Small Business Size Standards: Information, 63216-63229 [2011-26208]
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Federal Register / Vol. 76, No. 197 / Wednesday, October 12, 2011 / Proposed Rules
upon the ambient temperature and
humidity, so environmental conditions
for testing are much more important for
heat pump pool heaters than for gasfired pool heaters.
In light of the above, DOE tentatively
plans to update the pool heater test
procedures by adding provisions to
address electric heat pump pool heaters
through use of a COP performance
metric drawn from industry standards,
coupled with a separate conversion to
thermal efficiency (i.e., the regulating
metric specified in EPCA) and
integrated thermal efficiency (i.e., the
new regulating metric, as amended by
EISA 2007). Because there are currently
no energy conservation standards for
electric heat pump pool heaters, no
certification or reporting would be
required for those products until such
time as DOE sets minimum energy
conservation standards for those
products (which will include energy
consumption in active, standby, and off
modes). However, after a test method is
adopted for electric heat pump pool
heaters, manufacturers would be
required to use the DOE test method for
making efficiency representations and
would be able to use the COP metric,
the integrated thermal efficiency metric,
or both for making efficiency
representations during this interim
period. Compliance with the amended
test procedure for representations
purposes would be required 180 days
after the date of publication of the test
procedure final rule. Once DOE sets
energy conservation standards for pool
heaters, EPCA requires the use of the
thermal efficiency metric. Therefore, if
DOE were to set energy conservation
standards for heat pump pool heaters,
manufacturers would then be required
to rate their products using the
integrated thermal efficiency metric,
although they would still have the
option of making supplemental
representations of efficiency using the
COP metric.
DOE requests comment on the
applicability of the ANSI Z21.56 test
method for pool heaters that are
powered by energy sources other than
gas. Additionally, DOE seeks comment
on its tentative plans for updating the
pool heater test procedure to include
electric pool heaters and information on
potential methods to apply the
integrated thermal efficiency metric to
electric pool heaters (including heat
pump pool heaters).
2. Other Issues
DOE also seeks comments on other
relevant issues that would affect the test
procedures for residential pool heaters.
Although DOE has attempted to identify
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those portions of the test procedure
where it believes amendments may be
warranted, interested parties are
welcome to provide comments on any
aspect of the test procedure as part of
this comprehensive 7-year-review
rulemaking.
III. Public Participation
DOE invites all interested parties to
submit in writing by November 28,
2011, comments and information on
matters addressed in this notice and on
other matters relevant to DOE’s
consideration of amended test
procedures for residential water heaters,
direct heating equipment, and pool
heaters.
After the close of the comment period,
DOE will begin collecting data,
conducting relevant analyses, and
reviewing the public comments. These
actions will be taken to aid in the
development of a test procedure NOPR
for residential water heaters, direct
heating equipment, and pool heaters.
DOE considers public participation to
be a very important part of the process
for developing test procedures. DOE
actively encourages the participation
and interaction of the public during the
comment period in each stage of the
rulemaking process. Interactions with
and between members of the public
provide a balanced discussion of the
issues and assist DOE in the rulemaking
process. Anyone who wishes to be
added to the DOE mailing list to receive
future notices and information about
this rulemaking should contact Ms.
Brenda Edwards at (202) 586–2945, or
via e-mail at
Brenda.Edwards@ee.doe.gov.
Issued in Washington, DC, on September
29, 2011.
Kathleen Hogan,
Deputy Assistant Secretary for Energy
Efficiency, Office of Technology
Development, Energy Efficiency and
Renewable Energy.
[FR Doc. 2011–25815 Filed 10–11–11; 8:45 am]
BILLING CODE 6450–01–P
SMALL BUSINESS ADMINISTRATION
13 CFR Part 121
RIN 3245–AG26
Small Business Size Standards:
Information
U.S. Small Business
Administration.
ACTION: Proposed rule.
AGENCY:
The U.S. Small Business
Administration (SBA) proposes to
increase small business size standards
SUMMARY:
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for 15 industries in North American
Industry Classification System (NAICS)
Sector 51, Information. As part of its
ongoing comprehensive review of all
size standards, SBA has evaluated all
receipts based size standards in NAICS
Sector 51 to determine whether the
existing size standards should be
retained or revised. This proposed rule
is one of a series of proposals that
examines size standards of industries
grouped by NAICS Sector. The SBA
issued a White Paper entitled ‘‘Size
Standards Methodology’’ and published
a document 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.
SBA must receive comments to
this proposed rule on or before
December 12, 2011.
ADDRESSES: You may submit comments,
identified by RIN 3245–AF26, by one of
the following methods: (1) Federal
eRulemaking Portal: https://
www.regulations.gov; follow the
instructions for submitting comments;
or, (2) Mail/Hand Delivery/Courier:
Khem R. Sharma, PhD, Chief, Size
Standards Division, 409 Third Street,
SW, Mail Code 6530, Washington, DC
20416. The SBA will not accept
comments 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. The 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.
DATES:
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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. The SBA
uses two primary measures of business
size—average annual receipts and
average number of employees. The 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
standards 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. The
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
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conditions. Specifically, the Jobs Act
requires SBA to conduct a detailed
review of at least one-third of all size
standards during every 18-month period
from the date of its enactment and do a
complete review of all size standards
not less frequently than once every 5
years thereafter. 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
establishing, reviewing and modifying
size standards when necessary. The
SBA has published this document on its
Web site at https://www.sba.gov/size for
public review and comments and
included it, as a supporting document,
in the electronic docket of this proposed
rule at https://www.regulations.gov. The
SBA does not apply every feature of its
methodology to every size standard
evaluation because not all features are
appropriate for every industry. For
example, since this proposed rule
covers all industries with receipts based
standards in NAICS Sector 51, the
methodology described here applies to
establishing receipts based standards.
However, the methodology is made
available in its entirety for parties who
are interested in SBA’s overall approach
to establishing, evaluating, and
modifying small business size
standards. The SBA always explains its
analysis in individual proposed and
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final rules relating to size standards for
specific industries.
The 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; follow 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. 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. The SBA
continues to welcome comments on its
methodology from interested parties.
Congress granted discretion to SBA’s
Administrator 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 serves
as the underlying basis for developing
and modifying small business size
standards. The 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 the analysis of an industry’s
structure, SBA also 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
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on the proposed rule, when it
establishes small business size
standards. The SBA also examines
whether a size standard based on
industry and other relevant data
successfully exclude businesses that are
dominant in the industry.
This proposed rule includes
information regarding the factors SBA
evaluated and the criteria the Agency
used to propose any adjustments to size
standards in NAICS Sector 51. It also
explains why SBA has proposed to
adjust some size standards in NAICS
Sector 51 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 51 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. The 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. The SBA has periodically
increased the receipts based anchor size
standard for inflation, and it stands
today at $7 million. Since 1986, SBA
has set 100 employees as the size
standard for all industries in the
Wholesale Trade Sector for SBA
financial assistance programs. However,
NAICS codes for Wholesale Trade
Industries (NAICS Sector 42) and their
100 employee size standard for the
Wholesale Trade Sector do not apply to
Federal procurement programs. Rather,
for Federal procurement purposes the
size standard is 500 employees for all
industries in Wholesale Trade (NAICS
Sector 42), and for all industries in
Retail Trade (NAICS Sector 44–45)
under the 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
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economic characteristics and serves as a
reference point in evaluating size
standards for individual industries. The
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. The SBA may consider
adopting a size standard below the
anchor when (1) all or most of the
industry characteristics are significantly
smaller than the average characteristics
of the anchor comparison group, or (2)
other industry considerations strongly
suggest that the anchor size standard
would be an unreasonably high size
standard for the industry.
If the specific industry’s
characteristics are significantly higher
than those of the anchor comparison
group, 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
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 51 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
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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. The 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. The
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.). The 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. The 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 51 being
reviewed in this proposed rule. A more
detailed description of this analysis is
provided in the SBA’s ‘‘Size Standards
Methodology,’’ available at https://
www.sba.gov/size.
1. Average firm size. The 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
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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. The 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. The SBA generally evaluates
the share of industry receipts generated
by the four largest firms in each
industry. This is referred to as the ‘‘fourfirm concentration ratio,’’ a commonly
used economic measure of market
competition. The 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.
The SBA does not consider the four-firm
concentration ratio as an important
factor in assessing a size standard if its
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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. The
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 that 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 supports adopting the
anchor size standard. If most of an
industry’s economic activity is
attributable to larger firms, this would
indicate 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 an industry’s total receipts reflect
equal distribution among the industries,
the Gini coefficient will equal zero. If a
single firm accounts for an industry’s
total receipts, 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
equal, warrant a higher size standard
than the anchor. Conversely, if an
industry shows a similar or lower Gini
coefficient than industries in 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. The 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
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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 small business share may
be due to various factors, such as
extensive administrative and
compliance requirements associated
with Federal contracts, different skill
sets required for Federal contracts as
compared to typical commercial
contracting work, and the size of
Federal contracts. These, and other
factors, will likely influence the type of
firms that compete for Federal contracts.
By comparing the Federal contracting
small business share with the industrywide 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 also 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 current size
standards have impeded financial
assistance to small businesses, this can
support higher size standards. However,
if small businesses under current size
standards have been receiving
significant amounts of financial
assistance through SBA’s loan programs,
or if the businesses receiving SBA’s
financial assistance are much smaller
than the existing size standards, this
factor may not be considered in
determining the size standards.
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Sources of Industry and Program Data
The SBA’s primary source of industry
data used in this proposed rule is a
special tabulation of the data from 2007
Economic Census (see https://
www.census.gov/econ/census07/)
prepared by the U.S. Bureau of the
Census (Census Bureau) for the Agency.
The special tabulation provides SBA
with industry-specific data on the
number of firms, number of
establishments, number of employees,
annual payroll, and annual receipts of
companies by the size of firm 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 a
particular size class represents 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
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–
2009. The data are available from the
U.S. General Service Administration’s
Federal Procurement Data System—
Next Generation (FPDS–NG).
To assess the impact on financial
assistance to small businesses, SBA
examined data on its own guaranteed
loan programs for fiscal years 2008–
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
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17:32 Oct 11, 2011
Jkt 223001
definition or size standard established
by the SBA Administrator. The 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
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. The SBA
believes that to have so many different
size standards with small variations
among them is 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 51 that has a receipts based
standard. In NAICS Sector 51, 20
industries have size standards based on
annual receipts, and 12 have size
standards based on the number of
employees. In this proposed rule, SBA
has not reviewed employee based size
standards for those 12 industries and
the current standards 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 million, and
PO 00000
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Sfmt 4702
$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. Currently, the most
commonly used receipts based size
standards cluster around the following:
$2.5 million to $4.5 million, $7 million,
$9 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. The 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 ranged from $2
million to $4.5 million at the start of the
current comprehensive size standards
review. Among the higher level size
clusters, SBA has set four fixed levels:
Namely, $10 million, $14 million, $25.5
million, and $35.5 million. Because
there are large intervals between some
of the fixed levels, SBA also established
two intermediate levels: Namely, $19
million between $14 million and $25.5
million, and $30 million between $25.5
million and $35.5 million. These two
intermediate levels reflect roughly the
same proportional differences as
between the other two successive levels.
Evaluation of Industry Structure
SBA evaluated the structure of the 20
industries in NAICS Sector 51,
Information, to assess the
appropriateness of the current receipts
based size standards. As described
above, SBA compared data on the
economic characteristics of each of the
20 industries in NAICS Sector 51 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
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Federal Register / Vol. 76, No. 197 / Wednesday, October 12, 2011 / Proposed Rules
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
$29 million. The SBA refers to this
group of industries as the ‘‘higher level
receipts based size standard comparison
group.’’ The SBA determines differences
in industry structure between an
industry under review and the
industries in the two comparison groups
by comparing data on each of the
industry factors, including average firm
63221
size, average assets size, the four-firm
concentration ratio, and the Gini
coefficient of distribution of firms by
size. Table 1 shows two measures of the
average firm size (simple and weighted),
the average assets size, the four-firm
concentration ratio, the average receipts
of the four largest firms, and the Gini
coefficient for both anchor level and
higher level comparison groups for
receipts based size standards.
TABLE 1—AVERAGE CHARACTERISTICS OF RECEIPTS BASED COMPARISON GROUPS
Avg. firm size ($ million)
Receipts based
comparison group
Weighted
average
Simple average
Anchor Level ....................
Higher Level .....................
Avg. assets size
($ million)
1.32
5.07
19.63
116.84
Four-firm
concentration
ratio (%)
0.84
3.20
Avg. receipts
of four
largest firms
($ million) *
16.6
32.1
196.4
1,376.0
Gini
coefficient
0.693
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 the 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 $19 million.
SBA applies the above calculation to
derive a size standard for each industry
factor. Detailed formulas involved in
these calculations are presented in the
SBA’s ‘‘Size Standards Methodology,’’
available on SBA’s Web site at https://
www.sba.gov/size. (However, note that
figures in the ‘‘Size Standards
Methodology’’ White Paper are based on
2002 Economic Census data and are
different from those presented in this
proposed rule. That is because when
SBA prepared its ‘‘Size Standards
Methodology,’’ the 2007 Economic
Census data were not yet available.)
Table 2 (below) shows ranges of values
for each industry factor and the levels
of size standards supported by those
values.
TABLE 2—VALUES OF INDUSTRY FACTORS AND SUPPORTED SIZE STANDARDS
mstockstill on DSK4VPTVN1PROD with PROPOSALS
If simple
avg. receipts size
($ million)
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
< 1.15 .............................
1.15 to 1.57 ....................
1.58 to 2.17 ....................
2.18 to 2.94 ....................
2.95 to 3.92 ....................
3.93 to 4.86 ....................
4.87 to 5.71 ....................
> 5.71 .............................
< 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
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are at obtaining 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
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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
current size standard for industries
where the small business share of total
Federal contracting dollars is 10 to 30
percentage points lower than the small
business share of total industry receipts
E:\FR\FM\12OCP1.SGM
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Federal Register / Vol. 76, No. 197 / Wednesday, October 12, 2011 / Proposed Rules
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. The 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. The 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 20 industries reviewed in this
proposed rule, five industries averaged
$100 million or more annually in
Federal contracting during fiscal years
2007–2009. However, the Federal
contracting factor was not significant
and no size standard was calculated for
this factor for any of these five
industries. The small business share of
total Federal contracting dollars was
already higher than the small business
share of the total industry receipts for
four of these five industries. In the one
industry, the small business share of
total Federal contracting dollars was
less than the small business share of
total industry receipts, but the
difference was less than 10 percent.
Thus, the latest data show that Federal
contracting activity is insignificant for
most of the industries in NAICS Sector
51, and for the majority of those
industries where it is significant, small
businesses seem to be doing well in
terms of their share of the Federal
marketplace relative to their share of the
industry’s total sales.
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, and 7
show two numbers. The upper number
is the value for the industry factor
shown on the top of the column and the
lower number is the size standard
supported by that factor. For the fourfirm 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. As mentioned
earlier, no size standard is derived for
the Federal contracting factor as that
factor was significant in none of the
industries in NAICS Sector 51 reviewed
in this proposed rule. 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]
NAICS code/industry title
Simple
average
firm size
($ million)
Weighted
average
firm size
($ million)
Average
assets size
($ million)
Four-firm
ratio (%)
Four-firm
average
size
($ million)
Gini
coefficient
Federal
contract
factor (%)
Calculated
new size
standard
($ million)
Current
size
standard
($ million)
(1)
(2)
(3)
(4)
(5)
(6)
(7)
(8)
(9)
(10)
511210
Software Publishers ...
512110 Motion Picture and
Video Production ...................
512120 Motion Picture and
Video Distribution ..................
512131 Motion Picture Theaters (except Drive-Ins) ...........
512132 Drive-In Motion Picture Theaters .........................
512191 Teleproduction and
Other Postproduction Services ........................................
512199 Other Motion Picture
and Video Industries ..............
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512210
Record Production .....
512240 Sound Recording Studios ........................................
512290 Other Sound Recording Industries .........................
515111
Radio Networks .........
515112
Radio Stations ...........
VerDate Mar<15>2010
17:32 Oct 11, 2011
$22.9
35.5
$358.8
35.5
$16.0
35.5
38.9
$13,171.0
0.903
$35.5
31.0
$35.5
$25.0
5.1
30.0
591.5
35.5
2.4
19.0
52.7
7,893.3
35.5
0.932
$35.5
....................
30.0
29.5
4.1
25.5
34.9
10.0
....................
30.6
157.2
0.814
$25.5
....................
25.5
29.5
6.2
35.5
304.1
35.5
7.4
35.5
53.9
1,699.2
35.5
0.909
$35.5
....................
35.5
7.0
0.4
5.0
1.8
5.0
....................
23.0
5.5
0.322
$5.0
....................
5.0
7.0
2.2
14.0
46.5
14.0
1.4
10.0
27.1
296.6
0.817
$25.5
....................
19.0
29.5
3.2
19.0
1.0
5.0
78.8
19.0
26.2
7.0
1.7
14.0
0.5
5.0
75.7
151.8
7.0
39.5
5.0
0.866
$35.5
0.711
$10.0
....................
19.0
7.0
....................
7.0
7.0
0.5
5.0
4.6
5.0
0.2
5.0
9.8
21.0
0.520
$5.0
....................
5.0
7.0
1.1
5.0
7.9
35.5
4.7
25.5
19.7
7.0
112.1
30.0
149.1
35.5
....................
30.9
34.6
....................
10.0
7.0
....................
61.4
....................
30.0
7.0
6.6
35.5
42.2
633.4
14.0
1,569.4
30.0
0.718
$10.0
0.889
$35.5
0.885
$35.5
....................
35.5
7.0
Jkt 223001
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46.7
Sfmt 4702
E:\FR\FM\12OCP1.SGM
12OCP1
63223
Federal Register / Vol. 76, No. 197 / Wednesday, October 12, 2011 / Proposed Rules
TABLE 3—SIZE STANDARDS SUPPORTED BY EACH FACTOR FOR EACH INDUSTRY—Continued
[Millions of dollars]
NAICS code/industry title
Simple
average
firm size
($ million)
Weighted
average
firm size
($ million)
Average
assets size
($ million)
Four-firm
ratio (%)
Four-firm
average
size
($ million)
Gini
coefficient
Federal
contract
factor (%)
Calculated
new size
standard
($ million)
Current
size
standard
($ million)
(1)
(2)
(3)
(4)
(5)
(6)
(7)
(8)
(9)
(10)
515120 Television Broadcasting ...................................
515210 Cable and Other Subscription Programming ...........
517410 Satellite Telecommunications .....................
517919 All Other Telecommunications .....................
518210 Data Processing,
Hosting, and Related Services ........................................
519110
News Syndicates .......
519120
Libraries and Archives
519190 All Other Information
Services .................................
39.8
35.5
367.3
35.5
56.8
35.5
43.3
3,893.7
35.5
0.878
$35.5
....................
35.5
14.0
101.2
35.5
1,186.4
35.5
82.0
35.5
62.0
6,964.8
35.5
0.911
$35.5
....................
35.5
15.0
6.2
35.5
111.8
30.0
....................
42.4
471.1
14.0
0.894
$35.5
9.2
30.0
15.0
4.0
25.5
184.3
35.5
....................
46.8
1,572.9
30.0
0.908
$35.5
-2.3
30.0
25.0
7.3
35.5
8.1
35.5
0.9
5.0
74.4
19.0
105.5
25.5
24.7
7.0
5.9
35.5
....................
25.8
4,301.8
18.0
30.0
25.0
68.8
....................
25.5
7.0
....................
27.3
368.0
10.0
126.7
0.854
$35.5
0.894
$35.5
0.754
$19.0
....................
14.0
7.0
5.1
30.0
141.6
35.5
....................
54.5
320.2
10.0
0.916
$35.5
8.8
25.5
7.0
Special Considerations
Evaluation of SBA Loan Data
Employee Based Size Standards
In this proposed rule, SBA has not
reviewed 12 industries in NAICS Sector
51 that currently have employee based
size standards. The SBA will review
those industries when it reviews the
Manufacturing Sector (NAICS Sector
31–33) and other industries that have
employee based size standards. The
SBA proposes, therefore, to leave the
size standards for those 12 industries at
their current levels until it reviews the
employee based size standards.
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
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 small
businesses much smaller than the
current size standards that use the
SBA’s 7(a) and 504 loans. Therefore, no
size standard in NAICS Sector 51,
Information, needs an adjustment based
on this factor.
Proposed Changes to Size Standards
Table 4, below, summarizes the
results of SBA analyses of size standards
from Table 3. The results support
increases in size standards in 15
industries, decreases in four industries,
and no change in one industry.
TABLE 4—SUMMARY OF SIZE STANDARDS ANALYSIS
mstockstill on DSK4VPTVN1PROD with PROPOSALS
NAICS code
511210
512110
512120
512131
512132
512191
512199
512210
512240
512290
515111
515112
515120
515210
517410
517919
518210
519110
519120
........................................................
........................................................
........................................................
........................................................
........................................................
........................................................
........................................................
........................................................
........................................................
........................................................
........................................................
........................................................
........................................................
........................................................
........................................................
........................................................
........................................................
........................................................
........................................................
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17:32 Oct 11, 2011
Calculated
new size
standard
($ million)
NAICS industry title
Jkt 223001
Software Publishers .......................................................................
Motion Picture and Video Production ............................................
Motion Picture and Video Distribution ...........................................
Motion Picture Theaters (except Drive-Ins) ...................................
Drive-In Motion Picture Theaters ...................................................
Teleproduction and Other Postproduction Services ......................
Other Motion Picture and Video Industries ...................................
Record Production .........................................................................
Sound Recording Studios ..............................................................
Other Sound Recording Industries ................................................
Radio Networks .............................................................................
Radio Stations ...............................................................................
Television Broadcasting .................................................................
Cable and Other Subscription Programming ................................
Satellite Telecommunications ........................................................
All Other Telecommunications .......................................................
Data Processing, Hosting, and Related Services .........................
News Syndicates ...........................................................................
Libraries and Archives ...................................................................
PO 00000
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E:\FR\FM\12OCP1.SGM
12OCP1
$35.5
30.0
25.5
35.5
5.0
19.0
19.0
7.0
5.0
10.0
30.0
35.5
35.5
35.5
30.0
30.0
30.0
25.5
14.0
Current size
standard
($ million)
$25.0
29.5
29.5
7.0
7.0
29.5
7.0
7.0
7.0
7.0
7.0
7.0
14.0
15.0
15.0
25.0
25.0
7.0
7.0
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Federal Register / Vol. 76, No. 197 / Wednesday, October 12, 2011 / Proposed Rules
TABLE 4—SUMMARY OF SIZE STANDARDS ANALYSIS—Continued
Calculated
new size
standard
($ million)
NAICS code
NAICS industry title
519190 ........................................................
All Other Information Services .......................................................
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
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
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 Small Business Jobs Act of
2010 (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 $12 billion in tax relief to help
small businesses invest in their firms
and create jobs.
Reducing size standards based solely
on analytical results would decrease the
number of firms that could participate
in Federal financial and procurement
assistance for small businesses. That
would run counter to what SBA and the
Federal government are doing to help
small businesses. Reducing size
eligibility for Federal procurement
opportunities, especially under current
economic conditions, would not
preserve or create more jobs; rather, it
would have the opposite effect.
Therefore, in this proposed rule, SBA
has decided not to propose to reduce the
size standards for any industries. For
industries where analyses might seem to
support lowering size standards, SBA
proposes to retain the current size
standards. As stated previously, the
Small Business Act requires the
Administrator to ‘‘* * * consider other
factors deemed to be relevant * * *’’ to
establishing small business size
standards. The current economic
conditions and the impact on job
creation are quite relevant to
establishing small business size
standards. The SBA nevertheless invites
comments and suggestions on whether
it should lower size standards as
suggested by analyses of industry and
program data or retain the current
standards for those industries in view of
current economic conditions.
As discussed above, SBA has decided
that lowering small business size
standards would be inconsistent with
what the Federal government is doing to
stimulate the economy and encourage
25.5
Current size
standard
($ million)
7.0
job growth through the Recovery Act
and the Jobs Act. Therefore, for those
industries for which analyses suggested
decreasing their size standards, SBA
proposes to retain the current size
standards. Thus, of the 20 industries in
NAICS Sector 51 that were reviewed in
this proposed rule, SBA proposes to
increase size standards for 15 industries
and retain the current standards for five
industries. Industries for which SBA has
proposed to increase their size
standards and proposed standards are in
Table 5.
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),
which the Agency proposed (74 FR
53924, 74 FR 53913, and 74 FR 53941,
October 21, 2009) and adopted in its
final rules (75 FR 61597, 75 FR 61604,
and 75 FR 61591, October 6, 2010). 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 56 (Administrative and Support,
Waste Management and Remediation
Services) 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 5—SUMMARY OF PROPOSED SIZE STANDARD REVISIONS
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NAICS code
511210
512110
512131
512199
512290
515111
515112
515120
515210
517410
517919
518210
........................................................
........................................................
........................................................
........................................................
........................................................
........................................................
........................................................
........................................................
........................................................
........................................................
........................................................
........................................................
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Proposed size
standard
($ million)
NAICS industry title
Jkt 223001
Software Publishers .......................................................................
Motion Picture and Video Production ............................................
Motion Picture Theaters (except Drive-Ins) ...................................
Other Motion Picture and Video Industries ...................................
Other Sound Recording Industries ................................................
Radio Networks .............................................................................
Radio Stations ...............................................................................
Television Broadcasting .................................................................
Cable and Other Subscription Programming ................................
Satellite Telecommunications ........................................................
All Other Telecommunications .......................................................
Data Processing, Hosting, and Related Services .........................
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$35.5
30.0
35.5
19.0
10.0
30.0
35.5
35.5
35.5
30.0
30.0
30.0
Current size
standard
($ million)
$25.0
29.5
7.0
7.0
7.0
7.0
7.0
14.0
15.0
15.0
25.0
25.0
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TABLE 5—SUMMARY OF PROPOSED SIZE STANDARD REVISIONS—Continued
Proposed size
standard
($ million)
NAICS code
NAICS industry title
519110 ........................................................
519120 ........................................................
519190 ........................................................
News Syndicates ...........................................................................
Libraries and Archives ...................................................................
All Other Information Services .......................................................
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Evaluation of Dominance in Field of
Operation
The SBA has determined that for the
industries in NAICS Sector 51,
Information, for which it has proposed
to increase size standards, no firm at or
below the proposed size standard is
large enough to dominate its field of
operation. At the proposed size
standards, if adopted, the small business
shares of total industry receipts among
those industries vary from less than 0.1
percent to 2.4 percent, with an average
of 0.8 percent. These levels of market
share effectively preclude a firm at or
below the proposed size standards from
exerting control on its industry.
Request for Comments
The 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. The SBA invites comments on
whether simplification of size standards
in this way is necessary and if these
proposed fixed size levels are
appropriate. The SBA welcomes
suggestions on alternative approaches to
simplifying small business size
standards.
2. The SBA seeks feedback on
whether the proposed levels of size
standards are appropriate given the
economic characteristics of each
industry. The SBA also seeks feedback
and suggestions on alternative
standards, if they would be more
appropriate, including whether an
employee based standard for certain
industries or exceptions is a more
suitable measure of size, and if so, what
that employee level should be.
3. The SBA’s proposed size standards
are based on its evaluation of five
primary factors: Average firm size,
average assets size (a proxy for startup
costs and entry barriers), four-firm
concentration ratio, distribution of firms
by size, and the level and small business
share of Federal contracting dollars. The
SBA welcomes comments on these
factors and/or suggestions on other
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factors that it should consider in
assessing industry characteristics when
evaluating or revising size standards.
The SBA also seeks information on
relevant data sources, if available.
4. The SBA gives equal weight to each
of the five primary factors in all
industries. The SBA seeks feedback on
whether it should continue to give 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.
5. For some industries, SBA proposes
to increase the existing size standards
by a large amount (such as NAICS
512131, 515111, and 515112), while for
others the proposed increases are
modest. The 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. The SBA seeks
suggestions on appropriate levels of
changes to size standards and on their
minimum or maximum levels.
6. To simplify size standards, SBA has
established or proposed common size
standards for closely related industries
in other NAICS Sectors. Based on SBA’s
analysis of the industry data, too much
variation exists among the industries in
NAICS Sector 51 to propose a common
size standard for most industries.
Therefore, for industries reviewed in
this proposed rule, SBA has proposed
size standards based on an analysis of
each specific industry. SBA welcomes
comments on whether it should adopt
common size standards for certain
industries in NAICS Sector 51, and if so,
how are those industries related in a
way to require a common size standard.
7. 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. The SBA welcomes any
comments on this procedure and
suggestions on alternative methods.
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Current size
standard
($ million)
25.5
14.0
25.5
7.0
7.0
7.0
Public comments on the above issues
are very valuable to SBA for validating
its size standard methodology and its
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?
The SBA believes that the proposed
size standards revisions for a number of
industries in NAICS Sector 51,
Information, will better reflect the
economic characteristics of small
businesses and the Federal government
marketplace. The SBA’s mission is to
aid and assist small businesses through
a variety of financial, procurement,
business development, and advocacy
programs. To assist the intended
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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 the 15 industries for which SBA has
proposed increasing size standards, SBA
estimates that more than 500 additional
firms will obtain small business status
and become eligible for these programs.
That number is 1.2 percent of the total
number of firms that are classified as
small under the current standards in all
20 industries in NAICS Sector 51
covered by this proposed rule. If
adopted as proposed, this would
increase the small business share of
total industry receipts in those
industries from about 13 percent under
the current size standards to 15 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 will 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 a larger pool of small businesses
from which to draw for their small
business procurement programs.
During fiscal years 2007–2009, nearly
98 percent of Federal contracting dollars
spent in industries reviewed in this
proposed rule were accounted for by the
15 industries for which SBA has
proposed to increase size standards. The
SBA estimates that additional firms
gaining small business status under the
proposed size standards could
potentially obtain Federal contracts
totaling up to $15 million to $20 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 5 to 10
additional loans totaling about $1.0
million to $2.0 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
their exact number and 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 exact 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 500 newly defined
additional small firms could become
active in Federal procurement programs,
the proposed changes, if adopted, may
entail some additional administrative
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costs to the Federal Government
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, or 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.
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
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
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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
number of contracts transferred from
large and from currently defined small
businesses. The 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 either ‘‘small
business’’ or ‘‘other than small
business’’; FPDS–NG does not provide
the exact size of the business.
The proposed revisions to the existing
size standards for Industries in NAICS
Sector 51, Information, 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 the small
business programs designed to assist
them.
Executive Order 13563
A description of the need for this
regulatory action and benefits and costs
associated with this action including
possible distributions impacts that
relate to Executive Order 13563 is
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.
The SBA also met with various industry
groups to obtain their feedback on its
methodology and other size standards
issues. The 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. The
presentation also included information
on latest status of the comprehensive
size standards review and on how
interested parties can provide SBA with
input and feedback on size standards
review.
Additionally, SBA sent letters to the
Directors of the Offices of Small and
Disadvantaged Business Utilization
(OSDBU) at several Federal agencies
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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). The 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 51, Information, is
consistent with EO 13563, section 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. The
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
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 and do a
complete review of all size standards
not less frequently than once every
5 years thereafter.
Executive Order 12988
This action meets applicable
standards set forth in Sections 3(a) and
3(b)(2) of Executive Order 12988, Civil
Justice Reform, to minimize litigation,
eliminate ambiguity, and reduce
burden. The action does not have
retroactive or preemptive effect.
Executive Order 13132
For purposes of Executive Order
13132, SBA has determined that this
proposed rule will not have substantial,
direct effects on the States, on the
relationship between the national
government and the States, or on the
distribution of power and
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63227
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 51, Information. As described
above, this rule may affect small
businesses seeking Federal contracts;
loans under SBA’s 7(a), 504 Guaranteed
Loan and Economic Injury Disaster Loan
Programs, as well as 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 is SBA’s description and estimate
of the number of small entities to which
the rule will apply?; (3) What are the
projected reporting, recordkeeping, 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 51, Information, 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 that
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
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.
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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
500 additional firms will become small
because of increases in size standards in
15 industries. That represents 1.2
percent of the total number of firms that
are classified as small under the current
standards in all 20 industries in NAICS
Sector 51 covered by this proposed rule.
This will result in an increase in the
small business share of total industry
receipts for this Sector from about 13
percent under the current size standards
to 15 percent under the proposed
standards. The proposed standards, if
adopted, will enable more small
businesses to retain their small business
status for a longer period. Many firms
have lost their small business eligibility
and find it difficult to compete at such
low levels with companies that are
significantly larger than they are. The
SBA believes the competitive impact
will be positive for existing small
businesses and for those that exceed the
current 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 Central Contractor Registration
(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 section 3(a)(2)(C) of the Small
Business Act, 15 U.S.C. 632(a)(2)(c),
Federal agencies must use SBA’s size
standards to define a small business,
unless specifically authorized by statute
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). The SBA is not
aware of any Federal rule that would
duplicate or conflict with establishing
size standards.
However, the Small Business Act and
SBA’s regulations allow Federal
agencies to develop different size
standards if they believe that SBA’s size
standards are not appropriate for their
programs, with the approval of SBA’s
Administrator (13 CFR 121.903). The
Regulatory Flexibility Act authorizes an
agency to establish an alternative small
business definition after consultation
with the Office of Advocacy of the U.S.
Small Business Administration (5 U.S.C.
601(3)).
5. What alternatives will allow the
Agency to accomplish its regulatory
objectives while minimizing the impact
on small entities?
By law, SBA is required to develop
numerical size standards for
establishing eligibility for Federal small
business assistance programs. Other
than varying size standards by industry
and changing the size measures, no
practical alternative exists to the
systems of numerical size standards.
List of Subjects in 13 CFR Part 121
Administrative practice and
procedure, Government procurement,
Government property, Grant programs—
business, Individuals with disabilities,
Loan programs—business, Reporting
and recordkeeping requirements, Small
businesses.
For the reasons set forth in the
preamble, SBA proposes to amend part
13 CFR part 121 as follows:
PART 121—SMALL BUSINESS SIZE
REGULATIONS
1. The authority citation for part 121
continues to read as follows:
Authority: 15 U.S.C. 632, 634(b)(6), 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 ‘‘511210’’, ‘‘512110’’,
‘‘512131’’, ‘‘512199’’, ‘‘512290’’,
‘‘515111’’, ‘‘515112’’, ‘‘515120’’,
’’515210’’, ‘‘517410’’, ‘‘517919’’,
‘‘518210’’, ‘‘519110’’, ‘‘519120’’, and
‘‘519190’’ to read as follows:
§ 121.201 What size standards has SBA
identified by North American Industry
Classification System codes?
*
*
*
*
Size standards
in millions of
dollars
NAICS codes
NAICS U.S. industry title
*
*
511210 .........................................................
*
*
*
Software Publishers .......................................................................
*
*
*
512110 .........................................................
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*
*
*
*
Motion Picture and Video Production ............................................
*
*
*
512131 .........................................................
*
*
*
Motion Picture Theaters (except Drive-Ins) ...................................
*
*
*
512199 .........................................................
*
*
*
Other Motion Picture and Video Industries ...................................
*
*
*
512290 .........................................................
*
*
*
Other Sound Recording Industries ................................................
*
*
*
515111 .........................................................
*
*
*
Radio Networks .............................................................................
*
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in number of
employees
*
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*
30.0
*
35.5
*
19.0
*
10.0
*
30.0
63229
Federal Register / Vol. 76, No. 197 / Wednesday, October 12, 2011 / Proposed Rules
Size standards
in millions of
dollars
NAICS codes
NAICS U.S. industry title
515112 .........................................................
515120 .........................................................
515210 .........................................................
Radio Stations ...............................................................................
Television Broadcasting .................................................................
Cable and Other Subscription Programming ................................
*
*
517410 .........................................................
*
*
*
Satellite Telecommunications ........................................................
*
*
*
517919 .........................................................
*
*
*
All Other Telecommunications .......................................................
*
*
*
518210 .........................................................
*
*
*
Data Processing, Hosting, and Related Services .........................
*
*
*
519110 .........................................................
519120 .........................................................
*
*
*
News Syndicates ...........................................................................
Libraries and Archives ...................................................................
*
*
*
519190 .........................................................
*
*
*
All Other Information Services .......................................................
*
*
*
*
Dated: July 22, 2011.
Karen G. Mills,
Administrator.
[FR Doc. 2011–26208 Filed 10–7–11; 8:45 am]
BILLING CODE 8025–01–P
DEPARTMENT OF TRANSPORTATION
Federal Aviation Administration
14 CFR Part 39
[Docket No. FAA–2011–1068; Directorate
Identifier 2010–NM–189–AD]
RIN 2120–AA64
Airworthiness Directives; The Boeing
Company Model 737–100, –200, –200C,
–300, –400, and –500 Series Airplanes
Federal Aviation
Administration (FAA), DOT.
ACTION: Notice of proposed rulemaking
(NPRM).
AGENCY:
We propose to adopt a new
airworthiness directive (AD) for the
products listed above. This proposed
AD would require installing an
automatic shutoff system for the center
and auxiliary tank fuel boost pumps, as
applicable, and installing a placard in
the airplane flight deck if necessary;
replacing the P5–2 fuel system module
assembly; and installing the uncommanded on (UCO) protection
system for the center and auxiliary tank
fuel boost pumps, as applicable. This
proposed AD would also require
revisions to the Limitations and Normal
Procedures sections of the airplane
flight manual to advise the flightcrew of
certain operating restrictions for
mstockstill on DSK4VPTVN1PROD with PROPOSALS
SUMMARY:
VerDate Mar<15>2010
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*
*
airplanes equipped with an automatic
shutoff system. This proposed AD
would also require revising the
maintenance program by incorporating
new airworthiness limitations for fuel
tank systems to satisfy Special Federal
Aviation Regulation No. 88
requirements. This proposed AD was
prompted by fuel system reviews
conducted by the manufacturer. We are
proposing this AD to prevent operation
of the center and auxiliary tank fuel
boost pumps with continuous low
pressure, which could lead to friction
sparks or overheating in the fuel pump
inlet that could create a potential
ignition source inside the center and
auxiliary fuel tanks. These conditions,
in combination with flammable fuel
vapors, could result in a fuel tank
explosion and consequent loss of the
airplane.
DATES: We must receive comments on
this proposed AD by November 28,
2011.
ADDRESSES: You may send comments by
any of the following methods:
• Federal eRulemaking Portal: Go to
https://www.regulations.gov. Follow the
instructions for submitting comments.
• Fax: 202–493–2251.
• Mail: U.S. Department of
Transportation, Docket Operations,
M–30, West Building Ground Floor,
Room W12–140, 1200 New Jersey
Avenue, SE., Washington, DC 20590.
• Hand Delivery: Deliver to Mail
address above between 9 a.m. and
5 p.m., Monday through Friday, except
Federal holidays.
For service information identified in
this proposed AD, contact Boeing
Commercial Airplanes, Attention: Data
PO 00000
Frm 00024
Fmt 4702
Sfmt 4702
Size standards
in number of
employees
35.5
35.5
35.5
*
30.0
*
30.0
*
30.0
*
25.5
14.0
*
25.5
*
*
& Services Management, P.O. Box 3707,
MC 2H–65, Seattle, Washington 98124–
2207; telephone 206–544–5000,
extension 1; fax 206–766–5680; e-mail
me.boecom@boeing.com; Internet
https://www.myboeingfleet.com. You
may review copies of the referenced
service information at the FAA,
Transport Airplane Directorate, 1601
Lind Avenue SW., Renton, Washington.
For information on the availability of
this material at the FAA, call 425–227–
1221.
Examining the AD Docket
You may examine the AD docket on
the Internet at https://
www.regulations.gov; or in person at the
Docket Management Facility between
9 a.m. and 5 p.m., Monday through
Friday, except Federal holidays. The AD
docket contains this proposed AD, the
regulatory evaluation, any comments
received, and other information. The
street address for the Docket Office
(phone: 800–647–5527) is in the
ADDRESSES section. Comments will be
available in the AD docket shortly after
receipt.
FOR FURTHER INFORMATION CONTACT: Tak
Kobayashi, Aerospace Engineer,
Propulsion Branch, ANM–140S, FAA,
Seattle Aircraft Certification Office,
1601 Lind Avenue SW., Renton,
Washington 98057–3356; telephone:
425–917–6499; fax: 425–917–6590; email: Takahisa.Kobayashi@faa.gov.
SUPPLEMENTARY INFORMATION:
Comments Invited
We invite you to send any written
relevant data, views, or arguments about
this proposal. Send your comments to
E:\FR\FM\12OCP1.SGM
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]]>Agencies
[Federal Register Volume 76, Number 197 (Wednesday, October 12, 2011)]
[Proposed Rules]
[Pages 63216-63229]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2011-26208]
=======================================================================
-----------------------------------------------------------------------
SMALL BUSINESS ADMINISTRATION
13 CFR Part 121
RIN 3245-AG26
Small Business Size Standards: Information
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 15 industries in North
American Industry Classification System (NAICS) Sector 51, Information.
As part of its ongoing comprehensive review of all size standards, SBA
has evaluated all receipts based size standards in NAICS Sector 51 to
determine whether the existing size standards should be retained or
revised. This proposed rule is one of a series of proposals that
examines size standards of industries grouped by NAICS Sector. The SBA
issued a White Paper entitled ``Size Standards Methodology'' and
published a document 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-AF26, by one
of the following methods: (1) Federal eRulemaking Portal: https://www.regulations.gov; follow the instructions for submitting comments;
or, (2) Mail/Hand Delivery/Courier: Khem R. Sharma, PhD, Chief, Size
Standards Division, 409 Third Street, SW, Mail Code 6530, Washington,
DC 20416. The SBA will not accept comments 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. The 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.
[[Page 63217]]
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. The SBA uses two primary measures of business size--
average annual receipts and average number of employees. The 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 standards 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. The 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 and do a complete
review of all size standards not less frequently than once every 5
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
establishing, reviewing and modifying size standards when necessary.
The SBA has published this document on its Web site at https://www.sba.gov/size for public review and comments and included it, as a
supporting document, in the electronic docket of this proposed rule at
https://www.regulations.gov. The SBA does not apply every feature of its
methodology to every size standard evaluation because not all features
are appropriate for every industry. For example, since this proposed
rule covers all industries with receipts based standards in NAICS
Sector 51, the methodology described here applies to establishing
receipts based standards. However, the methodology is made available in
its entirety for parties who are interested in SBA's overall approach
to establishing, evaluating, and modifying small business size
standards. The SBA always explains its analysis in individual proposed
and final rules relating to size standards for specific industries.
The 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; follow 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. 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. The SBA
continues to welcome comments on its methodology from interested
parties.
Congress granted discretion to SBA's Administrator 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 serves as the underlying basis for
developing and modifying small business size standards. The 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 the analysis of an industry's
structure, SBA also 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
[[Page 63218]]
on the proposed rule, when it establishes small business size
standards. The SBA also examines whether a size standard based on
industry and other relevant data successfully exclude businesses that
are dominant in the industry.
This proposed rule includes information regarding the factors SBA
evaluated and the criteria the Agency used to propose any adjustments
to size standards in NAICS Sector 51. It also explains why SBA has
proposed to adjust some size standards in NAICS Sector 51 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
51 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. The 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. The SBA has periodically
increased the receipts based anchor size standard for inflation, and it
stands today at $7 million. Since 1986, SBA has set 100 employees as
the size standard for all industries in the Wholesale Trade Sector for
SBA financial assistance programs. However, NAICS codes for Wholesale
Trade Industries (NAICS Sector 42) and their 100 employee size standard
for the Wholesale Trade Sector do not apply to Federal procurement
programs. Rather, for Federal procurement purposes the size standard is
500 employees for all industries in Wholesale Trade (NAICS Sector 42),
and for all industries in Retail Trade (NAICS Sector 44-45) under the
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. The 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. The SBA may consider adopting a size standard below
the anchor when (1) all or most of the industry characteristics are
significantly smaller than the average characteristics of the anchor
comparison group, or (2) other industry considerations strongly suggest
that the anchor size standard would be an unreasonably high size
standard for the industry.
If the specific industry's characteristics are significantly higher
than those of the anchor comparison group, 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 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 51 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. The 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. The 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.).
The 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. The 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 51 being reviewed in this proposed rule. A more detailed
description of this analysis is provided in the SBA's ``Size Standards
Methodology,'' available at https://www.sba.gov/size.
1. Average firm size. The 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
[[Page 63219]]
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. The 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. The 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. The 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. The 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. The 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 that 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 supports adopting the anchor size standard. If most
of an industry's economic activity is attributable to larger firms,
this would indicate 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 an industry's total
receipts reflect equal distribution among the industries, the Gini
coefficient will equal zero. If a single firm accounts for an
industry's total receipts, 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 equal,
warrant a higher size standard than the anchor. Conversely, if an
industry shows a similar or lower Gini coefficient than industries in
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. The 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 small business share
may be due to various factors, such as extensive administrative and
compliance requirements associated with Federal contracts, different
skill sets required for Federal contracts as compared to typical
commercial contracting work, and the size of Federal contracts. These,
and other factors, will likely influence the type of firms that compete
for Federal contracts. By comparing the Federal contracting small
business 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 also
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 current
size standards have impeded financial assistance to small businesses,
this can support higher size standards. However, if small businesses
under current size standards have been receiving significant amounts of
financial assistance through SBA's loan programs, or if the businesses
receiving SBA's financial assistance are much smaller than the existing
size standards, this factor may not be considered in determining the
size standards.
[[Page 63220]]
Sources of Industry and Program Data
The SBA's primary source of industry data used in this proposed
rule is a special tabulation of the data from 2007 Economic Census (see
https://www.census.gov/econ/census07/) prepared by the U.S. Bureau of
the Census (Census Bureau) for the Agency. The special tabulation
provides SBA with industry-specific data on the number of firms, number
of establishments, number of employees, annual payroll, and annual
receipts of companies by the size of firm 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 a
particular size class represents 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 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 2007-2009. The data are
available from the U.S. General Service Administration's Federal
Procurement Data System--Next Generation (FPDS-NG).
To assess the impact on financial assistance to small businesses,
SBA examined data on its own guaranteed loan programs for fiscal years
2008-2010.
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. The 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 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. The SBA believes that to
have so many different size standards with small variations among them
is 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 51 that has a receipts
based standard. In NAICS Sector 51, 20 industries have size standards
based on annual receipts, and 12 have size standards based on the
number of employees. In this proposed rule, SBA has not reviewed
employee based size standards for those 12 industries and the current
standards 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 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. Currently, the
most commonly used receipts based size standards cluster around the
following: $2.5 million to $4.5 million, $7 million, $9 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. The 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 ranged from
$2 million to $4.5 million at the start of the current comprehensive
size standards review. Among the higher level size clusters, SBA has
set four fixed levels: Namely, $10 million, $14 million, $25.5 million,
and $35.5 million. Because there are large intervals between some of
the fixed levels, SBA also established two intermediate levels: Namely,
$19 million between $14 million and $25.5 million, and $30 million
between $25.5 million and $35.5 million. These two intermediate levels
reflect roughly the same proportional differences as between the other
two successive levels.
Evaluation of Industry Structure
SBA evaluated the structure of the 20 industries in NAICS Sector
51, Information, to assess the appropriateness of the current receipts
based size standards. As described above, SBA compared data on the
economic characteristics of each of the 20 industries in NAICS Sector
51 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
[[Page 63221]]
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 $29 million. The SBA refers to this group of
industries as the ``higher level receipts based size standard
comparison group.'' The SBA determines differences in industry
structure between an industry under review and the industries in the
two comparison groups by comparing data on each of the industry
factors, including average firm size, average assets size, the four-
firm concentration ratio, and the Gini coefficient of distribution of
firms by size. Table 1 shows two measures of the average firm size
(simple and weighted), the average assets size, the four-firm
concentration ratio, the average receipts of the four largest firms,
and the Gini coefficient for both anchor level and higher level
comparison groups for receipts based size standards.
Table 1--Average Characteristics of Receipts Based Comparison Groups
--------------------------------------------------------------------------------------------------------------------------------------------------------
Avg. firm size ($ million) Avg. receipts
------------------------------------ Avg. assets size Four[dash]firm of four largest Gini
Receipts based comparison group Weighted ($ million) concentration firms ($ coefficient
Simple average average ratio (%) million) *
--------------------------------------------------------------------------------------------------------------------------------------------------------
Anchor Level................................ 1.32 19.63 0.84 16.6 196.4 0.693
Higher Level................................ 5.07 116.84 3.20 32.1 1,376.0 0.830
--------------------------------------------------------------------------------------------------------------------------------------------------------
* To be used for industries with a four-firm concentration ratio of 40% or greater.
Derivation of Size Standards Based on Industry Factors
For each industry factor in Table 1, SBA derives a separate size
standard based on the differences between the values for the 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 $19 million.
SBA applies the above calculation to derive a size standard for
each industry factor. Detailed formulas involved in these calculations
are presented in the SBA's ``Size Standards Methodology,'' available on
SBA's Web site at https://www.sba.gov/size. (However, note that figures
in the ``Size Standards Methodology'' White Paper are based on 2002
Economic Census data and are different from those presented in this
proposed rule. That is because when SBA prepared its ``Size Standards
Methodology,'' the 2007 Economic Census data were not yet available.)
Table 2 (below) shows ranges of values for each industry factor and the
levels of size standards supported by those values.
Table 2--Values of Industry Factors and Supported Size Standards
----------------------------------------------------------------------------------------------------------------
Or if avg.
Or if weighted Or if avg. receipts of Then size
If simple avg. receipts size avg. receipts assets size ($ largest four Or if Gini standard is
($ million) size ($ million) firms ($ coefficient ($ million)
million) million)
----------------------------------------------------------------------------------------------------------------
< 1.15....................... < 15.22......... < 0.73.......... < 142.8........ < 0.686........ 5.0
1.15 to 1.57................. 15.22 to 26.26.. 0.73 to 1.00.... 142.8 to 276.9. 0.686 to 0.702. 7.0
1.58 to 2.17................. 26.27 to 41.73.. 1.01 to 1.37.... 277.0 to 464.5. 0.703 to 0.724. 10.0
2.18 to 2.94................. 41.74 to 61.61.. 1.38 to 1.86.... 464.6 to 705.8. 0.725 to 0.752. 14.0
2.95 to 3.92................. 61.62 to 87.02.. 1.87 to 2.48.... 705.9 to 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 at obtaining 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 10 to
30 percentage points lower than the small business share of total
industry receipts
[[Page 63222]]
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. The 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. The 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 20 industries reviewed in this proposed rule, five
industries averaged $100 million or more annually in Federal
contracting during fiscal years 2007-2009. However, the Federal
contracting factor was not significant and no size standard was
calculated for this factor for any of these five industries. The small
business share of total Federal contracting dollars was already higher
than the small business share of the total industry receipts for four
of these five industries. In the one industry, the small business share
of total Federal contracting dollars was less than the small business
share of total industry receipts, but the difference was less than 10
percent. Thus, the latest data show that Federal contracting activity
is insignificant for most of the industries in NAICS Sector 51, and for
the majority of those industries where it is significant, small
businesses seem to be doing well in terms of their share of the Federal
marketplace relative to their share of the industry's total sales.
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, and 7 show two
numbers. The upper number is the value for the industry factor shown on
the top of the column and the lower number is the size standard
supported by that factor. For the four-firm concentration ratio, SBA
estimates a size standard 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. As mentioned earlier, no size standard
is derived for the Federal contracting factor as that factor was
significant in none of the industries in NAICS Sector 51 reviewed in
this proposed rule. 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]
--------------------------------------------------------------------------------------------------------------------------------------------------------
Simple Weighted Average Four-firm Calculated Current
average average assets size Four-firm average Gini Federal new size size
NAICS code/industry title firm size firm size ($ ratio (%) size ($ coefficient contract standard standard
($ million) ($ million) million) million) factor (%) ($ million) ($ million)
(1) (2) (3) (4) (5) (6) (7) (8) (9) (10)
--------------------------------------------------------------------------------------------------------------------------------------------------------
511210 Software Publishers......... $22.9 $358.8 $16.0 38.9 $13,171.0 0.903 31.0 $35.5 $25.0
35.5 35.5 35.5 $35.5
512110 Motion Picture and Video 5.1 591.5 2.4 52.7 7,893.3 0.932 ........... 30.0 29.5
Production........................ 30.0 35.5 19.0 35.5 $35.5
512120 Motion Picture and Video 4.1 34.9 ........... 30.6 157.2 0.814 ........... 25.5 29.5
Distribution...................... 25.5 10.0 $25.5
512131 Motion Picture Theaters 6.2 304.1 7.4 53.9 1,699.2 0.909 ........... 35.5 7.0
(except Drive[dash]Ins)........... 35.5 35.5 35.5 35.5 $35.5
512132 Drive[dash]In Motion Picture 0.4 1.8 ........... 23.0 5.5 0.322 ........... 5.0 7.0
Theaters.......................... 5.0 5.0 $5.0
512191 Teleproduction and Other 2.2 46.5 1.4 27.1 296.6 0.817 ........... 19.0 29.5
Postproduction Services........... 14.0 14.0 10.0 $25.5
512199 Other Motion Picture and 3.2 78.8 1.7 75.7 151.8 0.866 ........... 19.0 7.0
Video Industries.................. 19.0 19.0 14.0 7.0 $35.5
512210 Record Production........... 1.0 26.2 0.5 46.7 39.5 0.711 ........... 7.0 7.0
5.0 7.0 5.0 5.0 $10.0
512240 Sound Recording Studios..... 0.5 4.6 0.2 9.8 21.0 0.520 ........... 5.0 7.0
5.0 5.0 5.0 $5.0
512290 Other Sound Recording 1.1 19.7 ........... 30.9 34.6 0.718 ........... 10.0 7.0
Industries........................ 5.0 7.0 $10.0
515111 Radio Networks.............. 7.9 112.1 ........... 61.4 633.4 0.889 ........... 30.0 7.0
35.5 30.0 14.0 $35.5
515112 Radio Stations.............. 4.7 149.1 6.6 42.2 1,569.4 0.885 ........... 35.5 7.0
25.5 35.5 35.5 30.0 $35.5
[[Page 63223]]
515120 Television Broadcasting..... 39.8 367.3 56.8 43.3 3,893.7 0.878 ........... 35.5 14.0
35.5 35.5 35.5 35.5 $35.5
515210 Cable and Other Subscription 101.2 1,186.4 82.0 62.0 6,964.8 0.911 ........... 35.5 15.0
Programming....................... 35.5 35.5 35.5 35.5 $35.5
517410 Satellite Telecommunications 6.2 111.8 ........... 42.4 471.1 0.894 9.2 30.0 15.0
35.5 30.0 14.0 $35.5
517919 All Other Telecommunications 4.0 184.3 ........... 46.8 1,572.9 0.908 [dash]2.3 30.0 25.0
25.5 35.5 30.0 $35.5
518210 Data Processing, Hosting, 7.3 74.4 5.9 25.8 4,301.8 0.854 18.0 30.0 25.0
and Related Services.............. 35.5 19.0 35.5 $35.5
519110 News Syndicates............. 8.1 105.5 ........... 68.8 368.0 0.894 ........... 25.5 7.0
35.5 25.5 10.0 $35.5
519120 Libraries and Archives...... 0.9 24.7 ........... 27.3 126.7 0.754 ........... 14.0 7.0
5.0 7.0 $19.0
519190 All Other Information 5.1 141.6 ........... 54.5 320.2 0.916 8.8 25.5 7.0
Services.......................... 30.0 35.5 10.0 $35.5
--------------------------------------------------------------------------------------------------------------------------------------------------------
Special Considerations
Employee Based Size Standards
In this proposed rule, SBA has not reviewed 12 industries in NAICS
Sector 51 that currently have employee based size standards. The SBA
will review those industries when it reviews the Manufacturing Sector
(NAICS Sector 31-33) and other industries that have employee based size
standards. The SBA proposes, therefore, to leave the size standards for
those 12 industries at their current levels until it reviews the
employee based size standards.
Evaluation of SBA Loan Data
Before deciding on an industry's size standard, SBA also considers
the impact of new or revised standards on SBA's loan programs.
Accordingly, SBA examined its 7(a) and 504 Loan Program data for fiscal
years 2008-2010 to assess whether the existing or proposed size
standards need further adjustments to ensure credit opportunities for
small businesses through those programs. For the industries reviewed in
this rule, the data show that it is mostly small businesses much
smaller than the current size standards that use the SBA's 7(a) and 504
loans. Therefore, no size standard in NAICS Sector 51, Information,
needs an adjustment based on this factor.
Proposed Changes to Size Standards
Table 4, below, summarizes the results of SBA analyses of size
standards from Table 3. The results support increases in size standards
in 15 industries, decreases in four industries, and no change in one
industry.
Table 4--Summary of Size Standards Analysis
----------------------------------------------------------------------------------------------------------------
Calculated new Current size
NAICS code NAICS industry title size standard standard ($
($ million) million)
----------------------------------------------------------------------------------------------------------------
511210........................................ Software Publishers............. $35.5 $25.0
512110........................................ Motion Picture and Video 30.0 29.5
Production.
512120........................................ Motion Picture and Video 25.5 29.5
Distribution.
512131........................................ Motion Picture Theaters (except 35.5 7.0
Drive[dash]Ins).
512132........................................ Drive[dash]In Motion Picture 5.0 7.0
Theaters.
512191........................................ Teleproduction and Other 19.0 29.5
Postproduction Services.
512199........................................ Other Motion Picture and Video 19.0 7.0
Industries.
512210........................................ Record Production............... 7.0 7.0
512240........................................ Sound Recording Studios......... 5.0 7.0
512290........................................ Other Sound Recording Industries 10.0 7.0
515111........................................ Radio Networks.................. 30.0 7.0
515112........................................ Radio Stations.................. 35.5 7.0
515120........................................ Television Broadcasting......... 35.5 14.0
515210........................................ Cable and Other Subscription 35.5 15.0
Programming.
517410........................................ Satellite Telecommunications.... 30.0 15.0
517919........................................ All Other Telecommunications.... 30.0 25.0
518210........................................ Data Processing, Hosting, and 30.0 25.0
Related Services.
519110........................................ News Syndicates................. 25.5 7.0
519120........................................ Libraries and Archives.......... 14.0 7.0
[[Page 63224]]
519190........................................ All Other Information Services.. 25.5 7.0
----------------------------------------------------------------------------------------------------------------
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 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 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 Small Business Jobs Act of 2010 (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.
Reducing size standards based solely on analytical results would
decrease the number of firms that could participate in Federal
financial and procurement assistance for small businesses. 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 has decided not to
propose to reduce the 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. The SBA nevertheless invites comments and suggestions on
whether it should lower size standards as suggested by analyses of
industry and program data or retain the current standards for those
industries in view of current economic conditions.
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 the Jobs Act. Therefore, for those industries for
which analyses suggested decreasing their size standards, SBA proposes
to retain the current size standards. Thus, of the 20 industries in
NAICS Sector 51 that were reviewed in this proposed rule, SBA proposes
to increase size standards for 15 industries and retain the current
standards for five industries. Industries for which SBA has proposed to
increase their size standards and proposed standards are in Table 5.
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), which the Agency proposed (74 FR 53924, 74 FR 53913, and 74
FR 53941, October 21, 2009) and adopted in its final rules (75 FR
61597, 75 FR 61604, and 75 FR 61591, October 6, 2010). 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 56 (Administrative and
Support, Waste Management and Remediation Services) 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 5--Summary of Proposed Size Standard Revisions
----------------------------------------------------------------------------------------------------------------
Proposed size Current size
NAICS code NAICS industry title standard ($ standard ($
million) million)
----------------------------------------------------------------------------------------------------------------
511210........................................ Software Publishers............. $35.5 $25.0
512110........................................ Motion Picture and Video 30.0 29.5
Production.
512131........................................ Motion Picture Theaters (except 35.5 7.0
Drive[dash]Ins).
512199........................................ Other Motion Picture and Video 19.0 7.0
Industries.
512290........................................ Other Sound Recording Industries 10.0 7.0
515111........................................ Radio Networks.................. 30.0 7.0
515112........................................ Radio Stations.................. 35.5 7.0
515120........................................ Television Broadcasting......... 35.5 14.0
515210........................................ Cable and Other Subscription 35.5 15.0
Programming.
517410........................................ Satellite Telecommunications.... 30.0 15.0
517919........................................ All Other Telecommunications.... 30.0 25.0
518210........................................ Data Processing, Hosting, and 30.0 25.0
Related Services.
[[Page 63225]]
519110........................................ News Syndicates................. 25.5 7.0
519120........................................ Libraries and Archives.......... 14.0 7.0
519190........................................ All Other Information Services.. 25.5 7.0
----------------------------------------------------------------------------------------------------------------
Evaluation of Dominance in Field of Operation
The SBA has determined that for the industries in NAICS Sector 51,
Information, for which it has proposed to increase size standards, no
firm at or below the proposed size standard is large enough to dominate
its field of operation. At the propos
