Small Business Size Standards: Retail Trade, 53924-53940 [E9-25193]

Agencies

• SMALL BUSINESS ADMINISTRATION

[Federal Register Volume 74, Number 202 (Wednesday, October 21, 2009)]
[Proposed Rules]
[Pages 53924-53940]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: E9-25193]


-----------------------------------------------------------------------

SMALL BUSINESS ADMINISTRATION

13 CFR Part 121

RIN: 3245-AF69


Small Business Size Standards: Retail Trade

AGENCY: U.S. Small Business Administration.

ACTION: Proposed Rule.

-----------------------------------------------------------------------

SUMMARY: The U.S. Small Business Administration (SBA) proposes to 
increase small business size standards for 48 industries in North 
American Industry Classification System (NAICS) Sector 44-45, Retail 
Trade, and retain the current standards for the remaining 28 industries 
in the Sector. As part of its ongoing initiative to review all size 
standards, SBA has evaluated each industry in Sector 44-45 to determine 
whether the existing size standards should be retained or revised. This 
proposed rule is one of a series of proposals that will examine 
industries grouped by an NAICS Sector. As part of this series of 
proposed rules SBA is publishing concurrently in this issue of the 
Federal Register a proposed rule to modify small business size 
standards in Sector 72, Accommodation and Food Services, and in Sector 
81, Other Services. SBA has established its ``Size Standards 
Methodology'' and published elsewhere in this issue of the Federal 
Register a notice of its availability on SBA's Web site at https://www.sba.gov/size. SBA has applied ``Size Standards Methodology'' to 
this proposed rule.

DATES: SBA must receive comments to this proposed rule on or before 
December 21, 2009.

ADDRESSES: You may submit comments, identified by RIN 3245-AF69 by one 
of the following methods: (1) Federal eRulemaking Portal: https://www.regulations.gov. Follow the instructions for submitting comments; 
or (2) Mail/Hand Delivery/Courier: Khem R. Sharma, Chief, Size 
Standards Division, 409 Third Street, SW., Mail Code 6530, Washington, 
DC 20416.
    SBA will post all comments on https://www.regulations.gov. If you 
wish to submit confidential business information (CBI) as defined in 
the User Notice at https://www.regulations.gov, please submit the 
information to U.S. Small Business Administration, Khem R. Sharma, 
Chief, Size Standards Division, 409 Third Street, SW., Mail Code 6530, 
Washington, DC 20416, or send an e-mail to sizestandards@sba.gov. 
Highlight the information that you consider to be CBI and explain why 
you believe SBA should hold this information as confidential. SBA will 
review the information and make the final determination of whether it 
will publish the information or not.

FOR FURTHER INFORMATION CONTACT: Carl J. Jordan, Program Analyst, Size 
Standards Division, (202) 205-6618 or sizestandards@sba.gov.

SUPPLEMENTARY INFORMATION: To determine eligibility for Federal small 
business assistance programs, SBA establishes small business 
definitions (referred to as size standards) for private sector 
industries in the U.S. SBA's existing size standards use two primary 
measures of business size--receipts and number of employees. Financial 
assets, electric output, and refining capacity are used as size 
measures for a few specialized industries. In addition, SBA's Small 
Business Investment Company (SBIC) and the Certified Development 
Company (CDC) Programs determine small business eligibility using 
either the industry based size standards or net worth and net income 
size standards. Currently, SBA's size standards consist of 45 different 
size levels, covering 1,141 NAICS industries and 17 sub-industry 
activities. Of these size levels, 32 are based on average annual 
receipts, eight are based on number of employees, and five are based on 
other measures. In addition, SBA has established 11 other size 
standards for its financial and procurement programs.
    Over the years, SBA has received comments that its size standards 
have not kept up with changes in the economy and, in particular, that 
they do not reflect the changes in the Federal contracting marketplace. 
The last overall review of size standards occurred during the late 
1970s to early 1980s. Since then, most reviews of size standards have 
been limited to in-depth analyses of specific industries in response to 
requests from the public and Federal agencies. SBA also makes

[[Page 53925]]

periodic inflation adjustments to its monetary based size standards. 
The latest inflation adjustment to size standards was published in the 
Federal Register on July 18, 2008 (73 FR 41237).
    The evaluation of the size standards in the Retail Trade is also 
necessary to account for changes in the industry classification. The 
development of NAICS in 1997 included a significant change in the 
definition of industries in the Retail and Wholesale Trade Sectors. 
Many businesses engaged in retail trade activities that had been 
classified in the Wholesale Trade Sector under the earlier Standard 
Industrial Classification (SIC) System were reclassified into the 
Retail Trade Sector under NAICS (see NAICS Clarification Memorandum No. 
1, ``NAICS Sector 42--Wholesale Trade Scope and Implementation 
Guidelines for U.S. Statistical Agencies''). Furthermore, the NAICS 
codes used in the 2002 Economic Census included a different set of 
businesses in the Retail Trade Sector than that in the 1997 Economic 
Census. For example, the 2002 NAICS included 11 new industries in 
Retail Trade. These changes in the industry classification have led SBA 
to evaluate if the existing size standards for the Retail Trade 
industries are appropriate. Most of the Retail Trade size standards 
have not been reviewed since the 1980s, and many have not been changed 
since the 1960s, except for periodic adjustments for inflation.
    SBA recognizes that industrial changes over time have rendered 
existing size standards for some industries no longer supportable by 
current data. Accordingly, SBA has begun a comprehensive review of its 
size standards to ensure that existing size standards have supportable 
bases and, where necessary, to make revisions to current size 
standards. This proposed rule affords the public an opportunity to 
review and comment on the data and methodology SBA uses to evaluate and 
revise a size standard.
    Rather than review all size standards at one time, SBA believes 
that a more manageable approach would be to examine a group of related 
industries within an NAICS Sector in phases. Except for manufacturing, 
an NAICS Sector generally consists of 25 to 75 industries. Once a 
review of size standards for industries within an NAICS Sector is 
completed, SBA will issue a proposed rule for those industries in which 
the analysis of industry data supports a change to the existing size 
standards. SBA expects to complete a review of all NAICS Sectors in two 
years.
    Below is a discussion of SBA's size standards methodology, 
including analyses of industry structure, Federal procurement trends 
and other factors for industries within Sector 44-45, Retail Trade, and 
the impact of the proposed revisions to size standards on Federal small 
businesses assistance.

Size Standards Methodology

    SBA has recently developed a ``Size Standards Methodology'' that it 
uses for developing and modifying size standards when necessary. SBA 
has published the document which is available at https://www.sba.gov/size. SBA does not apply all features of its ``Size Standards 
Methodology'' to all cases because not all are appropriate. However, 
SBA does make it available in its entirety for parties with an interest 
in SBA's overall approach to evaluating, establishing and modifying 
small business size standards. SBA always explains its analysis in the 
proposed and final rules that relate to size standards for specific 
industries. The following discussion is of SBA's size standard analysis 
applied to industries in Sector 44-45, Retail Trade.
    SBA welcomes comments from the public on a number of issues. SBA is 
aware that different choices among size standards can involve complex 
tradeoffs among relevant variables; SBA invites comments on how to 
identify and weigh those variables. Suggestions are invited on 
alternative methodologies for determining small businesses; on how 
these size standards affect competition in general and within the 
specific industry; on alternative or additional factors that SBA should 
consider; on whether SBA's approach to small business size standards 
makes sense in the current economic environment; on whether SBA's using 
anchor size standards is appropriate in the current economy; on whether 
there are gaps in SBA's methodology because of the lack of 
comprehensive data; and on alternative datasets SBA should consider for 
a specific sector.
    Congress granted SBA's Administrator discretion to establish 
detailed small business size standards (15 U.S.C. 632(a)(2)). Section 
3(a)(3) of the Small Business Act (15 U.S.C. 632 (a)(3)) requires that 
size standards vary by industry to the extent necessary to reflect 
differing characteristics among various industries. Accordingly, the 
economic structure of an industry serves as the underlying basis for 
developing and modifying small business size standards. By examining 
data on economic characteristics defining the industry structure (as 
described below), the small business segment of an industry is 
identified. In addition to the industry structure, SBA also takes into 
consideration its program objectives and whether a size standard 
successfully excludes businesses that are dominant in the industry. 
Discussed below is SBA's analysis of the economic characteristics of 
each industry in Sector 44-45, Retail Trade, the impact of proposed 
size standards on SBA programs, and the evaluation of whether a revised 
size standard would exclude dominant firms in the industry from being 
considered as small.

Industry Analysis

    For the current comprehensive size review, SBA has established 
three ``base'' or ``anchor'' size standards that apply to most 
industries--$7.0 million in average annual receipts for industries that 
have receipts based size standards, 500 employees for manufacturing and 
other industries that have employee based size standards (except for 
Wholesale Trade), and 100 employees for industries in the Wholesale 
Trade Sector. SBA established 500 employees as the anchor size standard 
for the manufacturing industries at SBA's inception in 1953 and shortly 
thereafter established a receipts based anchor size standard of $1 
million in average annual receipts for the nonmanufacturing industries. 
The receipts based anchor size standard has been adjusted periodically 
for inflation. The inflation adjustment over the years has increased it 
to $7.0 million today. Since 1986, all industries in the Wholesale 
Trade Sector have had the 100-employee size standard for non-
procurement SBA programs. The size standard for a non-manufacturer in 
Federal procurement is 500 employees. A procuring agency must classify 
a procurement for supplies with a manufacturing NAICS code, not a 
wholesale or retail NAICS code. 13 CFR 121.402(b).
    These long standing anchor size standards have gained legitimacy 
through practice and general public acceptance. An anchor size standard 
is neither a minimum nor a maximum size standard. It is a common size 
standard for a large number of industries that have similar economic 
characteristics and serves as a reference point in evaluating size 
standards for individual industries. SBA uses the anchor in lieu of 
trying to establish precise small business size standards for each 
industry. Otherwise, theoretically, that could require that the number 
of size standards be as high as the number of industries for which SBA 
establishes size standards. SBA presumes an anchor size standard is 
appropriate for a particular industry unless that industry displays 
significantly different economic characteristics, as compared

[[Page 53926]]

to the characteristics of industries with the anchor size standard, 
thereby suggesting a need for revision to an existing size standard.
    When evaluating a size standard, the economic characteristics of a 
specific industry under review are compared to the average 
characteristics of industries with one of the three anchor size 
standards (referred to as ``anchor comparison group'') to assess 
industry structure and to determine whether the industry displays 
significant differences relative to the industries in the anchor size 
standard group. If the characteristics of a specific industry under 
review are similar to the average characteristics of the anchor 
comparison group, the anchor size standard would be considered 
appropriate for that industry. 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 anchor comparison group, or (2) other industry 
considerations strongly suggest that the anchor size standard would be 
an unreasonably high size standard for the industry.
    If the specific industry's characteristics are significantly higher 
than those of the anchor comparison group, a size standard higher than 
the anchor size standard may be considered appropriate. The larger the 
differences are between the characteristics of the industry under 
review and those in the anchor comparison group, the larger will be the 
difference between the appropriate industry size standard and the 
anchor size standard. To determine the level of a size standard above 
the anchor size standard, the characteristics of a second comparison 
group are analyzed. For industries with receipts based size standards, 
SBA has developed a second comparison group consisting of industries 
with the highest levels of receipts based size standards. The size 
standards for this group of industries range from $23 million to $35.5 
million in average receipts, with the weighted average size standard 
for the group equaling $29 million. SBA refers to this comparison group 
as the ``higher level receipts based size standard group.''
    The primary factors that SBA evaluates in analyzing the structural 
characteristics of an industry include average firm size, startup costs 
and entry barriers, industry competition, and distribution of firms by 
size (13 CFR 121.102(a) and (b)). SBA also evaluates the possible 
impact of both existing and revised size standards on Federal 
contracting assistance to small businesses as an additional primary 
factor. SBA generally considers these five factors as the most 
important ones for establishing or revising a size standard for an 
industry. However, SBA will also consider and evaluate other 
information that it believes relevant to the decision on a size 
standard for a particular industry (such as technological changes, 
growth trends, SBA financial assistance and other program factors, 
etc.). Public comments on a proposed size standard rule also provide 
important additional information. SBA thoroughly reviews all public 
comments before making a final decision on its proposed size standard. 
Below is a brief description of each of the five primary evaluation 
factors. A more detailed description of this analysis is provided in 
``SBA Size Standards Methodology'' paper which is available at https://www.sba.gov/size.
    1. Average firm size. SBA computes two measures of average firm 
size: simple average firm size and weighted average firm size. For 
industries with receipts based standards (including Retail Trade 
industries), the simple average firm size is calculated as total 
receipts of an industry divided by the total number of firms in that 
industry. The weighted average firm size is computed as the sum of 
weighted simple average firm size in different receipts size classes 
where weights are the shares of total industry receipts for respective 
size classes. The simple average firm size weighs all firms within an 
industry equally regardless of their size. The weighted average 
overcomes that limitation by giving more weights to larger firms.
    If the average firm size of an industry under review is 
significantly higher than the average firm size of industries in the 
anchor comparison industry group, this would generally support a size 
standard higher than the anchor size standard. Conversely, if the 
industry's average firm size is similar to or significantly lower than 
that of the anchor comparison industry group, it would be a basis to 
adopt the anchor size standard or, in rare cases, a standard lower than 
the anchor.
    2. Startup costs. Startup costs reflect a firm's initial size in an 
industry. New entrants to an industry must have sufficient capital to 
start and maintain a viable business. If firms entering a particular 
industry have greater capital requirements than firms do in industries 
in the anchor comparison group, this will form a basis for establishing 
a size standard higher than the anchor standard. In lieu of data on 
actual startup costs, SBA uses average assets size as a proxy measure 
to assess the levels of capital requirements for new entrants to an 
industry.
    SBA calculates the average assets size within a particular industry 
by applying the sales to total assets ratios from the Risk Management 
Association's Annual Statement Studies, 2006-2008 to the average 
receipts size of firms in that industry. An industry with a 
significantly higher level of average assets size than that of the 
anchor comparison group is likely to have higher startup costs, which 
would support a size standard higher than the anchor size standard. 
Conversely, if the industry has a significantly smaller average assets 
size compared to the anchor comparison group, the anchor size standard, 
or in rare cases one lower than the anchor, would be considered 
appropriate.
    3. Industry competition. Industry competition is generally assessed 
by measuring the share of total industry receipts obtained by firms 
that are among the largest in an industry. In this proposed rule, SBA 
evaluates the share of industry receipts generated by the four largest 
firms in the industry. This is referred to as the ``four-firm 
concentration ratio.'' SBA then compares the four-firm concentration 
ratio for an industry under review to the average four-firm 
concentration ratio for industries in the anchor comparison group. If a 
significant share of economic activity within the industry is 
concentrated among a few relatively large companies, SBA would 
establish a size standard relatively higher than the anchor size 
standard. SBA would not consider the four-firm concentration ratio as 
an important factor in assessing a size standard if its value for an 
industry under review is less than 40 percent. For industries in which 
the four largest firms account for 40 percent or more of an industry's 
total receipts, SBA examines the average size of the four largest firms 
in determining a size standard.
    4. Distribution of firms by size. SBA examines the shares of 
industry total receipts accounted for by firms of different receipts 
and employment size classes in an industry. This is an additional 
factor SBA evaluates in assessing competition within an industry. If 
the preponderance of an industry's economic activity is attributable to 
smaller firms, this would indicate that small businesses are 
competitive in that industry and supports adopting the anchor size 
standard. A size standard higher than the anchor size standard would be 
supported for an industry in which the distribution of firms indicates 
that most

[[Page 53927]]

of the economic activity is concentrated among the larger firms.
    Concentration among firms is a measure of inequality of 
distribution. To evaluate the degree of inequality of distribution 
within an industry, SBA computes the Gini coefficient by constructing 
the Lorenz curve. The Gini coefficient values vary between zero and 
one. If receipts are distributed perfectly equally among all the firms 
in an industry, the value of the Gini coefficient would equal to zero. 
If an industry's total receipts are attributed to a single firm, the 
Gini coefficient would equal to one.
    SBA compares the degree of inequality of distribution for an 
industry under review with that for industries in the anchor comparison 
group. If an industry shows a higher degree of inequality of 
distribution (i.e., higher Gini coefficient) compared to industries in 
the anchor comparison industry group this would, all else being equal, 
warrant a higher size standard than the anchor. Conversely, for 
industries with similar or more equal distribution (i.e., similar or 
lower Gini coefficient values) than the anchor group, the anchor 
standard, or in some cases a standard lower than the anchor, would be 
adopted
    5. Impact on SBA programs. SBA examines the possible impact a size 
standard change may have on the level of Federal small business 
assistance. This assessment most often focuses on the share of Federal 
contracting dollars awarded to small businesses in the industry in 
question. In general, if the share of Federal contracting dollars 
awarded to small businesses in an industry that receives a significant 
amount of Federal assistance is significantly less than the small 
business share of the industry's total receipts, a justification would 
exist for considering a size standard higher than the existing size 
standard. The disparity between the small business Federal market share 
and industry-wide share may be attributed to a variety of reasons, such 
as extensive administrative and compliance requirements associated with 
Federal contracts, the different skill set required on Federal 
contracts as compared to typical commercial contracting work, and the 
size of contracting requirements of Federal customers. These, as wells 
as other factors, are likely to influence the type of firms within an 
industry that compete for Federal contracts and, hence, the firms 
receiving such contracts are expected to possess different 
characteristics than the average characteristics for all firms in that 
industry. By comparing the small business Federal contracting share 
with the industry-wide small business share, SBA includes in its size 
standards analysis the latest Federal contracting trends. This analysis 
may indicate a size standard larger than the current standard.
    For this proposed rule, SBA considered Federal procurement trends 
in the size standards analysis only if (1) the small business share of 
Federal contracting dollars is at least 10 percentage points lower than 
the small business share of total industry receipts and (2) the amount 
of total Federal contracting averages $100 million or more during 
fiscal years 2006-2008 (the latest years for which complete Federal 
procurement data are available). SBA has selected these thresholds 
because they reflect a significant level of contracting in which a 
revision to a size standard may have an impact on expanding small 
business opportunities.
    Another factor that SBA evaluates is the impact of a proposed size 
standard on SBA's loan programs, that is, the volume of SBA guaranteed 
loans within an industry and the size of firms obtaining those loans. 
This factor is examined to assess whether the existing or the proposed 
size standard for a particular industry may be restricting the level of 
financial assistance to small firms in that industry. If the analysis 
shows a reduction in financial assistance to small businesses, a higher 
size standard would be supportable. If small businesses have already 
been receiving significant amounts of financial assistance through 
SBA's loan programs, or if the financial assistance has been provided 
mainly to businesses that are much smaller in size than the existing 
size standard, consideration of this factor for determining the size 
standard may not be necessary.

Sources of Industry and Program Data

    The primary source of data for SBA's industry analysis is a special 
tabulation of the 2002 Economic Census (see https://www.census.gov/econ/census02/) prepared by the U.S. Bureau of the Census (Census Bureau) 
for SBA. The special tabulation provides SBA with industry-specific 
data on the number of firms, number of establishments, number of 
employees, annual payroll and annual receipts of companies by the size 
of firm reporting the data to Census. That is, the data are by the size 
class of the total company; however, the data itself, within a 
particular size class, represents the company's total data in that 
industry only. The special tabulation enables SBA to evaluate average 
firm size, the four-firm concentration ratio, and distribution of firms 
by receipts and employment size.
    In some cases, where Census data were not available due to 
disclosure prohibitions, SBA either estimated missing values using 
available relevant data, or examined data at a higher level of industry 
aggregation, such as at the 2- or 3-digit NAICS level. In some 
instances, SBA had to base its analysis only on those factors for which 
data were available or missing values could be estimated. Data sources 
and estimation procedures SBA uses in its size standards analysis are 
documented in detail in the ``SBA Size Standards Methodology'' paper, 
which is available at https://www.sba.gov/size.
    Sales to total assets ratios used to calculate average assets size 
are from the Risk Management Association's Annual Statement Studies, 
2006-2008.
    To evaluate Federal contracting trends, SBA examined Federal 
contract award data for fiscal years 2006-2008 from the U.S. General 
Service Administration's Federal Procurement Data System--Next 
Generation (FPDS-NG). SBA's internal data on its guaranteed loan 
programs for fiscal years 2006-2008 were analyzed to assess the impact 
on financial assistance to small businesses.

Dominant in Field of Operation

    Section 3(a) of the Small Business Act (15 U.S.C. Sec.  632(c) 
defines a small business concern as one that is (1) independently owned 
and operated, (2) not dominant in its field of operation, and (3) 
within a specific small business definition or size standard 
established by the SBA Administrator. SBA considers as part of its 
evaluation of a size standard whether a business concern at a proposed 
size standard would be considered dominant in its field of operation. 
For this, SBA generally examines the industry's market share of firms 
at the proposed standard or other factors that may indicate whether a 
firm can exercise a major controlling influence on a national basis in 
which significant numbers of business concerns are engaged. If SBA's 
analysis indicates that a proposed size standard would include a 
dominant firm, a lower size standard would be considered to exclude the 
dominant firm from being defined as small.

Selection of Size Standards

    To simplify size standards, for the ongoing comprehensive size 
standards review, SBA has proposed to select a size standard for an 
industry from a limited number of receipts based size standard levels. 
For many years, SBA

[[Page 53928]]

has been concerned about the complexity of determining small business 
status caused by a large number of varying receipts based size 
standards (see 69 FR 13130, March 4, 2004, and 57 FR 62515, December 
31, 1992). Currently, there are 32 different levels of receipts based 
size standards, ranging from $0.75 million to $35.5 million, with many 
of those levels applying to one or just a few industries only. SBA 
believes that such a large number of variations with small variations 
are both unnecessary and difficult to justify analytically. Simplifying 
the administration of SBA's size standards to a fewer number of size 
standard levels will produce more common size standards for businesses 
operating in multiple related industries and greater consistency in the 
size standards among industries that are similar in their economic 
characteristics.
    This proposed rule, therefore, applies one of eight receipts based 
size standards to each industry in Sector 44-45, Retail Trade. These 
eight ``fixed'' size standard levels are $5 million, $7 million, $10 
million, $14 million, $19 million, $25.5 million, $30.0 million and 
$35.5 million. These eight receipts based size standard levels are 
established by taking into consideration the minimum, maximum, and the 
more commonly used receipts based size standards. Currently, the more 
commonly used receipts based size standards cluster around the 
following six levels--$2.5 million to $4.5 million, $7 million, $9.0 
million to $10 million, $12.5 million to $14.0 million, $25.0 million 
to $25.5 million, and $33.5 million to $35.5 million. SBA has selected 
$7 million as one of eight fixed levels of receipts based size 
standards because this is also an anchor standard for receipts based 
standards. A lower or minimum receipts based size level is established 
at $5 million. Excluding monetary standards for agriculture and those 
based on net commissions (such as real estate brokers and travel 
agents), $5 million is in the close neighborhood of the current minimum 
receipts based standard of $4.5 million. Among the higher levels size 
clusters, $10 million, $14 million, $25.5 million, and $35.5 million 
are selected as other four levels of the fixed size standards. Because 
of a large gap between two of the size standard intervals, SBA has 
established intermediate levels of $19 million between $14 million and 
$25.5 million, and $30 million between $25.5 million and $35.5 million. 
These two intermediate size levels reflect roughly similar proportional 
differences between the two successive size standard levels.
    In a further effort to simplify size standards, SBA may propose a 
common size standard for certain closely related group of industries. 
Although the size standard analysis may support a specific size 
standard level for each industry, SBA believes that establishing 
different size standards for closely related industries may not be 
appropriate. For example, in cases where many of the same businesses 
operate in the same two industries, establishing the common size 
standard would better reflect the industry marketplace than 
establishing separate size standards for each of those industries. This 
situation has led SBA to establish a common size standard for the 
information technology (IT) services industries (NAICS 541511, NAICS 
541112, NAICS 541513 and NAICS 541519), even though the industry data 
might support a distinct size standard for each industry. Businesses 
engaged in IT related services typically perform activities in two or 
more other related industries. Whenever SBA proposes a common size 
standard for closely related industries it will provide a justification 
for that in the proposed rule.

Evaluation of Industry Structure

    SBA has evaluated the structure of each industry in the Retail 
Trade Sector to assess the appropriateness of the current size 
standards. As described above, SBA compared data on the economic 
characteristics of each industry in that Sector to the average 
characteristics of industries in two comparison groups. The first 
comparison group is comprised of all industries with $7.0 million size 
standards--referred to as the ``receipts based anchor comparison 
group.'' Because the goal of SBA's size review is to assess whether a 
specific industry's size standard should be at or different from the 
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 provide a meaningful 
assessment and comparison of industry characteristics.
    If the characteristics of an industry under review are similar to 
the average characteristics of industries in the anchor comparison 
group, the anchor size standard would be considered an appropriate 
standard for that industry. If an individual industry's structure is 
significantly different from that of the anchor group, a size standard 
lower or higher than the anchor size standard would be selected. The 
level of the new size standard is determined based on the difference 
between the characteristics of the anchor comparison group and a second 
industry comparison group. As described above, the second comparison 
group for receipts based standards consists of industries with the 
highest receipts based size standards, ranging from $23 million to 
$35.5 million, with the average size standard for the group equaling 
$29 million. SBA refers to this group of industries as the ``higher 
level receipts based size standard comparison group.'' Differences in 
industry structure between an industry under review and the industries 
in the two comparison groups are determined by comparing data on each 
of the industry factors, including average firm size, average assets 
size, four-firm concentration ratio, and the Gini coefficient of 
distribution of firms by size. Table 1 shows two measures of the 
average firm size (simple and weighted), average assets size, four-firm 
concentration ratio, average receipts of the four largest firms, and 
the Gini coefficient for both anchor level and higher level comparison 
groups for receipts based size standards.

                                          Table 1--Average Characteristics of Receipts Based Comparison Groups
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                            Avg. Firm Size ($ million)                                     Avg. Receipts
                                                         --------------------------------   Avg. Assets   Avg. Four-firm      of Four
             Receipts Based Comparison Group                                                  Size ($      Concentration   Largest Firms       Gini
                                                          Simple Average     Weighted        million)        Ratio (%)      ($ million)     Coefficient
                                                                              Average                                           \a\
--------------------------------------------------------------------------------------------------------------------------------------------------------
Anchor Level............................................            1.19           17.64            0.71            18.7           189.9           0.599
Higher Level............................................            4.77           52.27            2.05            22.3           639.4           0.725
--------------------------------------------------------------------------------------------------------------------------------------------------------
\a\ To be used for industries with a four-firm concentration ratio of 40% or greater.


[[Page 53929]]

Derivation of Size Standards Based on Industry Factors

    For each of the industry factors shown in Table 1, SBA derives a 
separate size standard based on the amount of differences between their 
values for an industry under review and those for the two comparison 
groups. An estimated size standard that is supported by each industry 
factor is derived by comparing its value for a specific industry under 
review to the corresponding value for the two comparison groups. If the 
industry value for a particular factor is near that for the anchor 
comparison group, the $7.0 million anchor size standard would be 
considered appropriate for that factor.
    If an industry's value for a factor is significantly above or below 
the anchor comparison group value, a size standard above or below the 
$7.0 million anchor size would be warranted. The level of the new size 
standard in these cases is derived based on the proportional difference 
between the industry value and the values for the two comparison 
groups.
    For example, if an industry's simple average receipts size equals 
$3.0 million, SBA's analysis would supports a size standard of $19 
million. The $3.0 million level is 50.6 percent between the average 
firm size of $1.19 million for the anchor comparison group and $4.77 
million for the higher level comparison group (($3.00 million-$1.19 
million) / ($4.77 million-$1.19 million) = 0.506 or 50.6%). This 
proportional difference is applied to the difference between the $7.0 
million anchor size standard and average size standard of $29 million 
for the higher level size standard group and then added to $7.0 million 
to estimate a size standard of $18.12 million ([{$29.0 million-$7.0 
million{time}  * 0.506] + $7.0 million = $18.12 million). The final 
step rounds the estimated size standard of $18.12 million to the 
nearest fixed size standard level, in this case to $19 million.
    SBA applies the above method of calculation to derive a size 
standard for each industry factor. Detailed formulas involved in these 
calculations are presented in ``SBA Size Standards Methodology'' which 
is available at https://www.sba.gov/size. Table 2 shows ranges of values 
for each industry factor and the levels of size standards supported by 
those values.

                                            Table 2--Values of Industry Factors and Supported Size Standards
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                     Or if weighted avg.                               Or if avg. receipts of                                Then size
 If Simple avg. receipts size ($      receipts size ($       Or if avg. assets size     largest four firms ($    Or if gini coefficient   standard is ($
            million)                      million)                 ($ million)                million)                                       million)
--------------------------------------------------------------------------------------------------------------------------------------------------------
<1.03...........................  <16.07                    <0.65                     <169.4                    <0.593                               5.0
1.03 to 1.43....................  16.07 to 20.00            0.65 to 0.80              169.4 to 220.5            0.593 to 0.608                       7.0
1.44 to 2.00....................  20.01 to 25.51            0.81 to 1.02              220.6 to 292.0            0.609 to 0.628                      10.0
2.01 to 2.74....................  25.52 to 32.59            1.03 to 1.29              292.1 to 384.0            0.629 to 0.653                      14.0
2.75 to 3.67....................  32.60 to 41.65            1.30 to 1.64              384.1 to 501.5            0.654 to 0.686                      19.0
3.68 to 4.57....................  41.66 to 50.30            1.65 to 1.97              501.6 to 613.8            0.687 to 0.718                      25.5
4.58 to 5.38....................  50.31 to 58.17            1.98 to 2.28              613.9 to 716.1            0.719 to 0.746                      30.0
> 5.38..........................  >58.17                    >2.28                     >716.1                    >0.746                              35.5
--------------------------------------------------------------------------------------------------------------------------------------------------------

    Table 3 shows the results of analyses of industry data and latest 
Federal contracting trends for each industry in Sector 44-45, Retail 
Trade. It is important to note, however, that the Federal procurement 
of supplies must be classified under the appropriate manufacturing 
NAICS code. See 13 CFR 121.402(b). However, because there were Federal 
procurements during the years analyzed that were classified in the 
Retail Sector, SBA is including the data because they affect its 
evaluation of size standards for the Retail Trade Sector. Each NAICS 
industry row in columns 2, 3, 4, 6, 7 and 8 shows two numbers. The 
upper number is the value for the industry factor shown on the top of 
the column, while the lower number is the size standard supported by 
that factor. For the four-firm concentration ratio, a size standard is 
estimated based on the average receipts of the top four firms if its 
value is 40 percent or more. If the four-firm concentration ratio for 
an industry is less than 40 percent, no size standard is estimated for 
that factor and column 5 is left blank. The value for Federal 
contracting factor in column 8 is shown only for industries that 
averaged $100 million or more annually in Federal contracting dollars 
during fiscal years 2006-2008. A size standard for that factor is 
derived only if the small business share of total Federal contracting 
dollars is 10 percentage points less than the small business share of 
industry's total receipts. Otherwise column 8 is also left blank. 
Column 9 shows the proposed or revised size standard for each industry 
in the Retail Trade Sector, calculated as the average of size standards 
supported by each industry factor and rounded to the nearest fixed size 
level. Analytical details involved in the averaging procedure are 
described in the SBA ``Size Standards Methodology'' paper which is 
available at https://www.sba.gov/size. For comparison, the current size 
standards for industries in Sector 44-45 are also shown in column 10 of 
Table 3.

                                                Table 3--Size Standards Supported by Each Industry Factor
                                                                  [Millions of dollars]
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                      (3)                                 (6) Four-                                              (10)
                                      (2) Simple    Weighted   (4) Average   (5) Four-       firm       (7) Gini   (8) Federal  (9) Revised    Current
             (1) NAICS                 average      average    assets size   firm ratio    average    coefficient    contract       size         size
                                      firm size    firm size                    (%)          size                   factor (%)    standard     standard
--------------------------------------------------------------------------------------------------------------------------------------------------------
441110.............................        $27.4       $102.6         $7.6          5.6     $9,110.3        0.638  ...........        $30.0        $29.0
New Car Dealers....................         35.5         35.5         35.5  ...........  ...........        $14.0  ...........  ...........  ...........
441120.............................          2.0         14.7          0.5          7.1        854.7        0.561  ...........          5.0         23.0
Used Car Dealers...................         10.0          5.0          5.0  ...........  ...........          5.0  ...........  ...........  ...........
441210.............................          5.2         45.2          2.2         10.5        388.7        0.702         72.4         30.0          7.0
Recreational Vehicle Dealers.......         30.0         25.5         30.0  ...........  ...........         25.5  ...........  ...........  ...........
441221.............................          3.4         10.4          1.4          2.4         97.8        0.576  ...........         14.0          7.0

[[Page 53930]]

 
Motorcycle, ATV, and Personal               19.0          5.0         19.0  ...........  ...........          5.0  ...........  ...........  ...........
 Watercraft Dealers................
441222.............................          2.6         23.3          1.4         10.1        310.7        0.624  ...........         14.0          7.0
Boat Dealers.......................         14.0         10.0         19.0  ...........  ...........         10.0  ...........  ...........  ...........
441229.............................          1.8         11.1          0.7          8.6         85.3        0.545  ...........          5.0          7.0
All Other Motor Vehicle Dealers....         10.0          5.0          5.0  ...........  ...........          5.0  ...........  ...........  ...........
Except.............................          3.8  ...........          1.3  ...........  ...........  ...........  ...........  ...........  ...........
Aircraft Dealers, Retail...........         25.5  ...........         19.0  ...........  ...........  ...........  ...........         25.5         10.0
441310.............................          1.6        109.5          0.6         30.7      3,004.6        0.643  ...........         14.0          7.0
Automotive Parts and Accessories            10.0         35.5          5.0  ...........  ...........         14.0  ...........  ...........  ...........
 Stores............................
441320.............................          2.0         92.0          0.6         25.9      1,399.2        0.647  ...........         14.0          7.0
Tire Dealers.......................         14.0         35.5          5.0  ...........  ...........         14.0  ...........  ...........  ...........
442110.............................          2.4         66.4          0.9          8.1      1,017.8        0.683  ...........         19.0          7.0
Furniture Stores...................         14.0         35.5         10.0  ...........  ...........         19.0  ...........  ...........  ...........
442210.............................          1.3          6.4          0.4          2.1         93.7        0.441  ...........          5.0          7.0
Floor Covering Stores..............          7.0          5.0          5.0  ...........  ...........          5.0  ...........  ...........  ...........
442291.............................          0.6          5.6  ...........         20.9         58.9        0.341  ...........          5.0          7.0
Window Treatment Stores............          5.0          5.0  ...........  ...........  ...........          5.0  ...........  ...........  ...........
442299.............................          1.8        146.4          0.6         39.1      2,175.8        0.776  ...........         19.0          7.0
All Other Home Furnishings Stores..         10.0         35.5          5.0  ...........  ...........         35.5  ...........  ...........  ...........
443111.............................          1.6         40.2          0.5         16.8        584.6        0.630  ...........         10.0          9.0
Household Appliance Stores.........         10.0         19.0          5.0  ...........  ...........         14.0  ...........  ...........  ...........
443112.............................          3.6        575.9          1.0         68.9      8,351.1        0.869  ...........         25.5          9.0
Radio, Television and Other                 19.0         35.5         14.0  ...........         35.5         35.5  ...........  ...........  ...........
 Electronics Stores................
443120.............................          2.2        285.2          0.6         52.5      2,192.0        0.782          9.7         25.5          9.0
Computer and Software Stores.......         14.0         35.5          5.0  ...........         35.5         35.5  ...........  ...........  ...........
443130.............................          2.6        423.0          0.7         54.3        427.9        0.770  ...........         19.0          7.0
Camera and Photographic Supplies            14.0         35.5          7.0  ...........         19.0         35.5  ...........  ...........  ...........
 Stores............................
444110.............................         37.3      4,210.0         13.2         91.1     21,591.9        0.960  ...........         35.5          7.0
Home Centers.......................         35.5         35.5         35.5  ...........         35.5         35.5  ...........  ...........  ...........
444120.............................          2.7        302.7          0.9         47.3        943.7        0.767  ...........         25.5          7.0
Paint and Wallpaper Stores.........         14.0         35.5         10.0  ...........         35.5         35.5  ...........  ...........  ...........
444130.............................          1.3         21.7          0.5         13.4        556.5        0.496        -10.2          7.0          7.0
Hardware Stores....................          7.0         10.0          5.0  ...........  ...........          5.0         10.0  ...........  ...........
444190.............................          3.3         36.9          1.1          8.7      2,100.2        0.695  ...........         19.0          7.0
Other Building Material Dealers....         19.0         19.0         14.0  ...........  ...........         25.5  ...........  ...........  ...........
444210.............................          1.1          3.3          0.4          2.1         23.4        0.391  ...........          5.0          7.0
Outdoor Power Equipment Stores.....          7.0          5.0          5.0  ...........  ...........          5.0  ...........  ...........  ...........
444220.............................          1.9         22.1          0.7         12.1        800.1        0.634  ...........         10.0          7.0
Nursery and Garden Centers.........         10.0         10.0          7.0  ...........  ...........         14.0  ...........  ...........  ...........
445110.............................          9.3        852.4          1.8         32.5     32,122.8        0.915         66.3         30.0         27.0
Supermarkets and Other Grocery              35.5         35.5         25.5  ...........  ...........         35.5  ...........  ...........  ...........
 (except Convenience) Stores.......
445120.............................          0.8         15.9          0.2         15.5        791.3        0.353  ...........          5.0         27.0
Convenience Stores.................          5.0          5.0          5.0  ...........  ...........          5.0  ...........  ...........  ...........
445210.............................          0.8          4.4          0.2          6.5         71.6        0.336  ...........          5.0          7.0
Meat Markets.......................          5.0          5.0          5.0  ...........  ...........          5.0  ...........  ...........  ...........
445220.............................          0.8          3.1  ...........          5.3         19.9        0.340  ...........          5.0          7.0
Fish and Seafood Markets...........          5.0          5.0  ...........  ...........  ...........          5.0  ...........  ...........  ...........
445230.............................          0.9          5.5          0.1          5.4         37.6        0.428         26.1          5.0          7.0
Fruit and Vegetable Markets........          5.0          5.0          5.0  ...........  ...........          5.0  ...........  ...........  ...........
445291.............................          0.5         19.6          0.2         36.1        126.0        0.499  ...........          5.0          7.0
Baked Goods Stores.................          5.0          7.0          5.0  ...........  ...........          5.0  ...........  ...........  ...........
445292.............................          0.7         25.4          0.3         41.2        139.3        0.627  ...........          7.0          7.0
Confectionery and Nut Stores.......          5.0         10.0          5.0  ...........          5.0         10.0  ...........  ...........  ...........
445299.............................          0.4          3.5          0.1         11.3         46.4        0.264  ...........          5.0          7.0
All Other Specialty Food Stores....          5.0          5.0          5.0  ...........  ...........          5.0  ...........  ...........  ...........
445310.............................          1.1         14.9          0.3          8.3        583.0        0.403  ...........          5.0          7.0
Beer, Wine and Liquor Stores.......          7.0          5.0          5.0  ...........  ...........          5.0  ...........  ...........  ...........
446110.............................          7.8        376.9          1.6         52.8     20,311.0        0.804        -20.2         25.5          7.0
Pharmacies and Drug Stores.........         35.5         35.5         19.0  ...........         35.5         35.5         10.0  ...........  ...........
446120.............................          1.2        162.6          0.5         56.8        892.5        0.748  ...........         25.5          7.0
Cosmetics, Beauty Supplies and               7.0         35.5          5.0  ...........         35.5         35.5  ...........  ...........  ...........
 Perfume Stores....................
446130.............................          1.1         88.3          0.4         44.1        733.0        0.642  ...........         19.0          7.0
Optical Goods Stores...............          7.0         35.5          5.0  ...........         35.5         14.0  ...........  ...........  ...........
446191.............................          0.8         67.5  ...........         31.1        361.8        0.527  ...........         14.0          7.0
Food (Health) Supplement Stores....          5.0         35.5  ...........  ...........  ...........          5.0  ...........  ...........  ...........
446199.............................          1.1          5.3  ...........         11.4        188.2        0.492  ...........          7.0          7.0
All Other Health and Personal Care           7.0          5.0  ...........  ...........  ...........          5.0  ...........  ...........  ...........
 Stores............................

[[Page 53931]]

 
447110.............................          4.2        150.8          0.7         10.4      4,854.2        0.723  ...........         25.5         27.0
Gasoline Stations with Convenience          25.5         35.5          7.0  ...........  ...........         30.0  ...........  ...........  ...........
 Stores............................
447190.............................          2.7         35.7          0.4         19.2      2,993.6        0.645  ...........         14.0          9.0
Other Gasoline Stations............         14.0         19.0          5.0  ...........  ...........         14.0  ...........  ...........  ...........
448110.............................          1.4         41.5          0.6         27.6        546.9        0.635  ...........         10.0          9.0
Men's Clothing Stores..............         10.0         19.0          5.0  ...........  ...........         14.0  ...........  ...........  ...........
448120.............................          2.2        180.2          0.8         30.5      2,334.0        0.812  ...........         25.5          9.0
Women's Clothing Stores............         14.0         35.5          7.0  ...........  ...........         35.5  ...........  ...........  ...........
448130.............................          2.5        176.3  ...........         58.5      1,035.4        0.851  ...........         30.0          7.0
Children's and Infants' Clothing            14.0         35.5  ...........  ...........         35.5         35.5  ...........  ...........  ...........
 Stores............................
448140.............................          8.1        526.1          3.1         47.5      7,579.2        0.930  ...........         35.5          9.0
Family Clothing Stores.............         35.5         35.5         35.5  ...........         35.5         35.5  ...........  ...........  ...........
448150.............................          1.1         46.1          0.4         52.9        360.9        0.728  ...........         14.0          7.0
Clothing Accessories Stores........          7.0         25.5          5.0  ...........         14.0         30.0  ...........  ...........  ...........
448190.............................          1.1         59.7          0.4         43.6        868.0        0.663  ...........         19.0          7.0
Other Clothing Stores..............          7.0         35.5          5.0  ...........         35.5         19.0  ...........  ...........  ...........
448210.............................          3.3        256.6          1.4         39.9      2,292.5        0.842  ...........         25.5          9.0
Shoe Stores........................         19.0         35.5         19.0  ...........  ...........         35.5  ...........  ...........  ...........
448310.............................          1.2        113.2          0.8         23.8      1,385.1        0.625  ...........         14.0          7.0
Jewelry Stores.....................          7.0         35.5          7.0  ...........  ...........         10.0  ...........  ...........  ...........
448320.............................          2.0         61.0  ...........         49.8        192.3        0.750  ...........         25.5          7.0
Luggage and Leather Goods Stores...         14.0         35.5  ...........  ...........          7.0         35.5  ...........  ...........  ...........
451110.............................          1.4        102.4          0.6         18.1      1,134.1        0.636         54.4         14.0          7.0
Sporting Goods Stores..............          7.0         35.5          5.0  ...........  ...........         14.0  ...........  ...........  ...........
451120.............................          2.7        488.2          1.0         71.7      2,903.1        0.853  ...........         25.5          7.0
Hobby, Toy and Game Stores.........         14.0         35.5         14.0  ...........         35.5         35.5  ...........  ...........  ...........
451130.............................          1.1        194.2  ...........         59.4        580.9        0.700  ...........         25.5          7.0
Sewing, Needlework and Piece Goods           7.0         35.5  ...........  ...........         25.5         25.5  ...........  ...........  ...........
 Stores............................
451140.............................          1.4         69.6          0.7         30.2        378.2        0.580  ...........         10.0          7.0
Musical Instrument and Supplies              7.0         35.5          7.0  ...........  ...........          5.0  ...........  ...........  ...........
 Stores............................
451211.............................          2.7        406.2          1.1         65.6      2,469.3        0.846  ...........         25.5          7.0
Book Stores........................         19.0         35.5         14.0  ...........         35.5         35.5  ...........  ...........  ...........
451212.............................          0.5          6.1  ...........         17.1         34.6        0.354  ...........          5.0          7.0
News Dealers and Newsstands........          5.0          5.0  ...........  ...........  ...........          5.0  ...........  ...........  ...........
451220.............................          2.2        259.4  ...........         57.7      1,042.1        0.836  ...........         30.0          7.0
Prerecorded Tape, Compact Disc and          14.0         35.5  ...........  ...........         35.5         35.5  ...........  ...........  ...........
 Record Stores.....................
452111.............................      2,227.1      3,926.7        890.8         72.1     15,654.5        0.434  ...........         30.0         27.0
Department Stores (except Discount          35.5         35.5         35.5  ...........         35.5          5.0  ...........  ...........  ...........
 Department Stores)................
452112.............................      3,433.0      8,326.5  ...........         95.0     31,807.8        0.588  ...........         25.5         27.0
Discount Department Stores.........         35.5         35.5  ...........  ...........         35.5          5.0  ...........  ...........  ...........
452910.............................     11,953.3     17,358.4  ...........         92.1     44,059.2        0.312  ...........         25.5         27.0
Warehouse Clubs and Superstores....         35.5         35.5  ...........  ...........         35.5          5.0  ...........  ...........  ...........
452990.............................          3.5        359.5          1.4         50.3      4,178.7        0.869  ...........         30.0         11.0
All Other General Merchandise               19.0         35.5         19.0  ...........         35.5         35.5  ...........  ...........  ...........
 Stores............................
453110.............................          0.3          1.1          0.1          1.7         27.9        0.112  ...........          5.0          7.0
Florists...........................          5.0          5.0          5.0  ...........  ...........          5.0  ...........  ...........  ...........
453210.............................          4.3        632.4          1.2         78.1      4,027.6        0.875          5.7         30.0          7.0
Office Supplies and Stationery              25.5         35.5         14.0  ...........         35.5         35.5  ...........  ...........  ...........
 Stores............................
453220.............................          0.6         14.9          0.2         12.3        491.1        0.464  ...........          5.0          7.0
Gift, Novelty and Souvenir Stores..          5.0          5.0          5.0  ...........  ...........          5.0  ...........  ...........  ...........
453310.............................          0.6          5.2          0.3          9.9        191.5        0.457  ...........          5.0          7.0
Used Merchandise Stores............          5.0          5.0          5.0  ...........  ...........          5.0  ...........  ...........  ...........
453910.............................          1.4        452.3          0.3         55.4      1,050.8        0.684  ...........         19.0          7.0
Pet and Pet Supplies Stores........          7.0         35.5          5.0  ...........         35.5         19.0  ...........  ...........  ...........
453920.............................          0.7         10.5          0.5          8.9         94.2        0.462  ...........          5.0          7.0
Art Dealers........................          5.0          5.0          5.0  ...........  ...........          5.0  ...........  ...........  ...........
453930.............................          2.6         48.7          1.3         20.2        481.0        0.592  ...........         14.0         13.0
Manufactured (Mobile) Home Dealers.         14.0         25.5         14.0  ...........  ...........          5.0  ...........  ...........  ...........
453991.............................          1.6          7.0          0.3         11.7        190.7        0.531  ...........          5.0          7.0
Tobacco Stores.....................         10.0          5.0          5.0  ...........  ...........          5.0  ...........  ...........  ...........
453998.............................          0.8          6.9          0.3          6.9        206.9        0.443          4.2          5.0          7.0
All Other Miscellaneous Store                5.0          5.0          5.0  ...........  ...........          5.0  ...........  ...........  ...........
 Retailers (except Tobacco Stores).
454111.............................          4.5         70.3          1.4  ...........  ...........        0.822  ...........         30.0         25.0
Electronic Shopping................         25.5         35.5         19.0  ...........  ...........         35.5  ...........  ...........  ...........

[[Page 53932]]

 
454112.............................         13.4        320.7  ...........  ...........  ........