligibility for the SBA 
guaranteed surety bond under the amended size standard. SBA 
anticipates, however, that these additional administrative costs will 
be minimal because surety companies and SBA already perform these 
administrative functions in the ordinary course of business. SBA does 
not anticipate an increase in its human resources with the related 
administrative costs. The increased surety fees, as described above, 
will also add to SBA's reserves and proportionately offset the 
additional guarantee payments, if any.
    SBA anticipates little or no adverse effects on currently defined 
small

[[Page 62207]]

businesses because of the increased number of newly eligible small 
businesses. Potentially, a newly defined small business could obtain a 
contract that a currently defined small business might have received. 
SBA expects those cases to be few in number because the decision to 
award a contract is based on many considerations. This rule enhances 
the environment for small construction and service concerns to compete 
for opportunities and strengthens their competitiveness related to 
contracts in the Gulf Coast Region of the United States and in Florida 
that the President declared disaster areas following Hurricanes 
Katrina, Rita and Wilma in 2005.
    For purposes of Executive Order 12988, SBA has drafted this rule, 
to the extent practicable, in accordance with the standards set forth 
in section 3 of that Order.
    This regulation will not have substantial direct effects on the 
States, on the relationship between the national government and the 
States, or on the distribution of power and responsibility among the 
various levels of government. Therefore, under Executive Order 13132, 
SBA determines that this rule does not have sufficient federalism 
implications to warrant the preparation of a federalism assessment.
    SBA has determined that this rule does not impose any new 
information collection requirements from SBA that require approval by 
OMB under the Paperwork Reduction Act of 1980, 44 U.S.C. Ch. 35.

Final Regulatory Flexibility Analysis

    Under the Regulatory Flexibility Act (RFA), this rule may have a 
significant impact on a substantial number of small entities. 
Immediately below, SBA sets forth a final regulatory flexibility 
analysis (FRFA). The FRFA addresses the reasons for promulgating the 
rule; the objectives of this rule; SBA's descriptions and estimate of 
the number of small entities to which the rule will apply; the 
projected reporting record keeping and other compliance requirements of 
the rule; the relevant Federal rules which may duplicate, overlap or 
conflict with the rule; and alternatives considered by SBA.

1. What is the reason for this action?

    This rule increases contracting opportunities for more small 
businesses. It extends eligibility for SBG Program assistance to 
certain construction and service contractors that were previously 
ineligible for the program because their average annual receipts exceed 
$6.5 million. It provides eligibility under the same small business 
size standards that apply to applicants for all other SBA financial 
assistance programs. Construction and service concerns that will 
perform contracts in the Gulf Coast regions and in Florida that the 
President declared disaster areas following Hurricanes Katrina, Rita 
and Wilma in 2005 are eligible if they meet the size standard stated in 
the regulation.
    The amended size standard will also assist small construction and 
service concerns in the disaster areas whose financial conditions 
suffered adverse effects from the disasters. SBA's SBG guarantee can 
afford surety companies added incentive to provide these companies 
surety bonds if they meet their other underwriting requirements.

2. What are the objectives and legal basis for the rule?

    SBA intends to assist firms that will contribute to the recovery 
and reconstruction efforts in the Gulf Coast and Florida. SBA's 
objective is to involve as many small businesses as possible in that 
effort.
    Section 3(a) of the Small Business Act (15 U.S.C. 632(a)) gives SBA 
authority to establish and change size standards. SBA is using this 
authority to provide SBG Program assistance to those who need it and 
who can help with recovery and reconstruction.

3. What is SBA's description and estimate of the number of small 
entities to which the rule will apply?

    This rule applies to all construction (general and special trades) 
and service concerns that meet the amended size standard, regardless of 
their principal place of business, that will perform their SBA 
guaranteed bonded contracts in the declared disaster areas. As stated 
above, SBA will monitor the SBG Program, particularly the use of this 
modified size standard for work in the disaster areas. SBA has not 
assessed the number of small construction and service contractors to 
whom it will apply, because there is not yet any adequate data on which 
to make such an estimate. SBA cannot estimate how many small 
construction and service concerns are in and how many are outside of 
the declared disaster areas. In addition, while it does have data on 
small businesses on a national basis, it does not have such information 
by State or other political jurisdiction. These data are what SBA uses 
to evaluate and establish small business size standards, which apply on 
a national basis.
    The scope of this amended size standard is limited to contracts 
performed in the Gulf Coast Region of the United States and in Florida 
that the President declared disaster areas following Hurricanes 
Katrina, Rita and Wilma in 2005.
    The most significant benefits of this rule will flow to small 
construction and service contractors that had not been eligible for SBG 
assistance before this rule because their average annual receipts 
exceeded $6.5 million. Under this rule, they are eligible if they 
(together with their affiliates) meet the small business size standards 
for their primary industries or the current SBG $6.5 million standard, 
whichever is higher, as well as meet the other requirement as to place 
of contract performance. Benefits will also flow to other entities in 
the disaster areas that can use the services of contractors not 
eligible for the SBG Program until now.
    SBA cannot estimate the number or value of Federal or non-Federal 
contracts that will require surety bonds. SBA cannot estimate the 
number of small businesses that will apply for SBG guarantees on their 
surety bonds or how many of those are located in the declared disaster 
areas. SBA believes, however, that increased contracting opportunities 
to participate in SBA's SBG Program will provide disaster victims with 
significant and timely benefits. Small construction and service 
contractors can receive SBG Program assistance to restart their 
businesses, if necessary, or help in their areas' reconstruction 
efforts. Under this size standard, more small business concerns may 
also qualify for more contracts and surety bonds with SBA's guarantee.
    Entities that are not small businesses, such as not-for-profit 
entities, cities, towns, and other political subdivisions that often 
require contractors to provide surety bonds to guarantee their contract 
performance, will benefit as well, because there will be a larger pool 
of bondable contractors that can perform work as needed.

4. Summary of significant issues raised by the public in response to 
the Initial Regulatory Flexibility Analysis in the November 14, 2005 
Interim Final Rule

    SBA summarized above the three comments it received to the November 
14, 2005 interim final rule. The surety and insurance industries' 
comments addressed a perceived increased recordkeeping burden on them 
to preserve SBA's guarantee on bonds they issue under this rule. 
However, SBA does not believe that this rule adds any additional 
recordkeeping requirements since it does not require sureties to 
maintain any information that they are not already required to maintain 
when they issue a bond with SBA's guarantee. The surety must document 
that the concern meets the small business size

[[Page 62208]]

standard, which will continue as a requirement. The surety also knows 
where the contractor will perform its contract or subcontract before it 
issues its bond. Under this modified size standard, before issuing a 
surety bond with SBA's guarantees, the surety must be sure the bond 
guarantees a contract in one or more of the counties or parishes that 
the President declared disaster areas following Hurricanes Katrina, 
Rita and Wilma in 2005. SBA has made the list of those counties and 
parishes readily available at https://www.sba.gov/disaster_recov/
katrina_rita_and_wilma_counties.pdf.
    The association of small minority contractors expressed concern 
that there will be increased competition for contracts in the disaster 
areas as a result of this rule. This competition could come both from 
larger small companies in the disaster areas and from out of state 
companies. As stated above, SBA takes very seriously the possibility of 
negative effects on smaller contractors. In this case, however, SBA 
does not believe that companies not located in the disaster areas, if 
they are performing contracts in the disaster areas and meet this 
modified standard, will adversely affect resident small businesses. 
Because of the extreme demand for construction and services in the 
disaster areas, SBA expects there will be more contracts in the 
affected areas. SBA believes that the priority should be to help 
restore and reconstruct the disaster areas, and all small businesses 
should have greater opportunities to participate in this. SBA will 
monitor bonded contracts for which SBA has extended its guarantee. If 
SBA finds that this rule has adversely affected local smaller 
businesses, then it will consider withdrawing or otherwise modifying 
this subsection.

5. Will this rule impose any additional reporting or recordkeeping 
requirements on small business entities?

    This rule does not impose any new information collection 
requirements under the Paperwork Reduction Act of 1980, 44 U.S.C. Ch. 
35. A new size standard does not impose any additional reporting, 
recordkeeping 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 because small 
business size standards neither regulate nor control business behavior.

6. What are the relevant Federal rules that may duplicate, overlap or 
conflict with this rule?

    This rule affects only SBA's SBG Program. This rule does not 
overlap with other Federal rules that use SBA's size standards to 
define a small business. Under Sec.  632(a)(2)(C) of the Small Business 
Act, unless specifically authorized by statute, Federal agencies must 
use SBA's size standards to define a small business. SBA published in 
the November 24, 1995, Federal Register a table of statutory and 
regulatory size standards set by agencies other than SBA. (60 FR 57988-
57991) SBA is not aware of any Federal rule that would duplicate or 
conflict with this rule.

7. What alternatives did SBA consider?

    SBA considered establishing a termination date for application of 
this size standard. SBA is not adopting this approach because it has no 
data it can use to anticipate when the amended size standard should no 
longer be available. Because SBA will be monitoring use of this size 
standard, it will be able to determine in the future how long the 
Agency should retain it for the SBG Program. As discussed above in the 
Supplemental Information, SBA will not terminate or withdraw this size 
standard without first seeking public comment to a proposed rule to do 
so. SBA will publish, in accordance with the Administrative Procedure 
Act, its proposal in the Federal Register.
    Another alternative SBA considered was limiting applicability to 
concerns that were located within or had a place of business in the 
disaster areas when the hurricanes occurred. As noted above, some 
commenters indicated a preference for limiting eligibility to small 
businesses located within the disaster areas. Because this is a 
specific response to the disasters' effects, SBA believes it must 
increase available resources for the recovery and reconstruction by 
increasing the number of small businesses that can participate in this 
work. SBA's Office of Surety Guarantees will continue to monitor the 
SBG Program, including in particular the use of this modified size 
standard, for work in the disaster areas. SBA will examine the size of 
contracts bonded and the size of the small businesses that receive 
them. If SBA determines that this amended size standard causes an 
adverse effect on local small businesses or that the modified size 
standard is no longer necessary, it will consider modifying the 
regulation.
    SBA also considered applying this size standard to any contract, no 
matter where performed, provided it was directly and/or primarily 
related to the recovery and reconstruction efforts in the declared 
disaster areas. However, SBA believes that establishing a clear and 
direct nexus of a contract or subcontract to the recovery and 
reconstruction efforts in the disaster areas would not be practicable, 
and would cause an unnecessary burden on sureties.

List of Subjects in 13 CFR Part 121

    Government procurement, Loan programs--business, Reporting and 
recordkeeping requirements, Small business.

0
For the reasons set forth in the preamble, amend part 121 of title 13 
Code of Federal Regulations as follows:

PART 121--SMALL BUSINESS SIZE REGULATIONS

0
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.

0
2. Amend Sec.  121.301 by revising paragraph (d)(1) and paragraph 
(d)(3) to read as follows:


Sec.  121.301  What size standards are applicable to financial 
assistance programs?

* * * * *
    (d) * * *
    (1) Any construction (general or special trade) concern or concern 
performing a contract for services is small if, together with its 
affiliates, its average annual receipts do not exceed $6.5 million, 
except as provided in Sec.  121.301(d)(3).
    (2) * * *
    (3) For any contract or subcontract, public or private, to be 
performed in the Presidentially-declared disaster areas resulting from 
the 2005 Hurricanes Katrina, Rita or Wilma, a construction (general or 
special trade) concern or concern performing a contract for services is 
small if, together with its affiliates, it meets the size standard for 
the primary industry in which it, together with its affiliates, is 
engaged, or if it meets the size standard set forth in paragraph 
(d)(1), whichever is higher.
* * * * *

    Dated: October 13, 2006.
Steven C. Preston,
Administrator.
 [FR Doc. E6-17682 Filed 10-23-06; 8:45 am]
BILLING CODE 8025-01-P