Small Business Size Standards: Administrative and Support, Waste Management and Remediation Services, 63510-63525 [2011-26207]
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Federal Register / Vol. 76, No. 197 / Wednesday, October 12, 2011 / Proposed Rules
SMALL BUSINESS ADMINISTRATION
13 CFR Part 121
RIN 3245–AG27
Small Business Size Standards:
Administrative and Support, Waste
Management and Remediation
Services
U.S. Small Business
Administration.
ACTION: Proposed rule.
AGENCY:
The U.S. Small Business
Administration (SBA) proposes to
increase small business size standards
for 37 industries in North American
Industry Classification System (NAICS)
Sector 56, Administrative and Support,
Waste Management and Remediation
Services. As part of its ongoing
comprehensive review of all size
standards, SBA has evaluated all
receipts based standards in NAICS
Sector 56 to determine whether the
existing size standards should be
retained or revised. This proposed rule
is one of a series of proposals that will
examine size standards of industries
grouped by an NAICS Sector. SBA
issued a White Paper entitled ‘‘Size
Standards Methodology’’ and published
a notice in the October 21, 2009 issue
of the Federal Register that ‘‘Size
Standards Methodology’’ is available on
its Web site at https://www.sba.gov/size
for public review and comments. The
‘‘Size Standards Methodology’’ White
Paper explains how SBA establishes,
reviews and modifies its receipts based
and employee based small business size
standards. In this proposed rule, SBA
has applied its methodology that
pertains to establishing, reviewing, and
modifying a receipts based size
standard.
SUMMARY:
SBA must receive comments to
this proposed rule on or before
December 12, 2011.
ADDRESSES: You may submit comments,
identified by RIN 3245–AF27 by one of
the following methods: (1) Federal
eRulemaking Portal: https://
www.regulations.gov, following the
instructions for submitting comments;
or (2) Mail/Hand Delivery/Courier:
Khem R. Sharma, PhD, Chief, Size
Standards Division, 409 Third Street,
SW., Mail Code 6530, Washington, DC
20416. SBA will not accept comments to
this proposed rule submitted by e-mail.
SBA will post all comments to this
proposed rule on https://
www.regulations.gov. If you wish to
submit confidential business
information (CBI) as defined in the User
Notice at https://www.regulations.gov,
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you must submit such information to
U.S. Small Business Administration,
Khem R. Sharma, PhD, Chief, Size
Standards Division, 409 Third Street,
SW., Mail Code 6530, Washington, DC
20416, or send an e-mail to
sizestandards@sba.gov. You should
highlight the information that you
consider to be CBI and explain why you
believe SBA should hold this
information as confidential. SBA will
review your information and determine
whether it will make the information
public or not.
FOR FURTHER INFORMATION CONTACT:
Khem R. Sharma, PhD, Chief, Size
Standards Division, (202) 205–6618 or
sizestandards@sba.gov.
SUPPLEMENTARY INFORMATION: To
determine eligibility for Federal small
business assistance, SBA establishes
small business definitions (referred to as
size standards) for private sector
industries in the United States. SBA
uses two primary measures of business
size: average annual receipts and
average number of employees. SBA uses
financial assets, electric output, and
refining capacity to measure the size of
a few specialized industries. In
addition, SBA’s Small Business
Investment Company (SBIC), Certified
Development Company (504) and 7(a)
Loan Programs use either the industry
based size standards or net worth and
net income based alternative size
standards to determine eligibility for
those programs. At the start of the
current comprehensive size standards
review, there were 41 different size
standards, covering 1,141 NAICS
industries and 18 sub-industry activities
(‘‘exceptions’’ in SBA’s table of size
standards). Thirty-one of these size
levels were based on average annual
receipts, seven were based on average
number of employees, and three were
based on other measures. In addition,
SBA has established 11 other size
standards for its financial and
procurement programs.
Over the years, SBA has received
comments that its size standards have
not kept up with changes in the
economy, in particular the changes in
the Federal contracting marketplace and
industry structure. The last time SBA
conducted a comprehensive review of
all size standards was during the late
1970s and early 1980s. Since then, most
reviews of size standards were limited
to in-depth analyses of specific
industries in response to requests from
the public and Federal agencies. SBA
also makes periodic inflation
adjustments to its monetary based size
standards. The SBA’s latest inflation
adjustment to size standards was
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published in the Federal Register on
July 18, 2008 (73 FR 41237).
Because of changes in the Federal
marketplace and industry structure
since the last overall review, SBA
recognizes that current data may no
longer support some of its existing size
standards. Accordingly, in 2007, SBA
began a comprehensive review of all
size standards to determine if they are
consistent with current data and to
adjust them when necessary. In
addition, on September 27, 2010, the
President of the United States signed the
Small Business Jobs Act of 2010 (Jobs
Act). The Jobs Act directs SBA to
conduct a detailed review of all size
standards and to make appropriate
adjustments to reflect market
conditions. Specifically, the Jobs Act
requires SBA to conduct a detailed
review of at least one-third of all size
standards during every 18-month period
from the date of its enactment. In
addition, the Jobs Act requires that SBA
do a complete review of all size
standards not less frequently than once
every five years thereafter. Reviewing
existing small business size standards
and making appropriate adjustments
based on current data are also consistent
with Executive Order 13563 on
improving regulation and regulatory
review.
Rather than review all size standards
at one time, SBA has adopted a more
manageable approach of reviewing a
group of industries within an NAICS
Sector. An NAICS Sector generally
consists of 25 to 75 industries, except
for the manufacturing sector, which has
considerably more. Once SBA
completes its review of size standards
for industries in an NAICS Sector, it
will issue a proposed rule to revise size
standards for those industries for which
currently available data and other
relevant factors support doing so.
Below is a discussion of SBA’s size
standards methodology for establishing
receipts based size standards, which
SBA applied to this proposed rule,
including analyses of industry structure,
Federal procurement trends and other
factors for industries reviewed in this
proposed rule, the impact of the
proposed revisions to size standards on
Federal small business assistance, and
the evaluation of whether a revised size
standard would exclude dominant firms
from being considered small.
Size Standards Methodology
SBA has recently developed a ‘‘Size
Standards Methodology’’ for
developing, reviewing, and modifying
size standards when necessary. SBA has
published the document on its Web site
at https://www.sba.gov/size for public
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review and comments and included it,
as a supporting document, in the
electronic docket of this proposed rule
at https://www.regulations.gov. SBA does
not apply all features of its ‘‘Size
Standards Methodology’’ to all
industries because not all are
appropriate. For example, since this
proposed rule covers all industries with
receipts based standards in NAICS
Sector 56, the methodology described
here applies to establishing receipts
based standards. However, SBA makes
the methodology available in its entirety
for parties who have an interest in
SBA’s overall approach to establishing,
evaluating and modifying small
business size standards. SBA always
explains its analysis in individual
proposed and final rules relating to size
standards for specific industries.
SBA welcomes comments from the
public on a number of issues concerning
its ‘‘Size Standards Methodology,’’ such
as suggestions on alternative approaches
to establishing and modifying size
standards; whether there are alternative
or additional factors that SBA should
consider; whether SBA’s approach to
small business size standards makes
sense in the current economic
environment; whether SBA’s use of
anchor size standards is appropriate in
the current economy; whether there are
gaps in SBA’s methodology because of
the lack of comprehensive data; and
whether there are other facts or issues
that SBA should consider. Comments on
the SBA’s methodology should be
submitted via (1) the Federal
eRulemaking Portal: https://
www.regulations.gov; the docket
number is SBA–2009–0008, following
the instructions for submitting
comments; or (2) Mail/Hand Delivery/
Courier: Khem R. Sharma, Ph.D., Chief,
Size Standards Division, 409 Third
Street, SW, Mail Code 6530,
Washington, DC 20416. As with
comments received to this and other
proposed rules, SBA will post all
comments on its methodology on https://
www.regulations.gov. As of October 12,
2011, SBA has received seven
comments to its ‘‘Size Standards
Methodology.’’ The comments are
available to the public at https://
www.regulations.gov. SBA continues to
welcome comments on its methodology
from interested parties.
Congress granted SBA’s Administrator
discretion to establish detailed small
business size standards. 15 U.S.C.
632(a)(2). Section 3(a)(3) of the Small
Business Act (15 U.S.C. 632(a)(3))
requires that ‘‘* * * the [SBA]
Administrator shall ensure that the size
standard varies from industry to
industry to the extent necessary to
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reflect the differing characteristics of the
various industries and consider other
factors deemed to be relevant by the
Administrator.’’ Accordingly, the
economic structure of an industry is the
basis for developing and modifying
small business size standards. SBA
identifies the small business segment of
an industry by examining data on the
economic characteristics defining the
industry structure itself (as described
below). In addition to analyzing an
industry’s structure, SBA considers
current economic conditions, together
with its own mission, program
objectives, and the Administration’s
current policies, suggestions from
industry groups and Federal agencies,
and public comments on the proposed
rule, when it establishes small business
size standards. SBA also examines
whether a size standard based on
industry and other relevant data
successfully excludes businesses that
are dominant in the industry.
This proposed rule includes
information regarding the factors SBA
evaluated and the criteria it used to
propose any adjustments to size
standards in NAICS Sector 56. The rule
also explains why SBA has proposed to
adjust some size standards in Sector 56
but not others. This proposed rule
affords the public an opportunity to
review and comment on SBA’s
proposals to revise size standards in
NAICS Sector 56 as well as on the data
and methodology it uses to evaluate and
revise a size standard.
Industry Analysis
For the current comprehensive size
standards review, SBA has established
three ‘‘base’’ or ‘‘anchor’’ size standards:
$7.0 million in average annual receipts
for industries that have receipts based
size standards, 500 employees for
manufacturing and other industries that
have employee based size standards
(except for Wholesale Trade), and 100
employees for industries in the
Wholesale Trade Sector. SBA
established 500 employees as the anchor
size standard for manufacturing
industries at its inception in 1953.
Shortly thereafter, SBA established $1
million in average annual receipts as the
anchor size standard for
nonmanufacturing industries. SBA has
periodically increased the receipts
based anchor size standard for inflation,
and it stands today at $7 million. Since
1986, the size standard for all industries
in the Wholesale Trade Sector for SBA
financial assistance and for most
Federal programs has been 100
employees. However, NAICS codes for
Wholesale Trade Industries (NAICS
Sector 42) and their 100 employee size
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standards do not apply to Federal
procurement programs. Rather, for
Federal procurement, the size standard
for all industries in Wholesale Trade
and for all industries in Retail Trade
(NAICS Sector 44–45) is 500 employees
under SBA’s nonmanufacturer rule (13
CFR 121.406(b)).
These long-standing anchor size
standards have stood the test of time
and gained legitimacy through practice
and general public acceptance. An
anchor size standard is neither a
minimum nor a maximum. It is a
common size standard for a large
number of industries that have similar
economic characteristics and serves as a
reference point in evaluating size
standards for individual industries. SBA
uses the anchor in lieu of trying to
establish precise small business size
standards for each industry. Otherwise,
theoretically, the number of size
standards might be as high as the
number of industries for which SBA
establishes size standards (1,141).
Furthermore, the data SBA analyzes are
static, but the U.S. economy is not.
Hence, absolute precision is impossible.
Therefore, SBA presumes an anchor size
standard is appropriate for a particular
industry unless that industry displays
economic characteristics that are
considerably different from others with
the same anchor size standard.
When evaluating a size standard, SBA
compares the economic characteristics
of the specific industry under review to
the average characteristics of industries
with one of the three anchor size
standards (referred to as the ‘‘anchor
comparison group’’). This allows SBA to
assess the industry structure and to
determine whether the industry is
appreciably different from the other
industries in the anchor comparison
group. If the characteristics of a specific
industry under review are similar to the
average characteristics of the anchor
comparison group, the anchor size
standard is considered appropriate for
that industry. SBA may consider
adopting a size standard below the
anchor when (1) all or most of the
industry characteristics are significantly
smaller than the average characteristics
of the anchor comparison group, or (2)
other industry considerations strongly
suggest that the anchor size standard
would be an unreasonably high size
standard for the industry.
If the specific industry’s
characteristics are significantly higher
than are those of the anchor comparison
group, then a size standard higher than
the anchor size standard may be
appropriate. The larger the differences
are between the characteristics of the
industry under review and those of the
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anchor comparison group, the larger
will be the difference between the
appropriate industry size standard and
the anchor size standard. To determine
a size standard above the anchor size
standard, SBA analyzes the
characteristics of a second comparison
group. For industries with receipts
based size standards, including those in
NAICS Sector 56 that are reviewed in
this proposed rule, SBA has developed
a second comparison group consisting
of industries with the highest levels of
receipts based size standards. To
determine the level of a size standard
above the anchor size standard, SBA
analyzes the characteristics of this
second comparison group. The size
standards for this group of industries
range from $23 million to $35.5 million
in average annual receipts, with the
weighted average size standard for the
group being $29 million. SBA refers to
this comparison group as the ‘‘higher
level receipts based size standard
group.’’
The primary factors that SBA
evaluates when analyzing the structural
characteristics of an industry include
average firm size, startup costs and
entry barriers, industry competition,
and distribution of firms by size. SBA
also evaluates, as an additional primary
factor, the possible impact that revising
size standards might have on Federal
contracting assistance to small
businesses. These are, generally, the five
most important factors SBA examines
when establishing or revising a size
standard for an industry. However, SBA
will also consider and evaluate other
information that it believes is relevant to
a particular industry (such as
technological changes, growth trends,
SBA financial assistance, other program
factors, etc.). SBA also considers
possible impacts of size standard
revisions on eligibility for Federal small
business assistance, current economic
conditions, the Administration’s
policies, and suggestions from industry
groups and Federal agencies. Public
comments on a proposed rule also
provide important additional
information. SBA thoroughly reviews all
public comments before making a final
decision on its proposed size standard.
Below are brief descriptions of each of
the five primary factors that SBA has
evaluated in each industry in NAICS
Sector 56 being reviewed in this
proposed rule. A more detailed
description of this analysis is provided
in the SBA ‘‘SBA Size Standards
Methodology,’’ available at https://
www.sba.gov/size.
1. Average firm size. SBA computes
two measures of average firm size:
simple average and weighted average.
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For industries with receipts based size
standards, the simple average is the total
receipts of the industry divided by the
total number of firms in the industry.
The weighted average firm size is the
sum of weighted simple averages in
different receipts size classes, where
weights are the shares of total industry
receipts for respective size classes. The
simple average weighs all firms within
an industry equally, regardless of their
size. The weighted average overcomes
that limitation by giving more weight to
larger firms.
If the average firm size of an industry
under review is significantly higher
than the average firm size of industries
in the anchor comparison industry
group, this will generally support a size
standard higher than the anchor size
standard. Conversely, if the industry’s
average firm size is similar to or
significantly lower than that of the
anchor comparison industry group, it
will be a basis to adopt the anchor size
standard, or, in rare cases, a standard
lower than the anchor.
2. Startup costs and entry barriers.
Startup costs reflect a firm’s initial size
in an industry. New entrants to an
industry must have sufficient capital
and other assets to start and maintain a
viable business. If new firms entering a
particular industry have greater capital
requirements than firms in industries in
the anchor comparison group, this can
be a basis for establishing a size
standard higher than the anchor
standard. In lieu of data on actual
startup costs, SBA uses average assets as
a proxy measure to assess the levels of
capital requirements for new entrants to
an industry.
To calculate average assets, SBA
begins with the sales to total assets ratio
for an industry from the Risk
Management Association’s Annual
Statement Studies. SBA then applies
these ratios to the average receipts of
firms in that industry. An industry with
a significantly higher level of average
assets than that of the anchor
comparison group is likely to have
higher startup costs; this in turn will
support a size standard higher than the
anchor. Conversely, if the industry has
a significantly smaller average assets
compared to the anchor comparison
group, the anchor size standard, or, in
rare cases, one lower than the anchor,
may be appropriate.
3. Industry competition. Industry
competition is generally measured by
the share of total industry receipts
generated by the largest firms in an
industry. SBA generally evaluates the
share of industry receipts generated by
the four largest firms in each industry.
This is referred to as the ‘‘four-firm
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concentration ratio,’’ a commonly used
economic measure of market
competition. SBA compares the fourfirm concentration ratio for an industry
under review to the average four-firm
concentration ratio for industries in the
anchor comparison group. If a
significant share of economic activity
within the industry is concentrated
among a few relatively large companies,
all else being equal, SBA will establish
a size standard higher than the anchor
size standard. SBA does not consider
the four-firm concentration ratio as an
important factor in assessing a size
standard if its value for an industry
under review is less than 40 percent.
For industries in which the four-firm
concentration ratio is 40 percent or
more, SBA examines the average size of
the four largest firms in determining a
size standard.
4. Distribution of firms by size. SBA
examines the shares of industry total
receipts accounted for by firms of
different receipts and employment size
classes in an industry. This is an
additional factor SBA evaluates in
assessing competition within an
industry. If most of an industry’s
economic activity is attributable to
smaller firms, this would indicate that
small businesses are competitive in that
industry. This would support adopting
the anchor size standard. If most of an
industry’s economic activity is
attributable to larger firms, this
indicates that small businesses are not
competitive in that industry. This
would support adopting a size standard
above the anchor.
Concentration among firms is a
measure of inequality of distribution. To
evaluate the degree of inequality of
distribution within an industry, SBA
computes the Gini coefficient by
constructing the Lorenz curve. The
Lorenz curve presents the cumulative
percentages of units (firms) along the
horizontal axis and the cumulative
percentages of receipts (or other
measures of size) along the vertical axis.
(For further detail, please refer to SBA’s
‘‘Size Standards Methodology’’ on its
Web site at https://www.sba.gov/size.)
Gini coefficient values vary from zero to
one. If receipts are distributed equally
among all the firms in an industry, the
value of the Gini coefficient will equal
zero. If an industry’s total receipts are
attributed to a single firm, the Gini
coefficient will equal one.
SBA compares the Gini coefficient
value for an industry under review with
that for industries in the anchor
comparison group. If an industry shows
a higher Gini coefficient value than
industries in the anchor comparison
industry group, this may, all else being
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equal, warrant a higher size standard
than the anchor. Conversely, if an
industry’s Gini coefficient is similar or
lower than that for the anchor group, the
anchor standard, or in some cases a
standard lower than the anchor, may be
adopted.
5. Impact on Federal contracting and
SBA loan programs. SBA examines the
possible impact a size standard change
may have on Federal small business
assistance. This most often focuses on
the share of Federal contracting dollars
awarded to small businesses in the
industry in question. In general, if the
small business share of Federal
contracting in an industry with
significant Federal contracting is
appreciably less than the small business
share of the industry’s total receipts,
there is justification for considering a
size standard higher than the existing
size standard. The disparity between the
small business Federal market share and
industry-wide share may be due to
various factors, such as extensive
administrative and compliance
requirements associated with Federal
contracts, the different skill set required
by Federal contracts as compared to
typical commercial contracting work,
and the size of Federal contracts. These,
as well as other factors, are likely to
influence the type of firms within an
industry that compete for Federal
contracts. By comparing the small
business Federal contracting share with
the industry-wide small business share,
SBA includes in its size standards
analysis the latest Federal contracting
trends. This analysis may indicate a size
standard larger than the current
standard.
SBA considers Federal contracting
trends in the size standards analysis
only if (1) the small business share of
Federal contracting dollars is at least 10
percent lower than the small business
share of total industry receipts, and (2)
the amount of total Federal contracting
averages $100 million or more during
the latest three fiscal years. These
thresholds reflect a significant level of
contracting where a revision to a size
standard may have an impact on
contracting opportunities to small
businesses.
Besides the impact on small business
Federal contracting, SBA evaluates the
influence of a proposed size standard on
SBA’s loan programs. For this, SBA
examines the volume and number of
SBA guaranteed loans within an
industry and the size of firms obtaining
those loans. This allows SBA to assess
whether the existing or proposed size
standard for a particular industry may
restrict the level of financial assistance
to small firms. If the analysis shows that
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the current size standards have impeded
financial assistance to small businesses,
higher size standards may be
supportable. However, if small
businesses under current size standards
have been receiving significant amounts
of financial assistance through SBA’s
loan programs, or if the financial
assistance has been provided mainly to
businesses that are much smaller than
the existing size standard, this factor is
not considered for determining the size
standard.
Sources of Industry and Program Data
SBA’s primary source of industry data
used in this proposed rule is a special
tabulation of the data from the 2007
Economic Census (see https://
www.census.gov/econ/census07/)
prepared by the U.S. Bureau of the
Census (Census Bureau) for SBA. The
special tabulation provides SBA with
industry-specific data on the number of
firms, number of establishments,
number of employees, and annual
receipts of companies by the size of firm
based on the 2007 Economic Census.
The data reflect the size classes of the
company’s overall enterprise size;
however, the data by NAICS industry
within the particular size class represent
the company’s total values for a specific
industry only. The special tabulation
enables SBA to evaluate average firm
size, the four-firm concentration ratio,
and distribution of firms by various
receipts and employment size classes.
In some cases, where data were not
available due to disclosure prohibitions
in the Census Bureau’s tabulation, SBA
either estimated missing values using
available relevant data or examined data
at a higher level of industry aggregation,
such as at the NAICS 2-digit (Sector), 3digit (Subsector), or 4-digit (Industry
Group) level. In some instances, SBA
had to base its analysis only on those
factors for which data were available or
on estimates of missing values were
possible.
To calculate average assets SBA used
sales to total assets ratios from the Risk
Management Association’s Annual
Statement Studies, 2007–2009.
To evaluate Federal contracting
trends, SBA examined data on Federal
contract awards for fiscal years 2007 to
2009. These data are available from the
U.S. General Service Administration’s
Federal Procurement Data System—
Next Generation (FPDS–NG).
To assess the impact on financial
assistance to small businesses, SBA
examined data on its own guaranteed
loan programs for fiscal years 2008 to
2010.
Data sources and estimation
procedures SBA uses in its size
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standards analysis are documented in
detail in the SBA’s ‘‘Size Standards
Methodology’’ White Paper, which is
available at https://www.sba.gov/size.
Dominance in Field of Operation
Section 3(a) of the Small Business Act
(15 U.S.C. 632(a)) defines a small
business concern as one that is (1)
independently owned and operated, (2)
not dominant in its field of operation,
and (3) within a specific small business
definition or size standard established
by the SBA Administrator. SBA
considers as part of its evaluation
whether a business concern at a
proposed size standard would be
dominant in its field of operation. For
this, SBA generally examines the
industry’s market share of firms at the
proposed standard. Market share and
other factors may indicate whether a
firm can exercise a major controlling
influence on a national basis in an
industry where a significant number of
business concerns are engaged. If a
contemplated size standard would
include a dominant firm, SBA would
consider a lower size standard to
exclude the dominant firm from being
defined as small.
Selection of Size Standards
To simplify size standards, for the
ongoing comprehensive review of
receipts based size standards, SBA has
proposed to select size standards for
industries from a limited number of
levels. For many years, SBA has been
concerned about the complexity of
determining small business status
caused by a large number of varying
receipts based size standards (see 69 FR
13130 (March 4, 2004) and 57 FR 62515
(December 31, 1992)). At the start of the
current comprehensive size standards
review, there were 31 different levels of
receipts based size standards. They
ranged from $0.75 million to $35.5
million, and many of them applied to
one or only a few industries. SBA
believes that size standards with such a
large number of small variations among
them are both unnecessary and difficult
to justify analytically. To simplify
managing and using size standards, SBA
proposes that there be fewer size
standard levels. This will produce more
common size standards for businesses
operating in related industries. This will
also result in greater consistency among
the size standards for industries that
have similar economic characteristics.
The SBA proposes, therefore, to apply
one of eight receipts based size
standards to each industry in NAICS
Sector 56 that has a receipts based
standard. In NAICS Sector 56, all size
standards are based on annual receipts,
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except for Environmental Remediation
Services, which is an ‘‘exception’’ to
NAICS 562910. In 1994, SBA
established a 500 employee size
standard for Federal contracts for
Environmental Remediation Services,
provided they meet certain specific
criteria (see 59 FR 47236 (September 15,
1994)). In this proposed rule, SBA has
not reviewed this employee based size
standard for Environmental
Remediation Services and the current
standard will remain in effect until SBA
reviews industries with employee based
size standards. The eight ‘‘fixed’’
receipts based size standard levels are
$5 million, $7 million, $10 million, $14
million, $19 million, $25.5 million,
$30.0 million, and $35.5 million. To
establish these eight receipts based size
standard levels SBA considered the
current minimum, the current
maximum, and the most commonly
used current receipts based size
standards. At the start of this
comprehensive size standards review,
the most commonly used receipts based
size standards clustered around the
following: $2.5 million to $4.5 million,
$7 million, $9.0 million to $10 million,
$12.5 million to $14.0 million, $25.0
million to $25.5 million, and $33.5
million to $35.5 million. SBA selected
$7 million as one of eight fixed levels
of receipts based size standards because
it is also an anchor standard for receipts
based standards. The lowest or
minimum receipts based size level will
be $5 million. Other than the standards
for agriculture and those based on
commissions (such as real estate brokers
and travel agents), $5 million include
those industries with the lowest receipts
based standards, which range from $2.0
million to $4.5 million, at the start of
this comprehensive review. Among the
higher level size clusters, SBA selected
four fixed levels: $10 million, $14
million, $25.5 million, and $35.5
million. Because there are large
intervals between the two of the fixed
levels, SBA also established two
intermediate levels: $19 million
between $14 million and $25.5 million,
and $30 million between $25.5 million
and $35.5 million. These two
intermediate levels reflect roughly the
same proportional differences as
between the other two successive levels.
To simplify size standards further,
SBA may propose a common size
standard for closely related industries.
Although the size standard analysis may
support a specific size standard level for
each industry, SBA believes that
establishing different size standards for
closely related industries may not
always be appropriate. For example, in
cases where many of the same
businesses operate in the same multiple
industries, establishing a common size
standard for those industries might
better reflect the Federal marketplace.
This might also make size standards
among related industries more
consistent than establishing separate
size standards for each of those
industries. This led SBA to establish a
common size standard for the
information technology (IT) services
(NAICS 541511, NAICS 541112, NAICS
541513, and NAICS 541519), even
though the industry data might support
a distinct size standard for each
industry (see 57 FR 27906 (June 23,
1992)). Within NAICS Sector 56, all
industries in NAICS Industry Group
5614, Business Support Services, and all
industries in NAICS Industry Group
5619, Other Support Services, have a
common $7.0 million size standard.
Similarly, eight industries in NAICS
Subsector 562, Waste Management and
Remediation Services, have a common
$12.5 million size standard. In this rule,
SBA proposes to retain common size
standards for those industries and
establish common size standards for
similar industries in other NAICS
Industry Groups as well. Whenever SBA
proposes a common size standard for
closely related industries, it will
provide a justification for that in the
proposed rule.
Evaluation of Industry Structure
SBA evaluated the structure of the 44
industries in NAICS Sector 56,
Administrative and Support, Waste
Management and Remediation Services,
to assess the appropriateness of the
current receipts based size standards. As
described above, SBA compared data on
the economic characteristics of each
industry (except for the Environmental
Remediation Services exception to
NAICS 562910) to the average
characteristics of industries in two
comparison groups. The first
comparison group consists of all
industries with $7.0 million size
standards and is referred to as the
‘‘receipts based anchor comparison
group.’’ Because the goal of SBA’s size
standards review is to assess whether a
specific industry’s size standard should
be the same as or different from the
anchor size standard, this is the most
logical group of industries to analyze. In
addition, this group includes a
sufficient number of firms to provide a
meaningful assessment and comparison
of industry characteristics.
If the characteristics of an industry
under review are similar to the average
characteristics of industries in the
anchor comparison group, the anchor
size standard is generally considered
appropriate for that industry. If an
industry’s structure is significantly
different from industries in the anchor
group, a size standard lower or higher
than the anchor size standard might be
appropriate. The level of the new size
standard is based on the difference
between the characteristics of the
anchor comparison group and a second
industry comparison group. As
described above, the second comparison
group for receipts based standards
consists of industries with the highest
receipts based size standards, ranging
from $23 million to $35.5 million. The
average size standard for this group is
$29 million. SBA refers to this group of
industries as the ‘‘higher level receipts
based size standard comparison group.’’
SBA determines differences in industry
structure between an industry under
review and the industries in the two
comparison groups by comparing data
on each of the industry factors,
including average firm size, average
assets size, the four-firm concentration
ratio, and the Gini coefficient of
distribution of firms by size. Table 1
shows two measures of the average firm
size (simple and weighted), average
assets size, the four-firm concentration
ratio, average receipts of the four largest
firms, and the Gini coefficient for both
anchor level and higher level
comparison groups for receipts based
size standards.
TABLE 1—AVERAGE CHARACTERISTICS OF RECEIPTS BASED COMPARISON GROUPS
Avg. Firm size ($ million)
Receipts based comparison group
Simple
average
Anchor Level ....................................................................
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average
19.63
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Avg. Assets
size
($ million)
0.84
E:\FR\FM\12OCP6.SGM
Four-firm
concentration ratio
(%)
16.6
12OCP6
Avg.
receipts of
four largest
firms
($ million) *
196.4
Gini
coefficient
0.693
Federal Register / Vol. 76, No. 197 / Wednesday, October 12, 2011 / Proposed Rules
63515
TABLE 1—AVERAGE CHARACTERISTICS OF RECEIPTS BASED COMPARISON GROUPS—Continued
Avg. Firm size ($ million)
Receipts based comparison group
Simple
average
Higher Level .....................................................................
Weighted
average
5.07
Avg. Assets
size
($ million)
116.84
3.20
Four-firm
concentration ratio
(%)
Avg.
receipts of
four largest
firms
($ million) *
32.1
1,376.0
Gini
coefficient
0.830
* To be used for industries with a four-firm concentration ratio of 40% or greater.
Derivation of Size Standards Based on
Industry Factors
For each industry factor in Table 1,
SBA derives a separate size standard
based on the differences between the
values for an industry under review and
the values for the two comparison
groups. If the industry value for a
particular factor is near the
corresponding factor for the anchor
comparison group, SBA will consider
the $7.0 million anchor size standard
appropriate for that factor.
An industry factor with a value
significantly above or below the anchor
comparison group will generally
warrant, a size standard above or below
the $7.0 million anchor. The new size
standard in these cases is based on the
proportional difference between the
industry value and the values for the
two comparison groups.
For example, if an industry’s simple
average receipts are $3.3 million, that
would support a $19 million size
standard. The $3.3 million level is 52.8
percent between the average firm size of
$1.32 million for the anchor comparison
group and $5.07 million for the higher
level comparison group (($3.30 million–
$1.32 million) ÷ ($5.07 million–$1.32
million) = 0.528 or 52.8%). This
proportional difference is applied to the
difference between the $7.0 million
anchor size standard and average size
standard of $29 million for the higher
level size standard group and then
added to $7.0 million to estimate a size
standard of $18.616 million ({$29.0
million–$7.0 million} * 0.528] + $7.0
million = $18.616 million). The final
step is to round the estimated $18.616
million size standard to the nearest
fixed size standard level, which in this
example is $19 million.
SBA applies the above calculation to
derive a size standard for each industry
factor. Detailed formulas involved in
these calculations are presented in the
SBA’s ‘‘Size Standards Methodology,’’
which is available at https://
www.sba.gov/size. (However, it should
be noted that figures in the ‘‘SBA Size
Standards Methodology’’ White Paper
are based on 2002 Economic Census
data and are different from those
presented in this proposed rule. That is
because when SBA prepared its ‘‘Size
Standards Methodology,’’ the 2007
Economic Census data were not yet
available). Table 2 (below) shows ranges
of values for each industry factor and
the levels of size standards supported by
those values.
TABLE 2—VALUES OF INDUSTRY FACTORS AND SUPPORTED SIZE STANDARDS
If Simple avg. receipts
size
($ million)
jlentini on DSK4TPTVN1PROD with PROPOSALS6
< 1.15
1.15 to
1.58 to
2.18 to
2.95 to
3.93 to
4.87 to
> 5.71
...........................
1.57 ..................
2.17 ..................
2.94 ..................
3.92 ..................
4.86 ..................
5.71 ..................
...........................
Or if Weighted avg.
receipts size ($ million)
Or if avg. assets size
($ million)
Or if avg. receipts of
largest four firms
($ million)
Or if gini coefficient
< 15.22 .........................
15.22 to 26.26 ..............
26.27 to 41.73 ..............
41.74 to 61.61 ..............
61.62 to 87.02 ..............
87.03 to 111.32 ............
111.33 to 133.41 ..........
> 133.41 .......................
< 0.73 ...........................
0.73 to 1.00 ..................
1.01 to 1.37 ..................
1.38 to 1.86 ..................
1.87 to 2.48 ..................
2.49 to 3.07 ..................
3.08 to 3.61 ..................
> 3.61 ...........................
< 142.8 .........................
142.8 to 276.9 ..............
277.0 to 464.5 ..............
464.6 to 705.8 ..............
705.9 to 1,014.1 ...........
1,014.2 to 1,309.0 ........
1,309.1 to 1,577.1 ........
> 1,577.1 ......................
< 0.686 .........................
0.686 to 0.702 ..............
0.703 to 0.724 ..............
0.725 to 0.752 ..............
0.753 to 0.788 ..............
0.789 to 0.822 ..............
0.823 to 0.853 ..............
> 0.853 .........................
Derivation of Size Standard Based on
Federal Contracting Factor
Besides industry structure, SBA also
evaluates Federal contracting data to
assess how successful small businesses
are in getting Federal contracts under
current size standards. For the current
comprehensive size standards review,
SBA has decided to designate a size
standard at one level higher than the
current size standard for industries
where the small business share of total
Federal contracting dollars is between
10 and 30 percentage points lower than
the small business share of total
industry receipts, and at two levels
higher than the current size standard
where the difference is more than 30
percentage points.
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Because of the complex relationships
among several variables affecting small
business participation in the Federal
marketplace, SBA has chosen not to
designate a size standard for the Federal
contracting factor alone that is higher
than two levels above the current size
standard. SBA believes that a larger
adjustment to size standards based on
Federal contracting activity should be
based on a more detailed analysis of the
impact of any subsequent revision to the
current size standard. In limited
situations, however, SBA may conduct
a more extensive examination of Federal
contracting experience. This may enable
SBA to support a different size standard
than indicated by this general rule and
take into consideration significant and
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Then size
standard is
($ million)
5.0
7.0
10.0
14.0
19.0
25.5
30.0
35.5
unique aspects of small business
competitiveness in the Federal contract
market. SBA welcomes comments on its
methodology of incorporating the
Federal contracting factor in the size
standard analysis and suggestions for
alternative methods and other relevant
information on small business
experience in the Federal contract
market.
Of the 44 industries reviewed in this
proposed rule, 15 industries averaged
$100 million or more annually in
Federal contracting during fiscal years
2007 to 2009. The Federal contracting
factor was significant (i.e., the difference
between the small business share of
total industry receipts and the small
business share of Federal contracting
E:\FR\FM\12OCP6.SGM
12OCP6
63516
Federal Register / Vol. 76, No. 197 / Wednesday, October 12, 2011 / Proposed Rules
dollars was 10 percentage points or
more) in six of those 15 industries, and
a separate size standard was derived for
that factor for each of them.
New Size Standards Based on Industry
and Federal Contracting Factors
Table 3 shows the results of analyses
of industry and Federal contracting
factors for each industry covered by this
proposed rule. Many of the NAICS
industries in columns 2, 3, 4, 6, 7, and
8 show two numbers. The upper
number is the value for the industry or
federal contracting factor shown on the
top of the column, and the lower
number is the size standard supported
by that factor. For the four-firm
concentration ratio, SBA estimates a
size standard if its value is 40 percent
or more. If the four-firm concentration
ratio for an industry is less than 40
percent, there is no estimated size
standard for that factor. If the four-firm
concentration ratio is more than 40
percent, SBA indicates in column 6 the
average size of the industry’s top four
firms together with a size standard
based on that average. Column 9 shows
a calculated new size standard for each
industry. This is the average of the size
standards supported by each factor and
rounded to the nearest fixed size level.
Analytical details involved in the
averaging procedure are described in the
SBA’s ‘‘Size Standard Methodology.’’
For comparison with the new standards,
the current size standards are in column
10 of Table 3.
TABLE 3—SIZE STANDARDS SUPPORTED BY EACH FACTOR FOR EACH INDUSTRY (MILLIONS OF DOLLARS)
(1)
NAICS code/ NAICS
industry title
(2)
Simple
average firm
size
($ million)
561110 Office Administrative Services ..................
561210 Facilities Support
Services .........................
561311 Employment
Placement Agencies ......
561312 Executive Search
Services .........................
561320 Temporary Help
Services .........................
561330 Professional Employer Organizations ......
561410 Document Preparation Services ...............
561421 Telephone Answering Services ...........
561422 Telemarketing Bureaus and Other contact
Centers ..........................
561431 Private Mail Centers .................................
561439 Other Business
Service Centers (including Copy Shops) ............
561440 Collection Agencies ................................
561450 Credit Bureaus .....
561491 Repossession
Services .........................
561492 Court Reporting
and Stenotype Services
561499 All Other Business
Support Services ...........
jlentini on DSK4TPTVN1PROD with PROPOSALS6
(5)
Fourfirm
ratio
(%)
(6)
Four-firm
average size
$ million)
(8)
Federal
contract
factor (%)
(7)
Gini
Co-efficient
(9)
Calculated
size
standard
$ million)
(10)
Current size
standard
$ million)
$7.0, 5.0
$0.6, 5.0
2.3
$225.8
0.694, $7.0
¥10.1%,
$10.0
$7.0
$7.0
13.8, 35.5
98.7, 25.5
4.5, 35.5
27.6
1,777.3
0.835, $30.0
¥2.8%
30.0
35.5
1.5, 7.0
23.6, 7.0
....................
22.1
652.4
0.759, $19.0
....................
14.0
7.0
1.0, 5.0
28.8, 10.0
....................
20.7
362.5
0.693, $7.0
....................
7.0
7.0
7.6, 35.5
152.6, 35.5
1.4, 10.0
15.6
4,122.2
0.857, $35.5
43.8%
25.5
13.5
21.4, 35.5
288.8, 35.5
3.0, 25.5
33.8
7,203.7
0.882, $35.5
....................
30.0
13.5
0.7, 5.0
10.0, 5.0
....................
22.3
189.7
0.697, $7.0
....................
7.0
7.0
1.4, 7.0
9.1, 5.0
....................
15.1
86.6
0.690, $7.0
¥35.5%,
$14.0
10.0
7.0
5.6, 30.0
35.5, 10.0
....................
24.8
910.6
0.807, $25.5
....................
25.5
7.0
0.4, 5.0
2.9, 5.0
....................
4.7
25.2
0.289, $5.0
....................
5.0
7.0
2.6, 14.0
95.9, 25.5
1.0, 10.0
54.5
1,119.2, 25.5
0.832, $30.0
....................
19.0
7.0
2.7, 14.0
15.3, 35.5
25.3, 7.0
379.2, 35.5
1.0, 10.0
....................
14.9
64.3
457.6
1,316.5, 30.0
0.792, $25.5
0.935, $35.5
....................
....................
14.0
35.5
7.0
7.0
0.8, 5.0
4.3, 5.0
....................
10.0
18.0
0.520, $5.0
....................
5.0
7.0
0.7, 5.0
16.5, 7.0
....................
19.7
110.5
0.653, $5.0
....................
7.0
7.0
2.5, 14.0
21.2, 7.0
1.0, 7.0
29.7
607.4
0.805, $25.5
14.0
7.0
1.4, 7.0
1.6, 7.0
109.9, 25.5
18.1, 7.0
0.5, 5.0
0.6, 5.0
48.7
16.2
2,105.8, 35.5
178.6
0.806, $25.5
0.735, $14.0
¥13.4%,
$10.0
....................
....................
19.0
10.0
3.5
7.0
1.3, 7.0
8.3, 5.0
....................
13.2
49.6
0.674, $5.0
....................
7.0
7.0
9.9, 35.5
150.5, 35.5
6.9, 35.5
42.2
1,468.2, 30.0
0.898, $35.5
....................
35.5
7.0
0.8, 5.0
23.9, 7.0
....................
27.0
261.9
0.719, $10.0
¥27.6%,
$19.0
14.0
12.5
3.2, 19.0
88.4, 25.5
0.7, 5.0
30.6
1,439.8
0.865, $35.5
¥6.3%
19.0
18.5
16.7, 35.5
253.3, 35.5
....................
88.9
494.6, 14.0
0.906, $35.5
....................
30.0
12.5
2.6, 14.0
0.4, 5.0
108.2, 25.5
2.6, 5.0
1.0, 7.0
....................
34.4
5.9
1,233.3
24.1
0.819, $25.5
0.377, $5.0
7.8
....................
19.0
5.0
12.5
7.0
0.8, 5.0
0.6, 5.0
112.7, 30.0
31.7, 10.0
0.2, 5.0
0.2, 5.0
27.3
10.5
592.5
868.3
0.681, $5.0
0.704, $10.0
....................
¥9.0
10.0
7.0
7.0
16.5
0.6, 5.0
22.6, 7.0
0.2, 5.0
8.6
1,160.6
0.571, $5.0
0.7
5.0
7.0
0.4, 5.0
9.4, 5.0
0.1, 5.0
10.4
76.9
0.419, $5.0
....................
5.0
4.5
561510 Travel
561520 Tour Operators .....
561591 Convention and
Visitors Bureaus ............
561599 All Other Travel
Arrangement and Reservation Services ...........
561611 Investigation Services ................................
VerDate Mar<15>2010
(4)
Average
assets size
$ million)
$1.4, 7.0
Agencies 1
561612 Security Guards
and Patrol Services .......
561613 Armored Car Services ................................
561621 Security Systems
Services (except Locksmiths) ...........................
561622 Locksmiths ...........
561710 Exterminating and
Pest Control Services ....
561720 Janitorial Services
561730 Landscaping Services ................................
561740 Carpet and Upholstery Cleaning Services
(3)
Weighted
average firm
size
($ million)
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63517
Federal Register / Vol. 76, No. 197 / Wednesday, October 12, 2011 / Proposed Rules
TABLE 3—SIZE STANDARDS SUPPORTED BY EACH FACTOR FOR EACH INDUSTRY (MILLIONS OF DOLLARS)—Continued
(2)
Simple
average firm
size
($ million)
(1)
NAICS code/ NAICS
industry title
561790 Other Services to
Buildings and Dwellings
(3)
Weighted
average firm
size
($ million)
(4)
Average
assets size
$ million)
(5)
Fourfirm
ratio
(%)
(6)
Four-firm
average size
$ million)
(8)
Federal
contract
factor (%)
(7)
Gini
Co-efficient
(9)
Calculated
size
standard
$ million)
(10)
Current size
standard
$ million)
0.4, 5.0
5.4, 5.0
0.1, $5.0
11.2
133.7
0.479, 5.0
¥38.5,
$14.0
7.0
7.0
2.8, 14.0
15.0, 5.0
1.2, 10.0
11.2
141.1
0.741, $14.0
....................
10.0
7.0
2.6, 14.0
38.2, 10.0
....................
19.8
555.5
0.802, $25.5
....................
19.0
7.0
1.6, 10.0
21.4, 7.0
0.7, 5.0
11.3
590.3
0.767, $19.0
¥21.9,
$10.0
10.0
7.0
5.4, 30.0
307.3, 35.5
3.1, 25.5
50.0
4,628.5, 35.5
0.878, $35.5
36.3
35.5
12.5
5.0, 30.0
37.7, 10.0
....................
45.8
212.8, 7.0
0.775, $19.0
....................
14.0
12.5
1.9, 10.0
40.4, 10.0
1.2, 10.0
39.7
159.4
0.776, $19.0
....................
14.0
12.5
13.4, 35.5
101.9, 25.5
7.5, 35.5
44.6
653.6, 14.0
0.834, $30.0
¥4.9%
25.5
12.5
6.6, 35.5
85.5, 19.0
4.6, 35.5
56.1
791.8, 19.0
0.854, $35.5
....................
30.0
12.5
36.5, 35.5
270.0, 35.5
....................
92.4
480.8, 14.0
0.856, $35.5
....................
30.0
12.5
3.8, 19.0
15.8, 7.0
....................
34.7
58.2
0.689, $7.0
....................
10.0
12.5
4.1, 25.5
29.3, 10.0
1.7, 14.0
14.7
455.1
0.770, $19.0
¥4.4%
19.0
14.0
4.4, 25.5
26.7, 10.0
2.0, $19.0
33.3
338.8
0.749, $14.0
....................
19.0
12.5
0.8, 5.0
8.9, 5.0
....................
13.2
84.3
0.556, $5.0
....................
5.0
7.0
1.5, 7.0
14.2, 5.0
0.6, 5.0
27.8
98.3
0.679, $5.0
....................
5.0
7.0
561910 Packaging and Labeling Services ..............
561920 Convention and
Trade Show Organizers
561990 All Other Support
Services .........................
562111 Solid Waste Collection ............................
562112 Hazardous Waste
Collection .......................
562119 Other Waste Collection ............................
562211 Hazardous Waste
Treatment and Disposal
562212 Solid Waste Landfill ...................................
562213 Solid Waste Combustors and Incinerators
562219 Other Nonhazardous Waste Treatment
and Disposal ..................
562910 Remediation Services ................................
562920 Materials Recovery Facilities ...................
562991 Septic Tank and
Related Services ...........
562998 All Other Miscellaneous Waste Management Services ................
Common Size Standards
When many of the same businesses
operate in multiple industries, SBA
believes that a common size standard
can be appropriate for these industries
even if the industry and relevant
program data support different size
standards. For instance, in past rules,
SBA has established a common size
standard for Computer Systems Design
and Related Services industries (NAICS
541511, NAICS 541112, NAICS 541513,
NAICS 541519 (excluding the
‘‘exception’’), and NAICS 811212).
Another example is the common size
standard for certain Architectural and
Engineering (A&E) and Related Services
industries. These include NAICS
541310, NAICS 541330 (excluding the
‘‘exceptions’’), Map Drafting (which is
identified as ‘‘exception’’ under NAICS
541340), NAICS 541360, and NAICS
541370 (see 64 FR 28275 (May 25,
1999)). More recently, SBA established
a common size standard for some of the
industries in NAICS Sector 44–45,
Retail Trade as well (see 75 FR 61597
(October 6, 2010)). Size standards for
NAICS Sector 44–45 do not apply to
Federal Government contracting, but
they do apply to all other Federal
Government programs that provide
benefits for being a small business
concern.
In this rule, SBA proposes, as an
alternative to a separate size standard
for each industry, common size
standards for industries under several
NAICS Industry Groups as shown in
Table 4. SBA evaluated industry and
Federal contracting factors and derived
a common size standard for each
Industry Group using the same method
as described above. The results are in
Table 5, which immediately follows
Table 4, below.
TABLE 4—INDUSTRY GROUPS FOR COMMON SIZE STANDARDS
Industry group title
5613 ........................
5614 ........................
jlentini on DSK4TPTVN1PROD with PROPOSALS6
Industry group:
NAICS codes
Employment Services ............................................................
Business Support Services ....................................................
5615
5616
5619
5621
5622
Travel Arrangement and Reservation Services ....................
Investigation and Security Services ......................................
Other Support Services .........................................................
Waste Collection ....................................................................
Waste Treatment and Disposal .............................................
........................
........................
........................
........................
........................
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Jkt 226001
PO 00000
Frm 00009
Industries: 6-digit NAICS codes
Fmt 4701
Sfmt 4702
561311, 561312, 561320, 561330
561410, 561421, 561422, 561431, 561439,
561450, 561491, 561492, 561499
561510, 561520, 561591, 561599
561611, 561612, 561613, 561621, 561622
561910, 561920, 591990
562111, 562112, 562119
562211, 562212, 562213, 562219
E:\FR\FM\12OCP6.SGM
12OCP6
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63518
Federal Register / Vol. 76, No. 197 / Wednesday, October 12, 2011 / Proposed Rules
TABLE 5 —SIZE STANDARDS SUPPORTED BY EACH FACTOR FOR EACH INDUSTRY GROUP
[millions of dollars]
(1)
NAICS Code/industry title
(2)
Simple average firm
size ($ million)
(3)
Weighted
average firm
size ($ million)
(4)
Average assets size ($
million)
$6.5, 35.5
$198.8, 35.5
$1.2, 10.0
2.1, 10.0
40.8, 10.0
2.2, 10.0
5613 Employment Services ...............................
5614 Business Support
Services ........................
5615 Travel Arrangement
and Reservation Services ...............................
5616 Investigation and
Security Services ..........
5619 Other support Services ...............................
5621 Waste Collection .....
5622 Waste Treatment
and Disposal .................
(6)
Four-firm average size ($
million)
(7)
Gini co-efficient
(8)
Federal contract
factor (%)
(9)
Calculated
size standard ($ million)
14.8
$7,751.2
0.891, $35.5
15.8%
$25.5
0.8, 7.0
12.2
1,896.1
0.824, $30.0
¥11.7%, $10.0
14.0
123.3, 30.0
0.9, 7.0
33.6
3,115.5
0.850, $30.0
..........................
19.0
2.1, 10.0
94.4, 25.5
0.6, 5.0
22.9
2,343.2
0.834, $30.0
2.4%
19.0
2.0, 10.0
5.0, 30.0
23.7, 7.0
254.2, 35.5
0.8, 7.0
2.9, 25.5
8.6
46.7
795.1
4,726.6,
$35.5
0.781, $19.0
0.872, $35.5
¥15.9%, $10.0
29.5%
10.0
35.5
9.5, 35.5
123.0, 30.0
5.9, 35.5
37.0
1,319.2
0.869, $35.5
¥5.9%
33.5
Special Considerations
jlentini on DSK4TPTVN1PROD with PROPOSALS6
Environmental Remediation Services
The current size standard for Federal
contracts for Environmental
Remediation Services (the ‘‘exception’’
to NAICS code 562910) is 500
employees. This size standard only
applies to certain Federal contracting
opportunities that meet specific criteria.
In short, the contract must be for the
remediation of a contaminated
environment and it must include at least
three separate types of contract work.
Each of those contract activities must be
identifiable by a different NAICS code;
however, no one of the activities may
constitute 50 percent or more of the
total anticipated cost of the contract.
The criteria that constitute an
Environmental Remediation Services
contract or company are detailed in 59
FR 47236 (September 15, 1994) and in
Footnote 14 to SBA’s table of size
standards (13 CFR 121.201).
In this proposed rule, SBA has not
reviewed this employee based size
standard for Environmental
Remediation Services and the current
standard will remain in effect until SBA
reviews industries with employee based
size standards.
Evaluation of SBA Loan Data
Before deciding on an industry’s size
standard, SBA also considers the impact
of new or revised standards on SBA’s
loan programs. Accordingly, SBA
VerDate Mar<15>2010
19:16 Oct 11, 2011
Jkt 226001
(5)
Fourfirm
ratio
(%)
examined its 7(a) and 504 Loan Program
data for fiscal years 2008–2010 to assess
whether the existing or proposed size
standards need further adjustments to
ensure credit opportunities for small
businesses through those programs. For
the industries reviewed in this rule, the
data show that it is mostly businesses
much smaller than the size standards
that use the SBA’s 7(a) and 504 loans.
Therefore, no size standard in NAICS
Sector 56, Administrative and Support,
Waste Management and Remediation
Services, needs an adjustment based on
this factor.
Proposed Changes to Size Standards
Table 6, below, summarizes the
results of SBA analyses of industry
specific size standards from Table 3 and
the results for common size standards
from Table 5. In terms of industry
specific size standards, the results in
Table 3 support increases in size
standards for 29 industries, decreases
for nine industries, and no changes for
six industries. Similarly, based on
common size standards for certain
NAICS Industry Groups, the results in
Table 5 appear to support increases for
37 industries, decreases for five
industries, and no changes for two
industries.
However, lowering small business
size standards is not in the best interest
of small businesses in the current
economic environment. The U.S.
economy was in recession from
PO 00000
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Fmt 4701
Sfmt 4702
December 2007 to June 2009, the longest
and deepest of any recessions since
World War II. The economy lost more
than eight million non-farm jobs during
2008–2009. In response, Congress
passed and the President signed into
law the American Recovery and
Reinvestment Act of 2009 (Recovery
Act) to promote economic recovery and
to preserve and create jobs. Although
the recession officially ended in June
2009, the unemployment rate was 9.4
percent or higher from May 2009 to
December 2010. It moderated to 8.8
percent in March 2011, but it increased
again to 9.2 percent in June 2011. The
unemployment rate is forecast to remain
around this elevated level at least
through the end of 2011. More recently,
Congress passed and the President
signed the Jobs Act to promote small
business job creation. The Jobs Act puts
more capital into the hands of
entrepreneurs and small business
owners; strengthens small businesses’
ability to compete for contracts;
includes recommendations from the
President’s Task Force on Federal
Contracting Opportunities for Small
Business; creates a better playing field
for small businesses; promotes small
business exporting, building on the
President’s National Export Initiative;
expands training and counseling; and
provides $12 billion in tax relief to help
small businesses invest in their firms
and create jobs.
E:\FR\FM\12OCP6.SGM
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Federal Register / Vol. 76, No. 197 / Wednesday, October 12, 2011 / Proposed Rules
63519
TABLE 6—SUMMARY OF SIZE STANDARDS ANALYSIS
NAICS Codes
.............................................
.............................................
.............................................
.............................................
.............................................
.............................................
.............................................
.............................................
.............................................
.............................................
.............................................
561440
561450
561491
561492
561499
561510
561520
561591
561599
.............................................
.............................................
.............................................
.............................................
.............................................
.............................................
.............................................
.............................................
.............................................
561611
561612
561613
561621
561622
561710
561720
561730
561740
561790
561910
561920
561990
562111
562112
562119
562211
562212
562213
562219
562910
562920
562991
562998
jlentini on DSK4TPTVN1PROD with PROPOSALS6
561110
561210
561311
561312
561320
561330
561410
561421
561422
561431
561439
.............................................
.............................................
.............................................
.............................................
.............................................
.............................................
.............................................
.............................................
.............................................
.............................................
.............................................
.............................................
.............................................
.............................................
.............................................
.............................................
.............................................
.............................................
.............................................
.............................................
.............................................
.............................................
.............................................
.............................................
Office Administrative Services ......................................
Facilities Support Services ...........................................
Employment Placement Agencies ................................
Executive Search Services ...........................................
Temporary Help Services .............................................
Professional Employer Organizations ...........................
Document Preparation Services ...................................
Telephone Answering Services ....................................
Telemarketing Bureaus and Other contact Centers .....
Private Mail Centers .....................................................
Other Business Service Centers (including Copy
Shops).
Collection Agencies ......................................................
Credit Bureaus ..............................................................
Repossession Services .................................................
Court Reporting and Stenotype Services .....................
All Other Business Support Services ...........................
Travel Agencies10 .........................................................
Tour Operators10 ..........................................................
Convention and Visitors Bureaus .................................
All Other Travel Arrangement and Reservation Services.
Investigation Services ...................................................
Security Guards and Patrol Services ...........................
Armored Car Services ..................................................
Security Systems Services (except Locksmiths) ..........
Locksmiths ....................................................................
Exterminating and Pest Control Services .....................
Janitorial Services .........................................................
Landscaping Services ...................................................
Carpet and Upholstery Cleaning Services ...................
Other Services to Buildings and Dwellings ..................
Packaging and Labeling Services ................................
Convention and Trade Show Organizers10 ..................
All Other Support Services ...........................................
Solid Waste Collection ..................................................
Hazardous Waste Collection ........................................
Other Waste Collection .................................................
Hazardous Waste Treatment and Disposal ..................
Solid Waste Landfill ......................................................
Solid Waste Combustors and Incinerators ...................
Other Nonhazardous Waste Treatment and Disposal
Remediation Services ...................................................
Materials Recovery Facilities ........................................
Septic Tank and Related Services ...............................
All Other Miscellaneous Waste Management Services
Lowering size standards would
decrease the number of firms that can
participate in Federal financial and
procurement assistance for small
businesses. Furthermore, size standards
based solely on analytical results
without any other considerations would
cut off more than 800 currently eligible
small firms from those programs. That
would run counter to what SBA and the
Federal government are doing to help
small businesses. Reducing size
eligibility for Federal procurement
opportunities, especially under current
economic conditions, would not
preserve or create more jobs; rather, it
would have the opposite effect.
Therefore, in this proposed rule, SBA
VerDate Mar<15>2010
19:16 Oct 11, 2011
Calculated industry specific
size standard
($ million)
NAICS Industry title
Jkt 226001
does not propose to reduce size
standards for any industries. For
industries where analyses might seem to
support lowering size standards, SBA
proposes to retain the current size
standards. As stated previously, the
Small Business Act requires the
Administrator to ‘‘* * * consider other
factors deemed to be relevant * * *’’ to
establishing small business size
standards. The current economic
conditions and the impact on job
creation are quite relevant to
establishing small business size
standards. SBA nevertheless invites
comments and suggestions on whether
it should lower size standards as
suggested by analyses of industry and
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Frm 00011
Fmt 4701
Sfmt 4702
Calculated
common size
standard ($
million)
Current size
standard ($
million)
$7.0
30.0
14.0
7.0
25.5
30.0
7.0
10.0
25.5
5.0
19.0
........................
........................
$25.5
25.5
25.5
25.5
14.0
14.0
14.0
14.0
14.0
$7.0
35.5
7.0
7.0
13.5
13.5
7.0
7.0
7.0
7.0
7.0
14.0
35.5
5.0
7.0
14.0
19.0
10.0
7.0
35.5
14.0
14.0
14.0
14.0
14.0
19.0
19.0
19.0
19.0
7.0
7.0
7.0
7.0
7.0
3.5
7.0
7.0
7.0
14.0
19.0
30.0
19.0
5.0
10.0
7.0
5.0
5.0
7.0
10.0
19.0
10.0
35.5
14.0
14.0
25.5
30.0
30.0
10.0
19.0
19.0
5.0
5.0
19.0
19.0
19.0
19.0
19.0
........................
........................
........................
........................
........................
10.0
10.0
10.0
35.5
35.5
35.5
35.5
35.5
35.5
35.5
........................
........................
........................
........................
12.5
18.5
12.5
12.5
7.0
7.0
16.5
7.0
4.5
7.0
7.0
7.0
7.0
12.5
12.5
12.5
12.5
12.5
12.5
12.5
14.0
12.5
7.0
7.0
program data or retain the current
standards for those industries in view of
current economic conditions.
Based on comparisons between
industry specific size standards and
common size standards within each
Industry Group, SBA finds that for some
industries common size standards are
more appropriate for several reasons.
First, analyzing industries at a more
aggregated Industry Group level
simplifies size standards analysis and
the results are likely to be more
consistent among related industries.
Second, in most cases, industries within
each Industry Group currently have the
same size standards and SBA believes it
is better to keep the revised size
E:\FR\FM\12OCP6.SGM
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Federal Register / Vol. 76, No. 197 / Wednesday, October 12, 2011 / Proposed Rules
standards also the same. Third, within
each Industry Group many of the same
businesses tend to operate in the same
multiple industries. SBA believes that
common size standards reflect the
Federal marketplace in those industries
better than do different size standards
for each industry. Fourth, for the
majority of industries for which SBA
has proposed common size standards,
industry specific size standards and
common size standards are within a
reasonably close range.
For industries where both industry
specific size standards and common size
standards have been calculated, for the
above reasons, SBA proposes to apply
common size standards. For industries
where common size standards have not
been estimated, SBA proposes to apply
industry specific size standards.
As discussed above, SBA has decided
that lowering small business size
standards would be inconsistent with
what the Federal government is doing to
stimulate the economy and encourage
job growth through the Recovery Act
and Jobs Act. Therefore, for those
industries for which its analyses
suggested decreasing their size
standards, SBA proposes to retain the
current size standards. Thus, of the 44
industries in NAICS Sector 56 that SBA
reviewed for this proposed rule, the
Agency proposes to increase size
standards for 37 industries and retain
the current standards for seven
industries. Industries for which SBA has
proposed to increase their size
standards and proposed standards are in
Table 7 (below).
In addition, not lowering size
standards is consistent with SBA’s prior
actions for NAICS Sector 44–45 (Retail
Trade), NAICS Sector 72
(Accommodation and Food Services),
and NAICS Sector 81 (Other Services)
that the Agency proposed and adopted
in its final rules (75 FR 61597, 75 FR
61604, and 75 FR 61591, (October 6,
2009)). It is also consistent with the
Agency’s recently proposed rules for
NAICS Sector 54, Professional,
Technical, and Scientific Services (76
FR 14323 (March 16, 2011)), NAICS
Sector 48–49, Transportation and
Warehousing (76 FR 27935 (May 13,
2011)), and NAICS Sector 51,
Information, that is being published
elsewhere in this issue of the Federal
Register. In each of those final and
proposed rules, SBA opted not to reduce
small business size standards for the
same reasons it has provided above in
this proposed rule.
TABLE 7—SUMMARY OF PROPOSED SIZE STANDARD REVISIONS
jlentini on DSK4TPTVN1PROD with PROPOSALS6
NAICS Codes
561311
561312
561320
561330
561410
561421
561422
561431
561439
561440
561450
561491
561492
561499
561510
561520
561591
561599
561611
561612
561613
561621
561622
561710
561740
561910
561920
561990
562111
562112
562119
562211
562212
562213
562219
562910
562920
........................................................
........................................................
........................................................
........................................................
........................................................
........................................................
........................................................
........................................................
........................................................
........................................................
........................................................
........................................................
........................................................
........................................................
........................................................
........................................................
........................................................
........................................................
........................................................
........................................................
........................................................
........................................................
........................................................
........................................................
........................................................
........................................................
........................................................
........................................................
........................................................
........................................................
........................................................
........................................................
........................................................
........................................................
........................................................
........................................................
........................................................
Footnote 10 to SBA’s table of size
standards states the following: ‘‘As
measured by total revenues, but
excluding funds received in trust for an
VerDate Mar<15>2010
19:16 Oct 11, 2011
Proposed size
standard ($
million)
NAICS Industry title
Jkt 226001
Employment Placement Agencies .................................................
Executive Search Services ............................................................
Temporary Help Services ..............................................................
Professional Employer Organizations ...........................................
Document Preparation Services ....................................................
Telephone Answering Services .....................................................
Telemarketing Bureaus and Other contact Centers ......................
Private Mail Centers ......................................................................
Other Business Service Centers (including Copy Shops) .............
Collection Agencies .......................................................................
Credit Bureaus ...............................................................................
Repossession Services .................................................................
Court Reporting and Stenotype Services ......................................
All Other Business Support Services ............................................
Travel Agencies 10 .........................................................................
Tour Operators 10 ...........................................................................
Convention and Visitors Bureaus ..................................................
All Other Travel Arrangement and Reservation Services .............
Investigation Services ....................................................................
Security Guards and Patrol Services ............................................
Armored Car Services ...................................................................
Security Systems Services (except Locksmiths) ...........................
Locksmiths .....................................................................................
Exterminating and Pest Control Services ......................................
Carpet and Upholstery Cleaning Services ....................................
Packaging and Labeling Services .................................................
Convention and Trade Show Organizers 10 ..................................
All Other Support Services ............................................................
Solid Waste Collection ...................................................................
Hazardous Waste Collection .........................................................
Other Waste Collection ..................................................................
Hazardous Waste Treatment and Disposal ..................................
Solid Waste Landfill .......................................................................
Solid Waste Combustors and Incinerators ....................................
Other Nonhazardous Waste Treatment and Disposal ..................
Remediation Services ....................................................................
Materials Recovery Facilities .........................................................
unaffiliated third party, such as
bookings or sales subject to
commissions. The commissions
received are included as revenue.’’ The
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Fmt 4701
Sfmt 4702
$25.5
25.5
25.5
25.5
14.0
14.0
14.0
14.0
14.0
14.0
14.0
14.0
14.0
14.0
10 19.0
10 19.0
19.0
19.0
19.0
19.0
19.0
19.0
19.0
10.0
5.0
10.0
10 10.0
10.0
35.5
35.5
35.5
35.5
35.5
35.5
35.5
19.0
19.0
Current size
standard ($
million)
$7.0
7.0
13.5
13.5
7.0
7.0
7.0
7.0
7.0
7.0
7.0
7.0
7.0
7.0
10 3.5
10 7.0
7.0
7.0
12.5
18.5
12.5
12.5
7.0
7.0
4.5
7.0
10 7.0
7.0
12.5
12.5
12.5
12.5
12.5
12.5
12.5
14.0
12.5
SBA does not propose to modify the
calculation of receipts for these
industries.
E:\FR\FM\12OCP6.SGM
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Federal Register / Vol. 76, No. 197 / Wednesday, October 12, 2011 / Proposed Rules
Evaluation of Dominance in Field of
Operation
SBA has determined that for the
industries in NAICS Sector 56,
Administrative and Support, Waste
Management and Remediation Services,
for which it has proposed to increase
size standards, no firm at or below the
proposed size standard will be large
enough to dominate its field of
operation. At the proposed size
standards, if adopted, small business
shares of total industry receipts among
those industries vary from less than 0.1
percent to 5.3 percent, with an average
of 0.6 percent. These levels of market
share effectively preclude a firm at or
below the proposed size standards from
exerting control on this industry.
jlentini on DSK4TPTVN1PROD with PROPOSALS6
Request for Comments
SBA invites public comments on the
proposed rule, especially on the
following issues.
1. To simplify size standards, SBA
proposes eight fixed size levels for
receipts based size standards: $5.0
million, $7.0 million, $10.0 million,
$14.0 million, $19.0 million, $25.5
million, $30.0 million and $35.5
million. SBA invites comments on
whether simplification of size standards
in this way is necessary and if these
proposed fixed size levels are
appropriate. SBA welcomes suggestions
on alternative approaches to simplifying
small business size standards.
2. SBA seeks feedback on whether the
proposed levels of size standards are
appropriate given the economic
characteristics of each industry. SBA
also seeks feedback and suggestions on
alternative standards, if they would be
more appropriate, including whether an
employee based standard for certain
industries is a more suitable measure of
size and if so, what that employee level
should be.
3. SBA proposes that each of seven 4digit NAICS Industry Groups (see Table
4, above) have common size standards
for the Industries that make up their
groups. SBA invites comments or
suggestions along with supporting
information with respect to the
following:
a. Whether SBA should adopt
common size standards for those
industries or establish a separate size
standard for each industry.
b. Whether the proposed common size
standards for those industries are at the
correct levels, and if not, what are more
appropriate size standards.
4. SBA’s proposed size standards are
based on its evaluation of five primary
factors: Average firm size, average assets
size (as a proxy for startup costs and
VerDate Mar<15>2010
19:16 Oct 11, 2011
Jkt 226001
entry barriers), four-firm concentration
ratio, distribution of firms by size, and
the level and small business share of
Federal contracting dollars. SBA
welcomes comments on these factors
and/or suggestions on other factors that
it should consider for assessing industry
characteristics when evaluating or
revising size standards. SBA also seeks
information on relevant data sources, if
available.
5. SBA gives equal weight to each of
the five primary factors in all industries.
SBA seeks feedback on whether it
should continue giving equal weight to
each factor or whether it should give
more weight to one or more factors for
certain industries. Recommendations to
weigh some factors more than others
should include suggestions on specific
weights for each factor for those
industries, along with supporting
information.
6. For some industries, based on
analysis of industry and program data,
SBA proposes to increase the existing
size standards by a large amount (such
as NAICS 561311, NAICS 561312, and
NAICS Industry Groups 5615, 5621 and
5622), while for others the proposed
increases are modest. SBA seeks
feedback on whether it should, as a
policy, limit the increase to a size
standard and/or whether it should, as a
policy, establish minimum or maximum
values for its size standards. SBA seeks
suggestions on appropriate levels of
changes to size standards and on their
minimum or maximum levels.
7. Based on the analysis of industry
and program data and common size
standards, SBA has proposed to increase
the size standards for NAICS 561510
(Travel Agencies) from $3.5 million to
$19 million and for NAICS 561520
(Tour Operators) from $7.0 million to
$19.0 million. SBA requests comments
on the proposed size standards for these
two industries because to determine if a
company meets the size standard for
either of these industries, firms may
exclude ‘‘* * * funds received in trust
for an unaffiliated third party, such as
bookings or sales subject to
commissions. The commissions
received are included as revenue’’ (see
Footnote 10 to SBA’s table of size
standards). SBA seeks feedback on
whether it should continue or terminate
the exclusion of funds received in trust
for an unaffiliated third party from
receipts if it adopts its proposed
standard or any other standard
considerably higher than the existing
standards for these industries. SBA also
welcomes information and data on how
businesses in these industries collect
and report income for Federal Income
Tax Returns, and what they recognize as
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63521
business receipts (see 13 CFR 121.104
for SBA’s definition of ‘‘receipts’’).
8. For analytical simplicity and
efficiency, in this proposed rule, SBA
has refined its size standard
methodology to obtain a single value as
a proposed size standard instead of a
range of values, as seen in its past size
regulations. SBA welcomes any
comments on this procedure and
suggestions on alternative methods.
Public comments on the above issues
are very valuable to SBA for validating
its size standard methodology and
proposed revisions to size standards in
this proposed rule. This will help SBA
to move forward with its review of size
standards for other NAICS Sectors.
Commenters addressing size standards
for a specific industry or a group of
industries should include relevant data
and/or other information supporting
their comments. If comments relate to
using size standards for Federal
procurement programs, SBA suggests
that commenters provide information on
the size of contracts awarded, the size
of businesses that can undertake the
contracts, start-up costs, equipment and
other asset requirements, the amount of
subcontracting, other direct and indirect
costs associated with the contracts, the
use of mandatory sources of supply for
products and services and the degree to
which contractors can mark up those
costs.
Compliance With Executive Orders
12866, 13563, 12988 and 13132, the
Paperwork Reduction Act (44 U.S.C.
Ch. 35) and the Regulatory Flexibility
Act (5 U.S.C. 601–612)
Executive Order 12866
The Office of Management and Budget
(OMB) has determined that this
proposed rule is a ‘‘significant’’
regulatory action for purposes of
Executive Order 12866. Accordingly,
the next section contains SBA’s
Regulatory Impact Analysis. This is not
a major rule, however, under the
Congressional Review Act, 5 U.S.C. 800.
Regulatory Impact Analysis
1. Is there a need for the regulatory
action?
SBA believes that proposed size
standards revisions for a number of
industries in NAICS Sector 56,
Administrative and Support, Waste
Management and Remediation Services,
will better reflect the economic
characteristics of small businesses and
the Federal government marketplace.
SBA’s mission is to aid and assist small
businesses through a variety of
financial, procurement, business
development, and advocacy programs.
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jlentini on DSK4TPTVN1PROD with PROPOSALS6
To assist the intended beneficiaries of
these programs, SBA must establish
distinct definitions of which businesses
are deemed small businesses. The Small
Business Act (15 U.S.C. 632(a))
delegates to SBA’s Administrator the
responsibility for establishing small
business definitions. The Act also
requires that small business definitions
vary to reflect industry differences. The
recently enacted Small Business Jobs
Act also requires SBA to review all size
standards and make necessary
adjustments to reflect market
conditions. The supplementary
information section of this proposed
rule explains SBA’s methodology for
analyzing a size standard for a particular
industry.
2. What are the potential benefits and
costs of this regulatory action?
The most significant benefit to
businesses obtaining small business
status because of this rule is gaining
eligibility for Federal small business
assistance programs. These include
SBA’s financial assistance programs,
economic injury disaster loans, and
Federal procurement programs intended
for small businesses. Federal
procurement programs provide targeted
opportunities for small businesses
under SBA’s business development
programs, such as 8(a), Small
Disadvantaged Businesses (SDB), small
businesses located in Historically
Underutilized Business Zones
(HUBZone), women-owned small
businesses (WOSB), and servicedisabled veteran-owned small business
concerns (SDVO SBC). Federal agencies
may also use SBA size standards for a
variety of other regulatory and program
purposes. These programs assist small
businesses to become more
knowledgeable, stable, and competitive.
In 37 industries for which SBA has
proposed increasing size standards, SBA
estimates that about 2,700 additional
firms will obtain small business status
and become eligible for these programs.
That number is nearly 1.0 percent of the
total number of firms that are classified
as small under the current standards in
all industries within NAICS Sector 56.
If adopted as proposed, this would
increase the small business share of
total industry receipts in those
industries from about 32 percent under
the current size standards to nearly 37
percent.
Three groups will benefit from these
proposed size standards, if they are
adopted as proposed: (1) Some
businesses that are above the current
size standards may gain small business
status under the higher size standards,
thereby enabling them to participate in
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Federal small business assistance
programs; (2) growing small businesses
that are close to exceeding the current
size standards will be able to retain their
small business status under the higher
size standards, thereby enabling them to
continue their participation in the
programs; and (3) Federal agencies will
have larger pools of small businesses
from which to draw for their small
business procurement programs.
During fiscal years 2007 to 2009, 35
percent of Federal contracting dollars
spent in industries reviewed in this
proposed rule were accounted for by the
37 industries for which SBA has
proposed to increase size standards.
SBA estimates that additional firms
gaining small business status in those
industries under the proposed size
standards could potentially obtain
Federal contracts totaling up to $60
million to $75 million annually under
SBA’s small business, 8(a), SDB,
HUBZone, WOSB, and SDVO SBC
Programs, and other unrestricted
procurements. The added competition
for many of these procurements could
also result in lower prices to the
Government for procurements reserved
for small businesses, although SBA
cannot quantify this benefit.
Under SBA’s 7(a) Business Loan and
504 Programs, based on the 2008–2010
data, SBA estimates that about 20 to 30
additional loans totaling about $3
million to $5 million in Federal loan
guarantees could be made to these
newly defined small businesses under
the proposed standards. Increasing the
size standards will likely result in more
small business guaranteed loans to
businesses in these industries, but it
would be impractical to try to estimate
exactly the extent of their number and
the total amount loaned. Under the Jobs
Act, SBA can now guarantee
substantially larger loans than in the
past. In addition, the Jobs Act
established an alternative size standard
($15 million in tangible net worth and
$5 million in net income after income
taxes) for business concerns that do not
meet the size standards for their
industry. Therefore, SBA finds it
similarly difficult to quantify the impact
of these proposed standards on its 7(a)
and 504 Loan Programs.
Newly defined small businesses will
also benefit from SBA’s Economic Injury
Disaster Loan (EIDL) Program. Since this
program is contingent on the occurrence
and severity of a disaster, SBA cannot
make a meaningful estimate of benefits
for future disasters.
To the extent that 2,700 newly
defined additional small firms could
become active in Federal procurement
programs, the proposed changes, if
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adopted, may entail some additional
administrative costs to the Federal
Government, including those associated
with additional bidders for Federal
small business procurement
opportunities, additional firms seeking
SBA guaranteed lending programs,
additional firms eligible for enrollment
in the Central Contractor Registration’s
(CCR) Dynamic Small Business Search
database, and additional firms seeking
certification as 8(a) or HUBZone firms
or qualifying for small business, WOSB,
SDVO SBC, and SDB status. Among
those newly defined small businesses
seeking SBA assistance, there could be
some additional costs associated with
compliance and verification of small
business status and protests of small
business status. These added costs will
be minimal because mechanisms are
already in place to handle these
administrative requirements.
Additionally, the costs to the Federal
Government may be higher on some
Federal contracts. With a greater
number of businesses defined as small,
Federal agencies may choose to set aside
more contracts for competition among
small businesses rather than using full
and open competition. The movement
from unrestricted to small business setaside contracting might result in
competition among fewer total bidders,
although there will be more small
businesses eligible to submit offers. In
addition, higher costs may result when
more full and open contracts are
awarded to HUBZone and SDB
businesses that receive price evaluation
preferences. However, the additional
costs associated with fewer bidders are
expected to be minor since, as a matter
of law, procurements may be set aside
for small businesses or reserved for the
8(a), HUBZone, WOSB, or SDVO SBC
Programs only if awards are expected to
be made at fair and reasonable prices. In
addition, higher costs may result when
more full and open contracts are
awarded to HUBZone and SDB
businesses that receive price evaluation
preferences.
The proposed size standards may
have distributional effects among large
and small businesses. Although SBA
cannot estimate with certainty the
actual outcome of the gains and losses
among small and large businesses, it can
identify several probable impacts. There
may be a transfer of some Federal
contracts to small businesses from large
businesses. Large businesses may have
fewer Federal contract opportunities as
Federal agencies decide to set aside
more Federal contracts for small
businesses. In addition, some Federal
contracts may be awarded to HUBZone
or SDB concerns instead of large
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businesses since those two categories of
small businesses may be eligible for an
evaluation adjustment for contracts
when they compete on a full and open
basis. Similarly, currently defined small
businesses may obtain fewer Federal
contracts due to the increased
competition from more businesses
defined as small. This transfer may be
offset by a greater number of Federal
procurements set aside for all small
businesses. The number of newly
defined and expanding small businesses
that are willing and able to sell to the
Federal Government will limit the
potential transfer of contracts away from
large and currently defined small
businesses. SBA cannot estimate the
potential distributional impacts of these
transfers with any degree of precision
because FPDS–NG data only identify the
size of businesses receiving Federal
contracts as ‘‘small business’’ or ‘‘other
than small business’’; FPDS–NG does
not provide the exact size of the
businesses.
The proposed revisions to the existing
size standards for Industries in NAICS
Sector 56, Administrative and Support,
Waste Management and Remediation
Services, are consistent with SBA’s
statutory mandate to assist small
business. This regulatory action
promotes the Administration’s
objectives. One of SBA’s goals in
support of the Administration’s
objectives is to help individual small
businesses succeed through fair and
equitable access to capital and credit,
Government contracts, and management
and technical assistance. Reviewing and
modifying size standards, when
appropriate, ensures that intended
beneficiaries have access to small
business programs designed to assist
them.
jlentini on DSK4TPTVN1PROD with PROPOSALS6
Executive Order 13563
A description of the need for this
regulatory action and the benefits and
costs associated with this action,
including possible distributional
impacts that relate to Executive Order
13563, are included above in the
Regulatory Impact Analysis under
Executive Order 12866.
In an effort to engage interested
parties in this action, SBA has presented
its methodology (discussed above under
Supplementary Information) to various
industry associations and trade groups.
SBA also met with various industry
groups to obtain their feedback on its
methodology and other size standards
issues. SBA also presented its size
standards methodology to businesses in
13 cities in the U.S. and sought their
input as part of the Jobs Act tours.
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Additionally, SBA sent letters to the
Directors of the Offices of Small and
Disadvantaged Business Utilization
(OSDBU) at several Federal agencies
with considerable procurement
responsibilities requesting their
feedback on how the agencies use SBA
size standards and whether current
standards meet their programmatic
needs (both procurement and nonprocurement). SBA gave appropriate
consideration to all input, suggestions,
recommendations, and relevant
information obtained from industry
groups, individual businesses, and
Federal agencies in preparing this
proposed rule.
The review of size standards in
NAICS Sector 56, Administrative and
Support, Waste Management and
Remediation Services, is consistent with
EO 13563, Sec. 6, calling for
retrospective analyses of existing rules.
As discussed previously, the last overall
review of size standards occurred
during the late 1970s and early 1980s.
Since then, except for periodic
adjustments for monetary based size
standards, most reviews of size
standards were limited to a few specific
industries in response to requests from
the public and Federal agencies. SBA
recognizes that changes in industry
structure and the Federal marketplace
over time have rendered existing size
standards for some industries no longer
supportable by current data.
Accordingly, SBA has begun a
comprehensive review of its size
standards to ensure that existing size
standards have supportable bases and to
revise them when necessary. In
addition, on September 27, 2010 the
President of the United States signed the
Jobs Act. The Jobs Act directs SBA to
conduct a detailed review of all size
standards and to make appropriate
adjustments to reflect market
conditions. Specifically, the Jobs Act
requires SBA to conduct a detailed
review of at least one-third of all size
standards during every 18-month period
from the date of its enactment and do a
complete review of all size standards
not less frequently than once every five
years thereafter.
Executive Order 12988
This action meets applicable
standards set forth in Sections 3(a) and
3(b)(2) of Executive Order 12988, Civil
Justice Reform, to minimize litigation,
eliminate ambiguity, and reduce
burden. The action does not have
retroactive or preemptive effect.
Executive Order 13132
For purposes of Executive Order
13132, SBA has determined that this
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63523
proposed rule will not have substantial,
direct effects on the States, on the
relationship between the national
government and the States, or on the
distribution of power and
responsibilities among the various
levels of government. Therefore, SBA
has determined that this proposed rule
has no federalism implications
warranting preparation of a federalism
assessment.
Paperwork Reduction Act
For the purpose of the Paperwork
Reduction Act, 44 U.S.C. Ch. 35, SBA
has determined that this rule would not
impose any new reporting or record
keeping requirements.
Initial Regulatory Flexibility Analysis
Under the Regulatory Flexibility Act
(RFA), this rule, if finalized, may have
a significant impact on a substantial
number of small businesses in NAICS
Sector 56, Administrative and Support,
Waste Management and Remediation
Services. As described above, this rule
may affect small businesses seeking
Federal contracts, loans under SBA’s
(7a), 504 Guaranteed Loan and
Economic Injury Disaster Loan
Programs, and assistance under other
Federal small business programs.
Immediately below, SBA sets forth an
initial regulatory flexibility analysis
(IRFA) of this proposed rule addressing
the following questions: (1) What are the
need for and objective of the rule? (2)
What are SBA’s description and
estimate of the number of small entities
to which the rule will apply? (3) What
are the projected reporting, record
keeping, and other compliance
requirements of the rule? (4) What are
the relevant Federal rules that may
duplicate, overlap, or conflict with the
rule?, and (5) What alternatives will
allow the Agency to accomplish its
regulatory objectives while minimizing
the impact on small entities?
1. What are the need for and objective
of the rule?
Most of the size standards in NAICS
Sector 56, Administrative and Support,
Remediation and Support Services, have
not been reviewed since the early 1980s.
Technology, productivity growth,
international competition, mergers and
acquisitions, and updated industry
definitions may have changed the
structure of many industries in the
Sector. Such changes can be sufficient
to support revisions to current size
standards for some industries. Based on
its analysis of the latest data available,
SBA believes that the revised standards
in this proposed rule more
appropriately reflect the size of
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businesses in those industries that need
Federal assistance. The recently enacted
Small Business Jobs Act also requires
SBA to review all size standards and
make necessary adjustments to reflect
market conditions.
2. What is SBA’s description and
estimate of the number of small entities
to which the rule will apply?
If the proposed rule is adopted in its
present form, SBA estimates that about
2,700 additional firms will become
small because of increases in size
standards in 37 industries and one subindustry. That represents about 1.0
percent of total firms that are small
under current size standards in all
industries within NAICS Sector 56. This
will result in an increase in the small
business share of total industry receipts
for this Sector from about 32 percent
under the current size standard to
nearly 37 percent under the proposed
standards. SBA does not anticipate a
significant competitive impact on
smaller businesses in these industries
because businesses in this Sector have
been requesting SBA to increase these
standards. The proposed standards, if
adopted, will enable more small
businesses to retain their small business
status for a longer period. Many have
lost their eligibility and find it difficult
to compete at such low levels with
companies that are significantly larger
than they are. SBA believes the
competitive impact will be positive for
existing small businesses and for those
that exceed the size standards but are on
the very low end of those that are not
small. They might otherwise be called
or referred to as mid-sized businesses,
although SBA only defines what is
small; other entities are other than
small.
3. What are the projected reporting,
record keeping and other compliance
requirements of the rule and an estimate
of the classes of small entities, which
will be subject to the requirements?
Proposed size standards changes do
not impose any additional reporting or
record keeping requirements on small
entities. However, qualifying for Federal
procurement and a number of other
programs requires that entities register
in the CCR database and certify at least
annually that they are small in the
Online Representations and
Certifications Application (ORCA).
Therefore, businesses opting to
participate in those programs must
comply with CCR and ORCA
requirements. There are no costs
associated with either CCR registration
or ORCA certification. Changing size
standards alters the access to SBA
programs that assist small businesses
but does not impose a regulatory burden
as they neither regulate nor control
business behavior.
4. What are the relevant Federal rules,
which may duplicate, overlap, or
conflict with the rule?
Under § 3(a)(2)(C) of the Small
Business Act, 15 U.S.C. 632(a)(2)(c),
Federal agencies must use SBA’s size
standards to define a small business,
unless specifically authorized by statute
to do otherwise. In 1995, SBA published
in the Federal Register a list of statutory
and regulatory size standards that
identified the application of SBA’s size
standards as well as other size standards
used by Federal agencies (60 FR 57988
(November 24, 1995)). SBA is not aware
of any Federal rule that would duplicate
or conflict with establishing size
standards.
However, the Small Business Act and
SBA’s regulations allow Federal
agencies to develop different size
standards if they believe that SBA’s size
standards are not appropriate for their
programs, with the approval of SBA’s
Administrator (13 CFR 121.903). The
Regulatory Flexibility Act authorizes an
Agency to establish an alternative small
business definition after consultation
with the Office of Advocacy of the U.S.
Small Business Administration (5 U.S.C.
601(3)).
jlentini on DSK4TPTVN1PROD with PROPOSALS6
NAICS Codes
561311
561312
561320
561330
561410
561421
561422
561431
561439
561440
19:16 Oct 11, 2011
By law, SBA is required to develop
numerical size standards for
establishing eligibility for Federal small
business assistance programs. Other
than varying size standards by industry
and changing the size measures, no
practical alternative exists to the
systems of numerical size standards.
List of Subjects in 13 CFR Part 121
Administrative practice and
procedure, Government procurement,
Government property, Grant programs—
business, Individuals with disabilities,
Loan programs—business, Reporting
and recordkeeping requirements, Small
businesses.
For the reasons set forth in the
preamble, SBA proposes to amend part
13 CFR Part 121 as follows:
PART 121—SMALL BUSINESS SIZE
REGULATIONS
1. The authority citation for part 121
continues to read as follows:
Authority: 15 U.S.C. 632, 634(b)(6), 636(b),
637(a), 644 and 662(5); and Pub. L. 105–135,
sec. 401 et seq., 111 Stat. 2592.
2. In § 121.201, in the table, revise the
entries for ‘‘561311,’’ ‘‘561312,’’
‘‘561320,’’ ‘‘561330,’’ ‘‘561410,’’
‘‘561421,’’ ‘‘561422,’’ ‘‘561431,’’
‘‘561439,’’ ‘‘561440,’’ ‘‘561450,’’
‘‘561491,’’ ‘‘561492,’’ ‘‘561499,’’
‘‘561510,’’ ‘‘561520,’’ ‘‘561591,’’
‘‘561599,’’ ‘‘561611,’’ ‘‘561612,’’
‘‘561613,’’ ‘‘561621,’’ ‘‘561622,’’
‘‘561710,’’ ‘‘561740,’’ ‘‘561910,’’
‘‘561920,’’ ‘‘561990,’’ ‘‘562111,’’
‘‘562112,’’ ‘‘562119,’’ ‘‘562211,’’
‘‘562212,’’ ‘‘562213,’’ ‘‘562219,’’
‘‘562910,’’and ‘‘562920’’ to read as
follows:
§ 121.201 What size standards has SBA
identified by North American Industry
Classification System codes?
*
*
*
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*
*
*
Employment Placement Agencies .................................................
Executive Search Services ............................................................
Temporary Help Services ..............................................................
Professional Employer Organizations ...........................................
Document Preparation Services ....................................................
Telephone Answering Services .....................................................
Telemarketing Bureaus and Other Contact Centers .....................
Private Mail Centers ......................................................................
Other Business Service Centers (including Copy Shops) ............
Collection Agencies .......................................................................
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*
*
Size standards
in millions of
dollars
NAICS U.S. industry title
*
*
.........................................................
.........................................................
.........................................................
.........................................................
.........................................................
.........................................................
.........................................................
.........................................................
.........................................................
.........................................................
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5. What alternatives will allow the
Agency to accomplish its regulatory
objectives while minimizing the impact
on small entities?
12OCP6
*
Size standards
in number of
employees
*
$25.5
25.5
25.5
25.5
14.0
14.0
14.0
14.0
14.0
14.0
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NAICS Codes
561450
561491
561492
561499
561510
561520
561591
561599
561611
561612
561613
561621
561622
561710
Size standards
in millions of
dollars
NAICS U.S. industry title
.........................................................
.........................................................
.........................................................
.........................................................
.........................................................
.........................................................
.........................................................
.........................................................
.........................................................
.........................................................
.........................................................
.........................................................
.........................................................
.........................................................
Credit Bureaus ...............................................................................
Repossession Services .................................................................
Court Reporting and Stenotype Services ......................................
All Other Business Support Services ............................................
Travel Agencies 10 .........................................................................
Tour Operators 10 ...........................................................................
Convention and Visitors Bureaus ..................................................
All Other Travel Arrangement and Reservation Services .............
Investigation Services ....................................................................
Security Guards and Patrol Services ............................................
Armored Car Services ...................................................................
Security Systems Services (except Locksmiths) ...........................
Locksmiths .....................................................................................
Exterminating and Pest Control Services ......................................
*
*
561740 .........................................................
*
*
*
Carpet and Upholstery Cleaning Services ....................................
*
*
*
561910 .........................................................
561920 .........................................................
561990 .........................................................
*
*
*
Packaging and Labeling Services .................................................
Convention and Trade Show Organizers10 ...................................
All Other Support Services ............................................................
*
*
*
.........................................................
.........................................................
.........................................................
.........................................................
.........................................................
.........................................................
.........................................................
.........................................................
*
*
*
Solid Waste Collection ...................................................................
Hazardous Waste Collection .........................................................
Other Waste Collection ..................................................................
Hazardous Waste Treatment and Disposal ..................................
Solid Waste Landfill .......................................................................
Solid Waste Combustors and Incinerators ....................................
Other Nonhazardous Waste Treatment and Disposal ..................
Remediation Services ....................................................................
*
*
*
562920 .........................................................
*
*
*
Materials Recovery Facilities .........................................................
*
562111
562112
562119
562211
562212
562213
562219
562910
*
*
*
*
*
[FR Doc. 2011–26207 Filed 10–11–11; 8:45 am]
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14.0
14.0
14.0
14.0
10 19.0
10 19.0
19.0
19.0
19.0
19.0
19.0
19.0
19.0
10.0
12OCP6
*
5.0
*
10.0
10 10.0
10.0
*
35.5
35.5
35.5
35.5
35.5
35.5
35.5
19.0
*
19.0
*
Dated: July 22, 2011.
Karen G. Mills,
Administrator.
Size standards
in number of
employees
*
]]>Agencies
[Federal Register Volume 76, Number 197 (Wednesday, October 12, 2011)]
[Proposed Rules]
[Pages 63510-63525]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2011-26207]
[[Page 63509]]
Vol. 76
Wednesday,
No. 197
October 12, 2011
Part VI
Small Business Administration
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13 CFR Part 121
Small Business Size Standards: Administrative and Support, Waste
Management and Remediation Services; Proposed Rule
Federal Register / Vol. 76 , No. 197 / Wednesday, October 12, 2011 /
Proposed Rules
[[Page 63510]]
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SMALL BUSINESS ADMINISTRATION
13 CFR Part 121
RIN 3245-AG27
Small Business Size Standards: Administrative and Support, Waste
Management and Remediation Services
AGENCY: U.S. Small Business Administration.
ACTION: Proposed rule.
-----------------------------------------------------------------------
SUMMARY: The U.S. Small Business Administration (SBA) proposes to
increase small business size standards for 37 industries in North
American Industry Classification System (NAICS) Sector 56,
Administrative and Support, Waste Management and Remediation Services.
As part of its ongoing comprehensive review of all size standards, SBA
has evaluated all receipts based standards in NAICS Sector 56 to
determine whether the existing size standards should be retained or
revised. This proposed rule is one of a series of proposals that will
examine size standards of industries grouped by an NAICS Sector. SBA
issued a White Paper entitled ``Size Standards Methodology'' and
published a notice in the October 21, 2009 issue of the Federal
Register that ``Size Standards Methodology'' is available on its Web
site at https://www.sba.gov/size for public review and comments. The
``Size Standards Methodology'' White Paper explains how SBA
establishes, reviews and modifies its receipts based and employee based
small business size standards. In this proposed rule, SBA has applied
its methodology that pertains to establishing, reviewing, and modifying
a receipts based size standard.
DATES: SBA must receive comments to this proposed rule on or before
December 12, 2011.
ADDRESSES: You may submit comments, identified by RIN 3245-AF27 by one
of the following methods: (1) Federal eRulemaking Portal: https://www.regulations.gov, following the instructions for submitting
comments; or (2) Mail/Hand Delivery/Courier: Khem R. Sharma, PhD,
Chief, Size Standards Division, 409 Third Street, SW., Mail Code 6530,
Washington, DC 20416. SBA will not accept comments to this proposed
rule submitted by e-mail.
SBA will post all comments to this proposed rule on https://www.regulations.gov. If you wish to submit confidential business
information (CBI) as defined in the User Notice at https://www.regulations.gov, you must submit such information to U.S. Small
Business Administration, Khem R. Sharma, PhD, Chief, Size Standards
Division, 409 Third Street, SW., Mail Code 6530, Washington, DC 20416,
or send an e-mail to sizestandards@sba.gov. You should highlight the
information that you consider to be CBI and explain why you believe SBA
should hold this information as confidential. SBA will review your
information and determine whether it will make the information public
or not.
FOR FURTHER INFORMATION CONTACT: Khem R. Sharma, PhD, Chief, Size
Standards Division, (202) 205-6618 or sizestandards@sba.gov.
SUPPLEMENTARY INFORMATION: To determine eligibility for Federal small
business assistance, SBA establishes small business definitions
(referred to as size standards) for private sector industries in the
United States. SBA uses two primary measures of business size: average
annual receipts and average number of employees. SBA uses financial
assets, electric output, and refining capacity to measure the size of a
few specialized industries. In addition, SBA's Small Business
Investment Company (SBIC), Certified Development Company (504) and 7(a)
Loan Programs use either the industry based size standards or net worth
and net income based alternative size standards to determine
eligibility for those programs. At the start of the current
comprehensive size standards review, there were 41 different size
standards, covering 1,141 NAICS industries and 18 sub-industry
activities (``exceptions'' in SBA's table of size standards). Thirty-
one of these size levels were based on average annual receipts, seven
were based on average number of employees, and three were based on
other measures. In addition, SBA has established 11 other size
standards for its financial and procurement programs.
Over the years, SBA has received comments that its size standards
have not kept up with changes in the economy, in particular the changes
in the Federal contracting marketplace and industry structure. The last
time SBA conducted a comprehensive review of all size standards was
during the late 1970s and early 1980s. Since then, most reviews of size
standards were limited to in-depth analyses of specific industries in
response to requests from the public and Federal agencies. SBA also
makes periodic inflation adjustments to its monetary based size
standards. The SBA's latest inflation adjustment to size standards was
published in the Federal Register on July 18, 2008 (73 FR 41237).
Because of changes in the Federal marketplace and industry
structure since the last overall review, SBA recognizes that current
data may no longer support some of its existing size standards.
Accordingly, in 2007, SBA began a comprehensive review of all size
standards to determine if they are consistent with current data and to
adjust them when necessary. In addition, on September 27, 2010, the
President of the United States signed the Small Business Jobs Act of
2010 (Jobs Act). The Jobs Act directs SBA to conduct a detailed review
of all size standards and to make appropriate adjustments to reflect
market conditions. Specifically, the Jobs Act requires SBA to conduct a
detailed review of at least one-third of all size standards during
every 18-month period from the date of its enactment. In addition, the
Jobs Act requires that SBA do a complete review of all size standards
not less frequently than once every five years thereafter. Reviewing
existing small business size standards and making appropriate
adjustments based on current data are also consistent with Executive
Order 13563 on improving regulation and regulatory review.
Rather than review all size standards at one time, SBA has adopted
a more manageable approach of reviewing a group of industries within an
NAICS Sector. An NAICS Sector generally consists of 25 to 75
industries, except for the manufacturing sector, which has considerably
more. Once SBA completes its review of size standards for industries in
an NAICS Sector, it will issue a proposed rule to revise size standards
for those industries for which currently available data and other
relevant factors support doing so.
Below is a discussion of SBA's size standards methodology for
establishing receipts based size standards, which SBA applied to this
proposed rule, including analyses of industry structure, Federal
procurement trends and other factors for industries reviewed in this
proposed rule, the impact of the proposed revisions to size standards
on Federal small business assistance, and the evaluation of whether a
revised size standard would exclude dominant firms from being
considered small.
Size Standards Methodology
SBA has recently developed a ``Size Standards Methodology'' for
developing, reviewing, and modifying size standards when necessary. SBA
has published the document on its Web site at https://www.sba.gov/size
for public
[[Page 63511]]
review and comments and included it, as a supporting document, in the
electronic docket of this proposed rule at https://www.regulations.gov.
SBA does not apply all features of its ``Size Standards Methodology''
to all industries because not all are appropriate. For example, since
this proposed rule covers all industries with receipts based standards
in NAICS Sector 56, the methodology described here applies to
establishing receipts based standards. However, SBA makes the
methodology available in its entirety for parties who have an interest
in SBA's overall approach to establishing, evaluating and modifying
small business size standards. SBA always explains its analysis in
individual proposed and final rules relating to size standards for
specific industries.
SBA welcomes comments from the public on a number of issues
concerning its ``Size Standards Methodology,'' such as suggestions on
alternative approaches to establishing and modifying size standards;
whether there are alternative or additional factors that SBA should
consider; whether SBA's approach to small business size standards makes
sense in the current economic environment; whether SBA's use of anchor
size standards is appropriate in the current economy; whether there are
gaps in SBA's methodology because of the lack of comprehensive data;
and whether there are other facts or issues that SBA should consider.
Comments on the SBA's methodology should be submitted via (1) the
Federal eRulemaking Portal: https://www.regulations.gov; the docket
number is SBA-2009-0008, following the instructions for submitting
comments; or (2) Mail/Hand Delivery/Courier: Khem R. Sharma, Ph.D.,
Chief, Size Standards Division, 409 Third Street, SW, Mail Code 6530,
Washington, DC 20416. As with comments received to this and other
proposed rules, SBA will post all comments on its methodology on https://www.regulations.gov. As of October 12, 2011, SBA has received seven
comments to its ``Size Standards Methodology.'' The comments are
available to the public at https://www.regulations.gov. SBA continues to
welcome comments on its methodology from interested parties.
Congress granted SBA's Administrator discretion to establish
detailed small business size standards. 15 U.S.C. 632(a)(2). Section
3(a)(3) of the Small Business Act (15 U.S.C. 632(a)(3)) requires that
``* * * the [SBA] Administrator shall ensure that the size standard
varies from industry to industry to the extent necessary to reflect the
differing characteristics of the various industries and consider other
factors deemed to be relevant by the Administrator.'' Accordingly, the
economic structure of an industry is the basis for developing and
modifying small business size standards. SBA identifies the small
business segment of an industry by examining data on the economic
characteristics defining the industry structure itself (as described
below). In addition to analyzing an industry's structure, SBA considers
current economic conditions, together with its own mission, program
objectives, and the Administration's current policies, suggestions from
industry groups and Federal agencies, and public comments on the
proposed rule, when it establishes small business size standards. SBA
also examines whether a size standard based on industry and other
relevant data successfully excludes businesses that are dominant in the
industry.
This proposed rule includes information regarding the factors SBA
evaluated and the criteria it used to propose any adjustments to size
standards in NAICS Sector 56. The rule also explains why SBA has
proposed to adjust some size standards in Sector 56 but not others.
This proposed rule affords the public an opportunity to review and
comment on SBA's proposals to revise size standards in NAICS Sector 56
as well as on the data and methodology it uses to evaluate and revise a
size standard.
Industry Analysis
For the current comprehensive size standards review, SBA has
established three ``base'' or ``anchor'' size standards: $7.0 million
in average annual receipts for industries that have receipts based size
standards, 500 employees for manufacturing and other industries that
have employee based size standards (except for Wholesale Trade), and
100 employees for industries in the Wholesale Trade Sector. SBA
established 500 employees as the anchor size standard for manufacturing
industries at its inception in 1953. Shortly thereafter, SBA
established $1 million in average annual receipts as the anchor size
standard for nonmanufacturing industries. SBA has periodically
increased the receipts based anchor size standard for inflation, and it
stands today at $7 million. Since 1986, the size standard for all
industries in the Wholesale Trade Sector for SBA financial assistance
and for most Federal programs has been 100 employees. However, NAICS
codes for Wholesale Trade Industries (NAICS Sector 42) and their 100
employee size standards do not apply to Federal procurement programs.
Rather, for Federal procurement, the size standard for all industries
in Wholesale Trade and for all industries in Retail Trade (NAICS Sector
44-45) is 500 employees under SBA's nonmanufacturer rule (13 CFR
121.406(b)).
These long-standing anchor size standards have stood the test of
time and gained legitimacy through practice and general public
acceptance. An anchor size standard is neither a minimum nor a maximum.
It is a common size standard for a large number of industries that have
similar economic characteristics and serves as a reference point in
evaluating size standards for individual industries. SBA uses the
anchor in lieu of trying to establish precise small business size
standards for each industry. Otherwise, theoretically, the number of
size standards might be as high as the number of industries for which
SBA establishes size standards (1,141). Furthermore, the data SBA
analyzes are static, but the U.S. economy is not. Hence, absolute
precision is impossible. Therefore, SBA presumes an anchor size
standard is appropriate for a particular industry unless that industry
displays economic characteristics that are considerably different from
others with the same anchor size standard.
When evaluating a size standard, SBA compares the economic
characteristics of the specific industry under review to the average
characteristics of industries with one of the three anchor size
standards (referred to as the ``anchor comparison group''). This allows
SBA to assess the industry structure and to determine whether the
industry is appreciably different from the other industries in the
anchor comparison group. If the characteristics of a specific industry
under review are similar to the average characteristics of the anchor
comparison group, the anchor size standard is considered appropriate
for that industry. SBA may consider adopting a size standard below the
anchor when (1) all or most of the industry characteristics are
significantly smaller than the average characteristics of the anchor
comparison group, or (2) other industry considerations strongly suggest
that the anchor size standard would be an unreasonably high size
standard for the industry.
If the specific industry's characteristics are significantly higher
than are those of the anchor comparison group, then a size standard
higher than the anchor size standard may be appropriate. The larger the
differences are between the characteristics of the industry under
review and those of the
[[Page 63512]]
anchor comparison group, the larger will be the difference between the
appropriate industry size standard and the anchor size standard. To
determine a size standard above the anchor size standard, SBA analyzes
the characteristics of a second comparison group. For industries with
receipts based size standards, including those in NAICS Sector 56 that
are reviewed in this proposed rule, SBA has developed a second
comparison group consisting of industries with the highest levels of
receipts based size standards. To determine the level of a size
standard above the anchor size standard, SBA analyzes the
characteristics of this second comparison group. The size standards for
this group of industries range from $23 million to $35.5 million in
average annual receipts, with the weighted average size standard for
the group being $29 million. SBA refers to this comparison group as the
``higher level receipts based size standard group.''
The primary factors that SBA evaluates when analyzing the
structural characteristics of an industry include average firm size,
startup costs and entry barriers, industry competition, and
distribution of firms by size. SBA also evaluates, as an additional
primary factor, the possible impact that revising size standards might
have on Federal contracting assistance to small businesses. These are,
generally, the five most important factors SBA examines when
establishing or revising a size standard for an industry. However, SBA
will also consider and evaluate other information that it believes is
relevant to a particular industry (such as technological changes,
growth trends, SBA financial assistance, other program factors, etc.).
SBA also considers possible impacts of size standard revisions on
eligibility for Federal small business assistance, current economic
conditions, the Administration's policies, and suggestions from
industry groups and Federal agencies. Public comments on a proposed
rule also provide important additional information. SBA thoroughly
reviews all public comments before making a final decision on its
proposed size standard. Below are brief descriptions of each of the
five primary factors that SBA has evaluated in each industry in NAICS
Sector 56 being reviewed in this proposed rule. A more detailed
description of this analysis is provided in the SBA ``SBA Size
Standards Methodology,'' available at https://www.sba.gov/size.
1. Average firm size. SBA computes two measures of average firm
size: simple average and weighted average. For industries with receipts
based size standards, the simple average is the total receipts of the
industry divided by the total number of firms in the industry. The
weighted average firm size is the sum of weighted simple averages in
different receipts size classes, where weights are the shares of total
industry receipts for respective size classes. The simple average
weighs all firms within an industry equally, regardless of their size.
The weighted average overcomes that limitation by giving more weight to
larger firms.
If the average firm size of an industry under review is
significantly higher than the average firm size of industries in the
anchor comparison industry group, this will generally support a size
standard higher than the anchor size standard. Conversely, if the
industry's average firm size is similar to or significantly lower than
that of the anchor comparison industry group, it will be a basis to
adopt the anchor size standard, or, in rare cases, a standard lower
than the anchor.
2. Startup costs and entry barriers. Startup costs reflect a firm's
initial size in an industry. New entrants to an industry must have
sufficient capital and other assets to start and maintain a viable
business. If new firms entering a particular industry have greater
capital requirements than firms in industries in the anchor comparison
group, this can be a basis for establishing a size standard higher than
the anchor standard. In lieu of data on actual startup costs, SBA uses
average assets as a proxy measure to assess the levels of capital
requirements for new entrants to an industry.
To calculate average assets, SBA begins with the sales to total
assets ratio for an industry from the Risk Management Association's
Annual Statement Studies. SBA then applies these ratios to the average
receipts of firms in that industry. An industry with a significantly
higher level of average assets than that of the anchor comparison group
is likely to have higher startup costs; this in turn will support a
size standard higher than the anchor. Conversely, if the industry has a
significantly smaller average assets compared to the anchor comparison
group, the anchor size standard, or, in rare cases, one lower than the
anchor, may be appropriate.
3. Industry competition. Industry competition is generally measured
by the share of total industry receipts generated by the largest firms
in an industry. SBA generally evaluates the share of industry receipts
generated by the four largest firms in each industry. This is referred
to as the ``four-firm concentration ratio,'' a commonly used economic
measure of market competition. SBA compares the four-firm concentration
ratio for an industry under review to the average four-firm
concentration ratio for industries in the anchor comparison group. If a
significant share of economic activity within the industry is
concentrated among a few relatively large companies, all else being
equal, SBA will establish a size standard higher than the anchor size
standard. SBA does not consider the four-firm concentration ratio as an
important factor in assessing a size standard if its value for an
industry under review is less than 40 percent. For industries in which
the four-firm concentration ratio is 40 percent or more, SBA examines
the average size of the four largest firms in determining a size
standard.
4. Distribution of firms by size. SBA examines the shares of
industry total receipts accounted for by firms of different receipts
and employment size classes in an industry. This is an additional
factor SBA evaluates in assessing competition within an industry. If
most of an industry's economic activity is attributable to smaller
firms, this would indicate that small businesses are competitive in
that industry. This would support adopting the anchor size standard. If
most of an industry's economic activity is attributable to larger
firms, this indicates that small businesses are not competitive in that
industry. This would support adopting a size standard above the anchor.
Concentration among firms is a measure of inequality of
distribution. To evaluate the degree of inequality of distribution
within an industry, SBA computes the Gini coefficient by constructing
the Lorenz curve. The Lorenz curve presents the cumulative percentages
of units (firms) along the horizontal axis and the cumulative
percentages of receipts (or other measures of size) along the vertical
axis. (For further detail, please refer to SBA's ``Size Standards
Methodology'' on its Web site at https://www.sba.gov/size.) Gini
coefficient values vary from zero to one. If receipts are distributed
equally among all the firms in an industry, the value of the Gini
coefficient will equal zero. If an industry's total receipts are
attributed to a single firm, the Gini coefficient will equal one.
SBA compares the Gini coefficient value for an industry under
review with that for industries in the anchor comparison group. If an
industry shows a higher Gini coefficient value than industries in the
anchor comparison industry group, this may, all else being
[[Page 63513]]
equal, warrant a higher size standard than the anchor. Conversely, if
an industry's Gini coefficient is similar or lower than that for the
anchor group, the anchor standard, or in some cases a standard lower
than the anchor, may be adopted.
5. Impact on Federal contracting and SBA loan programs. SBA
examines the possible impact a size standard change may have on Federal
small business assistance. This most often focuses on the share of
Federal contracting dollars awarded to small businesses in the industry
in question. In general, if the small business share of Federal
contracting in an industry with significant Federal contracting is
appreciably less than the small business share of the industry's total
receipts, there is justification for considering a size standard higher
than the existing size standard. The disparity between the small
business Federal market share and industry-wide share may be due to
various factors, such as extensive administrative and compliance
requirements associated with Federal contracts, the different skill set
required by Federal contracts as compared to typical commercial
contracting work, and the size of Federal contracts. These, as well as
other factors, are likely to influence the type of firms within an
industry that compete for Federal contracts. By comparing the small
business Federal contracting share with the industry-wide small
business share, SBA includes in its size standards analysis the latest
Federal contracting trends. This analysis may indicate a size standard
larger than the current standard.
SBA considers Federal contracting trends in the size standards
analysis only if (1) the small business share of Federal contracting
dollars is at least 10 percent lower than the small business share of
total industry receipts, and (2) the amount of total Federal
contracting averages $100 million or more during the latest three
fiscal years. These thresholds reflect a significant level of
contracting where a revision to a size standard may have an impact on
contracting opportunities to small businesses.
Besides the impact on small business Federal contracting, SBA
evaluates the influence of a proposed size standard on SBA's loan
programs. For this, SBA examines the volume and number of SBA
guaranteed loans within an industry and the size of firms obtaining
those loans. This allows SBA to assess whether the existing or proposed
size standard for a particular industry may restrict the level of
financial assistance to small firms. If the analysis shows that the
current size standards have impeded financial assistance to small
businesses, higher size standards may be supportable. However, if small
businesses under current size standards have been receiving significant
amounts of financial assistance through SBA's loan programs, or if the
financial assistance has been provided mainly to businesses that are
much smaller than the existing size standard, this factor is not
considered for determining the size standard.
Sources of Industry and Program Data
SBA's primary source of industry data used in this proposed rule is
a special tabulation of the data from the 2007 Economic Census (see
https://www.census.gov/econ/census07/) prepared by the U.S. Bureau of
the Census (Census Bureau) for SBA. The special tabulation provides SBA
with industry-specific data on the number of firms, number of
establishments, number of employees, and annual receipts of companies
by the size of firm based on the 2007 Economic Census. The data reflect
the size classes of the company's overall enterprise size; however, the
data by NAICS industry within the particular size class represent the
company's total values for a specific industry only. The special
tabulation enables SBA to evaluate average firm size, the four-firm
concentration ratio, and distribution of firms by various receipts and
employment size classes.
In some cases, where data were not available due to disclosure
prohibitions in the Census Bureau's tabulation, SBA either estimated
missing values using available relevant data or examined data at a
higher level of industry aggregation, such as at the NAICS 2-digit
(Sector), 3-digit (Subsector), or 4-digit (Industry Group) level. In
some instances, SBA had to base its analysis only on those factors for
which data were available or on estimates of missing values were
possible.
To calculate average assets SBA used sales to total assets ratios
from the Risk Management Association's Annual Statement Studies, 2007-
2009.
To evaluate Federal contracting trends, SBA examined data on
Federal contract awards for fiscal years 2007 to 2009. These data are
available from the U.S. General Service Administration's Federal
Procurement Data System--Next Generation (FPDS-NG).
To assess the impact on financial assistance to small businesses,
SBA examined data on its own guaranteed loan programs for fiscal years
2008 to 2010.
Data sources and estimation procedures SBA uses in its size
standards analysis are documented in detail in the SBA's ``Size
Standards Methodology'' White Paper, which is available at https://www.sba.gov/size.
Dominance in Field of Operation
Section 3(a) of the Small Business Act (15 U.S.C. 632(a)) defines a
small business concern as one that is (1) independently owned and
operated, (2) not dominant in its field of operation, and (3) within a
specific small business definition or size standard established by the
SBA Administrator. SBA considers as part of its evaluation whether a
business concern at a proposed size standard would be dominant in its
field of operation. For this, SBA generally examines the industry's
market share of firms at the proposed standard. Market share and other
factors may indicate whether a firm can exercise a major controlling
influence on a national basis in an industry where a significant number
of business concerns are engaged. If a contemplated size standard would
include a dominant firm, SBA would consider a lower size standard to
exclude the dominant firm from being defined as small.
Selection of Size Standards
To simplify size standards, for the ongoing comprehensive review of
receipts based size standards, SBA has proposed to select size
standards for industries from a limited number of levels. For many
years, SBA has been concerned about the complexity of determining small
business status caused by a large number of varying receipts based size
standards (see 69 FR 13130 (March 4, 2004) and 57 FR 62515 (December
31, 1992)). At the start of the current comprehensive size standards
review, there were 31 different levels of receipts based size
standards. They ranged from $0.75 million to $35.5 million, and many of
them applied to one or only a few industries. SBA believes that size
standards with such a large number of small variations among them are
both unnecessary and difficult to justify analytically. To simplify
managing and using size standards, SBA proposes that there be fewer
size standard levels. This will produce more common size standards for
businesses operating in related industries. This will also result in
greater consistency among the size standards for industries that have
similar economic characteristics.
The SBA proposes, therefore, to apply one of eight receipts based
size standards to each industry in NAICS Sector 56 that has a receipts
based standard. In NAICS Sector 56, all size standards are based on
annual receipts,
[[Page 63514]]
except for Environmental Remediation Services, which is an
``exception'' to NAICS 562910. In 1994, SBA established a 500 employee
size standard for Federal contracts for Environmental Remediation
Services, provided they meet certain specific criteria (see 59 FR 47236
(September 15, 1994)). In this proposed rule, SBA has not reviewed this
employee based size standard for Environmental Remediation Services and
the current standard will remain in effect until SBA reviews industries
with employee based size standards. The eight ``fixed'' receipts based
size standard levels are $5 million, $7 million, $10 million, $14
million, $19 million, $25.5 million, $30.0 million, and $35.5 million.
To establish these eight receipts based size standard levels SBA
considered the current minimum, the current maximum, and the most
commonly used current receipts based size standards. At the start of
this comprehensive size standards review, the most commonly used
receipts based size standards clustered around the following: $2.5
million to $4.5 million, $7 million, $9.0 million to $10 million, $12.5
million to $14.0 million, $25.0 million to $25.5 million, and $33.5
million to $35.5 million. SBA selected $7 million as one of eight fixed
levels of receipts based size standards because it is also an anchor
standard for receipts based standards. The lowest or minimum receipts
based size level will be $5 million. Other than the standards for
agriculture and those based on commissions (such as real estate brokers
and travel agents), $5 million include those industries with the lowest
receipts based standards, which range from $2.0 million to $4.5
million, at the start of this comprehensive review. Among the higher
level size clusters, SBA selected four fixed levels: $10 million, $14
million, $25.5 million, and $35.5 million. Because there are large
intervals between the two of the fixed levels, SBA also established two
intermediate levels: $19 million between $14 million and $25.5 million,
and $30 million between $25.5 million and $35.5 million. These two
intermediate levels reflect roughly the same proportional differences
as between the other two successive levels.
To simplify size standards further, SBA may propose a common size
standard for closely related industries. Although the size standard
analysis may support a specific size standard level for each industry,
SBA believes that establishing different size standards for closely
related industries may not always be appropriate. For example, in cases
where many of the same businesses operate in the same multiple
industries, establishing a common size standard for those industries
might better reflect the Federal marketplace. This might also make size
standards among related industries more consistent than establishing
separate size standards for each of those industries. This led SBA to
establish a common size standard for the information technology (IT)
services (NAICS 541511, NAICS 541112, NAICS 541513, and NAICS 541519),
even though the industry data might support a distinct size standard
for each industry (see 57 FR 27906 (June 23, 1992)). Within NAICS
Sector 56, all industries in NAICS Industry Group 5614, Business
Support Services, and all industries in NAICS Industry Group 5619,
Other Support Services, have a common $7.0 million size standard.
Similarly, eight industries in NAICS Subsector 562, Waste Management
and Remediation Services, have a common $12.5 million size standard. In
this rule, SBA proposes to retain common size standards for those
industries and establish common size standards for similar industries
in other NAICS Industry Groups as well. Whenever SBA proposes a common
size standard for closely related industries, it will provide a
justification for that in the proposed rule.
Evaluation of Industry Structure
SBA evaluated the structure of the 44 industries in NAICS Sector
56, Administrative and Support, Waste Management and Remediation
Services, to assess the appropriateness of the current receipts based
size standards. As described above, SBA compared data on the economic
characteristics of each industry (except for the Environmental
Remediation Services exception to NAICS 562910) to the average
characteristics of industries in two comparison groups. The first
comparison group consists of all industries with $7.0 million size
standards and is referred to as the ``receipts based anchor comparison
group.'' Because the goal of SBA's size standards review is to assess
whether a specific industry's size standard should be the same as or
different from the anchor size standard, this is the most logical group
of industries to analyze. In addition, this group includes a sufficient
number of firms to provide a meaningful assessment and comparison of
industry characteristics.
If the characteristics of an industry under review are similar to
the average characteristics of industries in the anchor comparison
group, the anchor size standard is generally considered appropriate for
that industry. If an industry's structure is significantly different
from industries in the anchor group, a size standard lower or higher
than the anchor size standard might be appropriate. The level of the
new size standard is based on the difference between the
characteristics of the anchor comparison group and a second industry
comparison group. As described above, the second comparison group for
receipts based standards consists of industries with the highest
receipts based size standards, ranging from $23 million to $35.5
million. The average size standard for this group is $29 million. SBA
refers to this group of industries as the ``higher level receipts based
size standard comparison group.'' SBA determines differences in
industry structure between an industry under review and the industries
in the two comparison groups by comparing data on each of the industry
factors, including average firm size, average assets size, the four-
firm concentration ratio, and the Gini coefficient of distribution of
firms by size. Table 1 shows two measures of the average firm size
(simple and weighted), average assets size, the four-firm concentration
ratio, average receipts of the four largest firms, and the Gini
coefficient for both anchor level and higher level comparison groups
for receipts based size standards.
Table 1--Average Characteristics of Receipts Based Comparison Groups
----------------------------------------------------------------------------------------------------------------
Avg. Firm size ($ Avg.
million) receipts of
-------------------------- Avg. Assets Four-firm four
Receipts based comparison group size ($ concentration largest Gini
Simple Weighted million) ratio (%) firms ($ coefficient
average average million)
\*\
----------------------------------------------------------------------------------------------------------------
Anchor Level.................... 1.32 19.63 0.84 16.6 196.4 0.693
[[Page 63515]]
Higher Level.................... 5.07 116.84 3.20 32.1 1,376.0 0.830
----------------------------------------------------------------------------------------------------------------
* To be used for industries with a four-firm concentration ratio of 40% or greater.
Derivation of Size Standards Based on Industry Factors
For each industry factor in Table 1, SBA derives a separate size
standard based on the differences between the values for an industry
under review and the values for the two comparison groups. If the
industry value for a particular factor is near the corresponding factor
for the anchor comparison group, SBA will consider the $7.0 million
anchor size standard appropriate for that factor.
An industry factor with a value significantly above or below the
anchor comparison group will generally warrant, a size standard above
or below the $7.0 million anchor. The new size standard in these cases
is based on the proportional difference between the industry value and
the values for the two comparison groups.
For example, if an industry's simple average receipts are $3.3
million, that would support a $19 million size standard. The $3.3
million level is 52.8 percent between the average firm size of $1.32
million for the anchor comparison group and $5.07 million for the
higher level comparison group (($3.30 million-$1.32 million) / ($5.07
million-$1.32 million) = 0.528 or 52.8%). This proportional difference
is applied to the difference between the $7.0 million anchor size
standard and average size standard of $29 million for the higher level
size standard group and then added to $7.0 million to estimate a size
standard of $18.616 million ({$29.0 million-$7.0 million{time} *
0.528] + $7.0 million = $18.616 million). The final step is to round
the estimated $18.616 million size standard to the nearest fixed size
standard level, which in this example is $19 million.
SBA applies the above calculation to derive a size standard for
each industry factor. Detailed formulas involved in these calculations
are presented in the SBA's ``Size Standards Methodology,'' which is
available at https://www.sba.gov/size. (However, it should be noted that
figures in the ``SBA Size Standards Methodology'' White Paper are based
on 2002 Economic Census data and are different from those presented in
this proposed rule. That is because when SBA prepared its ``Size
Standards Methodology,'' the 2007 Economic Census data were not yet
available). Table 2 (below) shows ranges of values for each industry
factor and the levels of size standards supported by those values.
Table 2--Values of Industry Factors and Supported Size Standards
----------------------------------------------------------------------------------------------------------------
Or if avg.
Or if Weighted Or if avg. receipts of Then size
If Simple avg. receipts size avg. receipts assets size ($ largest four Or if gini standard is
($ million) size ($ million) million) firms ($ coefficient ($ million)
million)
----------------------------------------------------------------------------------------------------------------
< 1.15....................... < 15.22......... < 0.73.......... < 142.8........ < 0.686........ 5.0
1.15 to 1.57................. 15.22 to 26.26.. 0.73 to 1.00.... 142.8 to 276.9. 0.686 to 0.702. 7.0
1.58 to 2.17................. 26.27 to 41.73.. 1.01 to 1.37.... 277.0 to 464.5. 0.703 to 0.724. 10.0
2.18 to 2.94................. 41.74 to 61.61.. 1.38 to 1.86.... 464.6 to 705.8. 0.725 to 0.752. 14.0
2.95 to 3.92................. 61.62 to 87.02.. 1.87 to 2.48.... 705.9 to 0.753 to 0.788. 19.0
1,014.1.
3.93 to 4.86................. 87.03 to 111.32. 2.49 to 3.07.... 1,014.2 to 0.789 to 0.822. 25.5
1,309.0.
4.87 to 5.71................. 111.33 to 133.41 3.08 to 3.61.... 1,309.1 to 0.823 to 0.853. 30.0
1,577.1.
> 5.71....................... > 133.41........ > 3.61.......... > 1,577.1...... > 0.853........ 35.5
----------------------------------------------------------------------------------------------------------------
Derivation of Size Standard Based on Federal Contracting Factor
Besides industry structure, SBA also evaluates Federal contracting
data to assess how successful small businesses are in getting Federal
contracts under current size standards. For the current comprehensive
size standards review, SBA has decided to designate a size standard at
one level higher than the current size standard for industries where
the small business share of total Federal contracting dollars is
between 10 and 30 percentage points lower than the small business share
of total industry receipts, and at two levels higher than the current
size standard where the difference is more than 30 percentage points.
Because of the complex relationships among several variables
affecting small business participation in the Federal marketplace, SBA
has chosen not to designate a size standard for the Federal contracting
factor alone that is higher than two levels above the current size
standard. SBA believes that a larger adjustment to size standards based
on Federal contracting activity should be based on a more detailed
analysis of the impact of any subsequent revision to the current size
standard. In limited situations, however, SBA may conduct a more
extensive examination of Federal contracting experience. This may
enable SBA to support a different size standard than indicated by this
general rule and take into consideration significant and unique aspects
of small business competitiveness in the Federal contract market. SBA
welcomes comments on its methodology of incorporating the Federal
contracting factor in the size standard analysis and suggestions for
alternative methods and other relevant information on small business
experience in the Federal contract market.
Of the 44 industries reviewed in this proposed rule, 15 industries
averaged $100 million or more annually in Federal contracting during
fiscal years 2007 to 2009. The Federal contracting factor was
significant (i.e., the difference between the small business share of
total industry receipts and the small business share of Federal
contracting
[[Page 63516]]
dollars was 10 percentage points or more) in six of those 15
industries, and a separate size standard was derived for that factor
for each of them.
New Size Standards Based on Industry and Federal Contracting Factors
Table 3 shows the results of analyses of industry and Federal
contracting factors for each industry covered by this proposed rule.
Many of the NAICS industries in columns 2, 3, 4, 6, 7, and 8 show two
numbers. The upper number is the value for the industry or federal
contracting factor shown on the top of the column, and the lower number
is the size standard supported by that factor. For the four-firm
concentration ratio, SBA estimates a size standard if its value is 40
percent or more. If the four-firm concentration ratio for an industry
is less than 40 percent, there is no estimated size standard for that
factor. If the four-firm concentration ratio is more than 40 percent,
SBA indicates in column 6 the average size of the industry's top four
firms together with a size standard based on that average. Column 9
shows a calculated new size standard for each industry. This is the
average of the size standards supported by each factor and rounded to
the nearest fixed size level. Analytical details involved in the
averaging procedure are described in the SBA's ``Size Standard
Methodology.'' For comparison with the new standards, the current size
standards are in column 10 of Table 3.
Table 3--Size Standards Supported by Each Factor for Each Industry (millions of dollars)
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
(5) (9) (10)
(2) Simple (3) Weighted (4) Average Four- (6) Four-firm (8) Federal Calculated Current
(1) NAICS code/ NAICS industry title average firm average firm assets firm average size (7) Gini Co- contract size size
size ($ size ($ size ($ ratio ($ million) efficient factor (%) standard standard
million) million) million) (%) ($ million) ($ million)
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
561110 Office Administrative Services.............................. $1.4, 7.0 $7.0, 5.0 $0.6, 5.0 2.3 $225.8 0.694, $7.0 -10.1%, $7.0 $7.0
$10.0
561210 Facilities Support Services................................. 13.8, 35.5 98.7, 25.5 4.5, 35.5 27.6 1,777.3 0.835, $30.0 -2.8% 30.0 35.5
561311 Employment Placement Agencies............................... 1.5, 7.0 23.6, 7.0 ........... 22.1 652.4 0.759, $19.0 ........... 14.0 7.0
561312 Executive Search Services................................... 1.0, 5.0 28.8, 10.0 ........... 20.7 362.5 0.693, $7.0 ........... 7.0 7.0
561320 Temporary Help Services..................................... 7.6, 35.5 152.6, 35.5 1.4, 10.0 15.6 4,122.2 0.857, $35.5 43.8% 25.5 13.5
561330 Professional Employer Organizations......................... 21.4, 35.5 288.8, 35.5 3.0, 25.5 33.8 7,203.7 0.882, $35.5 ........... 30.0 13.5
561410 Document Preparation Services............................... 0.7, 5.0 10.0, 5.0 ........... 22.3 189.7 0.697, $7.0 ........... 7.0 7.0
561421 Telephone Answering Services................................ 1.4, 7.0 9.1, 5.0 ........... 15.1 86.6 0.690, $7.0 -35.5%, 10.0 7.0
$14.0
561422 Telemarketing Bureaus and Other contact Centers............. 5.6, 30.0 35.5, 10.0 ........... 24.8 910.6 0.807, $25.5 ........... 25.5 7.0
561431 Private Mail Centers........................................ 0.4, 5.0 2.9, 5.0 ........... 4.7 25.2 0.289, $5.0 ........... 5.0 7.0
561439 Other Business Service Centers (including Copy Shops)....... 2.6, 14.0 95.9, 25.5 1.0, 10.0 54.5 1,119.2, 25.5 0.832, $30.0 ........... 19.0 7.0
561440 Collection Agencies......................................... 2.7, 14.0 25.3, 7.0 1.0, 10.0 14.9 457.6 0.792, $25.5 ........... 14.0 7.0
561450 Credit Bureaus.............................................. 15.3, 35.5 379.2, 35.5 ........... 64.3 1,316.5, 30.0 0.935, $35.5 ........... 35.5 7.0
561491 Repossession Services....................................... 0.8, 5.0 4.3, 5.0 ........... 10.0 18.0 0.520, $5.0 ........... 5.0 7.0
561492 Court Reporting and Stenotype Services...................... 0.7, 5.0 16.5, 7.0 ........... 19.7 110.5 0.653, $5.0 ........... 7.0 7.0
561499 All Other Business Support Services......................... 2.5, 14.0 21.2, 7.0 1.0, 7.0 29.7 607.4 0.805, $25.5 -13.4%, 14.0 7.0
$10.0
561510 Travel Agencies \1\......................................... 1.4, 7.0 109.9, 25.5 0.5, 5.0 48.7 2,105.8, 35.5 0.806, $25.5 ........... 19.0 3.5
561520 Tour Operators.............................................. 1.6, 7.0 18.1, 7.0 0.6, 5.0 16.2 178.6 0.735, $14.0 ........... 10.0 7.0
561591 Convention and Visitors Bureaus............................. 1.3, 7.0 8.3, 5.0 ........... 13.2 49.6 0.674, $5.0 ........... 7.0 7.0
561599 All Other Travel Arrangement and Reservation Services....... 9.9, 35.5 150.5, 35.5 6.9, 35.5 42.2 1,468.2, 30.0 0.898, $35.5 ........... 35.5 7.0
561611 Investigation Services...................................... 0.8, 5.0 23.9, 7.0 ........... 27.0 261.9 0.719, $10.0 -27.6%, 14.0 12.5
$19.0
561612 Security Guards and Patrol Services......................... 3.2, 19.0 88.4, 25.5 0.7, 5.0 30.6 1,439.8 0.865, $35.5 -6.3% 19.0 18.5
561613 Armored Car Services........................................ 16.7, 35.5 253.3, 35.5 ........... 88.9 494.6, 14.0 0.906, $35.5 ........... 30.0 12.5
561621 Security Systems Services (except Locksmiths)............... 2.6, 14.0 108.2, 25.5 1.0, 7.0 34.4 1,233.3 0.819, $25.5 7.8 19.0 12.5
561622 Locksmiths.................................................. 0.4, 5.0 2.6, 5.0 ........... 5.9 24.1 0.377, $5.0 ........... 5.0 7.0
561710 Exterminating and Pest Control Services..................... 0.8, 5.0 112.7, 30.0 0.2, 5.0 27.3 592.5 0.681, $5.0 ........... 10.0 7.0
561720 Janitorial Services......................................... 0.6, 5.0 31.7, 10.0 0.2, 5.0 10.5 868.3 0.704, $10.0 -9.0 7.0 16.5
561730 Landscaping Services........................................ 0.6, 5.0 22.6, 7.0 0.2, 5.0 8.6 1,160.6 0.571, $5.0 0.7 5.0 7.0
561740 Carpet and Upholstery Cleaning Services..................... 0.4, 5.0 9.4, 5.0 0.1, 5.0 10.4 76.9 0.419, $5.0 ........... 5.0 4.5
[[Page 63517]]
561790 Other Services to Buildings and Dwellings................... 0.4, 5.0 5.4, 5.0 0.1, $5.0 11.2 133.7 0.479, 5.0 -38.5, 7.0 7.0
$14.0
561910 Packaging and Labeling Services............................. 2.8, 14.0 15.0, 5.0 1.2, 10.0 11.2 141.1 0.741, $14.0 ........... 10.0 7.0
561920 Convention and Trade Show Organizers........................ 2.6, 14.0 38.2, 10.0 ........... 19.8 555.5 0.802, $25.5 ........... 19.0 7.0
561990 All Other Support Services.................................. 1.6, 10.0 21.4, 7.0 0.7, 5.0 11.3 590.3 0.767, $19.0 -21.9, 10.0 7.0
$10.0
562111 Solid Waste Collection...................................... 5.4, 30.0 307.3, 35.5 3.1, 25.5 50.0 4,628.5, 35.5 0.878, $35.5 36.3 35.5 12.5
562112 Hazardous Waste Collection.................................. 5.0, 30.0 37.7, 10.0 ........... 45.8 212.8, 7.0 0.775, $19.0 ........... 14.0 12.5
562119 Other Waste Collection...................................... 1.9, 10.0 40.4, 10.0 1.2, 10.0 39.7 159.4 0.776, $19.0 ........... 14.0 12.5
562211 Hazardous Waste Treatment and Disposal...................... 13.4, 35.5 101.9, 25.5 7.5, 35.5 44.6 653.6, 14.0 0.834, $30.0 -4.9% 25.5 12.5
562212 Solid Waste Landfill........................................ 6.6, 35.5 85.5, 19.0 4.6, 35.5 56.1 791.8, 19.0 0.854, $35.5 ........... 30.0 12.5
562213 Solid Waste Combustors and Incinerators..................... 36.5, 35.5 270.0, 35.5 ........... 92.4 480.8, 14.0 0.856, $35.5 ........... 30.0 12.5
562219 Other Nonhazardous Waste Treatment and Disposal............. 3.8, 19.0 15.8, 7.0 ........... 34.7 58.2 0.689, $7.0 ........... 10.0 12.5
562910 Remediation Services........................................ 4.1, 25.5 29.3, 10.0 1.7, 14.0 14.7 455.1 0.770, $19.0 -4.4% 19.0 14.0
562920 Materials Recovery Facilities............................... 4.4, 25.5 26.7, 10.0 2.0, $19.0 33.3 338.8 0.749, $14.0 ........... 19.0 12.5
562991 Septic Tank and Related Services............................ 0.8, 5.0 8.9, 5.0 ........... 13.2 84.3 0.556, $5.0 ........... 5.0 7.0
562998 All Other Miscellaneous Waste Management Services........... 1.5, 7.0 14.2, 5.0 0.6, 5.0 27.8 98.3 0.679, $5.0 ........... 5.0 7.0
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
Common Size Standards
When many of the same businesses operate in multiple industries,
SBA believes that a common size standard can be appropriate for these
industries even if the industry and relevant program data support
different size standards. For instance, in past rules, SBA has
established a common size standard for Computer Systems Design and
Related Services industries (NAICS 541511, NAICS 541112, NAICS 541513,
NAICS 541519 (excluding the ``exception''), and NAICS 811212). Another
example is the common size standard for certain Architectural and
Engineering (A&E) and Related Services industries. These include NAICS
541310, NAICS 541330 (excluding the ``exceptions''), Map Drafting
(which is identified as ``exception'' under NAICS 541340), NAICS
541360, and NAICS 541370 (see 64 FR 28275 (May 25, 1999)). More
recently, SBA established a common size standard for some of the
industries in NAICS Sector 44-45, Retail Trade as well (see 75 FR 61597
(October 6, 2010)). Size standards for NAICS Sector 44-45 do not apply
to Federal Government contracting, but they do apply to all other
Federal Government programs that provide benefits for being a small
business concern.
In this rule, SBA proposes, as an alternative to a separate size
standard for each industry, common size standards for industries under
several NAICS Industry Groups as shown in Table 4. SBA evaluated
industry and Federal contracting factors and derived a common size
standard for each Industry Group using the same method as described
above. The results are in Table 5, which immediately follows Table 4,
below.
Table 4--Industry Groups for Common Size Standards
------------------------------------------------------------------------
Industry group Industries: 6-
Industry group: NAICS codes title digit NAICS codes
------------------------------------------------------------------------
5613............................ Employment 561311, 561312,
Services. 561320, 561330
5614............................ Business Support 561410, 561421,
Services. 561422, 561431,
561439, 561440,
561450, 561491,
561492, 561499
5615............................ Travel Arrangement 561510, 561520,
and Reservation 561591, 561599
Services.
5616............................ Investigation and 561611, 561612,
Security Services. 561613, 561621,
561622
5619............................ Other Support 561910, 561920,
Services. 591990
5621............................ Waste Collection.. 562111, 562112,
562119
5622............................ Waste Treatment 562211, 562212,
and Disposal. 562213, 562219
------------------------------------------------------------------------
[[Page 63518]]
Table 5 --Size Standards Supported by Each Factor for Each Industry Group
[millions of dollars]
--------------------------------------------------------------------------------------------------------------------------------------------------------
(3) (5) (9)
(2) Simple Weighted (4) Four- (6) Four- (7) Gini (8) Federal Calculated
(1) NAICS Code/industry title average average Average firm firm average co- contract factor size
firm size firm size assets size ratio size ($ efficient (%) standard ($
($ million) ($ million) ($ million) (%) million) million)
--------------------------------------------------------------------------------------------------------------------------------------------------------
5613 Employment Services....................... $6.5, 35.5 $198.8, $1.2, 10.0 14.8 $7,751.2 0.891, 15.8% $25.5
35.5 $35.5
5614 Business Support Services................. 2.1, 10.0 40.8, 10.0 0.8, 7.0 12.2 1,896.1 0.824, -11.7%, $10.0 14.0
$30.0
5615 Travel Arrangement and Reservation 2.2, 10.0 123.3, 30.0 0.9, 7.0 33.6 3,115.5 0.850, ............... 19.0
Services...................................... $30.0
5616 Investigation and Security Services....... 2.1, 10.0 94.4, 25.5 0.6, 5.0 22.9 2,343.2 0.834, 2.4% 19.0
$30.0
5619 Other support Services.................... 2.0, 10.0 23.7, 7.0 0.8, 7.0 8.6 795.1 0.781, -15.9%, $10.0 10.0
$19.0
5621 Waste Collection.......................... 5.0, 30.0 254.2, 35.5 2.9, 25.5 46.7 4,726.6, 0.872, 29.5% 35.5
$35.5 $35.5
5622 Waste Treatment and Disposal.............. 9.5, 35.5 123.0, 30.0 5.9, 35.5 37.0 1,319.2 0.869, -5.9% 33.5
$35.5
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