Small Business Size Standards: Agriculture, Forestry, Fishing and Hunting; Mining, Quarrying, and Oil and Gas Extraction; Utilities; Construction, 62239-62266 [2020-21589]
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BILLING CODE 7590–01–P
SMALL BUSINESS ADMINISTRATION
13 CFR Part 121
RIN 3245–AG89
Small Business Size Standards:
Agriculture, Forestry, Fishing and
Hunting; Mining, Quarrying, and Oil
and Gas Extraction; Utilities;
Construction
U.S. Small Business
Administration.
ACTION: Proposed rule.
AGENCY:
The U.S. Small Business
Administration (SBA) proposes to
increase its receipts-based small
business size definitions (commonly
referred to as ‘‘size standards’’) for
North American Industry Classification
System (NAICS) Sectors related to
Agriculture, Forestry, Fishing and
Hunting; Mining, Quarrying, and Oil
and Gas Extraction; Utilities; and
Construction. SBA proposes to increase
size standards for 68 industries in those
sectors, including 58 industries and 2
subindustries (‘‘exceptions’’) in NAICS
Sector 11 (Agriculture, Forestry, Fishing
and Hunting), 3 industries in Sector 21
(Quarrying, and Oil and Gas Extraction),
3 industries in Sector 22 (Utilities), and
1 industry and 1 subindustry
(‘‘exception’’) in Sector 23
(Construction). SBA’s proposed
revisions relied on its recently revised
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SUMMARY:
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‘‘Size Standards Methodology’’
(Methodology). SBA seeks comments on
its proposed changes to size standards
in the above sectors, and the data
sources it evaluated to develop the
proposed size standards.
DATES: SBA must receive comments to
this proposed rule on or before
December 1, 2020.
ADDRESSES: Identify your comments by
RIN 3245–AG89 and submit them by
one of the following methods: (1)
Federal eRulemaking Portal:
www.regulations.gov. Follow the
instructions for submitting comments;
or (2) Mail/Hand Delivery/Courier:
Khem R. Sharma, Ph.D., Chief, Office of
Size Standards, 409 Third Street SW,
Mail Code 6530, Washington, DC 20416.
SBA will post all comments to this
proposed rule on www.regulations.gov.
If you wish to submit confidential
business information (CBI) as defined in
the User Notice at www.regulations.gov,
you must submit such information to
U.S. Small Business Administration,
Khem R. Sharma, Ph.D., Chief, Office of
Size Standards, 409 Third Street SW,
Mail Code 6530, Washington, DC 20416,
or send an email to sizestandards@
sba.gov. Highlight the information that
you consider to be CBI and explain why
you believe SBA should hold this
information as confidential. SBA will
review your information and determine
whether it will make the information
public.
FOR FURTHER INFORMATION CONTACT:
Jorge Laboy-Bruno, Ph.D., Economist,
Office of Size Standards, (202) 205–6618
or sizestandards@sba.gov.
SUPPLEMENTARY INFORMATION: To
determine eligibility for Federal small
business assistance, SBA establishes
small business size definitions (usually
referred to as ‘‘size standards’’) for
private sector industries in the United
States. SBA uses two primary measures
of business size for size standards
purposes: Average annual receipts and
average number of employees. SBA uses
financial assets for certain financial
industries and refining capacity, in
addition to employees, for the
petroleum refining industry to measure
business size. 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
tangible net worth and net income based
alternative size standards to determine
eligibility for those programs.
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In September 2010, Congress passed
the Jobs Act (Pub. L. 111–240, 124 Stat.
2504, September 27, 2010), (Jobs Act)
requiring SBA to review all size
standards every five years and make
necessary adjustments to reflect current
industry and market conditions. In
accordance with the Jobs Act, in early
2016 SBA completed the first 5-year
review of all size standards—except
those for agricultural enterprises for
which size standards were previously
set by Congress—and made appropriate
adjustments to size standards for a
number of industries to reflect current
industry and Federal market conditions.
During the previous 5-year
comprehensive review SBA reviewed
the receipts-based size standards for
sixteen (16) industries and two (2)
exceptions within NAICS Sector 11
(Agriculture, Forestry, Fishing and
Hunting); four (4) industries within
Sector 21 (Quarrying, and Oil and Gas
Extraction), Subsector 213 (Support
Activity for Mining); three (3) industries
in Sector 22 (Utilities) and thirty-one
(31) industries and one (1) exception in
Sector 23 (Construction). These reviews
of receipts-based size standards
occurred during October 2010 to
December 2013. SBA’s analyses of the
relevant industry and Federal
contracting data available at that time
supported lowering size standards for
twenty-eight (28) industries in Sector 23
and four (4) industries and two (2)
exceptions in Sector 11. However,
taking into consideration economic
conditions at the time, SBA decided to
either retain all size standards for which
the industry analysis suggested a lower
size standard at existing levels or bring
them up to the relevant common size
standard. In the final rules, SBA
increased receipts-based size standards
for nineteen (19) of all industries
reviewed, including eleven (11)
industries in Sector 11 (78 FR 37398,
June 20, 2013); three (3) industries in
Sector 21 (78 FR 37404, June 20, 2013);
three (3) industries in Sector 22 (78 FR
77343, December 23, 2013); and one (1)
industry and one (1) exception in Sector
23 (78 FR 77334, December 23, 2013).
SBA retained the existing size standards
for the remaining thirty-six (36)
industries and two (2) exceptions in
these sectors. Table 1, Size Standards
Revisions During the First 5-Year
Review, provides a summary of these
revisions by NAICS sector.
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TABLE 1—SIZE STANDARDS REVISIONS DURING THE FIRST 5-YEAR REVIEW
NAICS sector
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11
21
22
23
Number
of size
standards
reviewed
Sector name
Number
of size
standards
increased
Number
of size
standards
lowered
Number
of size
standards
maintained
..................................
..................................
..................................
..................................
Agriculture, Forestry, Fishing and Hunting ..........
Mining, Quarrying, and Oil and Gas Extraction ...
Utilities ..................................................................
Construction .........................................................
18
4
3
32
11
3
3
2
0
0
0
0
7
1
0
30
All Sectors ..............
..............................................................................
57
19
0
38
Currently, there are twenty-seven (27)
different size standards levels covering
1,023 NAICS industries and 14
subindustry activities (commonly
known as ‘‘exceptions’’ in SBA’s table of
size standards). Sixteen (16) of these
size levels are based on average annual
receipts, nine (9) are based on average
number of employees, and two (2) are
based on other measures.
Section 1831 of the National Defense
Authorization Act for Fiscal Year 2017
(‘‘NDAA 2017’’) (Pub. L. 114–328,
December 23, 2016) directed SBA to
establish size standards for all
agricultural enterprises in the same
manner as for other industries and to
include them in the 5-year rolling
review procedures established under
section 1344(a) of the Jobs Act.
Accordingly, in this proposed rule, SBA
has also reviewed and proposed
revisions to size standards for all
agricultural industries, including 46
industries that are being reviewed for
the first time. As stated above,
historically, the size standards for most
agricultural industries were established
by statute.
SBA also adjusts its monetary-based
size standards for inflation at least once
every five years. An interim final rule
on SBA’s latest inflation adjustment to
size standards, effective August 19,
2019, was published in the Federal
Register on July 18, 2019 (84 FR 34261).
SBA also updates its size standards
every five years to adopt the Office of
Management and Budget’s (OMB)
quinquennial NAICS revisions to its
table of small business size standards.
Effective October 1, 2017, SBA adopted
the OMB’s 2017 NAICS revisions to its
size standards (82 FR 44886, September
27, 2017).
This proposed rule is one of a series
of proposed rules that will review size
standards of industries grouped by
various NAICS sectors. Rather than
review all size standards at one time,
SBA is reviewing size standards by
grouping industries within various
NAICS sectors that use the same size
measure (i.e., employees or receipts). In
the current review, SBA will review size
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standards in six (6) groups of NAICS
sectors. (In the prior review, SBA
reviewed size standards mostly on a
sector-by-sector basis.) Once SBA
completes its review of size standards
for a group of sectors, the Agency issues
for public comments a proposed rule to
revise size standards for those industries
based on the latest available data and
other factors deemed relevant by the
SBA’s Administrator.
Below is a discussion of SBA’s
revised ‘‘Size Standards Methodology’’
(Methodology), available at
www.sba.gov/size, for establishing,
reviewing, or modifying receipts-based
size standards that SBA has applied to
this proposed rule. SBA examines the
structural characteristics of an industry
as a basis to assess industry differences
and the overall degree of
competitiveness of an industry and of
firms within the industry. Industry
structure is typically examined by
analyzing four primary factors—average
firm size, degree of competition within
an industry, start-up costs and entry
barriers, and distribution of firms by
size. To assess the ability of small
businesses to compete for Federal
contracting opportunities under the
current size standards, as the fifth
primary factor, SBA also examines, for
each industry averaging $20 million or
more in average annual Federal contract
dollars, the small business share in
Federal contract dollars relative to the
small business share in total industry’s
receipts. When necessary, SBA also
considers other secondary factors that
are relevant to the industries and the
interests of small businesses, including
impacts of size standards changes on
small businesses.
Size Standards Methodology
SBA has recently revised its
Methodology for establishing,
reviewing, or modifying size standards
when necessary. See the notification in
the April 11, 2019, edition of the
Federal Register (84 FR 14587). The
revised methodology is available on
SBA’s size standards web page at
www.sba.gov/size. Prior to finalizing the
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revised Methodology, SBA issued a
notification in the April 27, 2018
edition of the Federal Register (83 FR
18468) to solicit comments from the
public and notify stakeholders of the
proposed changes to the Methodology.
SBA considered all public comments in
finalizing the revised Methodology. For
a summary of comments and SBA’s
responses, refer to the SBA’s April 11,
2019, Federal Register notification.
The revised Methodology represents a
major change from the previous
methodology, which was issued on
October 21, 2009 (74 FR 53940).
Specifically, in its revised Methodology
SBA is replacing the ‘‘anchor’’ approach
applied in the previous methodology
with a ‘‘percentile’’ approach for
evaluating differences in characteristics
among various industries. Under the
‘‘anchor’’ approach, SBA generally
evaluated the characteristics of
individual industries relative to the
average characteristics of industries
with the anchor size standard to
determine whether they should have a
higher or a lower size standard than the
anchor. In the ‘‘percentile’’ approach,
SBA ranks each industry among all
industries with the same measure of size
standards (such as receipts or
employees) in terms of four primary
industry factors, discussed in the
Industry Analysis subsection below.
The ‘‘percentile’’ approach is explained
more fully elsewhere in this proposed
rule. For a more detailed explanation
please see the revised methodology at
www.sba.gov/size. Additionally, as the
fifth factor, SBA evaluates the difference
between the small business share in
Federal contract dollars and the small
business share in total industry’s
receipts to compute the size standard for
the Federal contracting factor. The
overall size standard for an industry is
then obtained by averaging all size
standards supported by each primary
factor. The evaluation of the Federal
contracting factor is explained more
fully elsewhere in this proposed rule.
SBA does not apply all aspects of its
Methodology to all proposed rules
because not all features are relevant for
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every industry covered by each
proposed rule. For example, since all
industries covered by this proposed rule
have receipts-based size standards, the
Methodology described in this proposed
rule applies only to establishing,
reviewing, or modifying receipts-based
size standards. SBA’s Methodology is
available on its website at www.sba.gov/
size.
Industry Analysis
Congress granted SBA’s Administrator
discretion to establish detailed small
business size standards (15 U.S.C.
632(a)(2)). Specifically, section 3(a)(3) of
the Small Business Act (15 U.S.C.
632(a)(3)) requires that ‘‘. . . the [SBA]
Administrator shall ensure that the size
standard varies from industry to
industry to the extent necessary to
reflect the differing characteristics of the
various industries and consider other
factors deemed to be relevant by the
Administrator.’’ Accordingly, the
economic structure of an industry is the
basis for establishing, reviewing, or
modifying small business size
standards. In addition, SBA considers
current economic conditions, its
mission and program objectives, the
Administration’s current policies,
impacts on small businesses under
current size and proposed or revised
size standards, suggestions from
industry groups and Federal agencies,
and public comments on the proposed
rule. SBA also examines whether a size
standard based on industry and other
relevant data successfully excludes
businesses that are dominant in the
industry.
The goal of SBA’s size standards
review is to determine whether its
existing small business size standards
reflect the current industry structure
and Federal market conditions and
revise them when the latest available
data suggest that revisions are
warranted. In the past, SBA compared
the characteristics of each industry with
the average characteristics of a group of
industries associated with the ‘‘anchor’’
size standard. For example, in the first
5-year comprehensive review of size
standards under the Jobs Act, $7 million
(now $8.0 million due to the inflation
adjustment in 2019; see 84 FR 34261
(July 18, 2019)) was considered the
‘‘anchor’’ for receipts-based size
standards and 500 employees was the
‘‘anchor’’ for employee-based size
standards. If the characteristics of a
specific industry under review were
similar to the average characteristics of
industries in the anchor group, SBA
generally adopted the anchor size
standard for that industry. If the specific
industry’s characteristics were
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significantly different from those in the
anchor group, SBA assigned a size
standard that was higher or lower than
the anchor. To determine a size
standard above or below the anchor size
standard, SBA evaluated the
characteristics of a second comparison
group of industries with higher size
standards. For industries with receiptsbased standards, the second comparison
group consisted of industries with size
standards between $23 million and
$35.5 million, with the weighted
average size standard for the group
equaling $29 million. For manufacturing
industries and other industries with
employee-based size standards (except
for Wholesale Trade and Retail Trade),
the second comparison group included
industries with a size standard of 1,000
employees or 1,500 employees, with the
weighted average size standard of 1,323
employees. Using the anchor size
standard and average size standard for
the second comparison group, SBA
computed a size standard for an
industry’s characteristic (factor) based
on the industry’s position for that factor
relative to the average values of the
same factor for industries in the anchor
and second comparison groups.
Under the ‘‘percentile’’ approach, for
each industry factor, an industry is
ranked and compared with the 20th
percentile and 80th percentile values of
that factor among the industries sharing
the same measure of size standards (i.e.,
receipts or employees). Combining that
result with the 20th percentile and 80th
percentile values of size standards
among the industries with the same
measure of size standards, SBA
computes a size standard supported by
each industry factor for each industry.
In the previous Methodology,
comparison industry groups were
predetermined independent of the data,
while in the revised Methodology they
are established using the actual data. A
more detailed description of the
percentile method is provided in SBA’s
Methodology, available at www.sba.gov/
size.
The primary factors that SBA
evaluates to examine industry structure
include average firm size, startup costs
and entry barriers, industry
competition, and distribution of firms
by size. SBA also evaluates, as an
additional primary factor, small
business success in receiving Federal
contracting assistance under the current
size standards. Specifically, for the
Federal contracting factor, SBA
examines the small business share of
Federal contract dollars relative to small
business share of total receipts within
an industry. These are, generally, the
five most important factors SBA
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examines when establishing, reviewing,
or revising a size standard for an
industry. However, SBA will also
consider and evaluate other secondary
factors that it believes are relevant to a
particular industry (such as
technological changes, growth trends,
SBA financial assistance, other program
factors). 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
proposed rules also provide important
additional information. SBA thoroughly
reviews all public comments before
making a final decision on its proposed
revisions to size standards. Below are
brief descriptions of each of the five
primary factors that SBA has evaluated
for each industry being reviewed in this
proposed rule. A more detailed
description of this analysis is provided
in the SBA’s Methodology, available at
www.sba.gov/size.
1. Average firm size. SBA computes
two measures of average firm size:
simple average and weighted average.
For industries with receipts-based size
standards, the simple average is the total
receipts of the industry divided by the
total number of firms in the industry.
The weighted average firm size is the
summation of all the receipts of the
firms in an industry multiplied by their
share of receipts in the industry. 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. The size standard
supported by average firm size is
obtained by averaging size standards
supported by simple average firm size
and weighted average firm size.
If the average firm size of an industry
is higher than the average firm size for
most other industries, this would
generally support a size standard higher
than the size standards for other
industries. Conversely, if the industry’s
average firm size is lower than that of
most other industries, it would provide
a basis to assign a lower size standard
as compared to size standards for most
other industries.
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 firms entering an
industry under review have greater
capital requirements than firms in most
other industries, all other factors
remaining the same, this would be a
basis for a higher size standard.
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Conversely, if the industry has smaller
capital needs compared to most other
industries, a lower size standard would
be considered appropriate.
Given the lack of actual data on
startup costs and entry barriers by
industry, SBA uses average assets as a
proxy for startup costs and entry
barriers. 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, available at https://
rmau.org/. SBA then applies these ratios
to the average receipts of firms in that
industry obtained from the Economic
Census tabulation. An industry with
average assets that are significantly
higher than most other industries is
likely to have higher startup costs; this
in turn will support a higher size
standard. Conversely, an industry with
average assets that are similar to or
lower than most other industries is
likely to have lower startup costs; this
will support either lowering or
maintaining the size standard.
3. Industry competition. Industry
competition is generally measured by
the share of total industry receipts
generated by the largest firms in an
industry. SBA generally evaluates the
share of industry receipts generated by
the four largest firms in each industry.
This is referred to as the ‘‘4-firm
concentration ratio,’’ a commonly used
economic measure of market
competition. Using the 4-firm
concentration ratio, SBA compares the
degree of concentration within an
industry to the degree of concentration
of the other industries with the same
measure of size standards. If a
significantly higher share of economic
activity within an industry is
concentrated among the four largest
firms compared to most other
industries, all else being equal, SBA
would set a size standard that is
relatively higher than for most other
industries. Conversely, if the market
share of the four largest firms in an
industry is appreciably lower than the
similar share for most other industries,
the industry will be assigned a size
standard that is lower than those for
most other industries.
4. Distribution of firms by size. SBA
examines the shares of industry total
receipts accounted for by firms of
different receipts and employment sizes
in an industry. This is an additional
factor SBA considers in assessing
competition within an industry besides
the 4-firm concentration ratio. If the
preponderance of an industry’s
economic activity is attributable to
smaller firms, this generally indicates
that small businesses are competitive in
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that industry, which would support
adopting a smaller size standard. A
higher size standard would be
supported for an industry in which the
distribution of firms indicates that most
of the economic activity is concentrated
among the larger firms.
Concentration is a measure of
inequality of distribution. To determine
the degree of inequality of distribution
in an industry, SBA computes the Gini
coefficient, using 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, see SBA’s
Methodology on its website at
www.sba.gov/size.) Gini coefficient
values vary from zero to one. If receipts
are distributed equally among all the
firms in an industry, the value of the
Gini coefficient will equal zero. If an
industry’s total receipts are attributed to
a single firm, the Gini coefficient will
equal one.
SBA compares the degree of
inequality of distribution for an industry
under review with other industries with
the same type of size standards. If an
industry shows a higher degree of
inequality of distribution (hence a
higher Gini coefficient value) compared
to most other industries in the group
this would, all else being equal, warrant
a size standard that is higher than the
size standards assigned to most other
industries. Conversely, an industry with
lower degree of inequality (i.e., a lower
Gini coefficient value) than most others
will be assigned a lower size standard
relative to others.
5. Federal contracting. As the fifth
factor, SBA examines the success small
businesses are having in winning
Federal contracts under the current size
standard as well as the possible impact
a size standard change may have on
Federal small business contracting
opportunities. The Small Business Act
requires the Federal government to
ensure that small businesses receive a
‘‘fair proportion’’ of Federal contracts.
The legislative history also discusses the
importance of size standards in Federal
contracting. To incorporate the Federal
contracting factor in the size standards
analysis, SBA evaluates small business
participation in Federal contracting in
terms of the share of total Federal
contract dollars awarded to small
businesses relative to the small business
share of industry’s total receipts. In
general, if the share of Federal contract
dollars awarded to small businesses in
an industry is significantly smaller than
the small business share of total
industry’s receipts, all else remaining
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the same, a justification would exist for
considering a size standard higher than
the current size standard. In cases where
small business share of the Federal
market is already appreciably high
relative to the small business share of
the overall market, SBA generally
assumes that the existing size standard
is adequate with respect to the Federal
contracting factor.
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, the different
skill set required to perform Federal
contracts as compared to typical
commercial contracting work, and the
size of Federal contracts. These, as well
as other factors, are likely to influence
the type of firms within an industry that
compete for Federal contracts. By
comparing the small business Federal
contracting share with the industrywide small business share, SBA
includes in its size standards analysis
the latest Federal market conditions.
Besides the impact on Federal
contracting, SBA also examines impacts
on SBA’s loan programs both under the
current and revised size standards.
Sources of Industry and Program Data
SBA’s primary source of industry data
used in this proposed rule for evaluating
industry characteristics and developing
size standards is a special tabulation of
the Economic Census from the U.S.
Census Bureau (www.census.gov/econ/
census). The tabulation based on the
2012 Economic Census is the latest
available. The special tabulation
provides industry data on the number of
firms, number of establishments,
number of employees, annual payroll,
and annual receipts of companies by
Industry (6-digit level), Industry Group
(4-digit level), Subsector (3-digit level),
and Sector (2-digit level). These data are
arrayed by various classes of firms’ size
based on the overall number of
employees and receipts of the entire
enterprise (all establishments and
affiliated firms) from all industries. The
special tabulation also contains
information for different levels of
NAICS categories on average and
median firm size in terms of both
receipts and employment, total receipts
generated by the four and eight largest
firms, the Herfindahl-Hirschman Index
(HHI), the Gini coefficient, and size
distributions of firms by various receipts
and employment size groupings.
In some cases, where data were not
available due to disclosure prohibitions
in the Census Bureau’s tabulation, SBA
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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’s
analysis was based only on those factors
for which data were available or
estimates of missing values were
possible.
To evaluate some industries that are
not covered by the Economic Census,
SBA used a similar special tabulation of
the latest County Business Patterns
(CBP) published by the U.S. Census
Bureau (www.census.gov/programssurveys/cbp.html). Similarly, to evaluate
industries in NAICS Sector 11 that are
also not covered by the Economic
Census and CBP, SBA evaluated a
similar special tabulation based on the
2012 Census of Agriculture
(www.nass.usda.gov) from the National
Agricultural Statistics Service (NASS).
Besides the Economic Census,
Agricultural Census and CBP
tabulations, SBA also evaluates relevant
industry data from other sources when
necessary, especially for industries that
are not covered by the Economic Census
or CBP. These include the Quarterly
Census of Employment and Wages
(QCEW, also known as ES–202 data)
(www.bls.gov/cew/) and Business
Employment Dynamics (BED) data
(www.bls.gov/bdm/) from the U.S.
Bureau of Labor Statistics. Similarly, to
evaluate certain financial industries that
have assets-based size standards, SBA
examines the data from the Statistics on
Depository Institutions (SDI) database
(www5.fdic.gov/sdi/main.asp) of the
Federal Deposit Insurance Corporation
(FDIC). Finally, to evaluate the capacity
component of the Petroleum Refiners
(NAICS 324110) size standard, SBA
evaluates the petroleum production data
from the Energy Information
Administration (www.eia.gov).
To calculate average assets, SBA used
sales to total assets ratios from the Risk
Management Association’s Annual
eStatement Studies, 2016–2018 (https://
rmau.org/). To evaluate Federal
contracting trends and evaluate two
exceptions in Sector 11 and one
exception in Sector 23, SBA examined
the data on Federal prime contract
awards from the Federal Procurement
Data System—Next Generation (FPDS–
NG) (www.fpds.gov) for fiscal years
2016–2018. To assess the impact on
financial assistance to small businesses,
SBA examined its internal data on 7(a)
and 504 loan programs for fiscal years
2016–2018. For some portion of impact
analysis, SBA also evaluated the data
from the System of Award Management
(www.sam.gov).
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Jkt 253001
Data sources and estimation
procedures SBA uses in its size
standards analysis are documented in
detail in SBA’s Methodology, which is
available at 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 SBA Administrator. SBA considers
as part of its evaluation whether a
business concern at a proposed size
standard would be dominant in its field
of operation. For this, SBA generally
examines the industry’s market share of
firms at the proposed or revised size
standard as well as the distribution of
firms by size. Market share and size
distribution 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 includes a
dominant firm, SBA will consider a
lower size standard to exclude the
dominant firm from being defined as
small.
Selection of Size Standards
In the 2009 Methodology SBA applied
to the first 5-year comprehensive review
of size standards, SBA adopted a fixed
number of size standards levels as part
of its effort to simplify size standards. In
response to public comments to the
2009 Methodology white paper, and the
2013 amendment to the Small Business
Act (section 3(a)(8)) under section 1661
of the National Defense Authorization
Act for Fiscal Year 2013 (‘‘NDAA 2013’’)
(Pub. L. 112–239, January 2, 2013), in
the revised Methodology SBA relaxed
the limitation on the number of small
business size standards. Specifically,
section 1661 of NDAA 2013 states ‘‘SBA
cannot limit the number of size
standards, and shall assign the
appropriate size standard to each
industry identified by NAICS.’’
In the revised Methodology, SBA
calculates a separate size standard for
each NAICS industry. However, to
account for errors and limitations
associated with various data SBA
evaluates in the size standards analysis,
SBA rounds the calculated size standard
value for a receipts-based size standard
to the nearest $500,000, except for
agricultural industries in Subsectors 111
and 112 for which the calculated size
standards will be rounded to the nearest
$250,000. This rounding procedure is
applied both in calculating a size
PO 00000
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Sfmt 4702
62243
standard for each of the five primary
factors and in calculating the overall
size standard for the industry.
As a policy decision, SBA continues
to maintain the minimum and
maximum levels for both receipts and
employee-based size standards.
Accordingly, SBA will not generally
propose or adopt a size standard that is
either below the minimum level or
above the maximum, even though the
calculations yield values below the
minimum or above the maximum. The
minimum size standard reflects the size
an established small business should be
to have adequate capabilities and
resources to be able to compete for and
perform Federal contracts (but does not
account for small businesses that are
newly formed or just starting
operations). On the other hand, the
maximum size standard represents the
level above which businesses, if
qualified as small, would outcompete
much smaller businesses when
accessing Federal assistance.
With respect to receipts-based size
standards, SBA has established $6
million and $41.5 million, respectively,
as the minimum and maximum size
standard levels (except for most
agricultural industries in NAICS
Subsectors 111 and 112). These levels
reflect the current minimum of $6.0
million and the current maximum of
$41.5 million. The industry data
suggests that $6 million minimum and
$41.5 million maximum size standards
would be too high for agricultural
industries. Accordingly, SBA has
established $1 million as the minimum
size standard and $5 million as the
maximum size standard for industries in
Subsector 111 (Crop Production) and
Subsector 112 (Animal Production and
Aquaculture).
Evaluation of Industry Factors
As mentioned earlier, to assess the
appropriateness of the current size
standards SBA evaluates the structure of
each industry in terms of four economic
characteristics or factors, namely
average firm size, average assets size as
a proxy for startup costs and entry
barriers, the 4-firm concentration ratio
as a measure of industry competition,
and size distribution of firms using the
Gini coefficient. For each size standard
type (i.e., receipts-based or employeebased) SBA ranks industries both in
terms of each of the four industry factors
and in terms of the existing size
standard and computes the 20th
percentile and 80th percentile values for
both. SBA then evaluates each industry
by comparing its value for each industry
factor to the 20th percentile and 80th
percentile values for the corresponding
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factor for industries under a particular
type of size standard.
If the characteristics of an industry
under review within a particular size
standard type are similar to the average
characteristics of industries within the
same size standard type in the 20th
percentile, SBA will consider adopting
as an appropriate size standard for that
industry the 20th percentile value of
size standards for those industries. For
each size standard type, if the industry’s
characteristics are similar to the average
characteristics of industries in the 80th
percentile, SBA will assign a size
standard that corresponds to the 80th
percentile in the size standard rankings
of industries. A separate size standard is
established for each factor based on the
amount of differences between the
factor value for an industry under a
particular size standard type and 20th
percentile and 80th percentile values for
the corresponding factor for all
industries in the same type.
Specifically, the actual level of the new
size standard for each industry factor is
derived by a linear interpolation using
the 20th percentile and 80th percentile
values of that factor and corresponding
percentiles of size standards. Each
calculated size standard is bounded
between the minimum and maximum
size standards levels, as discussed
before. As noted earlier, the calculated
value for a receipts-based size standard
for each industry factor is rounded to
the nearest $500,000, except for
industries in Subsectors 111 and 112 for
which a calculated size standard is
rounded to the nearest $250,000.
Table 2, 20th and 80th Percentiles of
Industry Factors for Receipts-based Size
Standards, shows the 20th percentile
and 80th percentile values for average
firm size (simple and weighted), average
assets size, 4-firm concentration ratio,
and Gini coefficient for industries with
receipts-based size standards.
TABLE 2—20TH AND 80TH PERCENTILES OF INDUSTRY FACTORS FOR RECEIPTS-BASED SIZE STANDARDS
Simple
average
receipts size
($ million)
Industries/percentiles
jbell on DSKJLSW7X2PROD with PROPOSALS
Industries, excluding Subsectors 111 and 112
20th percentile ..............................................................
80th percentile ..............................................................
Industries in Subsectors 111 and 112
20th percentile ..............................................................
80th percentile ..............................................................
Estimation of Size Standards Based on
Industry Factors
An estimated size standard supported
by each industry factor is derived by
comparing its value for a specific
industry to the 20th percentile and 80th
percentile values for that factor. If an
industry’s value for a particular factor is
near the 20th percentile value in the
distribution, the supported size
standard will be one that is close to the
20th percentile value of size standards
for industries in the size standards
group, which is $8.0 million. If a factor
for an industry is close to the 80th
percentile value of that factor, it would
support a size standard that is close to
the 80th percentile value in the
distribution of size standards, which is
$35.0 million. For a factor that is within,
above, or below the 20–80th percentile
range, the size standard is calculated
using linear interpolation based on the
20th percentile and 80th percentile
values for that factor and the 20th
percentile and 80th percentile values of
size standards.
For example, if an industry’s simple
average receipts are $1.9 million, that
would support a size standard of $12.5
million. According to Table 2, the 20th
percentile and 80th percentile values of
average receipts are $0.83 million and
$7.52 million, respectively. The $1.9
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Weighted
average
receipts size
($ million)
Gini
coefficient
19.42
830.65
0.34
5.19
7.9
42.4
0.686
0.834
0.06
0.83
1.48
13.32
0.07
0.88
1.7
12.3
0.608
0.908
Derivation of Size Standards Based on
Federal Contracting Factor
Besides industry structure, SBA also
evaluates Federal contracting data to
assess the success of small businesses in
getting Federal contracts under the
existing size standards. For each
Frm 00011
4-firm
concentration
ratio
(%)
0.83
7.52
million is 15.9 percent between the 20th
percentile value ($0.83 million) and the
80th percentile value ($7.52 million) of
simple average receipts (($1.9 million ¥
$0.83 million) ÷ ($7.52 million ¥ $0.83
million) = 0.159 or 15.9%). Applying
this percentage to the difference
between the 20th percentile value ($8
million) and 80th percentile ($35.0
million) value of size standards and
then adding the result to the 20th
percentile size standard value ($8.0
million) yields a calculated size
standard value of $12.32 million
([{$35.0 million ¥ $8.0 million} *
0.159] + $8.0 million = $12.32 million).
The final step is to round the calculated
$12.32 million size standard to the
nearest $500,000, which in this example
yields $12.5 million. This procedure is
applied to calculate size standards
supported by other industry factors.
Detailed formulas involved in these
calculations are presented in SBA’s
Methodology which is available at
www.sba.gov/size.
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Average
assets size
($ million)
Fmt 4702
Sfmt 4702
industry with $20 million or more in
annual Federal contract dollars, SBA
evaluates the small business share of
total Federal contract dollars relative to
the small business share of total
industry receipts. All other factors being
equal, if the share of Federal contracting
dollars awarded to small businesses in
an industry is significantly less than the
small business share of that industry’s
total receipts, a justification would exist
for considering a size standard higher
than the current size standard.
Conversely, if the small business share
of Federal contracting activity is near or
above the small business share in total
industry receipts, this will support the
current size standard.
SBA increases the existing size
standards by certain percentages when
the small business share of total
industry receipts exceeds the small
business share of total Federal contract
dollars by 10 or more percentage points.
Proposed percentage increases generally
reflect receipts levels needed to bring
the small business share of Federal
contracts on par with the small business
share of industry receipts. These
proposed percentage increases for
receipts-based size standards are given
in Table 3, Proposed Adjustments to
Size Standards Based on Federal
Contracting Factor.
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TABLE 3—PROPOSED ADJUSTMENTS TO SIZE STANDARDS BASED ON FEDERAL CONTRACTING FACTOR
Percentage difference between the small business shares of total Federal contract
dollars in an industry and of total industry receipts
Size standards
Receipts-based standards
<$15 million ..............................................................
$15 million to < $25 million ......................................
$25 million to < $41.5 million ...................................
For example, if an industry with the
current size standard of $8.0 million
had an average of $50 million in Federal
contracting dollars, of which 15 percent
went to small businesses, and if that
small businesses accounted for 40
percent of total receipts of that industry,
the small business share of total Federal
contract dollars would be 25 percent
less than the small business share of
total industry receipts (40% ¥ 15%).
According to the above rule, the new
size standard for the Federal contracting
factor for that industry would be set by
multiplying the current $8.0 million
standard by 1.3 (i.e., 30% increase) and
then by rounding the result to the
nearest $500,000, yielding a size
standard of $10.5 million.
SBA evaluated the small business
share of total Federal contract dollars for
the thirty-one (31) industries covered by
this proposed rule—five (5) in Sector 11,
one (1) in Sector 21, three (3) in Sector
22, and twenty-two (22) in Sector 23)—
that had $20 million or more in average
annual Federal contract dollars during
fiscal years 2016–2018. The Federal
contracting factor was significant (i.e.,
the difference between the small
business share of total industry receipts
and small business share of Federal
>¥10%
¥ 10% to ¥ 30%
No change .........................
No change .........................
No change .........................
Increase 30% ....................
Increase 20% ....................
Increase 15% ....................
contracting dollars was 10 percentage
points or more) in seven (7) of these
industries, prompting an upward
adjustment of their existing size
standards based on that factor. For the
remaining twenty-four (24) industries
that averaged $20 million or more in
average annual contract dollars, the
Federal contracting factor was not
significant, and the existing size
standard was applied for that factor. For
industries with less than $20 million in
average annual contract dollars, no size
standard was calculated for the Federal
contracting factor.
Derivation of Overall Industry Size
Standard
The SBA’s Methodology presented
above results in five separate size
standards based on evaluation of the
five primary factors (i.e., four industry
factors and one Federal contracting
factor). SBA typically derives an
industry’s overall size standard by
assigning equal weights to size
standards supported by each of these
five factors. However, if necessary,
SBA’s Methodology would allow
assigning different weights to some of
these factors in response to its policy
decisions and other considerations. For
detailed calculations, see SBA’s
<¥ 30%
Increase 60%
Increase 40%
Increase 25%
Methodology, available on its website at
www.sba.gov/size.
Calculated Size Standards Based on
Industry and Federal Contracting
Factors
Table 4, Size Standards Supported by
Each Factor for Each Industry
(Receipts), below, shows the results of
analyses of industry and Federal
contracting factors for each industry and
subindustry (exception) covered by this
proposed rule. NAICS industries in
columns 2, 3, 4, 5, 6, 7, and 8 show two
numbers. The upper number is the
value for the industry or Federal
contracting factor shown on the top of
the column and the lower number is the
size standard supported by that factor.
Column 9 shows a calculated new size
standard for each industry. This is the
average of the size standards supported
by each factor, rounded to the nearest
$500,000 for non-agriculture industries
and rounded to the nearest $250,000 for
agriculture industries. Analytical details
involved in the averaging procedure are
described in SBA’s Methodology, which
is available at www.sba.gov/size. For
comparison with the calculated new
size standards, the current size
standards are in column 10 of Table 4.
TABLE 4—SIZE STANDARDS SUPPORTED BY EACH FACTOR FOR EACH INDUSTRY (RECEIPTS)
[Upper value = calculated factor, lower value = size standard supported]
NAICS code
NAICS industry title
Type
Simple
average
firm size
($ million)
Weighted
average
firm size
($ million)
Average
assets size
($ million)
Four-firm
ratio
(%)
Gini
coefficient
Federal
contract
factor
(%)
Calculated
size
standard
($ million)
Current size
standard
($ million)
(1)
(2)
(3)
(4)
(5)
(6)
(7)
(8)
(9)
(10)
111110
Soybean Farming ..
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111120 Oilseed (except
Soybean) Farming.
111130 Dry Pea and Bean
Farming.
111140 Wheat Farming ......
111150
Corn Farming .........
111160
Rice Farming .........
111190 Other Grain Farming (includes NAICS
111191 and 111199).
111211 Potato Farming ......
VerDate Sep<11>2014
Factor ............
Size Std. ........
Factor ............
Size Std. ........
Factor ............
Size Std. ........
Factor ............
Size Std. ........
Factor ............
Size Std. ........
Factor ............
Size Std. ........
Factor ............
Size Std. ........
$0.2
2.25
0.3
2.75
0.3
2.50
0.2
2.25
0.4
2.75
0.8
4.00
0.5
3.25
$0.9
1.75
1.1
1.75
1.2
1.75
0.9
1.75
1.7
1.75
1.8
1.75
1.8
1.75
$0.1
1.75
0.2
2.00
0.2
2.00
0.2
2.25
0.7
3.50
0.5
3.00
0.4
2.75
0.3
1.50
5.5
2.75
7.5
3.25
0.4
1.50
0.2
1.50
1.5
1.75
0.3
1.50
0.663
2.25
0.544
1.25
0.630
2.00
0.610
1.75
0.606
1.75
0.469
1.00
0.567
1.50
....................
$2.00
$1.00
....................
2.00
1.00
....................
2.50
1.00
....................
2.00
1.00
....................
2.25
1.00
....................
2.25
1.00
....................
2.00
1.00
Factor ............
Size Std. ........
1.6
5.00
10.6
3.75
1.3
5.00
5.8
2.75
0.756
3.00
....................
3.75
1.00
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TABLE 4—SIZE STANDARDS SUPPORTED BY EACH FACTOR FOR EACH INDUSTRY (RECEIPTS)—Continued
[Upper value = calculated factor, lower value = size standard supported]
NAICS code
NAICS industry title
Type
Simple
average
firm size
($ million)
Weighted
average
firm size
($ million)
Average
assets size
($ million)
Four-firm
ratio
(%)
Gini
coefficient
Federal
contract
factor
(%)
Calculated
size
standard
($ million)
Current size
standard
($ million)
(1)
(2)
(3)
(4)
(5)
(6)
(7)
(8)
(9)
(10)
111219 Other Vegetable
(except Potato) and Melon
Farming.
111310 Orange Groves ......
Factor ............
Size Std. ........
0.3
2.50
17.8
5.00
0.2
2.00
3.5
2.25
0.943
4.50
....................
3.25
1.00
Factor ............
Size Std. ........
Factor ............
Size Std. ........
Factor ............
Size Std. ........
Factor ............
Size Std. ........
Factor ............
Size Std. ........
Factor ............
Size Std. ........
Factor ............
Size Std. ........
Factor ............
Size Std. ........
Factor ............
Size Std. ........
Factor ............
Size Std. ........
0.3
2.50
0.2
2.25
0.3
2.50
0.4
2.75
1.2
5.00
0.1
2.00
0.3
2.50
0.5
3.00
0.1
2.00
0.5
3.25
12.2
4.00
11.1
3.75
16.6
5.00
13.9
4.25
19.5
5.00
7.1
3.00
12.0
4.00
16.5
5.00
6.8
2.75
29.1
5.00
0.4
2.75
0.3
2.50
0.4
3.00
0.8
4.00
1.7
5.00
0.2
2.00
0.6
3.25
1.0
4.50
0.2
2.00
0.2
2.25
11.0
4.00
22.7
5.00
14.4
4.75
4.1
2.25
15.1
5.00
11.1
4.00
4.5
2.50
31.0
5.00
7.8
3.25
19.6
5.00
0.856
3.75
0.892
4.00
0.909
4.25
0.877
4.00
0.915
4.25
0.900
4.25
0.893
4.00
0.955
4.75
0.869
4.00
0.950
4.50
....................
3.50
1.00
....................
3.75
1.00
....................
4.00
1.00
....................
3.50
1.00
....................
4.75
1.00
....................
3.25
1.00
....................
3.25
1.00
....................
4.50
1.00
....................
3.00
1.00
....................
4.00
1.00
Factor ............
Size Std. ........
Factor ............
Size Std. ........
Factor ............
Size Std. ........
Factor ............
Size Std. ........
Factor ............
Size Std. ........
Factor ............
Size Std. ........
Factor ............
Size Std. ........
0.2
2.25
0.3
2.75
0.2
2.25
0.5
3.25
2.6
5.00
0.0
1.75
0.1
1.75
7.6
3.00
12.8
4.25
1.5
1.75
7.2
3.00
34.0
5.00
1.5
1.75
4.6
2.50
0.1
2.00
0.2
2.25
0.2
2.00
0.5
3.00
2.4
5.00
0.0
1.50
0.0
1.75
2.5
2.00
5.8
2.75
3.9
2.25
6.6
3.00
28.5
5.00
1.7
1.75
1.7
1.75
0.894
4.25
0.878
4.00
0.666
2.25
0.572
1.50
0.719
2.75
0.840
3.75
0.973
4.75
....................
2.75
1.00
....................
3.25
1.00
....................
2.25
1.00
....................
2.75
1.00
....................
4.50
1.00
....................
2.25
1.00
¥20.6
1.25
2.25
1.00
Factor ............
Size Std. ........
Factor ............
Size Std. ........
Factor ............
Size Std. ........
Factor ............
Size Std. ........
Factor ............
Size Std. ........
Factor ............
Size Std. ........
0.1
1.75
2.8
16.00
0.9
4.50
1.0
5.00
0.3
6.00
1.5
5.00
3.1
2.00
63.3
9.50
9.5
3.50
11.4
3.75
17.8
8.00
6.0
2.75
0.1
1.75
2.0
17.00
1.5
5.00
0.8
4.00
0.3
7.50
1.0
4.50
1.0
1.50
3.9
6.00
1.3
1.75
2.7
2.00
4.9
6.00
2.8
2.00
0.859
3.75
0.907
41.50
0.697
2.50
0.803
3.50
0.936
41.50
0.386
1.00
....................
2.25
1.00
....................
19.50
8.00
....................
3.25
1.00
....................
3.50
1.00
....................
15.50
16.50
....................
3.00
1.00
Factor ............
Size Std. ........
Factor ............
Size Std. ........
Factor ............
Size Std. ........
Factor ............
Size Std. ........
Factor ............
Size Std. ........
Factor ............
Size Std. ........
2.3
5.00
10.7
5.00
0.1
2.00
0.0
1.50
0.0
1.50
0.4
2.75
8.6
3.25
19.6
5.00
6.2
2.75
3.1
2.00
0.2
1.50
7.2
3.00
1.4
5.00
6.7
5.00
0.1
1.75
0.0
1.50
0.0
1.50
0.4
2.75
4.2
2.25
5.9
2.75
11.0
4.00
13.4
4.50
4.2
2.25
8.9
3.50
0.554
1.25
0.493
1.00
0.931
4.50
0.906
4.25
0.836
3.75
0.816
3.50
....................
3.25
1.00
....................
3.50
1.00
....................
3.25
1.00
....................
3.00
1.00
....................
2.25
1.00
....................
3.25
1.00
Factor ............
Size Std. ........
Factor ............
Size Std. ........
Factor ............
Size Std. ........
Factor ............
Size Std. ........
0.0
1.75
0.0
1.50
0.0
1.75
0.1
1.75
0.7
1.50
1.0
1.75
1.6
1.75
5.2
2.50
0.0
1.75
0.0
1.50
0.0
1.50
0.1
1.75
6.5
3.00
3.7
2.25
48.9
5.00
5.1
2.50
0.882
4.00
0.900
4.25
0.894
4.25
0.959
4.75
....................
2.75
1.00
....................
2.50
1.00
....................
3.25
1.00
¥6.9
1.00
2.50
1.00
111320 Citrus (except Orange) Groves.
111331 Apple Orchards ........
111332
Grape Vineyards ....
111333
Strawberry Farming
111334 Berry (except
Strawberry) Farming.
111335 Tree Nut Farming ..
111336 Fruit and Tree Nut
Combination Farming.
111339 Other Noncitrus
Fruit Farming.
111410 Food Crops Grown
Under Cover (includes
NAICS 111411 and
111419).
111421 Nursery and Tree
Production.
111422 Floriculture Production.
111910 Tobacco Farming ...
111920
Cotton Farming ......
111930
Sugarcane Farming
111940
Hay Farming ..........
111990 All Other Crop
Farming (includes NAICS
111991, 111992 and
111998).
112111 Beef Cattle Ranching and Farming.
112112 Cattle Feedlots ......
112120 Dairy Cattle and
Milk Production.
112210 Hog and Pig Farming.
112310 Chicken Egg Production.
112320 Broilers and Other
Meat Type Chicken Production.
112330 Turkey Production
112340
Poultry Hatcheries
112390 Other Poultry Production.
112410 Sheep Farming ......
jbell on DSKJLSW7X2PROD with PROPOSALS
112420
Goat Farming .........
112500 Aquaculture (includes NAICS 112511,
112512 and 112519).
112910 Apiculture ...............
112920 Horses and Other
Equine Production.
112930 Fur-Bearing Animal
and Rabbit Production.
112990 All Other Animal
Production.
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62247
Federal Register / Vol. 85, No. 192 / Friday, October 2, 2020 / Proposed Rules
TABLE 4—SIZE STANDARDS SUPPORTED BY EACH FACTOR FOR EACH INDUSTRY (RECEIPTS)—Continued
jbell on DSKJLSW7X2PROD with PROPOSALS
[Upper value = calculated factor, lower value = size standard supported]
NAICS code
NAICS industry title
Type
Simple
average
firm size
($ million)
Weighted
average
firm size
($ million)
Average
assets size
($ million)
Four-firm
ratio
(%)
Gini
coefficient
Federal
contract
factor
(%)
Calculated
size
standard
($ million)
Current size
standard
($ million)
(1)
(2)
(3)
(4)
(5)
(6)
(7)
(8)
(9)
(10)
113110 Timber Tract Operations.
113210 Forest Nurseries
and Gathering Forest Products.
114111 Finfish Fishing .......
Factor ............
Size Std. ........
Factor ............
Size Std. ........
1.8
12.00
1.4
10.00
19.4
8.00
12.5
8.00
1.0
11.50
0.7
10.00
29.6
25.00
39.2
32.50
0.749
19.50
0.748
19.50
Factor ............
Size Std. ........
Factor ............
Size Std. ........
Factor ............
Size Std. ........
Factor ............
Size Std. ........
Factor ............
Size Std. ........
Factor ............
Size Std. ........
Factor ............
Size Std. ........
Factor ............
Size Std. ........
1.8
12.00
0.8
8.00
0.8
8.00
0.6
7.00
4.3
22.00
1.5
10.50
1.7
11.50
9.4
41.50
72.7
10.00
18.5
8.00
6.6
7.50
9.8
7.50
10.0
7.50
13.6
8.00
9.5
7.50
191.4
13.50
2.3
18.50
0.6
9.00
0.7
10.00
0.5
9.00
3.3
24.50
0.8
10.50
1.0
11.50
6.3
41.00
30.5
25.50
25.9
22.00
....................
0.789
26.50
0.700
10.50
0.707
12.00
0.666
6.00
0.541
6.00
0.684
7.50
0.704
11.50
0.754
20.50
Factor ............
Size Std. ........
Factor ............
Size Std. ........
Factor ............
Size Std. ........
Factor ............
Size Std. ........
Factor ............
Size Std. ........
Factor ............
Size Std. ........
Factor ............
Size Std. ........
Factor ............
Size Std. ........
Factor ............
Size Std. ........
Factor ............
Size Std. ........
1.8
12.00
1.3
10.00
0.6
7.00
0.9
8.00
3.7
19.5
3.7
19.5
11.5
41.5
7.2
34.0
12.2
41.5
2.8
16.0
15.3
8.00
10.5
7.50
24.8
8.00
11.3
7.50
198.9
17.5
198.9
17.5
4,184.6
41.5
41.0
8.5
236.0
15.0
32.1
8.5
1.0
12.00
0.7
10.00
0.3
7.50
0.4
8.00
1.6
15.0
1.6
15.0
9.6
41.5
5.6
37.0
9.4
41.5
2.2
18.5
....................
Factor ............
Size Std. ........
Factor ............
Size Std. ........
Factor ............
Size Std. ........
Factor ............
Size Std. ........
2.9
16.5
3.6
19.5
43.3
41.5
1.3
10.0
1,023.6
41.5
142.2
12.0
176.2
13.0
30.8
8.5
Factor ............
Size Std. ........
10.9
41.5
Factor ............
Size Std. ........
Factor ............
Size Std. ........
Factor ............
Size Std. ........
Factor ............
Size Std. ........
114112
Shellfish Fishing ....
114119
ing.
114210
ping.
115111
Other Marine FishHunting and TrapCotton Ginning .......
115112 Soil Preparation,
Planting, and Cultivating.
115113 Crop Harvesting,
Primarily by Machine.
115114 Postharvest Crop
Activities (except Cotton
Ginning).
115115 Farm Labor Contractors and Crew Leaders.
115116 Farm Management
Services.
115210 Support Activities
for Animal Production.
115310 Support Activities
for Forestry.
115310 Except, Forest Fire
Suppression.
115310 Except Fuels Management Services.
213112 Support Activities
for Oil and Gas Operations.
213113 Support Activities
for Coal Mining.
213114 Support Activities
for Metal Mining.
213115 Support Activities
for Nonmetallic Minerals
(except Fuels) Mining.
221310 Water Supply and
Irrigation Systems.
221320 Sewage Treatment
Facilities.
221330 Steam and Air-Conditioning Supply.
236115 New Single-Family
Housing Construction (except For-Sale Builders).
236116 New Multifamily
Housing Construction (except For-Sale Builders).
236117 New Housing ForSale Builders.
236118 Residential Remodelers.
236210 Industrial Building
Construction.
236220 Commercial and Institutional Building Construction.
237110 Water and Sewer
Line and Related Structures Construction.
237120 Oil and Gas Pipeline and Related Structures
Construction.
237130 Power and Communication Line and Related
Structures Construction.
237210 Land Subdivision ...
VerDate Sep<11>2014
....................
16.50
12.00
....................
18.00
12.00
....................
20.50
22.00
....................
12.50
6.00
....................
10.00
8.00
....................
7.50
6.00
....................
14.00
12.00
10.3
8.00
....................
8.50
8.00
12.00
8.00
....................
27.50
30.00
....................
12.50
16.50
....................
13.50
8.00
¥8.9
8.00
21.3
8.00
74.7
20.5
74.7
20.5
10.1
41.5
....................
9.50
8.00
12.6
11.50
27.6
23.5
27.6
23.5
34.2
28.5
20.5
18.0
54.8
41.5
34.3
28.5
0.727
15.50
0.743
18.50
0.724
15.00
0.723
14.50
0.867
41.0
0.867
41.0
0.849
37.5
0.749
19.5
0.823
33.0
0.708
12.0
10.00
8.00
23.5
20.5
23.5
20.5
38.0
41.5
24.0
22.0
....................
36.0
22.0
....................
18.0
8.0
9.6
41.5
18.2
41.5
24.0
41.5
0.7
9.5
49.9
41.0
55.0
41.5
60.3
41.5
2.6
6.0
0.834
35.0
0.824
33.0
0.678
6.5
0.667
6.0
¥17.0
34.5
¥6.9
22.0
21.4
16.5
....................
36.0
30.0
31.0
22.0
26.5
16.5
8.0
39.5
121.7
11.5
3.6
26.5
9.4
9.0
0.782
25.5
¥3.8
39.5
25.5
39.5
5.2
26.0
0.7
7.5
10.2
41.5
8.3
38.5
1,172.3
41.5
34.6
8.5
351.6
19.0
515.4
24.5
3.5
25.5
0.2
7.0
3.5
25.5
2.6
20.5
19.9
17.5
3.4
6.0
17.7
15.5
5.0
6.0
0.818
32.0
0.667
6.0
0.830
34.0
0.802
29.0
....................
27.5
39.5
¥62.6
41.5
17.0
39.5
9.4
39.5
13.5
39.5
29.0
39.5
25.5
39.5
Factor ............
Size Std. ........
4.1
21.0
98.2
10.5
2.0
17.5
6.5
7.0
0.756
21.0
¥4.1
39.5
20.0
39.5
Factor ............
Size Std. ........
22.8
41.5
715.1
31.0
10.4
41.5
20.8
18.0
0.806
30.0
4.4
39.5
33.0
39.5
Factor ............
Size Std. ........
9.3
41.5
647.7
29.0
4.2
30.0
18.5
16.0
0.824
33.0
1.4
39.5
31.0
39.5
Factor ............
Size Std. ........
2.7
15.5
42.4
9.0
6.8
41.5
8.1
8.0
0.782
25.5
....................
22.0
30.0
17:54 Oct 01, 2020
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....................
10.2
10.00
7.9
8.00
18.3
16.00
24.1
20.50
17.9
16.00
....................
E:\FR\FM\02OCP1.SGM
02OCP1
62248
Federal Register / Vol. 85, No. 192 / Friday, October 2, 2020 / Proposed Rules
TABLE 4—SIZE STANDARDS SUPPORTED BY EACH FACTOR FOR EACH INDUSTRY (RECEIPTS)—Continued
[Upper value = calculated factor, lower value = size standard supported]
NAICS code
NAICS industry title
Type
Simple
average
firm size
($ million)
Weighted
average
firm size
($ million)
Average
assets size
($ million)
Four-firm
ratio
(%)
Gini
coefficient
Federal
contract
factor
(%)
Calculated
size
standard
($ million)
Current size
standard
($ million)
(1)
(2)
(3)
(4)
(5)
(6)
(7)
(8)
(9)
(10)
237310 Highway, Street,
and Bridge Construction.
237990 Other Heavy and
Civil Engineering Construction.
237990 Except Dredging
and Surface Cleanup Activities.
238110 Poured Concrete
Foundation and Structure
Contractors.
238120 Structural Steel and
Precast Concrete Contractors.
238130 Framing Contractors.
238140 Masonry Contractors.
238150 Glass and Glazing
Contractors.
238160 Roofing Contractors
Factor ............
Size Std. ........
Factor ............
Size Std. ........
12.3
41.5
7.4
34.5
285.7
17.0
458.2
22.5
6.2
40.5
3.9
28.0
6.9
7.0
20.6
18.0
0.779
25.0
0.825
33.0
24.8
39.5
7.8
39.5
28.5
39.5
29.5
39.5
Factor ............
Size Std .........
42.6
41.5
384.2
20.0
21.3
41.5
55.4
41.5
0.744
18.5.0
6.2
30.0
32.5
30.0
Factor ............
Size Std. ........
1.7
11.5
53.3
9.0
0.6
9.5
4.9
6.0
0.731
16.0
¥10.3
20.0
12.5
16.5
Factor ............
Size Std. ........
3.1
17.0
38.3
8.5
1.3
13.5
7.1
7.5
0.720
14.0
26.9
16.5
13.0
16.5
Factor ............
Size Std. ........
Factor ............
Size Std. ........
Factor ............
Size Std. ........
Factor ............
Size Std. ........
Factor ............
Size Std. ........
Factor ............
Size Std. ........
0.8
8.0
1.0
8.5
1.7
11.5
1.7
11.5
0.7
7.5
1.6
11.0
19.0
8.0
17.1
8.0
16.8
8.0
35.2
8.5
10.5
7.5
34.7
8.5
0.2
7.5
0.3
8.0
0.6
9.5
0.6
9.0
0.2
7.5
0.5
9.0
5.0
6.0
3.1
6.0
5.2
6.0
4.4
6.0
3.1
6.0
9.9
9.5
0.707
12.0
0.717
13.5
0.674
6.0
0.694
9.5
0.655
6.0
0.732
16.5
....................
8.5
16.5
¥4.8
16.5
....................
10.5
16.5
8.0
16.5
12.0
16.5
....................
10.0
16.5
7.0
16.5
¥10.2
20.0
13.0
16.5
Factor ............
Size Std. ........
2.0
12.5
164.4
13.0
0.7
10.0
5.1
6.0
0.767
22.5
¥1.7
16.5
13.5
16.5
Factor ............
Size Std. ........
1.7
11.5
123.8
11.5
0.5
9.0
4.1
6.0
0.737
17.5
24.0
16.5
12.0
16.5
Factor ............
Size Std. ........
Factor ............
Size Std. ........
Factor ............
Size Std. ........
Factor ............
Size Std. ........
Factor ............
Size Std. ........
Factor ............
Size Std. ........
Factor ............
Size Std. ........
Factor ............
Size Std. ........
Factor ............
Size Std. ........
4.4
22.5
1.7
11.5
0.6
7.0
0.9
8.5
0.7
7.5
0.7
7.5
1.4
10.5
2.0
12.5
1.4
10.0
453.7
22.5
59.3
9.5
60.6
9.5
22.4
8.0
10.4
7.5
15.1
8.0
18.1
8.0
39.3
8.5
113.9
11.0
1.5
14.0
0.5
9.0
0.2
7.0
0.3
7.5
0.3
7.5
0.2
7.0
0.5
8.5
0.9
11.0
0.5
9.0
24.7
21.0
6.0
6.5
6.9
7.0
5.0
6.0
3.4
6.0
2.2
6.0
5.1
6.0
2.1
6.0
7.8
8.0
0.775
24.0
0.746
19.0
0.697
10.0
0.718
14.0
0.695
9.5
0.686
8.0
0.705
11.5
0.733
16.5
0.703
11.0
22.5
16.5
....................
19.5
16.5
11.5
16.5
238170
Siding Contractors
238190 Other Foundation,
Structure, and Building Exterior Contractors.
238210 Electrical Contractors and Other Wiring Installation Contractors.
238220 Plumbing, Heating,
and Air-Conditioning Contractors.
238290 Other Building
Equipment Contractors.
238310 Drywall and Insulation Contractors.
238320 Painting and Wall
Covering Contractors.
238330 Flooring Contractors.
238340 Tile and Terrazzo
Contractors.
238350 Finish Carpentry
Contractors.
238390 Other Building Finishing Contractors.
238910 Site Preparation
Contractors.
238990 All Other Specialty
Trade Contractors.
jbell on DSKJLSW7X2PROD with PROPOSALS
Methodology for Agricultural Size
Standards
Forty-six industries in Subsectors 111
and 112 currently have the same $1
million receipts-based size standard.
These industries previously had a
$750,000 receipts-based size standard,
which was established directly by
Congress in section 806 of the Small
Business Reauthorization Act of 2000,
Appendix I, Public Law 106–554, 114
Stat. 2763, December 21, 2000).
Effective August 19, 2019, that size
standard was raised to $1 million by the
interim final rule adjusting all monetary
size standards for inflation (published
VerDate Sep<11>2014
17:54 Oct 01, 2020
Jkt 253001
in the Federal Register on July 18, 2019,
(84 FR 34261)). NDAA 2017 directed
SBA to establish the size standards for
those industries in the same manner
that the Agency establishes the size
standards for other industries and to
include them in the 5-year rolling
review under the Jobs Act. Accordingly,
in this proposed rule, SBA has
evaluated those industries using the
same industry and Federal contracting
factors that it uses in evaluating
characteristics of all other industries
and their size standards. However, the
industry data from the 2012 Agricultural
Census tabulation reveals that firms in
agricultural industries are much smaller
PO 00000
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0.4
16.5
12.3
16.5
....................
10.0
16.5
10.5
16.5
7.5
16.5
....................
7.5
16.5
¥13.9
20.0
19.4
16.5
¥24.4
20.0
11.0
16.5
12.0
16.5
11.5
16.5
than those in all other industries with
receipts-based size standards. Therefore,
as stated earlier, based on the data, SBA
has established $1 million and $5
million as the minimum and maximum
receipts-based size standard levels,
respectively, for agricultural industries,
as opposed to $6 million as the
minimum and $41.5 million as the
maximum receipts-based size standard
levels for all other industries. Similarly,
SBA rounds a calculated receipts-based
size standard for agricultural industries
to the nearest $250,000 instead of
rounding it to the nearest $500,000 as
for other industries.
E:\FR\FM\02OCP1.SGM
02OCP1
Federal Register / Vol. 85, No. 192 / Friday, October 2, 2020 / Proposed Rules
Of the 46 NAICS 6-digit industries in
Subsectors 111 and 112, the special
tabulation of the 2012 Census of
Agriculture provided data for 36
industries at the NAICS 6-digit level. Of
the remaining ten (10), seven (7) were
aggregated at three different 5-digit
NAICS levels and three (3) were
aggregated at one 4-digit NAICS level.
SBA ranked these 40 industry categories
(i.e., thirty-six (36) 6-digit, three (3) 3digit, and one (1) 4-digit) in terms of
each industry factor and obtained the
20th percentile an 80th percentile
values for each factor. However, since
all those industries currently have the
same $1 million size standard, SBA
cannot compute the 20th percentile and
80th percentile values from existing size
standards as for other industries. Given
the $1 million minimum and $5 million
maximum size standard levels and
calculated size standards being rounded
to the nearest $250,000, SBA derived all
possible size standards levels (e.g., $1
million, $1.25 million, $1.5 million . . .
$4.75 million, and $5 million). Based on
these levels, SBA computed $1.75
million as the 20th percentile and $4.25
million as 80th percentile values of size
standards for agricultural industries.
Combining these results with the 20th
62249
percentile and 80th percentile values of
industry factors, SBA computed a size
standard for each factor for each
industry. These results are provided in
Table 4, above.
For the 10 industries for which the
data did not exist at the 6-digit NAICS
level, SBA estimated the size standard
at the 5- or 4-digit NAICS level at which
the data were available and applied the
same results to the relevant 6-digit
NAICS levels. These results are shown,
below, in Table 5, Calculated
Agricultural Size Standards at the 4- or
5-Digit NAICS Level Matched to the 6Digit Level.
TABLE 5—CALCULATED AGRICULTURAL SIZE STANDARDS AT THE 4- OR 5-DIGIT NAICS LEVEL MATCHED TO THE 6-DIGIT
LEVEL
Calculated
size standard
($ million)
(see Table 4)
4- or 5-digit NAICS code/title
11119
Other Grain Farming .......................................
$2.0
11141
Food Crops Grown Under Cover ....................
4.0
11199
All Other Crop Farming ...................................
2.25
1125
Aquaculture .......................................................
3.25
jbell on DSKJLSW7X2PROD with PROPOSALS
Evaluation of Size Standards for
Subindustry Categories or ‘‘Exceptions’’
In accordance with SBA’s approach to
evaluating size standards for
subindustry categories (or
‘‘exceptions’’), SBA has evaluated the
three (3) exceptions covered by this rule
using the procedures described in the
revised SBA’s Methodology. The results
of that analysis are discussed in the
following two subsections.
Forest Fire Suppression and Fuel
Management Services
Forest Fire Suppression and Fuels
Management Services are subindustry
categories or exceptions under NAICS
115310 (Support Activities for Forestry)
with the current size standard of $20.5
million in average annual receipts. In
2003, SBA established a different size
standard for these subindustry activities
(68 FR 33348 (June 4, 2003)). In 2013,
as part of the first 5-year review of size
standards under the Jobs Act, SBA
initially maintained $17.5 million as the
size standard for these exceptions (78
FR 37398 (June 20, 2013)), and
subsequently, as part of the adjustment
to monetary-based size standards for
inflation, the Agency increased the size
standard from $17.5 million to $19
million (79 FR 33647 (June 12, 2014)),
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6-digit NAICS code/title
111191
111199
111411
111419
111991
111992
111998
112511
112512
112519
Oilseed and Grain Combination Farming .....
All Other Grain Farming ................................
Mushroom Production ...................................
Other Food Crops Grown Under Cover .......
Sugar Beet Farming ......................................
Peanut Farming ............................................
All Other Miscellaneous Crop Farming .........
Finfish Farming and Fish Hatcheries ............
Shellfish Farming ..........................................
Other Aquaculture .........................................
and in the fiscal year 2019 the size
standard was adjusted from $19 million
to $20.5 million (84 FR 34261 (July 18,
2019)).
The data from the Census Bureau’s
and NASS’ special tabulations are
limited to the 6-digit NAICS industry
level, and hence, do not provide
separate data to evaluate a size standard
at the subindustry level. As such, SBA
relied upon data from other sources to
evaluate the current $20.5 million size
standard for both exceptions.
Firms engaged in the Forest Fire
Suppression and Fuels Management
Services subindustries were identified
from the contracting data reported in
FPDS–NG during fiscal years 2016–
2018. Specifically, the contracts under
Forest Fire Suppression and Fuels
Management Services exceptions can be
identified as those classified within
NAICS 115310 under the Product
Service Code (PSC) F003 (Natural
Resources/Conservation—Forest-Range
Fire Suppression/Presuppression). SBA
also evaluated the contract data from the
USDA Forest Service National
Interagency Fire Center (https://
www.fs.fed.us/managing-land/fire and
https://www.fs.fed.us/business/incident/
vipr.php). SBA also evaluated the
description of requirements of the
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Calculated
size standard
($ million)
$2.0
2.0
4.0
4.0
2.25
2.25
2.25
3.25
3.25
3.25
contracts for Forest Fire Suppression
and Fuels Management Services in
FPDS–NG to identify principal activities
related to forest fire suppression and
fuel management services and to
differentiate them from other support
activities for forestry. SBA identified
activities associated with specialized
crews, equipment and engines with
trained personnel that are critical to
perform the tasks of suppressing or
managing fires as principal activities
and other activities, such as leases of
equipment, machinery and
transportation vehicles, or provision of
services that do not require specialized
personnel or training as supporting
activities. Since most firms involved in
Fire Suppression Services were also
found to be involved in Fuels
Management Services and vice versa,
SBA analyzed the two as one
subindustry category.
Finally, SBA obtained receipts and
employment data for the fiscal years
2016–2018 from FPDS–NG and from the
System for Award Management (SAM)
to develop industry and Federal
contracting factors for evaluating the
size standard for the two exceptions.
SBA chose firms with receipts greater
than zero and less than $1 billion. Firms
with receipts greater than $1 billion are
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outliers and their revenues would skew
the data. Similarly, firms with receipts
at or below zero have insignificant
contributions to total Federal contract
dollars obligated to the industry. Table
4, above, shows the results from the
analysis of these subindustries, which
supported a $23.5 million size standard
as compared to the current $20.5
million. Given the inherent uncertainty
of occurrences of forest fires and recent
surges in forest fire incidents and
extended fire seasons, SBA believes that
contracting officers need to have
flexibility to be able to hire enough
small businesses, especially in the
worst-case scenario. SBA estimates that
in a very busy season, it is not
implausible to assume 120 days of 14
hours shifts. Assuming an average price
of $43 dollars per person per hour, a
total amount of about $6 million could
be awarded to a firm with an average
number of 4 crews. In the case of firms
with 15 crews, the amount could reach
$22.0 million. Both numbers include
only payments to firefighters for direct
fire suppression activities; in other
words, here we did not consider in the
analysis additional payments, such as
payments for fire engines, water tenders,
etc. With this reality in mind, SBA
proposes to increase the size standard
for the Forest Fire Suppression and
Fuels Management Services exceptions
to $25 million, above the current size
standard of $20.5 million and the
calculated size standard of $23.5 million
and seeks comments on this proposal.
Dredging and Surface Cleanup
Activities
The Dredging and Surface Cleanup
Activities (Dredging) size standard is an
exception established by SBA within
the 6-digit NAICS code 237990 (Other
Heavy and Civil Engineering
Construction). As stated previously, the
data from the Census Bureau’s special
tabulation of the Economic Census is
limited to the 6-digit NAICS industry
level, and hence, does not provide
separate data at the subindustry level to
evaluate exceptions. Accordingly, SBA
relied upon the data from other sources
to evaluate the current $30.0 million
size standard for Dredging.
SBA identified firms engaged in the
Dredging subindustry using the contract
awards data within NAICS 237990 in
FPDS–NG for fiscal years 2016–2018.
Specifically, dredging contracts were
identified as those classified under one
of the following Product Service Codes
(PSCs): C1KF—Architect and
Engineering Construction—Dredging
Facilities; M1KF—Operation of
Dredging Facilities; X1KF—Lease/
Rental of Dredging Facilities; Y1KF—
Construction of Dredging Facilities;
Z1KF—Maintenance of Dredging
Facilities; Z2KF—Repair or alternation
of Dredging Facilities; and 1955—
Dredges. SBA obtained receipts and
employment data for the identified
Dredging firms from the System for
Award Management (SAM) and FPDS–
NG to develop industry and Federal
contracting factors for Dredging. SBA
excluded from the analysis firms for
which Dredging Federal contracts
dollars accounted for a very small
percentage of their average annual
receipts. SBA also excluded from the
analysis contracts awarded under PSCs
C1KF and X1KF and firms receiving
such contracts as contract dollars under
those PSCs were very small. After these
exclusions, SBA evaluated the data for
a total of 100 Dredging firms that have
received Federal contracts under NAICS
237990 and the above PSCs during fiscal
years 2016–2018.
SBA also looked at the Dredging
contracting information from the US
Army Corps of Engineers’ Navigation
and Civil Works Decision Support
Center (NDC) (https://
www.iwr.usace.army.mil/About/
Technical-Centers/NDC-Navigationand-Civil-Works-Decision-Support/), as
well as the annual reports from
Dredging Contractors of America (DCA)
(www.dredgingcontractors.org).
However, those sources do not provide
information on business size and seem
to include a smaller number of dredging
firms as compared to the number of
Dredging firms found in FPDS–NG.
SBA’s analysis included a vast majority
of all firms found in the NDC and DCA
reports, except a few that received
contracts in industries other than
NAICS 237990 or in PSCs other than
those described above.
Table 4, above, shows the results from
the analysis of the Dredging subindustry
that support raising the current $30.0
million size standard for the Dredging
exception to $33.0 million. As also
shown in Table 4, the results for overall
NAICS 237990 yields a smaller
calculated size standard of $29.5 million
as compared to the current standard of
$39.5 million. Thus, the analytical
results from the latest available industry
and Federal contracting data seem to
suggest that a separate size standard is
still warranted for Dredging.
Historically, the Dredging exception size
standard has been lower than the overall
NAICS 237990 size standard, but the
latest results suggest otherwise. As such,
in this proposed rule, SBA is proposing
to retain current size standard for the
overall NAICS 237990 and increase the
size standard of the Dredging
subindustry to $33.0 million and
seeking comment on the proposal.
Additionally, SBA is seeking comments
on whether Dredging and Surface
Cleanup Activities should continue to
be treated as an exception or on whether
it should be eliminated and subject to
the same overall NAICS 237990 size
standard.
Summary of Calculated Size Standards
Of the one hundred (100) industries
and three (3) subindustries (exceptions)
reviewed in this proposed rule, the
results from analyses of the latest
available data on the five primary
factors from Table 4, Size Standards
Supported by Each Factor for Each
Industry (millions of dollars), above,
would support increasing size standards
for sixty-five (65) industries and three
(3) subindustries, and decreasing size
standards for thirty-five (35) industries.
Table 6, Summary of Calculated Size
Standards, summarizes these results by
NAICS sector.
TABLE 6—SUMMARY OF CALCULATED SIZE STANDARDS
jbell on DSKJLSW7X2PROD with PROPOSALS
NAICS sector
11
21
22
23
Number
of size
standards
reviewed
Sector name
Number
of size
standards
increased
Number
of size
standards
decreased
Number
of size
standards
unchanged
..........................................
..........................................
..........................................
..........................................
Agriculture, Forestry, Fishing and Hunting ..........................
Mining, Quarrying, and Oil and Gas Extraction ...................
Utilities ..................................................................................
Construction .........................................................................
64
4
3
32
60
3
3
2
4
1
0
30
0
0
0
0
All Sectors ......................
...............................................................................................
103
68
35
0
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Evaluation of SBA Loan Data
Before proposing or deciding on an
industry’s size standard revision, SBA
also considers the impact of size
standards revisions on SBA’s loan
programs. Accordingly, SBA examined
its internal 7(a) and 504 loan data for
fiscal years 2016–2018 to assess whether
the calculated size standards in Table 4
(above) need further adjustments to
ensure credit opportunities for small
businesses through those programs. For
the industries reviewed in this rule, the
data shows that it is mostly businesses
much smaller than the current or
proposed size standards that receive
SBA’s 7(a) and 504 loans. For example,
for industries covered by this rule, more
than 95.6 percent of 7(a) and 504 loans
in fiscal years 2016–2018 went to
businesses below the current or
proposed size standards.
Proposed Changes to Size Standards
Based on the analytical results in
Table 4 and considerations of impacts of
calculated size standards in terms of
access by currently small businesses to
SBA’s loans, as discussed above, of a
total of one hundred three (103)
industries or subindustries (exceptions)
with receipts-based size standards in
Sectors 11, 21, 22 and 23 that are
covered by this rule, and considering
the current situation due to the COVID–
19 related national emergency and its
impacts on small businesses and the
overall economy, SBA proposes to
increase size standards for 68 industries
or subindustries, and retain the current
size standards for the remaining 35
industries.
Special Considerations
On March 13, 2020, the ongoing
Coronavirus Disease 2019 (COVID–19)
was declared a pandemic of enough
severity and magnitude to warrant an
emergency declaration for all states,
territories, and the District of Columbia.
With the COVID–19 emergency, many
small businesses nationwide are
experiencing economic hardship as a
direct result of the Federal, State, and
local public health measures that are
being taken to minimize the public’s
exposure to the virus. These measures,
some of which are governmentmandated, are being implemented
nationwide and include the closures of
restaurants, bars, and gyms. In addition,
based on the advice of public health
officials, other measures, such as
keeping a safe distance from others or
even stay-at-home orders, are being
implemented, resulting in a dramatic
decrease in economic activity as the
public avoids malls, retail stores, and
other businesses.
The Coronavirus Aid, Relief, and
Economic Security Act (the CARES Act
or the Act) (Pub. L. 116–136) was signed
on March 27, 2020, to provide
emergency assistance and health care
response for individuals, families, and
businesses affected by the coronavirus
pandemic. Section 1102 of the Act
temporarily permits SBA to guarantee
100 percent of 7(a) loans under a new
program titled the Paycheck Protection
Program (PPP). Section 1106 of the Act
provides for forgiveness of up to the full
principal amount of qualifying loans
guaranteed under the PPP. The PPP and
loan forgiveness are intended to provide
economic relief to small businesses
nationwide adversely impacted under
the COVID–19. On April 24, 2020,
additional funding for the CARES Act,
including for the PPP, was provided.
The Agency is following closely the
development of the pandemic and the
economic situation and recovery. The
consequence of the initial response of
the public to the COVID–19 pandemic
as well as the different measures taken
by the Government to contain it (e.g.
stay at home orders, social distancing,
etc.) have resulted in the present
economic decline. A variety of
economic indicators such as the Gross
Domestic Product (GDP) and the
unemployment rate shows that this
recession is significantly worse than any
other recession since World War II. The
GDP decreased nearly 5 percent, and the
Personal consumption in goods and
services decreased 6.8 percent in the
first quarter of 2020; in May 2020,
personal income decreased 4.2 percent
and the unemployment rate increased
from 3.5 percent in February 2020 to
11.1 percent in June 2020, and, also for
the month of June 2020, Non-farm
payroll decreased by 15 million since
February 2020. Specifically for the
sectors evaluated in this proposed rule,
more recent data in June 2020 shows
that the unemployment rate for
Agriculture and related private wage
and salary workers was 5.4 percent, but
the sector of Mining, quarrying, and oil
and gas extraction shows an
unemployment rate of 17.8 percent and
the construction sector, 10.1 percent. In
June 2019, the unemployment rates for
these sectors were 5.9, 3.2 and 4
percent, respectively. The latest Federal
Reserve Board’s Monetary Policy Report
shows that in general the most impacted
firms in these sectors are small
businesses.1
Accordingly, in view of above impacts
on small businesses from the COVID–19
pandemic and Federal government
efforts to provide relief to small
businesses and support to the overall
economy, SBA proposes to adopt
increases to size standards for 68
industries and retain the current size
standards for 35 industries for which
analytical results suggested their size
standards could be lowered.
The proposed size standards are
presented in Table 7, Proposed Size
Standards Revisions. Also presented in
Table 7 are current and calculated size
standards for comparison.
TABLE 7—PROPOSED SIZE STANDARDS REVISIONS
jbell on DSKJLSW7X2PROD with PROPOSALS
NAICS code
111110
111120
111130
111140
111150
111160
111191
111199
...........
...........
...........
...........
...........
...........
...........
...........
Soybean Farming ............................................................................................
Oilseed (except Soybean) Farming ................................................................
Dry Pea and Bean Farming ............................................................................
Wheat Farming ................................................................................................
Corn Farming ..................................................................................................
Rice Farming ...................................................................................................
Oilseed and Grain Combination Farming .......................................................
All Other Grain Farming ..................................................................................
1 Board of Governors of the Federal Reserve
System (June 2020), Monetary Policy Report, p. 24
(see https://www.federalreserve.gov/
monetarypolicy/files/20200612_mprfullreport.pdf)
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Current
size
standard
($ million)
NAICS industry title
17:54 Oct 01, 2020
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and U.S. Census Bureau’s Small Business Pulse
Survey (https://portal.census.gov/pulse/data). The
latest is a recent survey created by the Census
Bureau to provide high-frequency, detailed
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$1.0
1.0
1.0
1.0
1.0
1.0
1.0
1.0
Calculated
size
standard
($ million)
Proposed
size
standard
($ million)
$2.0
2.0
2.5
2.0
2.25
2.25
2.0
2.0
information on participation in small businessspecific initiatives such as the PPP.
E:\FR\FM\02OCP1.SGM
02OCP1
$2.0
2.0
2.5
2.0
2.25
2.25
2.0
2.0
62252
Federal Register / Vol. 85, No. 192 / Friday, October 2, 2020 / Proposed Rules
jbell on DSKJLSW7X2PROD with PROPOSALS
TABLE 7—PROPOSED SIZE STANDARDS REVISIONS—Continued
Current
size
standard
($ million)
NAICS code
NAICS industry title
111211 ...........
111219 ...........
111310 ...........
111320 ...........
111331 ...........
111332 ...........
111333 ...........
111334 ...........
111335 ...........
111336 ...........
111339 ...........
111411 ...........
111419 ...........
111421 ...........
111422 ...........
111910 ...........
111920 ...........
111930 ...........
111940 ...........
111991 ...........
111992 ...........
111998 ...........
112111 ...........
112112 ...........
112120 ...........
112210 ...........
112310 ...........
112320 ...........
112330 ...........
112340 ...........
112390 ...........
112410 ...........
112420 ...........
112511 ...........
112512 ...........
112519 ...........
112910 ...........
112920 ...........
112930 ...........
112990 ...........
113110 ...........
113210 ...........
114111 ...........
114112 ...........
114119 ...........
114210 ...........
115111 ...........
115112 ...........
115113 ...........
115114 ...........
115115 ...........
115116 ...........
115210 ...........
115310 ...........
Except ............
Except ............
213112 ...........
213113 ...........
213114 ...........
213115 ...........
221310 ...........
221320 ...........
221330 ...........
236115 ...........
236116 ...........
236117 ...........
236118 ...........
236210 ...........
236220 ...........
Potato Farming ................................................................................................
Other Vegetable (except Potato) and Melon Farming ....................................
Orange Groves ................................................................................................
Citrus (except Orange) Groves .......................................................................
Apple Orchards ...............................................................................................
Grape Vineyards .............................................................................................
Strawberry Farming .........................................................................................
Berry (except Strawberry) Farming .................................................................
Tree Nut Farming ............................................................................................
Fruit and Tree Nut Combination Farming .......................................................
Other Noncitrus Fruit Farming ........................................................................
Mushroom Production .....................................................................................
Other Food Crops Grown Under Cover ..........................................................
Nursery and Tree Production ..........................................................................
Floriculture Production ....................................................................................
Tobacco Farming ............................................................................................
Cotton Farming ...............................................................................................
Sugarcane Farming .........................................................................................
Hay Farming ....................................................................................................
Sugar Beet Farming ........................................................................................
Peanut Farming ...............................................................................................
All Other Miscellaneous Crop Farming ...........................................................
Beef Cattle Ranching and Farming ................................................................
Cattle Feedlots ................................................................................................
Dairy Cattle and Milk Production ....................................................................
Hog and Pig Farming ......................................................................................
Chicken Egg Production .................................................................................
Broilers and Other Meat Type Chicken Production ........................................
Turkey Production ...........................................................................................
Poultry Hatcheries ...........................................................................................
Other Poultry Production .................................................................................
Sheep Farming ................................................................................................
Goat Farming ..................................................................................................
Finfish Farming and Fish Hatcheries ..............................................................
Shellfish Farming ............................................................................................
Other Aquaculture ...........................................................................................
Apiculture ........................................................................................................
Horses and Other Equine Production .............................................................
Fur-Bearing Animal and Rabbit Production ....................................................
All Other Animal Production ............................................................................
Timber Tract Operations .................................................................................
Forest Nurseries and Gathering of Forest Products ......................................
Finfish Fishing .................................................................................................
Shellfish Fishing ..............................................................................................
Other Marine Fishing ......................................................................................
Hunting and Trapping .....................................................................................
Cotton Ginning ................................................................................................
Soil Preparation, Planting, and Cultivating .....................................................
Crop Harvesting, Primarily by Machine ..........................................................
Postharvest Crop Activities (except Cotton Ginning) .....................................
Farm Labor Contractors and Crew Leaders ...................................................
Farm Management Services ...........................................................................
Support Activities for Animal Production ........................................................
Support Activities for Forestry .........................................................................
Fire Suppression Services ..............................................................................
Fuels Management Services ..........................................................................
Support Activities for Oil and Gas Operations ................................................
Support Activities for Coal Mining ...................................................................
Support Activities for Metal Mining .................................................................
Support Activities for Nonmetallic Minerals (except Fuels) Mining ................
Water Supply and Irrigation Systems .............................................................
Sewage Treatment Facilities ...........................................................................
Steam and Air-Conditioning Supply ................................................................
New Single-Family Housing Construction (except For-Sale Builders) ...........
New Multifamily Housing Construction (except For-Sale Builders) ................
New Housing For-Sale Builders ......................................................................
Residential Remodelers ..................................................................................
Industrial Building Construction ......................................................................
Commercial and Institutional Building Construction .......................................
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1.0
1.0
1.0
1.0
1.0
1.0
1.0
1.0
1.0
1.0
1.0
1.0
1.0
1.0
1.0
1.0
1.0
1.0
1.0
1.0
1.0
1.0
1.0
8.0
1.0
1.0
16.5
1.0
1.0
1.0
1.0
1.0
1.0
1.0
1.0
1.0
1.0
1.0
1.0
1.0
12.0
12.0
22.0
6.0
8.0
6.0
12.0
8.0
8.0
30.0
16.50
8.0
8.0
8.0
20.5
20.5
41.5
22.0
22.0
8.0
30.0
22.0
16.5
39.5
39.5
39.5
39.5
39.5
39.5
02OCP1
Calculated
size
standard
($ million)
3.75
3.25
3.5
3.75
4.0
3.5
4.75
3.25
3.25
4.5
3.0
4.0
4.0
2.75
3.25
2.25
2.75
4.5
2.25
2.25
2.25
2.25
2.25
19.5
3.25
3.5
15.5
3.0
3.25
3.5
3.25
3.0
2.25
3.25
3.25
3.25
2.75
2.5
3.25
2.5
16.5
18.0
20.5
12.5
10.0
7.5
14.0
8.5
12.0
27.5
12.5
13.5
9.5
10.0
23.5
23.5
38.0
24.0
36.0
18.0
36.0
31.0
26.5
8.0
25.5
27.5
13.5
29.0
25.5
Proposed
size
standard
($ million)
3.75
3.25
3.5
3.75
4.0
3.5
4.75
3.25
3.25
4.5
3.0
4.0
4.0
2.75
3.25
2.25
2.75
4.5
2.25
2.25
2.25
2.25
2.25
19.5
3.25
3.5
16.5
3.0
3.25
3.5
3.25
3.0
2.25
3.25
3.25
3.25
2.75
2.5
3.25
2.5
16.5
18.0
22.0
12.5
10.0
7.5
14.0
8.5
12.0
30.0
16.5
13.5
9.5
10.0
25.0
25.0
41.5
24.0
36.0
18.0
36.0
31.0
26.5
39.5
39.5
39.5
39.5
39.5
39.5
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TABLE 7—PROPOSED SIZE STANDARDS REVISIONS—Continued
Current
size
standard
($ million)
NAICS code
NAICS industry title
237110 ...........
237120 ...........
237130 ...........
237210 ...........
237310 ...........
237990 ...........
Except ............
238110 ...........
238120 ...........
238130 ...........
238140 ...........
238150 ...........
238160 ...........
238170 ...........
238190 ...........
238210 ...........
238220 ...........
238290 ...........
238310 ...........
238320 ...........
238330 ...........
238340 ...........
238350 ...........
238390 ...........
238910 ...........
238990 ...........
Water and Sewer Line and Related Structures Construction ........................
Oil and Gas Pipeline and Related Structures Construction ...........................
Power and Communication Line and Related Structures Construction .........
Land Subdivision .............................................................................................
Highway, Street, and Bridge Construction ......................................................
Other Heavy and Civil Engineering Construction ...........................................
Dredging and Surface Clean-Up Activities .....................................................
Poured Concrete Foundation and Structure Contractors ...............................
Structural Steel and Precast Concrete Contractors .......................................
Framing Contractors .......................................................................................
Masonry Contractors .......................................................................................
Glass and Glazing Contractors .......................................................................
Roofing Contractors ........................................................................................
Siding Contractors ...........................................................................................
Other Foundation, Structure, and Building Exterior Contractors ....................
Electrical Contractors and Other Wiring Installation Contractors ...................
Plumbing, Heating, and Air-Conditioning Contractors ....................................
Other Building Equipment Contractors ...........................................................
Drywall and Insulation Contractors .................................................................
Painting and Wall Covering Contractors .........................................................
Flooring Contractors ........................................................................................
Tile and Terrazzo Contractors ........................................................................
Finish Carpentry Contractors ..........................................................................
Other Building Finishing Contractors ..............................................................
Site Preparation Contractors ...........................................................................
All Other Specialty Trade Contractors ............................................................
Table 8, Summary of Proposed Size
Standards Revisions by Sector, below,
Calculated
size
standard
($ million)
39.5
39.5
39.5
30.0
39.5
39.5
30.0
16.5
16.5
16.5
16.5
16.5
16.5
16.5
16.5
16.5
16.5
16.5
16.5
16.5
16.5
16.5
16.5
16.5
16.5
16.5
Proposed
size
standard
($ million)
20.0
33.0
31.0
22.0
28.5
29.5
32.5
12.5
13.0
8.5
10.5
8.0
10.0
7.0
13.0
13.5
12.0
19.5
11.5
10.0
10.5
7.5
7.5
11.0
12.0
11.5
39.5
39.5
39.5
30.0
39.5
39.5
32.5
16.5
16.5
16.5
16.5
16.5
16.5
16.5
16.5
16.5
16.5
19.5
16.5
16.5
16.5
16.5
16.5
16.5
16.5
16.5
summarizes the proposed changes to
size standards by NAICS sector.
TABLE 8—SUMMARY OF PROPOSED SIZE STANDARDS REVISIONS BY SECTOR
NAICS Sector
11
21
22
23
Size
standards
lowered
Size
standards
maintained
...........................................
...........................................
...........................................
...........................................
Agriculture, Forestry, Fishing and Hunting .............................
Mining, Quarrying, and Oil and Gas Extraction ......................
Utilities ....................................................................................
Construction ............................................................................
60
3
3
2
0
0
0
0
4
1
0
30
All Sectors .......................
.................................................................................................
68
0
35
Evaluation of Dominance in Field of
Operation
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Size
standards
increased
Sector name
Alternatives Considered
SBA has determined that for the
industries which it has evaluated in this
proposed rule, no individual firm at or
below the proposed size standard would
be large enough to dominate its field of
operation. At the proposed size
standards levels, if adopted, the small
business share of total industry receipts
among those industries would be, on
average, 1.1 percent, varying from 0.003
percent to 30.5 percent. These market
shares effectively preclude a firm at or
below the proposed size standards from
exerting control on any of the
industries.
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By law, SBA is required to develop
numerical size standards for
establishing eligibility for Federal small
business assistance programs and to
review every five years all size
standards and make necessary
adjustments to reflect the current
industry structure and Federal market
conditions. Other than varying the
levels of size standards by industry and
changing the measures of size standards
(e.g., using annual receipts vs. the
number of employees), no practical
alternatives exist to the systems of
numerical size standards.
The proposal is to increase size
standards where the data suggested
increases are warranted, and to retain,
in response to COVID–19 emergency
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and resultant economic impacts on
small businesses, all current size
standards where the data suggested
lowering is appropriate.
Nonetheless, SBA considered two
other alternatives. Alternative option
one was to propose changes exactly as
suggested by the analytical results.
Alternative option two was to retain all
current size standards.
Alternative option one would cause a
substantial number of currently small
businesses to lose their small business
status and hence to lose their access to
Federal small business assistance,
especially small business set-aside
contracts and SBA’s financial assistance
in some cases. During the first 5-year
review of size standards, some
commenters had expressed concerns
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about SBA’s policy of not lowering size
standards based on the analytical
results.
As part of option one, SBA also
considered increasing 68 size standards
as suggested by the analytical results
and mitigating the impact of the
decreases to size standards by adjusting
the calculated sizes considering the
impact on small business access to
Federal contracting and loans. However,
in the present situation with the global
COVID–19 pandemic resulting in high
levels of risk and dramatic reductions in
economic activity of unprecedented
nature, SBA presents the impacts of
adopting the analytical results without
adjustment in alternative option one
and proposes to retain all size standards
for which the evaluation of principal
factors suggested reductions, and to
adopt only the increases suggested by
the evaluation. SBA will adopt this
approach temporarily and may
reevaluate this approach as the
economic situation evolves.
Under option two, given the current
COVID–19 Pandemic, SBA considered
retaining the current level of all size
standards even though the current
analysis may suggest changing them.
SBA considers that the option of
retaining all size standards at this
moment provides the opportunity to
reassess the economic situation once the
economic recovery starts. Under this
option, as the current situation
develops, SBA will be able to assess
new data available on economic
indicators, federal procurement, and
SBA loans as well, before adopting
changes to size standards. However,
SBA is not adopting option two because
the Regulatory Impact Analysis shows
that retaining all size standards at their
current levels is more onerous for the
small businesses than the option of
adopting 68 increases and retaining 35
size standards. Additionally, SBA
regards size standards evaluation of 46
agricultural industries for the first time
as one of the most important
contributions of our current
comprehensive size standards review,
and postponing the adoption of the
calculated size standards should be
detrimental for the small businesses
within those industries. Finally, given
the inherent uncertainty of occurrences
of fires, the recent surges in forest fire
incidents and the extended fire seasons,
SBA believes that not proposing the
increases in size standards for the
NAICS 115310 in general and its two
exceptions will adversely affect the
availability of small businesses for these
tasks, especially in the worst-case
scenarios. SBA may reevaluate this
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approach as the current economic
situation evolves.
Request for Comments
SBA invites public comments on this
proposed rule, especially on the
following issues:
1. SBA seeks feedback on whether
SBA’s proposal to increase 68 size
standards and retain 35 size standards is
appropriate given the results from the
latest available industry and Federal
contracting data of each industry and
subindustry (exception) reviewed in this
proposed rule, along with ongoing
uncertainty and dramatic contraction in
economic activity due to the global
COVID–19 pandemic. SBA also seeks
suggestions, along with supporting facts
and analysis, for alternative standards, if
they would be more appropriate than
the proposed size standards.
2. SBA also seeks comments on
whether SBA should not lower any size
standards in view of COVID–19
pandemic and its adverse impacts on
small businesses as well as on the
overall economic situation when
analytical results suggest some size
standards could be lowered. SBA
believes that lowering size standards
under the current economic
environment would run counter to what
Congress and the Federal government
are doing to aid and provide relief to the
nation’s small businesses impacted by
the COVID–19 pandemic.
3. Given the uncertainty produced by
the global COVID–19 pandemic and the
economic consequences, SBA would
like to receive comments from the
public on the possibility of lowering
size standards while mitigating the
consequences of the lower standards,
instead of not lowering any size
standards.
4. In accordance with NDAA 2017, in
this proposed rule, SBA has evaluated
46 agricultural industries for which the
size standards were previously
established directly by Congress and
proposed a new size standard for each
of those industries. SBA seeks
comments on the methodology and data
sources it used to develop such
proposed standards as well as on the
appropriateness of the proposed size
standards levels.
5. In calculating the overall industry
size standard, SBA has assigned equal
weight to each of the five primary
factors in all industries and
subindustries covered by this proposed
rule. SBA seeks feedback on whether it
should assign equal weight to each
factor or on whether it should give more
weight to one or more factors for certain
industries or subindustries.
Recommendations to weigh some
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factors differently than others should
include suggested weights for each
factor along with supporting facts and
analysis.
6. For evaluating the size standards
for the Forest Fire Suppression and Fuel
Management Services subindustries
(‘‘exceptions’’) within NAICS 115310,
SBA used PSC F003 (Forest/Range Fire
Suppression/Presuppression Services)
within NAICS 115310 in FPDS–NG to
identify firms engaged in the Forest Fire
Suppression and Fuel Management
Services exceptions during fiscal years
2016–2018. Using the receipts and
employment data for those firms, SBA
analyzed the industry and Federal
contracting factors for these
subindustries. SBA seeks suggestions or
comments on data sources it used and
its proposal to increase the current
$20.5 million size standard for both
exceptions to $25 million even if the
analysis supported an increase to $23.5
million. SBA is also interested in
comments on the possible elimination
of the Forest Fire Suppression and Fuel
Management Services as ‘‘exceptions’’
to NAICS 115310, and the application of
the same general size standard for
NAICS 115310. Comments on applying
the same NAICS 115310 size standard
for Forest Fire Suppression and Fuel
management Services should address
why the same size standard is more
suitable than separate size standards for
Forest Fire Suppression and Fuel
Management Services or why firms
engaged in Forest Fire Suppression and
Fuel Management Services should
continue to be treated as separate
activities from the rest of NAICS 115310
for SBA’s size standards purposes.
7. For evaluating the size standard for
the Dredging and Surface Cleanup
Activities (Dredging), a subindustry
(‘‘exception’’) category within NAICS
code 237990, SBA used relevant PSCs
within NAICS code 237990 to identify
Dredging contracts in FPDS–NG and
firms receiving such contracts during
fiscal years 2016–2018. Using the
receipts and employment data for those
firms from FPDS–NG, SBA analyzed the
industry and Federal contracting factor
for this subindustry. SBA seeks
suggestions or comments on the use of
the data sources and the proposed size
standard. SBA is also interested in
comments on the elimination of the
subindustry category for Dredging, and
the application of the same size
standard as for overall NAICS 237990.
Comments on applying the same NAICS
237990 size standard for Dredging
should address the basis for why that
industry size standard is more suitable
than a specific dredging subindustry
size standard or why dredging firms
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should continue to be evaluated as a
discrete subindustry for SBA’s size
standards purposes.
8. In addition to comments on its
proposal to increase the size standard
for the Dredging exception from the
current $30.0 million to $33.0 million,
SBA also seeks comments regarding the
requirement for a dredging concern to
qualify as small on a Federal
procurement that it or its similarly
situated subcontractors must perform at
least 40 percent of the volume dredged
with its own equipment or equipment
owned by another small dredging
concern (see Footnote 2 in 13 CFR
121.201). This requirement has been in
SBA’s small business size regulations
since 1974 (see 30 FR 24669, July 5,
1974 and 39 FR 31302, August 28, 1974)
and was interpreted by SBA’s Office of
Hearings and Appeals to encompass
subcontractors in Size Appeal of U.S.
Army Corps of Engineers, SBA No. SIZ–
5915 (2018). This proposed rule retains
the requirement set forth in Footnote 2
in order to ensure that small Dredging
firms or their similarly situated
subcontractors perform a significant and
meaningful portion of a Dredging
project set aside for small business.
However, SBA requests comments as to
whether that footnote is still necessary.
Comments pertaining to this
requirement should address: (1)
Whether there continues to be a need to
retain the current 40 percent equipment
requirement under current industry
practices; (2) whether the 40 percent
equipment requirement should be
revised, and if so, the rationale for an
alternative percentage; and (3) whether
a different and more verifiable
requirement based on an alternative
measure (such as value of contract or
personnel involved) may achieve the
same objective of ensuring that small
businesses perform significant and
meaningful work on dredging contracts
set aside for small businesses.
9. Finally, SBA seeks comments on
data sources it used to examine industry
and Federal market conditions, as well
as suggestions on relevant alternative
data sources that the Agency should
evaluate in reviewing or modifying size
standards for industries covered by this
proposed rule.
Public comments on the above issues
are very valuable to SBA for validating
its proposed size standards revisions in
this proposed rule. 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 the application of
size standards for Federal procurement
programs, SBA suggests that
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commenters provide information on the
size of contracts in their industries, 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 and 13771, the Regulatory
Flexibility Act (5 U.S.C. 601–612),
Executive Orders 13563, 12988, and
13132, and the Paperwork Reduction
Act (44 U.S.C. Ch. 35)
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, in the next section
SBA provides a Regulatory Impact
Analysis of this proposed rule,
including: (1) A statement of the need
for the proposed action, (2) an
examination of alternative approaches,
and (3) an evaluation of the benefits and
costs—both quantitative and
qualitative—of the proposed action and
the alternatives considered. However,
this rule is not a ‘‘major rule’’ under the
Congressional Review Act, 5 U.S.C. 800.
Regulatory Impact Analysis
1. What is a need for this regulatory
action?
Under the Small Business Act (Act)
(15 U.S.C. 632(a)), SBA’s Administrator
is responsible for establishing small
business size definitions (or ‘‘size
standards’’) and ensuring that such
definitions vary from industry to
industry to reflect differences among
various industries. The Jobs Act requires
SBA to review every five years all size
standards and make necessary
adjustments to reflect current industry
and Federal market conditions. This
proposed rule is part of the second 5year review of size standards in
accordance with the Jobs Act. The first
5-year review of size standards was
completed in early 2016. Such periodic
reviews of size standards provide SBA
with an opportunity to incorporate
ongoing changes to industry structure
and Federal market environment into
size standards and to evaluate the
impacts of prior revisions to size
standards on small businesses. This also
provides SBA with an opportunity to
seek and incorporate public input to the
size standards review and analysis. SBA
believes that proposed size standards
revisions for industries being reviewed
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62255
in this rule will make size standards
more reflective of the current economic
characteristics of businesses in those
industries and the latest trends in
Federal marketplace.
SBA’s mission is to aid and assist
small businesses through a variety of
financial, procurement, business
development and counseling, and
disaster assistance programs. To
determine the actual intended
beneficiaries of these programs, SBA
establishes numerical size standards by
industry to identify businesses that are
deemed small.
The proposed revisions to the existing
size standards for 103 industries in
NAICS Sectors 11, 21, 22 and 23 are
consistent with SBA’s statutory
mandates to help small businesses grow
and create jobs and to review and adjust
size standards every five years. This
regulatory action promotes the
Administration’s goals and objectives as
well as meets the SBA’s statutory
responsibility. One of SBA’s goals in
support of promoting the
Administration’s objectives is to help
small businesses succeed through fair
and equitable access to capital and
credit, Federal Government contracts
and purchases, and management and
technical assistance. Reviewing and
modifying size standards, when
appropriate, ensures that intended
beneficiaries are able to access Federal
small business programs that are
designed to assist them to become
competitive and create jobs.
2. What are the potential benefits and
costs of this regulatory action?
OMB directs agencies to establish an
appropriate baseline to evaluate any
benefits, costs, or transfer impacts of
regulatory actions and alternative
approaches considered. The baseline
should represent the agency’s best
assessment of what the world would
look like absent the regulatory action.
For a new regulatory action
promulgating modifications to an
existing regulation (such as modifying
the existing size standards), a baseline
assuming no change to the regulation
(i.e., making no changes to current size
standards) generally provides an
appropriate benchmark for evaluating
benefits, costs, or transfer impacts of
proposed regulatory changes and their
alternatives.
Proposed Changes to Size Standards
Based on the results from analysis of
latest industry and Federal contracting
data, as well as consideration of impact
of size standards changes on small
businesses and significant adverse
impacts of the COVID–19 emergency on
small businesses and the overall
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economic activity, of the total of 103
industries in Sectors 11, 21, 22 and 23
that have receipts-based size standards,
SBA proposes to increase size standards
for 68 industries (including exceptions),
and maintain current size standards for
the remaining 35 industries.
The Baseline
For purposes of this regulatory action,
the baseline represents maintaining the
‘‘status quo,’’ i.e., making no changes to
the current size standards. Using the
number of small businesses and levels
of benefits (such as set-aside contracts,
SBA’s loans, disaster assistance, etc.)
they receive under the current size
standards as a baseline, one can
examine the potential benefits, costs
and transfer impacts of proposed
changes to size standards on small
businesses and on the overall economy.
Based on the 2012 Economic Census
(the latest available), of a total of about
2.7 million businesses in industries in
Sectors 11, 21, 22, and 23 for which
SBA proposes to increase their receiptsbased size standards, 96.9 percent are
considered small under the current size
standards. That percentage varies from
95.5 percent in Sector 21 to 98.5 percent
in Sector 23. Based on the data from
FPDS–NG for fiscal years 2016–2018,
about 17,300 unique firms in those
industries received at least one Federal
contract during that period, of which
86.4 percent were small under the
current size standards. A total of $30.2
billion in average annual contract
dollars were awarded to businesses in
those industries during the period of
evaluation, and 51.2 percent of the
dollars awarded went to small
businesses. For these sectors, providing
contract dollars to small business
through set asides is quite important.
From the total small business contract
dollars awarded during the period
considered, 83.4 percent were awarded
through various small business set-aside
programs and 16.6 percent were
awarded through non-set aside
contracts. Based on the SBA’s internal
data on its loan programs for fiscal years
2016–2018, small businesses in those
industries received, on an annual basis,
a total of nearly 8,300 7(a) and 504 loans
in that period, totaling about $2.4
billion, of which 89 percent was issued
through the 7(a) program and 11 percent
was issued through the 504/CDC
program. During fiscal years 2016–2018,
small businesses in those industries also
received 318 loans through the SBA’s
Economic Injury Disaster Loan (EIDL)
program, totaling about $25.0 million on
an annual basis. Table 9, Baseline for
All Industries, below, provides these
baseline results by sector.
TABLE 9—BASELINE FOR ALL INDUSTRIES
Sector 11
Baseline All Industries (current size standards) ..................
Total firms (Economic Census) ....................................
Total small firms under current size standards (Economic Census) ..........................................................
Small firms as % of total firms .....................................
Total contract dollars ($ million) (FPDS–NG FY2016–
2018) .........................................................................
Total small business contract dollars under current
standards ($ million) (FPDS–NG FY2016–2018) .....
Small business dollars as % of total dollars (FPDS–
NG FY2016–2018) ....................................................
Total No. of unique firms getting contracts (FPDS–NG
FY2016–2018) ...........................................................
Total No. of unique small firms getting small business
contracts (FPDS–NG FY2016–2018) .......................
Small business firms as % of total firms ......................
No. of 7(a) and 504/CDC loans (FY2016–2018) .........
Amount of 7(a) and 504 loans ($ million) (FY2016–
2018) .........................................................................
No. of EIDL loans (FY2016–2018) ...............................
Amount of EIDL loans ($ million) (FY2016–2018) .......
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Increases to Size Standards
As stated above, of 103 receipts-based
size standards in Sectors 11, 21, 22 and
23 that are reviewed in this rule, based
on the results from analyses of latest
industry and Federal market data as
well as impacts of size standards
changes on small businesses, SBA
proposes to increase 68 size standards.
Below are descriptions of the benefits,
costs and transfer impacts of these
proposed increases to size standards.
Benefits of Increases to Size Standards
The most significant benefit to
businesses from proposed increases to
size standards is gaining eligibility for
Federal small business assistance
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Sector 21
Frm 00023
Sector 23
Total
64
2,122,631
4
8,196
3
3,673
32
587,173
103
2,721,673
2,046,316
96.4
7,828
95.5
3,586
97.6
578,430
98.5
2,636,160
96.9
$591.2
$90.0
$311.1
$29,178
$30,170.0
$459.1
$31.3
$67.0
$14,879
$15,436.4
77.6
34.8
21.5
51.0
51.2
3,557
298
624
13,290
17,300
3,174
89.2
843
221
74.2
73
488
78.2
36
11,422
85.9
7,334
14,933
86.4
8,286
$620.7
90
$5.6
$34.2
3
$0.6
$6.5
3
$0.7
$1,705.3
222
$18.0
$2,366.7
318
$25.0
programs or retaining that eligibility for
a longer period. These include SBA’s
business loan programs, EIDL program,
and Federal procurement programs
intended for small businesses. Federal
procurement programs provide targeted,
set-aside opportunities for small
businesses under SBA’s various
business development and contracting
programs. These include the 8(a)/
BD(business development) Program, the
Small Disadvantaged Businesses (SDB)
Program, the Historically Underutilized
Business Zones (HUBZone) Program,
the Women-Owned Small Businesses
(WOSB) Program, the Economically
Disadvantaged Women-Owned Small
Businesses (EDWOSB) Program, and the
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Service-Disabled Veteran-Owned Small
Businesses (SDVOSB) Program.
Besides set-aside contracting and
financial assistance discussed above,
small businesses also benefit through
reduced fees, less paperwork, and fewer
compliance requirements that are
available to small businesses through
Federal government. However, SBA has
no data to estimate the number of small
businesses receiving such benefits.
Based on the 2012 Economic Census
(latest available), SBA estimates that in
68 industries in NAICS Sectors 11, 21,
22 and 23 for which it has proposed to
increase size standards, more than
49,400 firms (see Table 10, below) not
small under the current size standards
will become small under the proposed
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size standards increases and therefore
become eligible for these programs. That
represents about 2.4 percent of all firms
classified as small under the current
size standards in industries for which
SBA has proposed increasing size
standards. If adopted, proposed size
standards would result in an increase to
the small business share of total receipts
in those industries from 35.6 percent to
55.2 percent.
With more businesses qualifying as
small under the proposed increases to
size standards, Federal agencies will
have a larger pool of small businesses
from which to draw for their small
business procurement programs.
Growing small businesses that are close
to exceeding the current size standards
will be able to retain their small
business status for a longer period under
the higher size standards, thereby
enabling them to continue to benefit
from the small business programs.
Based on the FPDS–NG data for fiscal
years 2016–2018, SBA estimates that
about 90 firms that are active in Federal
contracting in those industries would
gain small business status under the
proposed size standards. Based on the
same data, SBA estimates that those
newly qualified small businesses under
the proposed increases to size
standards, if adopted, could receive
Federal small business contracts totaling
about $9.8 million annually. That
represents a 1.6 percent increase to
small business dollars from the sector
baseline.
The added competition from more
businesses qualifying as small can result
in lower prices to the government for
procurements set aside or reserved for
small businesses, but SBA cannot
quantify this impact. Costs could be
higher when full and open contracts are
awarded to HUBZone businesses that
receive price evaluation preferences.
However, with agencies likely setting
aside more contracts for small
businesses in response to the
availability of a larger pool of small
businesses under the proposed increases
to size standards, HUBZone firms might
actually end up getting more set-aside
contracts and fewer full and open
contracts, thereby resulting in some cost
savings to agencies. While SBA cannot
estimate such costs savings as it is
impossible to determine the number and
value of unrestricted contracts to be
otherwise awarded to HUBZone firms
will be awarded as set-asides, such cost
savings are likely to be relatively small
as only a small fraction of full and open
contracts are awarded to HUBZone
businesses.
Under SBA’s 7(a) and 504 loan
programs, based on the data for fiscal
years 2016–2018, SBA estimates up to
about 21 7(a) and 504 loans totaling
about $14.4 million could be made to
these newly qualified small businesses
in those industries under the proposed
size standards. That represents a 0.6
percent increase to the loan amount
compared to the Group baseline.
Newly qualified small businesses will
also benefit from the SBA’s EIDL
program. Since the benefit provided
through this program is contingent on
the occurrence and severity of a disaster
in the future, SBA cannot make a
meaningful estimate of this impact.
However, based on the historical trends
of the EIDL data, SBA estimates that, on
an annual basis, the newly defined
small businesses under the proposed
increases to size standards, if adopted,
could receive four (4) EIDL loans,
totaling about $0.5 million.
Additionally, the newly defined small
businesses would also benefit through
reduced fees, less paperwork, and fewer
compliance requirements that are
available to small businesses through
the Federal government, but SBA has no
data to quantify this impact. Table 10,
Impacts of Proposed Increases to Size
Standards, provides these results by
NAICS sector.
TABLE 10—IMPACTS OF PROPOSED INCREASES TO SIZE STANDARDS
jbell on DSKJLSW7X2PROD with PROPOSALS
Sector 11
No. of industries with proposed increases to size standards ...................................................................................
Total current small businesses in industries with Proposed
increases to size standards (Economic Census 2012) ...
Additional firms qualifying as small under proposed standards (2012 Economic Census) .........................................
Percentage of additional firms qualifying as small relative
to current small businesses in industries with proposed
increases to size standards .............................................
No. of current unique small firms getting small business
contracts in industries with proposed increases to size
standards (FPDS–NG FY2016–2018) 1 ...........................
Additional small business firms getting small business status (FPDS–NG FY2016–2018) ........................................
% increase to small businesses relative to current unique
small firms getting small business contracts in industries
with proposed increases to size standards (FPDS–NG
FY2016–2018) 1 ...............................................................
Total small business contract dollars under current standards in industries with proposed increases to size standards ($ million) (FPDS–NG FY2016–2018) .....................
Estimated small business dollars available to newly qualified small firms (Using avg dollars obligated to SBs) ($
million) (FPDS–NG FY 2016–2018) 1 ..............................
% increase to small business dollars relative to total small
business contract dollars under current standards in industries with proposed increases to size standards ........
Total no. of 7(a) and 504 loans to small business in industries with proposed increases to size standards
(FY2016–2018) .................................................................
Total amount of 7(a) and 504 loans to small businesses in
industries with proposed increases to size standards ($
million) (FY2016–2018) ....................................................
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Sector 21
Sector 22
Sector 23
Total
60
3
3
2
68
2,016,066
536
3,586
5,413
2,025,601
49,352
21
9
34
49,415
2.4%
3.9%
0.2%
0.6%
2.4%
3,143
171
488
576
4,346
66
1
12
12
88
2.1%
0.6%
2.5%
2.1%
2.0%
$455.7
$4.5
$67.0
$90.8
$618.0
$5.1
$0.2
$2.7
$1.8
$9.8
1.1
5.1
4.1
2.0
1.26
779
4
36
96
915
$582.5
$1.5
$6.5
$33.7
$624.3
Fmt 4702
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Federal Register / Vol. 85, No. 192 / Friday, October 2, 2020 / Proposed Rules
TABLE 10—IMPACTS OF PROPOSED INCREASES TO SIZE STANDARDS—Continued
Sector 11
Estimated no. of 7(a) and 504 loans to newly qualified
small firms ........................................................................
Estimated 7(a) and 504 loan amount to newly qualified
small firms ($ million) .......................................................
% increase to 7(a) and 504 loan amount relative to the
total amount of 7(a) and 504 loans in industries with
proposed increases to size standards .............................
Total no. of EIDL loans to small businesses in industries
with proposed increases to size standards (FY2016–
2018) ................................................................................
Total amount of EIDL loans to small businesses in industries with proposed increases to size standards ($ million) (FY2016–2018) .........................................................
Estimated no. of EIDL loans to newly qualified small firms
Estimated EIDL loan amount to newly qualified small firms
($ million) ..........................................................................
% increase to EIDL loan amount relative to the total
amount of EIDL loans in industries with proposed increases to size standards ................................................
Sector 21
Sector 22
Sector 23
Total
18
1
1
1
21
$13.5
$0.4
$0.2
$0.4
$14.4
2.3
25.0
2.8
1.0
2.3
73
0
3
3
79
$4.7
2
$0.0
0
$0.7
1
$0.3
1
$5.8
4
$0.13
$0.0
$0.3
$0.10
$0.5
2.3
0.0
33.3
33.3
8.2
1. Additional dollars are calculated multiplying average small business dollars obligated per DUNS times change in number of firms. Numbers
of firms are calculated using the SBA current size standard, not the contracting officer’s size designation.
2. Total impact represents total unique number of firms impacted to avoid double counting as some firms are participating in more than one
industry.
jbell on DSKJLSW7X2PROD with PROPOSALS
Costs of Increases to Size Standards
Besides having to register in SAM to
be able to participate in Federal
contracting and update the SAM profile
annually, small businesses incur no
direct costs to gain or retain their small
business status as a result of increases
to size standards. All businesses willing
to do business with the Federal
government must register in SAM and
update their SAM profiles annually,
regardless of their size status. SBA
believes that a vast majority of
businesses that are willing to participate
in Federal contracting are already
registered in SAM and update their
SAM profiles annually. More
importantly, this proposed rule does not
establish the new size standards for the
very first time; rather it intends to
modify the existing size standards in
accordance with a statutory requirement
and the latest data and other relevant
factors.
To the extent that the newly qualified
small businesses could become active in
Federal procurement, the proposed
increases to size standards, if adopted,
may entail some additional
administrative costs to the government
as a result of more businesses qualifying
as small for Federal small business
programs. For example, there will be
more firms seeking SBA’s loans, more
firms eligible for enrollment in the
Dynamic Small Business Search (DSBS)
database or in certify.sba.gov, more
firms seeking certification as 8(a)/BD or
HUBZone firms or qualifying for small
business, SDB, WOSB, EDWOSB, and
SDVOSB status, and more firms
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applying for SBA’s 8(a)/BD and all small
business mentor-prote´ge´ programs. With
an expanded pool of small businesses,
it is likely that Federal agencies would
set aside more contracts for small
businesses under the proposed increases
to size standards. One may surmise that
this might result in a higher number of
small business size protests and
additional processing costs to agencies.
However, the SBA’s historical data on
size protests shows that the number of
size protests decreased following the
increases to receipts-based size
standards as part of the first 5-year
review of size standards. Specifically,
on an annual basis, the number of size
protests fell from about 600 during fiscal
years 2011–2013 (review of most
receipts-based size standards was
completed by the end of FY 2013), as
compared to about 500 during fiscal
years 2014–2016 when size standards
increases were in effect. That represents
a 17 percent decline. Among those
newly defined small businesses seeking
SBA’s loans, there could be some
additional costs associated with
verification of their small business
status. However, small business lenders
have an option of using the tangible net
worth and net income based alternative
size standard instead of using the
industry-based size standards to
establish eligibility for SBA’s loans. For
these reasons, SBA believes that these
added administrative costs will be
minor because necessary mechanisms
are already in place to handle these
added requirements.
Additionally, some Federal contracts
may possibly have higher costs. With a
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greater number of businesses defined as
small due to the proposed increases to
size standards, Federal agencies may
choose to set aside more contracts for
competition among small businesses
only instead of using a full and open
competition. The movement of contracts
from unrestricted competition to small
business set-aside contracts might result
in competition among fewer total
bidders, although there will be more
small businesses eligible to submit
offers under the proposed size
standards. However, the additional costs
associated with fewer bidders are
expected to be minor since, by law,
procurements may be set aside for small
businesses under the 8(a)/BD, SDB,
HUBZone, WOSB, EDWOSB, or
SDVOSB programs only if awards are
expected to be made at fair and
reasonable prices.
Costs may also be higher when full
and open contracts are awarded to
HUBZone businesses that receive price
evaluation preferences. However, with
agencies likely setting aside more
contracts for small businesses in
response to the availability of a larger
pool of small businesses under the
proposed increases to size standards,
HUBZone firms might actually end up
getting fewer full and open contracts,
thereby resulting in some cost savings to
agencies. However, such cost savings
are likely to be minimal as only a small
fraction of unrestricted contracts are
awarded to HUBZone businesses.
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02OCP1
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Federal Register / Vol. 85, No. 192 / Friday, October 2, 2020 / Proposed Rules
Transfer Impacts of Increases to Size
Standards
The proposed increases to size
standards, if adopted, may result in
some redistribution of Federal contracts
between the newly qualified small
businesses and large businesses and
between the newly qualified small
businesses and small businesses under
the current standards. However, it
would have no impact on the overall
economic activity since total Federal
contract dollars available for businesses
to compete for will not change with
changes to size standards. While SBA
cannot quantify with certainty the
actual outcome of the gains and losses
from the redistribution contracts among
different groups of businesses, it can
identify several probable impacts in
qualitative terms. With the availability
of a larger pool of small businesses
under the proposed increases to size
standards, some unrestricted Federal
contracts which would otherwise be
awarded to large businesses may be set
aside for small businesses. As a result,
large businesses may lose some Federal
contracting opportunities. Similarly,
some small businesses under the current
size standards may obtain a fewer set
aside contracts due to the increased
competition from more advanced
businesses qualifying as small under the
proposed increases to size standards.
This impact may be offset by a greater
number of procurements being set aside
for all small businesses. With larger
businesses qualifying as small under the
higher size standards, smaller small
businesses could face some
disadvantage in competing for set aside
contracts against their larger
counterparts. However, SBA cannot
quantify these impacts.
3. What alternatives have been
considered?
Under OMB Circular A–4, SBA is
required to consider regulatory
alternatives to the proposed changes in
the proposed rule. In this section, SBA
describes and analyzes two such
alternatives to the proposed rule.
Alternative Option One to the proposed
rule, a more stringent alternative to the
proposed rule, would propose adopting
size standards based solely on the
analytical results. In other words, the
size standards of 68 industries for which
the analytical results suggest raising size
standards would be raised. However,
the size standards of 35 industries for
which the analytical results suggest
lowering size standards would be
lowered. Alternative Option Two would
propose retaining all size standards for
all industries, given the uncertainty
generated by the ongoing COVID–19
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pandemic. Below, SBA discusses and
presents the net impacts of each option.
Alternative Option One: Consider
Adopting All Calculated Size Standards
As discussed elsewhere in this
proposed rule, Alternative Option One
would cause a substantial number of
currently small businesses to lose their
small business status and hence to lose
their access to Federal small business
assistance, especially small business setaside contracts and SBA’s financial
assistance in some cases. These
consequences could be mitigated. For
example, in response to the 2008
Financial Crisis and economic
conditions that followed, SBA adopted
a general policy in the first 5-year
comprehensive size standards review to
not lower any size standard (except to
exclude one or more dominant firms)
even when the analytical results
suggested the size standard should be
lowered. Currently, because of the
economic challenges presented by the
COVID–19 pandemic and the measures
taken to protect public health, SBA has
decided to propose the same general
policy of not lowering size standards in
the ongoing second 5-year
comprehensive size standards review as
well.
The primary benefit of adopting this
alternative is that SBA’s procurement,
management, technical and financial
assistance resources would be targeted
to the most appropriate beneficiaries of
such programs according to the
analytical results. Adopting the size
standards suggested by the analytical
results would also promote consistency
with analytical results in SBA’s exercise
of its authority to determine size
standards. SBA seeks public comment
on the impact of adopting the size
standard as suggested by the analytical
results.
As explained in the Size Standards
Methodology White Paper, in addition
to adopting all results of the primary
analysis, SBA evaluates other relevant
factors as needed such as the impact of
the reductions or increases of size
standards on the distribution of
contracts awarded to small businesses,
and may adopt different results with the
intention of mitigating potential
negative impacts.
We have discussed already the
benefits and costs of increasing 68 size
standards. Below we discuss the
benefits and costs of decreasing 35 size
standards.
Benefits of Decreases to Size Standards
The most significant benefit to
businesses from decreases to size
standards when the SBA’s analysis
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62259
suggests such decreases is to ensure that
size standards are more reflective of
latest industry structure and Federal
market trends and that Federal small
business assistance is more effectively
targeted to its intended beneficiaries.
These include SBA’s loan programs,
EIDL program, and Federal procurement
programs intended for small businesses.
Federal procurement programs provide
targeted, set-aside opportunities for
small businesses under SBA’s business
development programs, such as small
business, 8(a)/BD, SDB HUBZone,
WOSB, EDWOSB, and SDVOSB
programs. The adoption of smaller size
standards when the results support
them diminishes the risk of awarding
contracts to firms which are not small
anymore.
Decreasing size standards may reduce
the administrative costs of the
government, because the risk of
awarding contracts to other than small
businesses may diminish when the size
standards reflect better the structure of
the market. The risks of providing SBA’s
loans to firms that are not needing them
the most, or allowing firms that are not
eligible for small business set-asides or
to participate on the SBA procurement
programs will provide for a better
chance for smaller firms to grow and
benefit from the opportunities available
on the Federal market, and strengthen
the small business industrial base for
the Federal Government.
Costs of Decreases to Size Standards
With fewer businesses qualifying as
small under the decreases to size
standards, Federal agencies will have a
smaller pool of small businesses from
which to draw for their small business
procurement programs. For example, in
Option One, during fiscal years 2016–
2018, agencies awarded, on an annual
basis, about $14,818 million in small
business contracts in those 35 industries
for which this Option considered
decreasing size standards. Table 11
below shows that lowering 35 size
standards would reduce Federal
contract dollars awarded to small
businesses by $865.4 million or about
5.8 percent relative to the baseline level,
of which 99 percent are accounted for
by the Construction Sector (NAICS 23).
Because of the importance of the
construction sector for Federal
procurement and the immediate impact
on businesses that will see their status
as small changed relatively fast, SBA
would adopt mitigating measures to
reduce the negative impact under the
assumptions of Option One. SBA could
adopt one or more of the following three
actions: (1) To accept decreases in size
standards as suggested by the analytical
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Federal Register / Vol. 85, No. 192 / Friday, October 2, 2020 / Proposed Rules
results, (2) to decrease size standards by
a smaller amount than the calculated
threshold, and (3) to retain the size
standards at their current levels.
Nevertheless, since Federal agencies
are still required to meet the statutory
small business contracting goal of 23
percent, actual impacts on the overall
set aside activity is likely to be smaller
as agencies are likely to award more set
aside contracts to small businesses that
continue to remain small under the
reduced size standards.
With fewer businesses qualifying as
small, the decreased competition can
also result in higher prices to the
Government for procurements set aside
or reserved for small businesses, but
SBA cannot quantify this impact.
However, SBA estimates an almost null
impact or non-significant reduction in
dollars obligated to small businesses, if
mitigation measures are adopted.
Decreases to size standards would have
a very minor impact on small businesses
applying for SBA’s 7(a) and 504 loans
because a vast majority of such loans are
issued to businesses that are far below
the reduced size standards. For
example, based on the loan data for
fiscal years 2016–2018, Option One
estimates that about 71 7(a) and 504
loans with total amounts of $16.8
million could not be made to those
small businesses that would lose
eligibility under the reduced size
standards (before mitigation). That
represents about one (1.0) percent
decrease of the loan amounts compared
to the baseline. Table 11, Impacts of
Decreases to Size Standards Under
Alternative Option One, below, shows
these results by sector. However, the
actual impact could be much less as
businesses losing small business
eligibility under the decreases to
industry based size standards could still
qualify for SBA’s loans under the
tangible net worth and net income based
alternative size standard.
Businesses losing small business
status would also be impacted in terms
of access to loans through SBA’s EIDL
program. However, SBA expects such
impact to be minimal as only a small
number of businesses in those
industries received such loans during
fiscal years 2016–2018. Additionally, all
those businesses were below the
reduced size standards. Since this
program is contingent on the occurrence
and severity of a disaster in the future,
SBA cannot make a meaningful estimate
of this impact.
Small businesses becoming other than
small if size standards were decreased
might lose benefits through reduced
fees, less paperwork, and fewer
compliance requirements that are
available to small businesses through
Federal government, but SBA has no
data to quantify this impact. However,
if agencies determine that SBA’s size
standards do not adequately serve such
purposes, they can establish a different
size standard with an approval from
SBA if they are required to use SBA’s
size standards for their programs.
TABLE 11—IMPACTS OF DECREASES TO SIZE STANDARDS UNDER ALTERNATIVE OPTION ONE
jbell on DSKJLSW7X2PROD with PROPOSALS
Sector 11
No. of industries for which SBA considered decreasing
size standards (2012 Economic Census) ........................
Total current small businesses in industries for which SBA
considered decreasing size standards (EC 2012) ...........
Estimated no. of firms losing small status for which SBA
considered decreasing size standards (EC 2012) ...........
% of Firms losing small status relative to current small
businesses in industries for which SBA considered decreasing size standards ...................................................
No. of current unique small firms getting small business
contracts in industries for which SBA considered decreasing size standards (FPDS–NG FY2016–2018) 1 ....
Estimated number of small business firms that would have
lost small business status in the decreases that SBA
considered ........................................................................
% decrease to small business firms relative to current
unique small firms getting small business contracts in
industries for which SBA considered decreasing size
standards (FPDS–NG FY2016–2018) 1 ......................
Total small business contract dollars under current size
standards in industries for which SBA considered decreasing size standards ($ million) (FPDS–NG FY2016–
2018) ................................................................................
Estimated small business dollars not available to firms losing small business status (Using avg dollars obligated to
SBs) ($ million) 1 (FPDS–NG FY 2016–2018) ............
% decrease to small business dollars relative to total small
business contract dollars under current size standards
in industries for which SBA considered decreasing size
standards ..........................................................................
Total no. of 7(a) and 504 loans to small businesses in industries for which SBA considered decreasing size
standards (FY2016–2018) ................................................
Total amount of 7(a) and 504 loans to small businesses in
industries for which SBA considered decreasing size
standards ($ million) (FY2016–2018) ...............................
Estimated no. of 7(a) and 504 loans not available to firms
that would have lost small business status .....................
Estimated 7(a) and 504 loan amount not available to firms
that would have lost small status ($ million) ....................
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Sector 21
Sector 22
Sector 23
Total
4
1
0
30
35
30,250
7,292
0
573,017
610,559
17
16
0
5,479
5,512
0.1
0.2
0.0
1.0
0.9
33
50
0
11,087
11,157
0
2
0
518
518
0
4.0
0
4.7
4.6
$3.3
$26.9
$0
$14,790
$14,818
$0
$1.1
$0
$864.4
$865.4
0
4.1
0
5.8
5.8
64
69
0
7,328
7,371
$38.2
$32.7
$0.0
$1,671.5
$1,742.4
1
0
0
70
71
$0.6
$0.0
$0.0
$16.2
$16.8
Fmt 4702
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Federal Register / Vol. 85, No. 192 / Friday, October 2, 2020 / Proposed Rules
TABLE 11—IMPACTS OF DECREASES TO SIZE STANDARDS UNDER ALTERNATIVE OPTION ONE—Continued
Sector 11
% decrease to 7(a) and 504 loan amount relative to the
total amount of 7(a) and 504 loans in industries for
which SBA considered decreasing size standards ..........
Total no. of EIDL loans to small businesses in industries
for which SBA considered decreasing size standards
(FY2016–2018) .................................................................
Total amount of EIDL loans to small businesses in industries for which SBA considered decreasing size standards ($ million) (FY2016–2018) .......................................
Estimated no. of EIDL loans not available to firms that
would have lost small business status .............................
Estimated EIDL loan amount not available to firms that
would have lost small business status ($ million) ............
% decrease to EIDL loan amount relative to the baseline ..
Sector 21
Sector 22
Sector 23
Total
1.6%
0.0%
0.0%
1.0%
1.0%
17
3
0
219
239
$0.9
$0.6
$0.0
$17.8
$19.2
-1
0
0
¥3
¥4
¥$0.1
5.9%
$0.0
0.0%
$0.0
0.0%
¥$0.2
1.4%
$0
1.5%
jbell on DSKJLSW7X2PROD with PROPOSALS
1. Additional dollars are calculated multiplying average small business dollars obligated per DUNS times change in number of firms.
2. Total impact represents total unique industries impacted to avoid double counting as some industries have large firms gaining small business status and small firms extending small business status.
Transfer Impacts of Decreases to Size
Standards
If the size standards were decreased
under Alternative Option One, it may
result in a redistribution of Federal
contracts between small businesses
losing their small business status and
large businesses and between small
businesses losing their small business
status and small businesses remaining
small under the reduced size standards.
However, as under the proposed
increases to size standards, it would
have no impact on the overall economic
activity since total Federal contract
dollars available for businesses to
compete for will stay the same. While
SBA cannot estimate with certainty the
actual outcome of the gains and losses
among different groups of businesses
from contract redistribution resulting
from decreases to size standards, it can
identify several probable impacts. With
a smaller pool of small businesses under
the decreases to size standards, some
set-aside Federal contracts to be
otherwise awarded to small businesses
may be competed in unrestricted basis.
As a result, large businesses may have
more Federal contracting opportunities.
However, because agencies are still
required by law to award 23 percent of
dollars to small businesses, SBA expects
the movement of set-aside contracts to
unrestricted competition to be limited.
For the same reason, small businesses
remaining small under the reduced size
standards are likely to obtain more set
aside contracts due to the reduced
competition from fewer businesses
qualifying as small under the decreases
to size standards. With some larger
small businesses losing small business
status under the decreases to size
standards, smaller small businesses
would likely become more competitive
in obtaining set aside contracts.
However, SBA cannot quantify these
impacts.
Net Impact of Alternative Option One
To estimate the net impacts of
Alternative Option One, SBA followed
the same methodology used to evaluate
the impacts of the proposed size
standards (see Table 10 above).
However, under Alternative Option
One, SBA used the calculated size
standards instead of the proposed ones
to determine the impacts of changes to
current thresholds. The impact of the
increases of the calculated size
standards were already shown in Table
10 above. Table 11 (above) and Table 12,
Net Impacts of Size Standards Changes
under Alternative Option One, below,
present the impact of the decreases of
size standards and the net impact of
adopting the calculated results under
Alternative Option One, respectively.
Based on the 2012 Economic Census,
SBA estimates that in 103 industries in
NAICS Sectors 11, 21, 22 and 23 for
which the analytical results suggested to
change size standards, about 43,900
firms (see Table 12, below), would
become small under the Option One.
That represents about 1.7 percent of all
firms classified as small under the
current size standards.
Based on the FPDS–NG data for fiscal
years 2016–2018, SBA estimates that
about 433 active firms in Federal
contracting in those industries would
lose small business status under Option
One, most of them from the
Construction Sector. This represents a
decrease of about 2.9 percent of the total
number of small businesses
participating in Federal contracting
under the current size standards. Based
on the same data, SBA estimates that
about $855.6 million of Federal
procurement dollars would not be
available to firms losing their small
status. This represents a decrease of 5.5
percent from the Group’s baseline.
Again, a large amount of the loses are
accounted for by the Construction
Sector.
Based on the SBA’s loan data for
fiscal years 2016–2018, the total number
of 7(a) and 504 loans may decrease by
about 50 loans, and the loan amounts by
about $2.4 million. This represents a 0.1
percent decrease of the loan amounts
relative to the Group baseline.
Firms’ Participation under the SBA’s
EIDL program will be affected as well.
Since the benefit provided through this
program is contingent on the occurrence
and severity of a disaster in the future,
SBA cannot make a meaningful estimate
of this impact. However, based on the
historical trends of the EIDL data, SBA
estimates that, on an annual basis, the
net impact of the Option One on
additional firms is zero, and additional
loans amounts total about $0.18 million
for the Group relative to the baseline.
Table 12, below, provides these results
by NAICS sector.
TABLE 12—NET IMPACTS OF SIZE STANDARDS CHANGES UNDER ALTERNATIVE OPTION ONE
Sector 11
No. of industries with proposed changes to size standards
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4
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3
02OCP1
Total
32
103
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Federal Register / Vol. 85, No. 192 / Friday, October 2, 2020 / Proposed Rules
TABLE 12—NET IMPACTS OF SIZE STANDARDS CHANGES UNDER ALTERNATIVE OPTION ONE—Continued
Sector 11
Total no. of small business under the current size standards (2012 Economic Census) .........................................
Additional firms qualifying as small under proposed size
standards (2012 Economic Census) ................................
% of additional firms qualifying as small relative to total
current small businesses ..................................................
No. of current unique small firms getting small business
contracts (FPDS–NG FY2016–2018) 1 ............................
Additional small firms getting small business status
(FPDS–NG FY2016–2018) ..............................................
% increase to small firms relative to current unique small
firms getting small business contracts (FPDS–NG
FY2016–2018) 1 ...............................................................
Total small business contract dollars under current size
standards ($ million) (FPDS–NG FY 2016–2018) ...........
Estimated small business dollars available to newly qualified small firms ($ million) (FPDS–NG FY 2016–2018) 1
% increase to dollars relative to total small business contract dollars under current size standards .......................
Total no. of 7(a) and 504 loans to small businesses
(FY2016–2018) .................................................................
Total amount of 7(a) and 504 loans to small businesses
(FY2016–2018) .................................................................
Estimated no. of additional 7(a) and 504 loans to newly
qualified small firms ..........................................................
Estimated additional 7(a) and 504 loan amount to newly
qualified small firms ($ million) .........................................
% increase to 7(a)and 504 loan amount relative to the
total amount of 7(a) and 504 loans to small businesses
Total no. of EIDL loans to small businesses (FY2016–
2018) ................................................................................
Total amount of EIDL loans to small businesses (FY2016–
2018) ................................................................................
Estimated no. of additional EIDL loans to newly qualified
small firms ........................................................................
Estimated additional EIDL loan amount to newly qualified
small firms ($ million) .......................................................
% increase to EIDL loan amount relative to the total
amount of EIDL loans to small businesses .....................
Sector 21
Sector 22
Sector 23
Total
2,046,316
7,828
3,586
578,430
2,636,160
49,335
5
9
¥5,445
43,902
2.4%
0.1%
0.2%
¥0.9%
1.7%
3,174
221
488
11,422
14,933
64
¥1
12
¥505
¥433
2.0
¥0.5
2.5
¥4.4
¥2.9
459.1
31.3
67.0
14,879.0
15,436.4
5.1
¥0.9
2.7
¥862.6
¥855.6
1.1
¥2.8
4.1
¥5.8
¥5.5
843
73
36
7,334
8,286
$620.7
$34.2
$6.5
$1,705.3
$2,366.7
17
1
1
¥69
¥50
$12.9
$0.4
$0.2
¥$15.8
¥$2.4
2.1%
1.1%
2.8%
¥0.93%
¥0.1%
90
3
3
222
318
$5.6
$0.6
$0.7
$18.0
$25.0
1
0
1
¥2
0
$0.08
$0.0
$0.2
¥$0.1
$0.18
1.4%
0.0%
33.3%
¥0.8%
0.7%
1 Additional
dollars are calculated multiplying average small business dollars obligated per DUNS times change in number of firms.
impact represents total unique industries impacted to avoid double counting as some industries have large firms gaining small business
status and small firms extending small business status.
jbell on DSKJLSW7X2PROD with PROPOSALS
2 Total
Alternative Option Two: To Retain All
Current Size Standards
which SBA is not proposing the
Alternative Option Two.
Under this option, given the current
COVID–19 pandemic, as discussed
elsewhere, SBA considered retaining the
current levels of all size standards even
though the analytical results may
suggest changing them. SBA considers
that the option of retaining all size
standards at this moment provides the
opportunity to reassess the economic
situation once the economic recovery
starts. Under this option, as the current
situation develops, SBA will be able to
assess new data available on economic
indicators, federal procurement, and
SBA loans as well. SBA estimates a net
impact of zero for this option, when
compared to the baseline. However, if
we compare the proposal of increasing
68 size standards and retaining 35 with
this alternative approach, the benefits
for small businesses of adopting the
proposal will not be attained, because of
Executive Order 13771
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SBA has determined, subject to the
approval of the Office of Information
and Regulatory Affairs (OIRA) of the
Office of Management and Budget
(OMB), that this proposed rule is not
subject to the requirements of E.O.
13771, because most of the rule’s
impacts are income transfers between
small and other than small businesses.
According to the E.O. 13771 guidance in
OMB M–17–21, dated April 5, 2017
(‘‘E.O. 13771 Guidance’’), ‘‘transfers’’
are not covered by E.O. 13771. The E.O.
13771 Guidance also states that ‘‘in
some cases, [transfer rules] may impose
requirements apart from transfers, or
transfers may distort markets causing
inefficiencies. In those cases, the actions
would need to be offset to the extent
they impose more than de minimis
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costs.’’ SBA estimates that this
rulemaking would impose only de
minimis costs on small businesses and
would result in negligible compliance
costs. Thus, SBA has determined that
this rulemaking is exempt from the
requirements of E.O. 13771. Details on
the estimated costs of this proposed rule
can be found in the Regulatory Impact
Analysis above.
Initial Regulatory Flexibility Analysis
According to the Regulatory
Flexibility Act (RFA), 5 U.S.C. 601–612,
when an agency issues a rulemaking, it
must prepare a regulatory flexibility
analysis to address the impact of the
rule on small entities.
This proposed rule, if adopted, may
have a significant impact on a
substantial number of small businesses
in the industries covered by this
proposed rule. As described above, this
rule may affect small businesses seeking
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Federal Register / Vol. 85, No. 192 / Friday, October 2, 2020 / Proposed Rules
Federal contracts, loans under SBA’s
7(a), 504 and EIDL Programs, and
assistance under other Federal small
business programs.
Immediately below, SBA sets forth an
initial regulatory flexibility analysis
(IRFA) of this proposed rule addressing
the following questions: (1) What is the
need for and objective of the rule;? (2)
What are SBA’s description and
estimate of the number of small
businesses to which the rule will
apply;? (3) What are the projected
reporting, record keeping, and other
compliance requirements of the rule;?
(4) What are the relevant Federal rules
that may duplicate, overlap, or conflict
with the rule;? and (5) What alternatives
will allow the Agency to accomplish its
regulatory objectives while minimizing
the impact on small businesses?
1. What is the need for and objective
of the rule?
Changes in industry structure,
technological changes, productivity
growth, mergers and acquisitions, and
updated industry definitions have
changed the structure of many the
industries covered by this proposed
rule. Such changes can be enough to
support revisions to current size
standards for some industries. Based on
the analysis of the latest data available,
SBA believes that the revised standards
in this proposed rule more
appropriately reflect the size of
businesses that need Federal assistance.
The 2010 Jobs Act also requires SBA to
review all size standards and make
necessary adjustments to reflect market
conditions.
2. What are SBA’s description and
estimate of the number of small
businesses to which the rule will apply?
Based on data from the 2012
Economic Census, SBA estimates that
there are about 2.02 million small firms
covered by this rulemaking under
industries with proposed changes to
size standards. If the proposed rule is
adopted in its present form, SBA
estimates that an additional 49,415
businesses will become small.
3. What are the projected reporting,
record keeping and other compliance
requirements of the rule?
The proposed size standard changes
impose no additional reporting or
record keeping requirements on small
businesses. However, qualifying for
Federal procurement and a number of
other programs requires that businesses
register in SAM and self-certify that
they are small at least once annually.
Therefore, businesses opting to
participate in those programs must
comply with SAM requirements. There
are no costs associated with SAM
registration or certification. Changing
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size standards alters the access to SBA’s
programs that assist small businesses
but does not impose a regulatory burden
because 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)). 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.
However, SBA considered two
alternatives to its proposal to increase
68 size standards and maintain 35 size
standards at their current levels. The
first alternative SBA considered was
adopting size standards based solely on
the analytical results. In other words,
the size standards of 68 industries for
which the analytical results suggest
raising size standards would be raised.
However, the size standards of 35
industries for which the analytical
results suggest lowering size standards
would be lowered. This would cause a
significant number of small businesses
to lose their small business status,
especially in the construction sector.
Under the second alternative, in view of
the COVID–19 pandemic, SBA
considered retaining all size standards
at the current levels, even though the
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62263
analytical results may suggest increasing
68 size standards and decreasing 35.
Retaining all size standards at their
current levels would be more onerous
for the small businesses than the option
of adopting 68 increases and retaining
the rest of size standards. Additionally,
for the first time, SBA evaluated 46
agricultural industries in this proposed
rule, and postponing the adoption of the
calculated size standards would be
detrimental for the small businesses
within these industries.
Executive Order 13563
Executive Order 13563 emphasizes
the importance of quantifying both costs
and benefits, reducing costs,
harmonizing rules, and promoting
flexibility. A description of the need for
this regulatory action and benefits and
costs associated with this action
including possible distributional
impacts that relate to Executive Order
13563 is included above in the
Regulatory Impact Analysis under
Executive Order 12866. Additionally,
Executive Order 13563, section 6, calls
for retrospective analyses of existing
rules.
The review of size standards in the
industries covered by this proposed rule
is consistent with section 6 of Executive
Order 13563 and the 2010 Jobs Act
which requires SBA to review all size
standards and make necessary
adjustments to reflect market
conditions. Specifically, the 2010 Jobs
Act requires SBA to review at least onethird of all size standards during every
18-month period from the date of its
enactment (September 27, 2010) and to
review all size standards not less
frequently than once every five years,
thereafter. SBA had already launched a
comprehensive review of size standards
in 2007. In accordance with the Jobs
Act, SBA completed the comprehensive
review of the small business size
standard for each industry, except those
for agricultural enterprises previously
set by Congress, and made appropriate
adjustments to size standards for a
number of industries to reflect current
Federal and industry market conditions.
The first comprehensive review was
completed in 2015. Prior to 2007, the
last time SBA conducted a
comprehensive review of all size
standards was during the late 1970s and
early 1980s.
SBA issued a White Paper entitled
‘‘Size Standards Methodology’’ and
published a notice in the April 11, 2019,
edition of the Federal Register (84 FR
14587) to advise the public that the
document is available for public review
and comments. The ‘‘Size Standards
Methodology’’ White Paper explains
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Federal Register / Vol. 85, No. 192 / Friday, October 2, 2020 / Proposed Rules
how SBA establishes, reviews, and
modifies its receipts-based and
employee-based small business size
standards. SBA gave appropriate
consideration to all input, suggestions,
recommendations, and relevant
information obtained from industry
groups, individual businesses, and
Federal agencies in developing size
standards for those industries covered
by this proposed rule.
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
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 will not
impose any new reporting or record
keeping requirements.
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 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(a)(36), 662, and 694a(9); Pub. L. 116–136,
Section 1114.
2. In § 121.201 amend the table
‘‘Small Business Size Standards by
NAICS Industry’’ as follows:
■ a. Revise Subsector 111, entries
‘‘112111’’, ‘‘112112’’, ‘‘112120’’,
‘‘112210’’, ‘‘112320’’ through ‘‘112340’’,
‘‘112390’’, ‘‘112410’’, ‘‘112420’’,
‘‘112511’’, ‘‘112512’’, ‘‘112519’’,
‘‘112910’’ through ‘‘112930’’, ‘‘112990’’,
‘‘113110’’, ‘‘113210’’, ‘‘114112’’,
‘‘114119’’, ‘‘114210’’, entries ‘‘115111’’
through ‘‘115113’’, ‘‘115116’’, ‘‘115210’’
‘‘115310’’, ‘‘115310 first and second
sub-entry’’, entries ‘‘213113’’ through
‘‘213115’’, ‘‘221310’’ through ‘‘221330’’,
‘‘237990’’, ‘‘237990 sub-entry’’, and
‘‘238290’’;
■ b. Revise footnote 2;
■ c. Redesignate footnote 17 as footnote
1;
■ d. Redesignate footnote 20 as footnote
15;
■ e. Redesignate footnote 19 as footnote
17;
■ f. Revise Editorial Note 1; and
■ g. Remove Editorial Note 2.
The revisions read as follows:
■
§ 121.201 What size standards has SBA
identified by North American Industry
Classification System codes?
*
*
*
*
*
SMALL BUSINESS SIZE STANDARDS BY NAICS INDUSTRY
NAICS codes
Size standards
in millions of
dollars
NAICS U.S. industry title
Size standards
in number of
employees
jbell on DSKJLSW7X2PROD with PROPOSALS
Sector 11—Agriculture, Forestry, Fishing and Hunting
Subsector 111—Crop Production
111110
111120
111130
111140
111150
111160
111191
111199
111211
111219
111310
111320
111331
111332
111333
111334
111335
111336
111339
111411
111419
111421
111422
111910
111920
111930
111940
111991
111992
111998
................................
................................
................................
................................
................................
................................
................................
................................
................................
................................
................................
................................
................................
................................
................................
................................
................................
................................
................................
................................
................................
................................
................................
................................
................................
................................
................................
................................
................................
................................
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Soybean Farming ...........................................................................................
Oilseed (except Soybean) Farming ................................................................
Dry Pea and Bean Farming ...........................................................................
Wheat Farming ...............................................................................................
Corn Farming ..................................................................................................
Rice Farming ..................................................................................................
Oilseed and Grain Combination Farming .......................................................
All Other Grain Farming .................................................................................
Potato Farming ...............................................................................................
Other Vegetable (except Potato) and Melon Farming ...................................
Orange Groves ...............................................................................................
Citrus (except Orange) Groves ......................................................................
Apple Orchards ...............................................................................................
Grape Vineyards .............................................................................................
Strawberry Farming ........................................................................................
Berry (except Strawberry) Farming ................................................................
Tree Nut Farming ...........................................................................................
Fruit and Tree Nut Combination Farming ......................................................
Other Noncitrus Fruit Farming ........................................................................
Mushroom Production ....................................................................................
Other Food Crops Grown Under Cover .........................................................
Nursery and Tree Production .........................................................................
Floriculture Production ....................................................................................
Tobacco Farming ............................................................................................
Cotton Farming ...............................................................................................
Sugarcane Farming ........................................................................................
Hay Farming ...................................................................................................
Sugar Beet Farming .......................................................................................
Peanut Farming ..............................................................................................
All Other Miscellaneous Crop Farming ..........................................................
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$2.0
2.0
2.5
2.0
2.25
2.25
2.0
2.0
3.75
3.25
3.5
3.75
4.0
3.5
4.75
3.25
3.25
4.5
3.0
4.0
4.0
2.75
3.25
2.25
2.75
4.5
2.25
2.25
2.25
2.25
............................
............................
............................
............................
............................
............................
............................
............................
............................
............................
............................
............................
............................
............................
............................
............................
............................
............................
............................
............................
............................
............................
............................
............................
............................
............................
............................
............................
............................
............................
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SMALL BUSINESS SIZE STANDARDS BY NAICS INDUSTRY—Continued
NAICS codes
Size standards
in millions of
dollars
NAICS U.S. industry title
Size standards
in number of
employees
Subsector 112—Animal Production and Aquaculture
112111
112112
112120
112210
................................
................................
................................
................................
Beef Cattle Ranching and Farming ................................................................
Cattle Feedlots ...............................................................................................
Dairy Cattle and Milk Production ....................................................................
Hog and Pig Farming .....................................................................................
112320
112330
112340
112390
112410
112420
112511
112512
112519
112910
112920
112930
112990
*
*
*
*
*
................................ Broilers and Other Meat Type Chicken Production .......................................
................................ Turkey Production ..........................................................................................
................................ Poultry Hatcheries ..........................................................................................
................................ Other Poultry Production ................................................................................
................................ Sheep Farming ...............................................................................................
................................ Goat Farming ..................................................................................................
................................ Finfish Farming and Fish Hatcheries .............................................................
................................ Shellfish Farming ............................................................................................
................................ Other Aquaculture ..........................................................................................
................................ Apiculture ........................................................................................................
................................ Horses and Other Equine Production ............................................................
................................ Fur-Bearing Animal and Rabbit Production ...................................................
................................ All Other Animal Production ...........................................................................
2.25
19.5
3.25
3.5
............................
............................
............................
............................
3.0
3.25
3.5
3.25
3.0
2.25
3.25
3.25
3.25
2.75
2.5
3.25
2.5
*
............................
............................
............................
............................
............................
............................
............................
............................
............................
............................
............................
............................
............................
16.5
18.0
............................
............................
*
Subsector 113—Forestry and Logging
113110 ................................
113210 ................................
*
Timber Tract Operations ................................................................................
Forest Nurseries and Gathering of Forest Products ......................................
*
*
*
*
*
*
Subsector 114—Fishing, Hunting and Trapping
*
*
*
*
*
114112 ................................ Shellfish Fishing .............................................................................................
114119 ................................ Other Marine Fishing ......................................................................................
114210 ................................ Hunting and Trapping .....................................................................................
*
12.5
10.0
7.5
*
............................
............................
............................
14.0
8.5
12.0
............................
............................
............................
13.5
9.5
10.0
25.0 1
25.0 1
*
............................
............................
............................
............................
............................
Subsector 115—Support Activities for Agriculture and Forestry
115111 ................................
115112 ................................
115113 ................................
115116
115210
115310
115310
115310
Cotton Ginning ................................................................................................
Soil Preparation, Planting, and Cultivating .....................................................
Crop Harvesting, Primarily by Machine ..........................................................
*
*
*
*
*
................................ Farm Management Services ..........................................................................
................................ Support Activities for Animal Production ........................................................
................................ Support Activities for Forestry ........................................................................
(Exception 1) ......... Forest Fire Suppression 1 ...............................................................................
(Exception 2) ......... Fuels Management Services 1 ........................................................................
*
Sector 21—Mining, Quarrying, and Oil and Gas Extraction
*
*
*
*
*
*
*
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Subsector 213—Support Activities for Mining
*
*
*
*
*
213113 ................................ Support Activities for Coal Mining ..................................................................
213114 ................................ Support Activities for Metal Mining .................................................................
213115 ................................ Support Activities for Nonmetallic Minerals (except Fuels) Mining ................
*
24.0
36.0
18.0
*
............................
............................
............................
36.0
31.0
*
............................
............................
Sector 22—Utilities
Subsector 221—Utilities
*
*
*
*
*
221310 ................................ Water Supply and Irrigation Systems .............................................................
221320 ................................ Sewage Treatment Facilities ..........................................................................
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SMALL BUSINESS SIZE STANDARDS BY NAICS INDUSTRY—Continued
Size standards
in millions of
dollars
NAICS codes
NAICS U.S. industry title
221330 ................................
Steam and Air-Conditioning Supply ...............................................................
26.5
Size standards
in number of
employees
............................
Sector 23—Construction
Subsector 236—Construction of Buildings
*
*
*
*
*
*
*
Subsector 237—Heavy and Civil Engineering Construction
*
*
*
*
*
237990 ................................ Other Heavy and Civil Engineering Construction ..........................................
237990 (Exception) ............. Dredging and Surface Cleanup Activities 2 ....................................................
*
39.5
33.0 2
*
............................
............................
19.5
*
............................
41.5 15
*
............................
*
............................
*
............................
Subsector 238—Specialty Trade Contractors
*
*
*
*
*
238290 ................................ Other Building Equipment Contractors ...........................................................
*
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511210 ................................ Software Publishers 15 ....................................................................................
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............................................. Sector 92—Public Administration 17 ...............................................................
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Footnotes
1 NAICS code 115310—Support Activities for Forestry: Forest Fire Suppression and Fuels Management Services are two components of Support Activities for Forestry. Forest Fire Suppression includes establishments which provide services to fight forest fires. These firms usually have
fire-fighting crews and equipment. Fuels Management Services firms provide services to clear land of hazardous materials that would fuel forest
fires. The treatments used by these firms may include prescribed fire, mechanical removal, establishing fuel breaks, thinning, pruning, and piling.
2 NAICS code 237990—Dredging: To be considered small for purposes of Government procurement, a firm or its similarly situated subcontractors must perform at least 40 percent of the volume dredged with its own equipment or equipment owned by another small dredging concern.
15 NAICS code 511210—For purposes of Government procurement, the purchase of software subject to potential waiver of the nonmanufacturer rule pursuant to § 121.1203(d) should be classified under this NAICS code.
17 NAICS Sector 92—Small business size standards are not established for this sector. Establishments in the Public Administration sector are
Federal, State, and local government agencies which administer and oversee government programs and activities that are not performed by private establishments. Concerns performing operational services for the administration of a government program are classified under the NAICS
private sector industry based on the activities performed. Similarly, procurements for these types of services are classified under the NAICS private sector industry that best describes the activities to be performed. For example, if a government agency issues a procurement for law enforcement services, the requirement would be classified using one of the NAICS industry codes under NAICS industry 56161, Investigation,
Guard, and Armored Car Services.
*
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DEPARTMENT OF TRANSPORTATION
Editorial Note: For Federal Register
citations affecting § 121.201, see the List of
CFR Sections Affected, which appears in the
Finding Aids section of the printed volume
and at www.govinfo.gov.
Jovita Carranza,
Administrator.
Federal Aviation Administration
14 CFR Part 39
[Docket No. FAA–2020–0857; Project
Identifier MCAI–2020–00707–A]
RIN 2120–AA64
[FR Doc. 2020–21589 Filed 10–1–20; 8:45 am]
BILLING CODE 8026–03–P
Airworthiness Directives; Pilatus
Aircraft Limited Airplanes
Federal Aviation
Administration (FAA), DOT.
ACTION: Notice of proposed rulemaking
(NPRM).
jbell on DSKJLSW7X2PROD with PROPOSALS
AGENCY:
The FAA proposes to
supersede Airworthiness Directive (AD)
2014–25–04, which applies to all Pilatus
Aircraft Limited (Pilatus) Models PC–6,
PC–6–H1, PC–6–H2, PC–6/350, PC–6/
350–H1, PC–6/350–H2, PC–6/A, PC–6/
SUMMARY:
VerDate Sep<11>2014
17:54 Oct 01, 2020
Jkt 253001
PO 00000
Frm 00033
Fmt 4702
Sfmt 4702
A–H1, PC–6/A–H2, PC–6/B–H2, PC–6/
B1–H2, PC–6/B2–H2, PC–6/B2–H4, PC–
6/C–H2, and PC–6/C1–H2 airplanes. AD
2014–25–04 requires incorporating
revised airworthiness limitations into
the aircraft maintenance manual
(AMM). Since the FAA issued AD 2014–
25–04, the FAA has determined that
new or more restrictive airworthiness
limitations are necessary for the
stabilizer trim actuator, fuselage wing
fittings, and wing-to-fuselage fittings.
This proposed AD would require
revising the airworthiness limitation
section of the existing maintenance
manual or instructions for continued
airworthiness to incorporate new
airworthiness limitations, and
performing an eddy current inspection
of the fuselage wing fittings and wing to
fuselage fittings. The FAA is proposing
E:\FR\FM\02OCP1.SGM
02OCP1
]]>Agencies
[Federal Register Volume 85, Number 192 (Friday, October 2, 2020)]
[Proposed Rules]
[Pages 62239-62266]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2020-21589]
=======================================================================
-----------------------------------------------------------------------
SMALL BUSINESS ADMINISTRATION
13 CFR Part 121
RIN 3245-AG89
Small Business Size Standards: Agriculture, Forestry, Fishing and
Hunting; Mining, Quarrying, and Oil and Gas Extraction; Utilities;
Construction
AGENCY: U.S. Small Business Administration.
ACTION: Proposed rule.
-----------------------------------------------------------------------
SUMMARY: The U.S. Small Business Administration (SBA) proposes to
increase its receipts-based small business size definitions (commonly
referred to as ``size standards'') for North American Industry
Classification System (NAICS) Sectors related to Agriculture, Forestry,
Fishing and Hunting; Mining, Quarrying, and Oil and Gas Extraction;
Utilities; and Construction. SBA proposes to increase size standards
for 68 industries in those sectors, including 58 industries and 2
subindustries (``exceptions'') in NAICS Sector 11 (Agriculture,
Forestry, Fishing and Hunting), 3 industries in Sector 21 (Quarrying,
and Oil and Gas Extraction), 3 industries in Sector 22 (Utilities), and
1 industry and 1 subindustry (``exception'') in Sector 23
(Construction). SBA's proposed revisions relied on its recently revised
``Size Standards Methodology'' (Methodology). SBA seeks comments on its
proposed changes to size standards in the above sectors, and the data
sources it evaluated to develop the proposed size standards.
DATES: SBA must receive comments to this proposed rule on or before
December 1, 2020.
ADDRESSES: Identify your comments by RIN 3245-AG89 and submit them by
one of the following methods: (1) Federal eRulemaking Portal:
www.regulations.gov. Follow the instructions for submitting comments;
or (2) Mail/Hand Delivery/Courier: Khem R. Sharma, Ph.D., Chief, Office
of Size Standards, 409 Third Street SW, Mail Code 6530, Washington, DC
20416.
SBA will post all comments to this proposed rule on
www.regulations.gov. If you wish to submit confidential business
information (CBI) as defined in the User Notice at www.regulations.gov,
you must submit such information to U.S. Small Business Administration,
Khem R. Sharma, Ph.D., Chief, Office of Size Standards, 409 Third
Street SW, Mail Code 6530, Washington, DC 20416, or send an email to
[email protected]. Highlight the information that you consider to
be CBI and explain why you believe SBA should hold this information as
confidential. SBA will review your information and determine whether it
will make the information public.
FOR FURTHER INFORMATION CONTACT: Jorge Laboy-Bruno, Ph.D., Economist,
Office of Size Standards, (202) 205-6618 or [email protected].
SUPPLEMENTARY INFORMATION: To determine eligibility for Federal small
business assistance, SBA establishes small business size definitions
(usually referred to as ``size standards'') for private sector
industries in the United States. SBA uses two primary measures of
business size for size standards purposes: Average annual receipts and
average number of employees. SBA uses financial assets for certain
financial industries and refining capacity, in addition to employees,
for the petroleum refining industry to measure business size. 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 tangible net worth and net income
based alternative size standards to determine eligibility for those
programs.
In September 2010, Congress passed the Jobs Act (Pub. L. 111-240,
124 Stat. 2504, September 27, 2010), (Jobs Act) requiring SBA to review
all size standards every five years and make necessary adjustments to
reflect current industry and market conditions. In accordance with the
Jobs Act, in early 2016 SBA completed the first 5-year review of all
size standards--except those for agricultural enterprises for which
size standards were previously set by Congress--and made appropriate
adjustments to size standards for a number of industries to reflect
current industry and Federal market conditions.
During the previous 5-year comprehensive review SBA reviewed the
receipts-based size standards for sixteen (16) industries and two (2)
exceptions within NAICS Sector 11 (Agriculture, Forestry, Fishing and
Hunting); four (4) industries within Sector 21 (Quarrying, and Oil and
Gas Extraction), Subsector 213 (Support Activity for Mining); three (3)
industries in Sector 22 (Utilities) and thirty-one (31) industries and
one (1) exception in Sector 23 (Construction). These reviews of
receipts-based size standards occurred during October 2010 to December
2013. SBA's analyses of the relevant industry and Federal contracting
data available at that time supported lowering size standards for
twenty-eight (28) industries in Sector 23 and four (4) industries and
two (2) exceptions in Sector 11. However, taking into consideration
economic conditions at the time, SBA decided to either retain all size
standards for which the industry analysis suggested a lower size
standard at existing levels or bring them up to the relevant common
size standard. In the final rules, SBA increased receipts-based size
standards for nineteen (19) of all industries reviewed, including
eleven (11) industries in Sector 11 (78 FR 37398, June 20, 2013); three
(3) industries in Sector 21 (78 FR 37404, June 20, 2013); three (3)
industries in Sector 22 (78 FR 77343, December 23, 2013); and one (1)
industry and one (1) exception in Sector 23 (78 FR 77334, December 23,
2013). SBA retained the existing size standards for the remaining
thirty-six (36) industries and two (2) exceptions in these sectors.
Table 1, Size Standards Revisions During the First 5-Year Review,
provides a summary of these revisions by NAICS sector.
[[Page 62240]]
Table 1--Size Standards Revisions During the First 5-Year Review
----------------------------------------------------------------------------------------------------------------
Number of Number of Number of Number of
size size size size
NAICS sector Sector name standards standards standards standards
reviewed increased lowered maintained
----------------------------------------------------------------------------------------------------------------
11............................ Agriculture, 18 11 0 7
Forestry,
Fishing and
Hunting.
21............................ Mining, 4 3 0 1
Quarrying, and
Oil and Gas
Extraction.
22............................ Utilities....... 3 3 0 0
23............................ Construction.... 32 2 0 30
---------------------------------------------------------------
All Sectors............... ................ 57 19 0 38
----------------------------------------------------------------------------------------------------------------
Currently, there are twenty-seven (27) different size standards
levels covering 1,023 NAICS industries and 14 subindustry activities
(commonly known as ``exceptions'' in SBA's table of size standards).
Sixteen (16) of these size levels are based on average annual receipts,
nine (9) are based on average number of employees, and two (2) are
based on other measures.
Section 1831 of the National Defense Authorization Act for Fiscal
Year 2017 (``NDAA 2017'') (Pub. L. 114-328, December 23, 2016) directed
SBA to establish size standards for all agricultural enterprises in the
same manner as for other industries and to include them in the 5-year
rolling review procedures established under section 1344(a) of the Jobs
Act. Accordingly, in this proposed rule, SBA has also reviewed and
proposed revisions to size standards for all agricultural industries,
including 46 industries that are being reviewed for the first time. As
stated above, historically, the size standards for most agricultural
industries were established by statute.
SBA also adjusts its monetary-based size standards for inflation at
least once every five years. An interim final rule on SBA's latest
inflation adjustment to size standards, effective August 19, 2019, was
published in the Federal Register on July 18, 2019 (84 FR 34261). SBA
also updates its size standards every five years to adopt the Office of
Management and Budget's (OMB) quinquennial NAICS revisions to its table
of small business size standards. Effective October 1, 2017, SBA
adopted the OMB's 2017 NAICS revisions to its size standards (82 FR
44886, September 27, 2017).
This proposed rule is one of a series of proposed rules that will
review size standards of industries grouped by various NAICS sectors.
Rather than review all size standards at one time, SBA is reviewing
size standards by grouping industries within various NAICS sectors that
use the same size measure (i.e., employees or receipts). In the current
review, SBA will review size standards in six (6) groups of NAICS
sectors. (In the prior review, SBA reviewed size standards mostly on a
sector-by-sector basis.) Once SBA completes its review of size
standards for a group of sectors, the Agency issues for public comments
a proposed rule to revise size standards for those industries based on
the latest available data and other factors deemed relevant by the
SBA's Administrator.
Below is a discussion of SBA's revised ``Size Standards
Methodology'' (Methodology), available at www.sba.gov/size, for
establishing, reviewing, or modifying receipts-based size standards
that SBA has applied to this proposed rule. SBA examines the structural
characteristics of an industry as a basis to assess industry
differences and the overall degree of competitiveness of an industry
and of firms within the industry. Industry structure is typically
examined by analyzing four primary factors--average firm size, degree
of competition within an industry, start-up costs and entry barriers,
and distribution of firms by size. To assess the ability of small
businesses to compete for Federal contracting opportunities under the
current size standards, as the fifth primary factor, SBA also examines,
for each industry averaging $20 million or more in average annual
Federal contract dollars, the small business share in Federal contract
dollars relative to the small business share in total industry's
receipts. When necessary, SBA also considers other secondary factors
that are relevant to the industries and the interests of small
businesses, including impacts of size standards changes on small
businesses.
Size Standards Methodology
SBA has recently revised its Methodology for establishing,
reviewing, or modifying size standards when necessary. See the
notification in the April 11, 2019, edition of the Federal Register (84
FR 14587). The revised methodology is available on SBA's size standards
web page at www.sba.gov/size. Prior to finalizing the revised
Methodology, SBA issued a notification in the April 27, 2018 edition of
the Federal Register (83 FR 18468) to solicit comments from the public
and notify stakeholders of the proposed changes to the Methodology. SBA
considered all public comments in finalizing the revised Methodology.
For a summary of comments and SBA's responses, refer to the SBA's April
11, 2019, Federal Register notification.
The revised Methodology represents a major change from the previous
methodology, which was issued on October 21, 2009 (74 FR 53940).
Specifically, in its revised Methodology SBA is replacing the
``anchor'' approach applied in the previous methodology with a
``percentile'' approach for evaluating differences in characteristics
among various industries. Under the ``anchor'' approach, SBA generally
evaluated the characteristics of individual industries relative to the
average characteristics of industries with the anchor size standard to
determine whether they should have a higher or a lower size standard
than the anchor. In the ``percentile'' approach, SBA ranks each
industry among all industries with the same measure of size standards
(such as receipts or employees) in terms of four primary industry
factors, discussed in the Industry Analysis subsection below. The
``percentile'' approach is explained more fully elsewhere in this
proposed rule. For a more detailed explanation please see the revised
methodology at www.sba.gov/size. Additionally, as the fifth factor, SBA
evaluates the difference between the small business share in Federal
contract dollars and the small business share in total industry's
receipts to compute the size standard for the Federal contracting
factor. The overall size standard for an industry is then obtained by
averaging all size standards supported by each primary factor. The
evaluation of the Federal contracting factor is explained more fully
elsewhere in this proposed rule.
SBA does not apply all aspects of its Methodology to all proposed
rules because not all features are relevant for
[[Page 62241]]
every industry covered by each proposed rule. For example, since all
industries covered by this proposed rule have receipts-based size
standards, the Methodology described in this proposed rule applies only
to establishing, reviewing, or modifying receipts-based size standards.
SBA's Methodology is available on its website at www.sba.gov/size.
Industry Analysis
Congress granted SBA's Administrator discretion to establish
detailed small business size standards (15 U.S.C. 632(a)(2)).
Specifically, section 3(a)(3) of the Small Business Act (15 U.S.C.
632(a)(3)) requires that ``. . . the [SBA] Administrator shall ensure
that the size standard varies from industry to industry to the extent
necessary to reflect the differing characteristics of the various
industries and consider other factors deemed to be relevant by the
Administrator.'' Accordingly, the economic structure of an industry is
the basis for establishing, reviewing, or modifying small business size
standards. In addition, SBA considers current economic conditions, its
mission and program objectives, the Administration's current policies,
impacts on small businesses under current size and proposed or revised
size standards, suggestions from industry groups and Federal agencies,
and public comments on the proposed rule. SBA also examines whether a
size standard based on industry and other relevant data successfully
excludes businesses that are dominant in the industry.
The goal of SBA's size standards review is to determine whether its
existing small business size standards reflect the current industry
structure and Federal market conditions and revise them when the latest
available data suggest that revisions are warranted. In the past, SBA
compared the characteristics of each industry with the average
characteristics of a group of industries associated with the ``anchor''
size standard. For example, in the first 5-year comprehensive review of
size standards under the Jobs Act, $7 million (now $8.0 million due to
the inflation adjustment in 2019; see 84 FR 34261 (July 18, 2019)) was
considered the ``anchor'' for receipts-based size standards and 500
employees was the ``anchor'' for employee-based size standards. If the
characteristics of a specific industry under review were similar to the
average characteristics of industries in the anchor group, SBA
generally adopted the anchor size standard for that industry. If the
specific industry's characteristics were significantly different from
those in the anchor group, SBA assigned a size standard that was higher
or lower than the anchor. To determine a size standard above or below
the anchor size standard, SBA evaluated the characteristics of a second
comparison group of industries with higher size standards. For
industries with receipts-based standards, the second comparison group
consisted of industries with size standards between $23 million and
$35.5 million, with the weighted average size standard for the group
equaling $29 million. For manufacturing industries and other industries
with employee-based size standards (except for Wholesale Trade and
Retail Trade), the second comparison group included industries with a
size standard of 1,000 employees or 1,500 employees, with the weighted
average size standard of 1,323 employees. Using the anchor size
standard and average size standard for the second comparison group, SBA
computed a size standard for an industry's characteristic (factor)
based on the industry's position for that factor relative to the
average values of the same factor for industries in the anchor and
second comparison groups.
Under the ``percentile'' approach, for each industry factor, an
industry is ranked and compared with the 20th percentile and 80th
percentile values of that factor among the industries sharing the same
measure of size standards (i.e., receipts or employees). Combining that
result with the 20th percentile and 80th percentile values of size
standards among the industries with the same measure of size standards,
SBA computes a size standard supported by each industry factor for each
industry. In the previous Methodology, comparison industry groups were
predetermined independent of the data, while in the revised Methodology
they are established using the actual data. A more detailed description
of the percentile method is provided in SBA's Methodology, available at
www.sba.gov/size.
The primary factors that SBA evaluates to examine industry
structure include average firm size, startup costs and entry barriers,
industry competition, and distribution of firms by size. SBA also
evaluates, as an additional primary factor, small business success in
receiving Federal contracting assistance under the current size
standards. Specifically, for the Federal contracting factor, SBA
examines the small business share of Federal contract dollars relative
to small business share of total receipts within an industry. These
are, generally, the five most important factors SBA examines when
establishing, reviewing, or revising a size standard for an industry.
However, SBA will also consider and evaluate other secondary factors
that it believes are relevant to a particular industry (such as
technological changes, growth trends, SBA financial assistance, other
program factors). 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 proposed
rules also provide important additional information. SBA thoroughly
reviews all public comments before making a final decision on its
proposed revisions to size standards. Below are brief descriptions of
each of the five primary factors that SBA has evaluated for each
industry being reviewed in this proposed rule. A more detailed
description of this analysis is provided in the SBA's Methodology,
available at www.sba.gov/size.
1. Average firm size. SBA computes two measures of average firm
size: simple average and weighted average. For industries with
receipts-based size standards, the simple average is the total receipts
of the industry divided by the total number of firms in the industry.
The weighted average firm size is the summation of all the receipts of
the firms in an industry multiplied by their share of receipts in the
industry. 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. The size standard
supported by average firm size is obtained by averaging size standards
supported by simple average firm size and weighted average firm size.
If the average firm size of an industry is higher than the average
firm size for most other industries, this would generally support a
size standard higher than the size standards for other industries.
Conversely, if the industry's average firm size is lower than that of
most other industries, it would provide a basis to assign a lower size
standard as compared to size standards for most other industries.
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 firms entering an industry under review have greater
capital requirements than firms in most other industries, all other
factors remaining the same, this would be a basis for a higher size
standard.
[[Page 62242]]
Conversely, if the industry has smaller capital needs compared to most
other industries, a lower size standard would be considered
appropriate.
Given the lack of actual data on startup costs and entry barriers
by industry, SBA uses average assets as a proxy for startup costs and
entry barriers. 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, available at https://rmau.org/.
SBA then applies these ratios to the average receipts of firms in that
industry obtained from the Economic Census tabulation. An industry with
average assets that are significantly higher than most other industries
is likely to have higher startup costs; this in turn will support a
higher size standard. Conversely, an industry with average assets that
are similar to or lower than most other industries is likely to have
lower startup costs; this will support either lowering or maintaining
the size standard.
3. Industry competition. Industry competition is generally measured
by the share of total industry receipts generated by the largest firms
in an industry. SBA generally evaluates the share of industry receipts
generated by the four largest firms in each industry. This is referred
to as the ``4-firm concentration ratio,'' a commonly used economic
measure of market competition. Using the 4-firm concentration ratio,
SBA compares the degree of concentration within an industry to the
degree of concentration of the other industries with the same measure
of size standards. If a significantly higher share of economic activity
within an industry is concentrated among the four largest firms
compared to most other industries, all else being equal, SBA would set
a size standard that is relatively higher than for most other
industries. Conversely, if the market share of the four largest firms
in an industry is appreciably lower than the similar share for most
other industries, the industry will be assigned a size standard that is
lower than those for most other industries.
4. Distribution of firms by size. SBA examines the shares of
industry total receipts accounted for by firms of different receipts
and employment sizes in an industry. This is an additional factor SBA
considers in assessing competition within an industry besides the 4-
firm concentration ratio. If the preponderance of an industry's
economic activity is attributable to smaller firms, this generally
indicates that small businesses are competitive in that industry, which
would support adopting a smaller size standard. A higher size standard
would be supported for an industry in which the distribution of firms
indicates that most of the economic activity is concentrated among the
larger firms.
Concentration is a measure of inequality of distribution. To
determine the degree of inequality of distribution in an industry, SBA
computes the Gini coefficient, using 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, see
SBA's Methodology on its website at www.sba.gov/size.) Gini coefficient
values vary from zero to one. If receipts are distributed equally among
all the firms in an industry, the value of the Gini coefficient will
equal zero. If an industry's total receipts are attributed to a single
firm, the Gini coefficient will equal one.
SBA compares the degree of inequality of distribution for an
industry under review with other industries with the same type of size
standards. If an industry shows a higher degree of inequality of
distribution (hence a higher Gini coefficient value) compared to most
other industries in the group this would, all else being equal, warrant
a size standard that is higher than the size standards assigned to most
other industries. Conversely, an industry with lower degree of
inequality (i.e., a lower Gini coefficient value) than most others will
be assigned a lower size standard relative to others.
5. Federal contracting. As the fifth factor, SBA examines the
success small businesses are having in winning Federal contracts under
the current size standard as well as the possible impact a size
standard change may have on Federal small business contracting
opportunities. The Small Business Act requires the Federal government
to ensure that small businesses receive a ``fair proportion'' of
Federal contracts. The legislative history also discusses the
importance of size standards in Federal contracting. To incorporate the
Federal contracting factor in the size standards analysis, SBA
evaluates small business participation in Federal contracting in terms
of the share of total Federal contract dollars awarded to small
businesses relative to the small business share of industry's total
receipts. In general, if the share of Federal contract dollars awarded
to small businesses in an industry is significantly smaller than the
small business share of total industry's receipts, all else remaining
the same, a justification would exist for considering a size standard
higher than the current size standard. In cases where small business
share of the Federal market is already appreciably high relative to the
small business share of the overall market, SBA generally assumes that
the existing size standard is adequate with respect to the Federal
contracting factor.
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, the different skill set required to perform Federal
contracts as compared to typical commercial contracting work, and the
size of Federal contracts. These, as well as other factors, are likely
to influence the type of firms within an industry that compete for
Federal contracts. By comparing the small business Federal contracting
share with the industry-wide small business share, SBA includes in its
size standards analysis the latest Federal market conditions.
Besides the impact on Federal contracting, SBA also examines
impacts on SBA's loan programs both under the current and revised size
standards.
Sources of Industry and Program Data
SBA's primary source of industry data used in this proposed rule
for evaluating industry characteristics and developing size standards
is a special tabulation of the Economic Census from the U.S. Census
Bureau (www.census.gov/econ/census). The tabulation based on the 2012
Economic Census is the latest available. The special tabulation
provides industry data on the number of firms, number of
establishments, number of employees, annual payroll, and annual
receipts of companies by Industry (6-digit level), Industry Group (4-
digit level), Subsector (3-digit level), and Sector (2-digit level).
These data are arrayed by various classes of firms' size based on the
overall number of employees and receipts of the entire enterprise (all
establishments and affiliated firms) from all industries. The special
tabulation also contains information for different levels of NAICS
categories on average and median firm size in terms of both receipts
and employment, total receipts generated by the four and eight largest
firms, the Herfindahl-Hirschman Index (HHI), the Gini coefficient, and
size distributions of firms by various receipts and employment size
groupings.
In some cases, where data were not available due to disclosure
prohibitions in the Census Bureau's tabulation, SBA
[[Page 62243]]
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's analysis was based only on those
factors for which data were available or estimates of missing values
were possible.
To evaluate some industries that are not covered by the Economic
Census, SBA used a similar special tabulation of the latest County
Business Patterns (CBP) published by the U.S. Census Bureau
(www.census.gov/programs-surveys/cbp.html). Similarly, to evaluate
industries in NAICS Sector 11 that are also not covered by the Economic
Census and CBP, SBA evaluated a similar special tabulation based on the
2012 Census of Agriculture (www.nass.usda.gov) from the National
Agricultural Statistics Service (NASS). Besides the Economic Census,
Agricultural Census and CBP tabulations, SBA also evaluates relevant
industry data from other sources when necessary, especially for
industries that are not covered by the Economic Census or CBP. These
include the Quarterly Census of Employment and Wages (QCEW, also known
as ES-202 data) (www.bls.gov/cew/) and Business Employment Dynamics
(BED) data (www.bls.gov/bdm/) from the U.S. Bureau of Labor Statistics.
Similarly, to evaluate certain financial industries that have assets-
based size standards, SBA examines the data from the Statistics on
Depository Institutions (SDI) database (www5.fdic.gov/sdi/main.asp) of
the Federal Deposit Insurance Corporation (FDIC). Finally, to evaluate
the capacity component of the Petroleum Refiners (NAICS 324110) size
standard, SBA evaluates the petroleum production data from the Energy
Information Administration (www.eia.gov).
To calculate average assets, SBA used sales to total assets ratios
from the Risk Management Association's Annual eStatement Studies, 2016-
2018 (https://rmau.org/). To evaluate Federal contracting trends and
evaluate two exceptions in Sector 11 and one exception in Sector 23,
SBA examined the data on Federal prime contract awards from the Federal
Procurement Data System--Next Generation (FPDS-NG) (www.fpds.gov) for
fiscal years 2016-2018. To assess the impact on financial assistance to
small businesses, SBA examined its internal data on 7(a) and 504 loan
programs for fiscal years 2016-2018. For some portion of impact
analysis, SBA also evaluated the data from the System of Award
Management (www.sam.gov).
Data sources and estimation procedures SBA uses in its size
standards analysis are documented in detail in SBA's Methodology, which
is available at 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 SBA
Administrator. SBA considers as part of its evaluation whether a
business concern at a proposed size standard would be dominant in its
field of operation. For this, SBA generally examines the industry's
market share of firms at the proposed or revised size standard as well
as the distribution of firms by size. Market share and size
distribution 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 includes a dominant firm, SBA will consider a lower size
standard to exclude the dominant firm from being defined as small.
Selection of Size Standards
In the 2009 Methodology SBA applied to the first 5-year
comprehensive review of size standards, SBA adopted a fixed number of
size standards levels as part of its effort to simplify size standards.
In response to public comments to the 2009 Methodology white paper, and
the 2013 amendment to the Small Business Act (section 3(a)(8)) under
section 1661 of the National Defense Authorization Act for Fiscal Year
2013 (``NDAA 2013'') (Pub. L. 112-239, January 2, 2013), in the revised
Methodology SBA relaxed the limitation on the number of small business
size standards. Specifically, section 1661 of NDAA 2013 states ``SBA
cannot limit the number of size standards, and shall assign the
appropriate size standard to each industry identified by NAICS.''
In the revised Methodology, SBA calculates a separate size standard
for each NAICS industry. However, to account for errors and limitations
associated with various data SBA evaluates in the size standards
analysis, SBA rounds the calculated size standard value for a receipts-
based size standard to the nearest $500,000, except for agricultural
industries in Subsectors 111 and 112 for which the calculated size
standards will be rounded to the nearest $250,000. This rounding
procedure is applied both in calculating a size standard for each of
the five primary factors and in calculating the overall size standard
for the industry.
As a policy decision, SBA continues to maintain the minimum and
maximum levels for both receipts and employee-based size standards.
Accordingly, SBA will not generally propose or adopt a size standard
that is either below the minimum level or above the maximum, even
though the calculations yield values below the minimum or above the
maximum. The minimum size standard reflects the size an established
small business should be to have adequate capabilities and resources to
be able to compete for and perform Federal contracts (but does not
account for small businesses that are newly formed or just starting
operations). On the other hand, the maximum size standard represents
the level above which businesses, if qualified as small, would
outcompete much smaller businesses when accessing Federal assistance.
With respect to receipts-based size standards, SBA has established
$6 million and $41.5 million, respectively, as the minimum and maximum
size standard levels (except for most agricultural industries in NAICS
Subsectors 111 and 112). These levels reflect the current minimum of
$6.0 million and the current maximum of $41.5 million. The industry
data suggests that $6 million minimum and $41.5 million maximum size
standards would be too high for agricultural industries. Accordingly,
SBA has established $1 million as the minimum size standard and $5
million as the maximum size standard for industries in Subsector 111
(Crop Production) and Subsector 112 (Animal Production and
Aquaculture).
Evaluation of Industry Factors
As mentioned earlier, to assess the appropriateness of the current
size standards SBA evaluates the structure of each industry in terms of
four economic characteristics or factors, namely average firm size,
average assets size as a proxy for startup costs and entry barriers,
the 4-firm concentration ratio as a measure of industry competition,
and size distribution of firms using the Gini coefficient. For each
size standard type (i.e., receipts-based or employee-based) SBA ranks
industries both in terms of each of the four industry factors and in
terms of the existing size standard and computes the 20th percentile
and 80th percentile values for both. SBA then evaluates each industry
by comparing its value for each industry factor to the 20th percentile
and 80th percentile values for the corresponding
[[Page 62244]]
factor for industries under a particular type of size standard.
If the characteristics of an industry under review within a
particular size standard type are similar to the average
characteristics of industries within the same size standard type in the
20th percentile, SBA will consider adopting as an appropriate size
standard for that industry the 20th percentile value of size standards
for those industries. For each size standard type, if the industry's
characteristics are similar to the average characteristics of
industries in the 80th percentile, SBA will assign a size standard that
corresponds to the 80th percentile in the size standard rankings of
industries. A separate size standard is established for each factor
based on the amount of differences between the factor value for an
industry under a particular size standard type and 20th percentile and
80th percentile values for the corresponding factor for all industries
in the same type. Specifically, the actual level of the new size
standard for each industry factor is derived by a linear interpolation
using the 20th percentile and 80th percentile values of that factor and
corresponding percentiles of size standards. Each calculated size
standard is bounded between the minimum and maximum size standards
levels, as discussed before. As noted earlier, the calculated value for
a receipts-based size standard for each industry factor is rounded to
the nearest $500,000, except for industries in Subsectors 111 and 112
for which a calculated size standard is rounded to the nearest
$250,000.
Table 2, 20th and 80th Percentiles of Industry Factors for
Receipts-based Size Standards, shows the 20th percentile and 80th
percentile values for average firm size (simple and weighted), average
assets size, 4-firm concentration ratio, and Gini coefficient for
industries with receipts-based size standards.
Table 2--20th and 80th Percentiles of Industry Factors for Receipts-Based Size Standards
----------------------------------------------------------------------------------------------------------------
Weighted
Simple average average Average assets 4-firm Gini
Industries/percentiles receipts size receipts size size ($ concentration coefficient
($ million) ($ million) million) ratio (%)
----------------------------------------------------------------------------------------------------------------
Industries, excluding Subsectors
111 and 112
20th percentile............. 0.83 19.42 0.34 7.9 0.686
80th percentile............. 7.52 830.65 5.19 42.4 0.834
Industries in Subsectors 111 and
112
20th percentile............. 0.06 1.48 0.07 1.7 0.608
80th percentile............. 0.83 13.32 0.88 12.3 0.908
----------------------------------------------------------------------------------------------------------------
Estimation of Size Standards Based on Industry Factors
An estimated size standard supported by each industry factor is
derived by comparing its value for a specific industry to the 20th
percentile and 80th percentile values for that factor. If an industry's
value for a particular factor is near the 20th percentile value in the
distribution, the supported size standard will be one that is close to
the 20th percentile value of size standards for industries in the size
standards group, which is $8.0 million. If a factor for an industry is
close to the 80th percentile value of that factor, it would support a
size standard that is close to the 80th percentile value in the
distribution of size standards, which is $35.0 million. For a factor
that is within, above, or below the 20-80th percentile range, the size
standard is calculated using linear interpolation based on the 20th
percentile and 80th percentile values for that factor and the 20th
percentile and 80th percentile values of size standards.
For example, if an industry's simple average receipts are $1.9
million, that would support a size standard of $12.5 million. According
to Table 2, the 20th percentile and 80th percentile values of average
receipts are $0.83 million and $7.52 million, respectively. The $1.9
million is 15.9 percent between the 20th percentile value ($0.83
million) and the 80th percentile value ($7.52 million) of simple
average receipts (($1.9 million - $0.83 million) / ($7.52 million -
$0.83 million) = 0.159 or 15.9%). Applying this percentage to the
difference between the 20th percentile value ($8 million) and 80th
percentile ($35.0 million) value of size standards and then adding the
result to the 20th percentile size standard value ($8.0 million) yields
a calculated size standard value of $12.32 million ([{$35.0 million -
$8.0 million{time} * 0.159] + $8.0 million = $12.32 million). The
final step is to round the calculated $12.32 million size standard to
the nearest $500,000, which in this example yields $12.5 million. This
procedure is applied to calculate size standards supported by other
industry factors.
Detailed formulas involved in these calculations are presented in
SBA's Methodology which is available at www.sba.gov/size.
Derivation of Size Standards Based on Federal Contracting Factor
Besides industry structure, SBA also evaluates Federal contracting
data to assess the success of small businesses in getting Federal
contracts under the existing size standards. For each industry with $20
million or more in annual Federal contract dollars, SBA evaluates the
small business share of total Federal contract dollars relative to the
small business share of total industry receipts. All other factors
being equal, if the share of Federal contracting dollars awarded to
small businesses in an industry is significantly less than the small
business share of that industry's total receipts, a justification would
exist for considering a size standard higher than the current size
standard. Conversely, if the small business share of Federal
contracting activity is near or above the small business share in total
industry receipts, this will support the current size standard.
SBA increases the existing size standards by certain percentages
when the small business share of total industry receipts exceeds the
small business share of total Federal contract dollars by 10 or more
percentage points. Proposed percentage increases generally reflect
receipts levels needed to bring the small business share of Federal
contracts on par with the small business share of industry receipts.
These proposed percentage increases for receipts-based size standards
are given in Table 3, Proposed Adjustments to Size Standards Based on
Federal Contracting Factor.
[[Page 62245]]
Table 3--Proposed Adjustments to Size Standards Based on Federal Contracting Factor
----------------------------------------------------------------------------------------------------------------
Percentage difference between the small business shares of total Federal
contract dollars in an industry and of total industry receipts
Size standards --------------------------------------------------------------------------
>-10% - 10% to - 30% <- 30%
----------------------------------------------------------------------------------------------------------------
Receipts-based standards
<$15 million..................... No change.............. Increase 30%........... Increase 60%
$15 million to < $25 million..... No change.............. Increase 20%........... Increase 40%
$25 million to < $41.5 million... No change.............. Increase 15%........... Increase 25%
----------------------------------------------------------------------------------------------------------------
For example, if an industry with the current size standard of $8.0
million had an average of $50 million in Federal contracting dollars,
of which 15 percent went to small businesses, and if that small
businesses accounted for 40 percent of total receipts of that industry,
the small business share of total Federal contract dollars would be 25
percent less than the small business share of total industry receipts
(40% - 15%). According to the above rule, the new size standard for the
Federal contracting factor for that industry would be set by
multiplying the current $8.0 million standard by 1.3 (i.e., 30%
increase) and then by rounding the result to the nearest $500,000,
yielding a size standard of $10.5 million.
SBA evaluated the small business share of total Federal contract
dollars for the thirty-one (31) industries covered by this proposed
rule--five (5) in Sector 11, one (1) in Sector 21, three (3) in Sector
22, and twenty-two (22) in Sector 23)--that had $20 million or more in
average annual Federal contract dollars during fiscal years 2016-2018.
The Federal contracting factor was significant (i.e., the difference
between the small business share of total industry receipts and small
business share of Federal contracting dollars was 10 percentage points
or more) in seven (7) of these industries, prompting an upward
adjustment of their existing size standards based on that factor. For
the remaining twenty-four (24) industries that averaged $20 million or
more in average annual contract dollars, the Federal contracting factor
was not significant, and the existing size standard was applied for
that factor. For industries with less than $20 million in average
annual contract dollars, no size standard was calculated for the
Federal contracting factor.
Derivation of Overall Industry Size Standard
The SBA's Methodology presented above results in five separate size
standards based on evaluation of the five primary factors (i.e., four
industry factors and one Federal contracting factor). SBA typically
derives an industry's overall size standard by assigning equal weights
to size standards supported by each of these five factors. However, if
necessary, SBA's Methodology would allow assigning different weights to
some of these factors in response to its policy decisions and other
considerations. For detailed calculations, see SBA's Methodology,
available on its website at www.sba.gov/size.
Calculated Size Standards Based on Industry and Federal Contracting
Factors
Table 4, Size Standards Supported by Each Factor for Each Industry
(Receipts), below, shows the results of analyses of industry and
Federal contracting factors for each industry and subindustry
(exception) covered by this proposed rule. NAICS industries in columns
2, 3, 4, 5, 6, 7, and 8 show two numbers. The upper number is the value
for the industry or Federal contracting factor shown on the top of the
column and the lower number is the size standard supported by that
factor. Column 9 shows a calculated new size standard for each
industry. This is the average of the size standards supported by each
factor, rounded to the nearest $500,000 for non-agriculture industries
and rounded to the nearest $250,000 for agriculture industries.
Analytical details involved in the averaging procedure are described in
SBA's Methodology, which is available at www.sba.gov/size. For
comparison with the calculated new size standards, the current size
standards are in column 10 of Table 4.
Table 4--Size Standards Supported by Each Factor for Each Industry (Receipts)
[Upper value = calculated factor, lower value = size standard supported]
--------------------------------------------------------------------------------------------------------------------------------------------------------
Simple Weighted Average Calculated Current
NAICS code NAICS industry average average assets size Four-firm Gini Federal size size
title Type firm size firm size ($ ratio (%) coefficient contract standard standard
($ million) ($ million) million) factor (%) ($ million) ($ million)
(1) (2)............. (3) (4) (5) (6) (7) (8) (9) (10)
--------------------------------------------------------------------------------------------------------------------------------------------------------
111110 Soybean Farming........ Factor.......... $0.2 $0.9 $0.1 0.3 0.663 ........... $2.00 $1.00
Size Std........ 2.25 1.75 1.75 1.50 2.25
111120 Oilseed (except Factor.......... 0.3 1.1 0.2 5.5 0.544 ........... 2.00 1.00
Soybean) Farming. Size Std........ 2.75 1.75 2.00 2.75 1.25
111130 Dry Pea and Bean Factor.......... 0.3 1.2 0.2 7.5 0.630 ........... 2.50 1.00
Farming. Size Std........ 2.50 1.75 2.00 3.25 2.00
111140 Wheat Farming.......... Factor.......... 0.2 0.9 0.2 0.4 0.610 ........... 2.00 1.00
Size Std........ 2.25 1.75 2.25 1.50 1.75
111150 Corn Farming........... Factor.......... 0.4 1.7 0.7 0.2 0.606 ........... 2.25 1.00
Size Std........ 2.75 1.75 3.50 1.50 1.75
111160 Rice Farming........... Factor.......... 0.8 1.8 0.5 1.5 0.469 ........... 2.25 1.00
Size Std........ 4.00 1.75 3.00 1.75 1.00
111190 Other Grain Farming Factor.......... 0.5 1.8 0.4 0.3 0.567 ........... 2.00 1.00
(includes NAICS 111191 and Size Std........ 3.25 1.75 2.75 1.50 1.50
111199).
111211 Potato Farming......... Factor.......... 1.6 10.6 1.3 5.8 0.756 ........... 3.75 1.00
Size Std........ 5.00 3.75 5.00 2.75 3.00
[[Page 62246]]
111219 Other Vegetable (except Factor.......... 0.3 17.8 0.2 3.5 0.943 ........... 3.25 1.00
Potato) and Melon Farming. Size Std........ 2.50 5.00 2.00 2.25 4.50
111310 Orange Groves.......... Factor.......... 0.3 12.2 0.4 11.0 0.856 ........... 3.50 1.00
Size Std........ 2.50 4.00 2.75 4.00 3.75
111320 Citrus (except Orange) Factor.......... 0.2 11.1 0.3 22.7 0.892 ........... 3.75 1.00
Groves. Size Std........ 2.25 3.75 2.50 5.00 4.00
111331 Apple Orchards......... Factor.......... 0.3 16.6 0.4 14.4 0.909 ........... 4.00 1.00
Size Std........ 2.50 5.00 3.00 4.75 4.25
111332 Grape Vineyards........ Factor.......... 0.4 13.9 0.8 4.1 0.877 ........... 3.50 1.00
Size Std........ 2.75 4.25 4.00 2.25 4.00
111333 Strawberry Farming..... Factor.......... 1.2 19.5 1.7 15.1 0.915 ........... 4.75 1.00
Size Std........ 5.00 5.00 5.00 5.00 4.25
111334 Berry (except Factor.......... 0.1 7.1 0.2 11.1 0.900 ........... 3.25 1.00
Strawberry) Farming. Size Std........ 2.00 3.00 2.00 4.00 4.25
111335 Tree Nut Farming....... Factor.......... 0.3 12.0 0.6 4.5 0.893 ........... 3.25 1.00
Size Std........ 2.50 4.00 3.25 2.50 4.00
111336 Fruit and Tree Nut Factor.......... 0.5 16.5 1.0 31.0 0.955 ........... 4.50 1.00
Combination Farming. Size Std........ 3.00 5.00 4.50 5.00 4.75
111339 Other Noncitrus Fruit Factor.......... 0.1 6.8 0.2 7.8 0.869 ........... 3.00 1.00
Farming. Size Std........ 2.00 2.75 2.00 3.25 4.00
111410 Food Crops Grown Under Factor.......... 0.5 29.1 0.2 19.6 0.950 ........... 4.00 1.00
Cover (includes NAICS 111411 Size Std........ 3.25 5.00 2.25 5.00 4.50
and 111419).
111421 Nursery and Tree Factor.......... 0.2 7.6 0.1 2.5 0.894 ........... 2.75 1.00
Production. Size Std........ 2.25 3.00 2.00 2.00 4.25
111422 Floriculture Production Factor.......... 0.3 12.8 0.2 5.8 0.878 ........... 3.25 1.00
Size Std........ 2.75 4.25 2.25 2.75 4.00
111910 Tobacco Farming........ Factor.......... 0.2 1.5 0.2 3.9 0.666 ........... 2.25 1.00
Size Std........ 2.25 1.75 2.00 2.25 2.25
111920 Cotton Farming......... Factor.......... 0.5 7.2 0.5 6.6 0.572 ........... 2.75 1.00
Size Std........ 3.25 3.00 3.00 3.00 1.50
111930 Sugarcane Farming...... Factor.......... 2.6 34.0 2.4 28.5 0.719 ........... 4.50 1.00
Size Std........ 5.00 5.00 5.00 5.00 2.75
111940 Hay Farming............ Factor.......... 0.0 1.5 0.0 1.7 0.840 ........... 2.25 1.00
Size Std........ 1.75 1.75 1.50 1.75 3.75
111990 All Other Crop Farming Factor.......... 0.1 4.6 0.0 1.7 0.973 -20.6 2.25 1.00
(includes NAICS 111991, Size Std........ 1.75 2.50 1.75 1.75 4.75 1.25
111992 and 111998).
112111 Beef Cattle Ranching Factor.......... 0.1 3.1 0.1 1.0 0.859 ........... 2.25 1.00
and Farming. Size Std........ 1.75 2.00 1.75 1.50 3.75
112112 Cattle Feedlots........ Factor.......... 2.8 63.3 2.0 3.9 0.907 ........... 19.50 8.00
Size Std........ 16.00 9.50 17.00 6.00 41.50
112120 Dairy Cattle and Milk Factor.......... 0.9 9.5 1.5 1.3 0.697 ........... 3.25 1.00
Production. Size Std........ 4.50 3.50 5.00 1.75 2.50
112210 Hog and Pig Farming.... Factor.......... 1.0 11.4 0.8 2.7 0.803 ........... 3.50 1.00
Size Std........ 5.00 3.75 4.00 2.00 3.50
112310 Chicken Egg Production. Factor.......... 0.3 17.8 0.3 4.9 0.936 ........... 15.50 16.50
Size Std........ 6.00 8.00 7.50 6.00 41.50
112320 Broilers and Other Meat Factor.......... 1.5 6.0 1.0 2.8 0.386 ........... 3.00 1.00
Type Chicken Production. Size Std........ 5.00 2.75 4.50 2.00 1.00
112330 Turkey Production...... Factor.......... 2.3 8.6 1.4 4.2 0.554 ........... 3.25 1.00
Size Std........ 5.00 3.25 5.00 2.25 1.25
112340 Poultry Hatcheries..... Factor.......... 10.7 19.6 6.7 5.9 0.493 ........... 3.50 1.00
Size Std........ 5.00 5.00 5.00 2.75 1.00
112390 Other Poultry Factor.......... 0.1 6.2 0.1 11.0 0.931 ........... 3.25 1.00
Production. Size Std........ 2.00 2.75 1.75 4.00 4.50
112410 Sheep Farming.......... Factor.......... 0.0 3.1 0.0 13.4 0.906 ........... 3.00 1.00
Size Std........ 1.50 2.00 1.50 4.50 4.25
112420 Goat Farming........... Factor.......... 0.0 0.2 0.0 4.2 0.836 ........... 2.25 1.00
Size Std........ 1.50 1.50 1.50 2.25 3.75
112500 Aquaculture (includes Factor.......... 0.4 7.2 0.4 8.9 0.816 ........... 3.25 1.00
NAICS 112511, 112512 and Size Std........ 2.75 3.00 2.75 3.50 3.50
112519).
112910 Apiculture............. Factor.......... 0.0 0.7 0.0 6.5 0.882 ........... 2.75 1.00
Size Std........ 1.75 1.50 1.75 3.00 4.00
112920 Horses and Other Equine Factor.......... 0.0 1.0 0.0 3.7 0.900 ........... 2.50 1.00
Production. Size Std........ 1.50 1.75 1.50 2.25 4.25
112930 Fur-Bearing Animal and Factor.......... 0.0 1.6 0.0 48.9 0.894 ........... 3.25 1.00
Rabbit Production. Size Std........ 1.75 1.75 1.50 5.00 4.25
112990 All Other Animal Factor.......... 0.1 5.2 0.1 5.1 0.959 -6.9 2.50 1.00
Production. Size Std........ 1.75 2.50 1.75 2.50 4.75 1.00
[[Page 62247]]
113110 Timber Tract Operations Factor.......... 1.8 19.4 1.0 29.6 0.749 ........... 16.50 12.00
Size Std........ 12.00 8.00 11.50 25.00 19.50
113210 Forest Nurseries and Factor.......... 1.4 12.5 0.7 39.2 0.748 ........... 18.00 12.00
Gathering Forest Products. Size Std........ 10.00 8.00 10.00 32.50 19.50
114111 Finfish Fishing........ Factor.......... 1.8 72.7 2.3 30.5 0.789 ........... 20.50 22.00
Size Std........ 12.00 10.00 18.50 25.50 26.50
114112 Shellfish Fishing...... Factor.......... 0.8 18.5 0.6 25.9 0.700 ........... 12.50 6.00
Size Std........ 8.00 8.00 9.00 22.00 10.50
114119 Other Marine Fishing... Factor.......... 0.8 6.6 0.7 ........... 0.707 ........... 10.00 8.00
Size Std........ 8.00 7.50 10.00 12.00
114210 Hunting and Trapping... Factor.......... 0.6 9.8 0.5 ........... 0.666 ........... 7.50 6.00
Size Std........ 7.00 7.50 9.00 6.00
115111 Cotton Ginning......... Factor.......... 4.3 10.0 3.3 10.2 0.541 ........... 14.00 12.00
Size Std........ 22.00 7.50 24.50 10.00 6.00
115112 Soil Preparation, Factor.......... 1.5 13.6 0.8 7.9 0.684 10.3 8.50 8.00
Planting, and Cultivating. Size Std........ 10.50 8.00 10.50 8.00 7.50 8.00
115113 Crop Harvesting, Factor.......... 1.7 9.5 1.0 18.3 0.704 ........... 12.00 8.00
Primarily by Machine. Size Std........ 11.50 7.50 11.50 16.00 11.50
115114 Postharvest Crop Factor.......... 9.4 191.4 6.3 24.1 0.754 ........... 27.50 30.00
Activities (except Cotton Size Std........ 41.50 13.50 41.00 20.50 20.50
Ginning).
115115 Farm Labor Contractors Factor.......... 1.8 15.3 1.0 ........... 0.727 ........... 12.50 16.50
and Crew Leaders. Size Std........ 12.00 8.00 12.00 15.50
115116 Farm Management Factor.......... 1.3 10.5 0.7 17.9 0.743 ........... 13.50 8.00
Services. Size Std........ 10.00 7.50 10.00 16.00 18.50
115210 Support Activities for Factor.......... 0.6 24.8 0.3 ........... 0.724 -8.9 9.50 8.00
Animal Production. Size Std........ 7.00 8.00 7.50 15.00 8.00
115310 Support Activities for Factor.......... 0.9 11.3 0.4 12.6 0.723 21.3 10.00 8.00
Forestry. Size Std........ 8.00 7.50 8.00 11.50 14.50 8.00
115310 Except, Forest Fire Factor.......... 3.7 198.9 1.6 27.6 0.867 74.7 23.5 20.5
Suppression. Size Std........ 19.5 17.5 15.0 23.5 41.0 20.5
115310 Except Fuels Management Factor.......... 3.7 198.9 1.6 27.6 0.867 74.7 23.5 20.5
Services. Size Std........ 19.5 17.5 15.0 23.5 41.0 20.5
213112 Support Activities for Factor.......... 11.5 4,184.6 9.6 34.2 0.849 10.1 38.0 41.5
Oil and Gas Operations. Size Std........ 41.5 41.5 41.5 28.5 37.5 41.5
213113 Support Activities for Factor.......... 7.2 41.0 5.6 20.5 0.749 ........... 24.0 22.0
Coal Mining. Size Std........ 34.0 8.5 37.0 18.0 19.5
213114 Support Activities for Factor.......... 12.2 236.0 9.4 54.8 0.823 ........... 36.0 22.0
Metal Mining. Size Std........ 41.5 15.0 41.5 41.5 33.0
213115 Support Activities for Factor.......... 2.8 32.1 2.2 34.3 0.708 ........... 18.0 8.0
Nonmetallic Minerals (except Size Std........ 16.0 8.5 18.5 28.5 12.0
Fuels) Mining.
221310 Water Supply and Factor.......... 2.9 1,023.6 9.6 49.9 0.834 -17.0 36.0 30.0
Irrigation Systems. Size Std........ 16.5 41.5 41.5 41.0 35.0 34.5
221320 Sewage Treatment Factor.......... 3.6 142.2 18.2 55.0 0.824 -6.9 31.0 22.0
Facilities. Size Std........ 19.5 12.0 41.5 41.5 33.0 22.0
221330 Steam and Air- Factor.......... 43.3 176.2 24.0 60.3 0.678 21.4 26.5 16.5
Conditioning Supply. Size Std........ 41.5 13.0 41.5 41.5 6.5 16.5
236115 New Single-Family Factor.......... 1.3 30.8 0.7 2.6 0.667 ........... 8.0 39.5
Housing Construction (except Size Std........ 10.0 8.5 9.5 6.0 6.0
For-Sale Builders).
236116 New Multifamily Housing Factor.......... 10.9 121.7 3.6 9.4 0.782 -3.8 25.5 39.5
Construction (except For-Sale Size Std........ 41.5 11.5 26.5 9.0 25.5 39.5
Builders).
236117 New Housing For-Sale Factor.......... 5.2 1,172.3 3.5 19.9 0.818 ........... 27.5 39.5
Builders. Size Std........ 26.0 41.5 25.5 17.5 32.0
236118 Residential Remodelers. Factor.......... 0.7 34.6 0.2 3.4 0.667 -62.6 13.5 39.5
Size Std........ 7.5 8.5 7.0 6.0 6.0 41.5
236210 Industrial Building Factor.......... 10.2 351.6 3.5 17.7 0.830 17.0 29.0 39.5
Construction. Size Std........ 41.5 19.0 25.5 15.5 34.0 39.5
236220 Commercial and Factor.......... 8.3 515.4 2.6 5.0 0.802 9.4 25.5 39.5
Institutional Building Size Std........ 38.5 24.5 20.5 6.0 29.0 39.5
Construction.
237110 Water and Sewer Line Factor.......... 4.1 98.2 2.0 6.5 0.756 -4.1 20.0 39.5
and Related Structures Size Std........ 21.0 10.5 17.5 7.0 21.0 39.5
Construction.
237120 Oil and Gas Pipeline Factor.......... 22.8 715.1 10.4 20.8 0.806 4.4 33.0 39.5
and Related Structures Size Std........ 41.5 31.0 41.5 18.0 30.0 39.5
Construction.
237130 Power and Communication Factor.......... 9.3 647.7 4.2 18.5 0.824 1.4 31.0 39.5
Line and Related Structures Size Std........ 41.5 29.0 30.0 16.0 33.0 39.5
Construction.
237210 Land Subdivision....... Factor.......... 2.7 42.4 6.8 8.1 0.782 ........... 22.0 30.0
Size Std........ 15.5 9.0 41.5 8.0 25.5
[[Page 62248]]
237310 Highway, Street, and Factor.......... 12.3 285.7 6.2 6.9 0.779 24.8 28.5 39.5
Bridge Construction. Size Std........ 41.5 17.0 40.5 7.0 25.0 39.5
237990 Other Heavy and Civil Factor.......... 7.4 458.2 3.9 20.6 0.825 7.8 29.5 39.5
Engineering Construction. Size Std........ 34.5 22.5 28.0 18.0 33.0 39.5
237990 Except Dredging and Factor.......... 42.6 384.2 21.3 55.4 0.744 6.2 32.5 30.0
Surface Cleanup Activities. Size Std........ 41.5 20.0 41.5 41.5 18.5.0 30.0
238110 Poured Concrete Factor.......... 1.7 53.3 0.6 4.9 0.731 -10.3 12.5 16.5
Foundation and Structure Size Std........ 11.5 9.0 9.5 6.0 16.0 20.0
Contractors.
238120 Structural Steel and Factor.......... 3.1 38.3 1.3 7.1 0.720 26.9 13.0 16.5
Precast Concrete Contractors. Size Std........ 17.0 8.5 13.5 7.5 14.0 16.5
238130 Framing Contractors.... Factor.......... 0.8 19.0 0.2 5.0 0.707 ........... 8.5 16.5
Size Std........ 8.0 8.0 7.5 6.0 12.0
238140 Masonry Contractors.... Factor.......... 1.0 17.1 0.3 3.1 0.717 -4.8 10.5 16.5
Size Std........ 8.5 8.0 8.0 6.0 13.5 16.5
238150 Glass and Glazing Factor.......... 1.7 16.8 0.6 5.2 0.674 ........... 8.0 16.5
Contractors. Size Std........ 11.5 8.0 9.5 6.0 6.0
238160 Roofing Contractors.... Factor.......... 1.7 35.2 0.6 4.4 0.694 12.0 10.0 16.5
Size Std........ 11.5 8.5 9.0 6.0 9.5 16.5
238170 Siding Contractors..... Factor.......... 0.7 10.5 0.2 3.1 0.655 ........... 7.0 16.5
Size Std........ 7.5 7.5 7.5 6.0 6.0
238190 Other Foundation, Factor.......... 1.6 34.7 0.5 9.9 0.732 -10.2 13.0 16.5
Structure, and Building Size Std........ 11.0 8.5 9.0 9.5 16.5 20.0
Exterior Contractors.
238210 Electrical Contractors Factor.......... 2.0 164.4 0.7 5.1 0.767 -1.7 13.5 16.5
and Other Wiring Installation Size Std........ 12.5 13.0 10.0 6.0 22.5 16.5
Contractors.
238220 Plumbing, Heating, and Factor.......... 1.7 123.8 0.5 4.1 0.737 24.0 12.0 16.5
Air-Conditioning Contractors. Size Std........ 11.5 11.5 9.0 6.0 17.5 16.5
238290 Other Building Factor.......... 4.4 453.7 1.5 24.7 0.775 22.5 19.5 16.5
Equipment Contractors. Size Std........ 22.5 22.5 14.0 21.0 24.0 16.5
238310 Drywall and Insulation Factor.......... 1.7 59.3 0.5 6.0 0.746 ........... 11.5 16.5
Contractors. Size Std........ 11.5 9.5 9.0 6.5 19.0
238320 Painting and Wall Factor.......... 0.6 60.6 0.2 6.9 0.697 0.4 10.0 16.5
Covering Contractors. Size Std........ 7.0 9.5 7.0 7.0 10.0 16.5
238330 Flooring Contractors... Factor.......... 0.9 22.4 0.3 5.0 0.718 12.3 10.5 16.5
Size Std........ 8.5 8.0 7.5 6.0 14.0 16.5
238340 Tile and Terrazzo Factor.......... 0.7 10.4 0.3 3.4 0.695 ........... 7.5 16.5
Contractors. Size Std........ 7.5 7.5 7.5 6.0 9.5
238350 Finish Carpentry Factor.......... 0.7 15.1 0.2 2.2 0.686 ........... 7.5 16.5
Contractors. Size Std........ 7.5 8.0 7.0 6.0 8.0
238390 Other Building Factor.......... 1.4 18.1 0.5 5.1 0.705 -13.9 11.0 16.5
Finishing Contractors. Size Std........ 10.5 8.0 8.5 6.0 11.5 20.0
238910 Site Preparation Factor.......... 2.0 39.3 0.9 2.1 0.733 19.4 12.0 16.5
Contractors. Size Std........ 12.5 8.5 11.0 6.0 16.5 16.5
238990 All Other Specialty Factor.......... 1.4 113.9 0.5 7.8 0.703 -24.4 11.5 16.5
Trade Contractors. Size Std........ 10.0 11.0 9.0 8.0 11.0 20.0
--------------------------------------------------------------------------------------------------------------------------------------------------------
Methodology for Agricultural Size Standards
Forty-six industries in Subsectors 111 and 112 currently have the
same $1 million receipts-based size standard. These industries
previously had a $750,000 receipts-based size standard, which was
established directly by Congress in section 806 of the Small Business
Reauthorization Act of 2000, Appendix I, Public Law 106-554, 114 Stat.
2763, December 21, 2000). Effective August 19, 2019, that size standard
was raised to $1 million by the interim final rule adjusting all
monetary size standards for inflation (published in the Federal
Register on July 18, 2019, (84 FR 34261)). NDAA 2017 directed SBA to
establish the size standards for those industries in the same manner
that the Agency establishes the size standards for other industries and
to include them in the 5-year rolling review under the Jobs Act.
Accordingly, in this proposed rule, SBA has evaluated those industries
using the same industry and Federal contracting factors that it uses in
evaluating characteristics of all other industries and their size
standards. However, the industry data from the 2012 Agricultural Census
tabulation reveals that firms in agricultural industries are much
smaller than those in all other industries with receipts-based size
standards. Therefore, as stated earlier, based on the data, SBA has
established $1 million and $5 million as the minimum and maximum
receipts-based size standard levels, respectively, for agricultural
industries, as opposed to $6 million as the minimum and $41.5 million
as the maximum receipts-based size standard levels for all other
industries. Similarly, SBA rounds a calculated receipts-based size
standard for agricultural industries to the nearest $250,000 instead of
rounding it to the nearest $500,000 as for other industries.
[[Page 62249]]
Of the 46 NAICS 6-digit industries in Subsectors 111 and 112, the
special tabulation of the 2012 Census of Agriculture provided data for
36 industries at the NAICS 6-digit level. Of the remaining ten (10),
seven (7) were aggregated at three different 5-digit NAICS levels and
three (3) were aggregated at one 4-digit NAICS level. SBA ranked these
40 industry categories (i.e., thirty-six (36) 6-digit, three (3) 3-
digit, and one (1) 4-digit) in terms of each industry factor and
obtained the 20th percentile an 80th percentile values for each factor.
However, since all those industries currently have the same $1 million
size standard, SBA cannot compute the 20th percentile and 80th
percentile values from existing size standards as for other industries.
Given the $1 million minimum and $5 million maximum size standard
levels and calculated size standards being rounded to the nearest
$250,000, SBA derived all possible size standards levels (e.g., $1
million, $1.25 million, $1.5 million . . . $4.75 million, and $5
million). Based on these levels, SBA computed $1.75 million as the 20th
percentile and $4.25 million as 80th percentile values of size
standards for agricultural industries. Combining these results with the
20th percentile and 80th percentile values of industry factors, SBA
computed a size standard for each factor for each industry. These
results are provided in Table 4, above.
For the 10 industries for which the data did not exist at the 6-
digit NAICS level, SBA estimated the size standard at the 5- or 4-digit
NAICS level at which the data were available and applied the same
results to the relevant 6-digit NAICS levels. These results are shown,
below, in Table 5, Calculated Agricultural Size Standards at the 4- or
5-Digit NAICS Level Matched to the 6-Digit Level.
Table 5--Calculated Agricultural Size Standards at the 4- or 5-Digit NAICS Level Matched to the 6-Digit Level
----------------------------------------------------------------------------------------------------------------
Calculated
size standard Calculated
4- or 5-digit NAICS code/title ($ million) 6-digit NAICS code/title size standard
(see Table 4) ($ million)
----------------------------------------------------------------------------------------------------------------
11119 Other Grain Farming..................... $2.0 111191 Oilseed and Grain $2.0
Combination Farming.
111199 All Other Grain Farming.. 2.0
11141 Food Crops Grown Under Cover............ 4.0 111411 Mushroom Production...... 4.0
111419 Other Food Crops Grown 4.0
Under Cover.
11199 All Other Crop Farming.................. 2.25 111991 Sugar Beet Farming....... 2.25
111992 Peanut Farming........... 2.25
111998 All Other Miscellaneous 2.25
Crop Farming.
1125 Aquaculture.............................. 3.25 112511 Finfish Farming and Fish 3.25
Hatcheries.
112512 Shellfish Farming........ 3.25
112519 Other Aquaculture........ 3.25
----------------------------------------------------------------------------------------------------------------
Evaluation of Size Standards for Subindustry Categories or
``Exceptions''
In accordance with SBA's approach to evaluating size standards for
subindustry categories (or ``exceptions''), SBA has evaluated the three
(3) exceptions covered by this rule using the procedures described in
the revised SBA's Methodology. The results of that analysis are
discussed in the following two subsections.
Forest Fire Suppression and Fuel Management Services
Forest Fire Suppression and Fuels Management Services are
subindustry categories or exceptions under NAICS 115310 (Support
Activities for Forestry) with the current size standard of $20.5
million in average annual receipts. In 2003, SBA established a
different size standard for these subindustry activities (68 FR 33348
(June 4, 2003)). In 2013, as part of the first 5-year review of size
standards under the Jobs Act, SBA initially maintained $17.5 million as
the size standard for these exceptions (78 FR 37398 (June 20, 2013)),
and subsequently, as part of the adjustment to monetary-based size
standards for inflation, the Agency increased the size standard from
$17.5 million to $19 million (79 FR 33647 (June 12, 2014)), and in the
fiscal year 2019 the size standard was adjusted from $19 million to
$20.5 million (84 FR 34261 (July 18, 2019)).
The data from the Census Bureau's and NASS' special tabulations are
limited to the 6-digit NAICS industry level, and hence, do not provide
separate data to evaluate a size standard at the subindustry level. As
such, SBA relied upon data from other sources to evaluate the current
$20.5 million size standard for both exceptions.
Firms engaged in the Forest Fire Suppression and Fuels Management
Services subindustries were identified from the contracting data
reported in FPDS-NG during fiscal years 2016-2018. Specifically, the
contracts under Forest Fire Suppression and Fuels Management Services
exceptions can be identified as those classified within NAICS 115310
under the Product Service Code (PSC) F003 (Natural Resources/
Conservation--Forest-Range Fire Suppression/Presuppression). SBA also
evaluated the contract data from the USDA Forest Service National
Interagency Fire Center (https://www.fs.fed.us/managing-land/fire and
https://www.fs.fed.us/business/incident/vipr.php). SBA also evaluated
the description of requirements of the contracts for Forest Fire
Suppression and Fuels Management Services in FPDS-NG to identify
principal activities related to forest fire suppression and fuel
management services and to differentiate them from other support
activities for forestry. SBA identified activities associated with
specialized crews, equipment and engines with trained personnel that
are critical to perform the tasks of suppressing or managing fires as
principal activities and other activities, such as leases of equipment,
machinery and transportation vehicles, or provision of services that do
not require specialized personnel or training as supporting activities.
Since most firms involved in Fire Suppression Services were also found
to be involved in Fuels Management Services and vice versa, SBA
analyzed the two as one subindustry category.
Finally, SBA obtained receipts and employment data for the fiscal
years 2016-2018 from FPDS-NG and from the System for Award Management
(SAM) to develop industry and Federal contracting factors for
evaluating the size standard for the two exceptions. SBA chose firms
with receipts greater than zero and less than $1 billion. Firms with
receipts greater than $1 billion are
[[Page 62250]]
outliers and their revenues would skew the data. Similarly, firms with
receipts at or below zero have insignificant contributions to total
Federal contract dollars obligated to the industry. Table 4, above,
shows the results from the analysis of these subindustries, which
supported a $23.5 million size standard as compared to the current
$20.5 million. Given the inherent uncertainty of occurrences of forest
fires and recent surges in forest fire incidents and extended fire
seasons, SBA believes that contracting officers need to have
flexibility to be able to hire enough small businesses, especially in
the worst-case scenario. SBA estimates that in a very busy season, it
is not implausible to assume 120 days of 14 hours shifts. Assuming an
average price of $43 dollars per person per hour, a total amount of
about $6 million could be awarded to a firm with an average number of 4
crews. In the case of firms with 15 crews, the amount could reach $22.0
million. Both numbers include only payments to firefighters for direct
fire suppression activities; in other words, here we did not consider
in the analysis additional payments, such as payments for fire engines,
water tenders, etc. With this reality in mind, SBA proposes to increase
the size standard for the Forest Fire Suppression and Fuels Management
Services exceptions to $25 million, above the current size standard of
$20.5 million and the calculated size standard of $23.5 million and
seeks comments on this proposal.
Dredging and Surface Cleanup Activities
The Dredging and Surface Cleanup Activities (Dredging) size
standard is an exception established by SBA within the 6-digit NAICS
code 237990 (Other Heavy and Civil Engineering Construction). As stated
previously, the data from the Census Bureau's special tabulation of the
Economic Census is limited to the 6-digit NAICS industry level, and
hence, does not provide separate data at the subindustry level to
evaluate exceptions. Accordingly, SBA relied upon the data from other
sources to evaluate the current $30.0 million size standard for
Dredging.
SBA identified firms engaged in the Dredging subindustry using the
contract awards data within NAICS 237990 in FPDS-NG for fiscal years
2016-2018. Specifically, dredging contracts were identified as those
classified under one of the following Product Service Codes (PSCs):
C1KF--Architect and Engineering Construction--Dredging Facilities;
M1KF--Operation of Dredging Facilities; X1KF--Lease/Rental of Dredging
Facilities; Y1KF--Construction of Dredging Facilities; Z1KF--
Maintenance of Dredging Facilities; Z2KF--Repair or alternation of
Dredging Facilities; and 1955--Dredges. SBA obtained receipts and
employment data for the identified Dredging firms from the System for
Award Management (SAM) and FPDS-NG to develop industry and Federal
contracting factors for Dredging. SBA excluded from the analysis firms
for which Dredging Federal contracts dollars accounted for a very small
percentage of their average annual receipts. SBA also excluded from the
analysis contracts awarded under PSCs C1KF and X1KF and firms receiving
such contracts as contract dollars under those PSCs were very small.
After these exclusions, SBA evaluated the data for a total of 100
Dredging firms that have received Federal contracts under NAICS 237990
and the above PSCs during fiscal years 2016-2018.
SBA also looked at the Dredging contracting information from the US
Army Corps of Engineers' Navigation and Civil Works Decision Support
Center (NDC) (https://www.iwr.usace.army.mil/About/Technical-Centers/NDC-Navigation-and-Civil-Works-Decision-Support/), as well as the
annual reports from Dredging Contractors of America (DCA)
(www.dredgingcontractors.org). However, those sources do not provide
information on business size and seem to include a smaller number of
dredging firms as compared to the number of Dredging firms found in
FPDS-NG. SBA's analysis included a vast majority of all firms found in
the NDC and DCA reports, except a few that received contracts in
industries other than NAICS 237990 or in PSCs other than those
described above.
Table 4, above, shows the results from the analysis of the Dredging
subindustry that support raising the current $30.0 million size
standard for the Dredging exception to $33.0 million. As also shown in
Table 4, the results for overall NAICS 237990 yields a smaller
calculated size standard of $29.5 million as compared to the current
standard of $39.5 million. Thus, the analytical results from the latest
available industry and Federal contracting data seem to suggest that a
separate size standard is still warranted for Dredging. Historically,
the Dredging exception size standard has been lower than the overall
NAICS 237990 size standard, but the latest results suggest otherwise.
As such, in this proposed rule, SBA is proposing to retain current size
standard for the overall NAICS 237990 and increase the size standard of
the Dredging subindustry to $33.0 million and seeking comment on the
proposal. Additionally, SBA is seeking comments on whether Dredging and
Surface Cleanup Activities should continue to be treated as an
exception or on whether it should be eliminated and subject to the same
overall NAICS 237990 size standard.
Summary of Calculated Size Standards
Of the one hundred (100) industries and three (3) subindustries
(exceptions) reviewed in this proposed rule, the results from analyses
of the latest available data on the five primary factors from Table 4,
Size Standards Supported by Each Factor for Each Industry (millions of
dollars), above, would support increasing size standards for sixty-five
(65) industries and three (3) subindustries, and decreasing size
standards for thirty-five (35) industries. Table 6, Summary of
Calculated Size Standards, summarizes these results by NAICS sector.
Table 6--Summary of Calculated Size Standards
----------------------------------------------------------------------------------------------------------------
Number of Number of Number of Number of
size size size size
NAICS sector Sector name standards standards standards standards
reviewed increased decreased unchanged
----------------------------------------------------------------------------------------------------------------
11.................................... Agriculture, Forestry, 64 60 4 0
Fishing and Hunting.
21.................................... Mining, Quarrying, and 4 3 1 0
Oil and Gas Extraction.
22.................................... Utilities............... 3 3 0 0
23.................................... Construction............ 32 2 30 0
-----------------------------------------------
All Sectors....................... ........................ 103 68 35 0
----------------------------------------------------------------------------------------------------------------
[[Page 62251]]
Evaluation of SBA Loan Data
Before proposing or deciding on an industry's size standard
revision, SBA also considers the impact of size standards revisions on
SBA's loan programs. Accordingly, SBA examined its internal 7(a) and
504 loan data for fiscal years 2016-2018 to assess whether the
calculated size standards in Table 4 (above) need further adjustments
to ensure credit opportunities for small businesses through those
programs. For the industries reviewed in this rule, the data shows that
it is mostly businesses much smaller than the current or proposed size
standards that receive SBA's 7(a) and 504 loans. For example, for
industries covered by this rule, more than 95.6 percent of 7(a) and 504
loans in fiscal years 2016-2018 went to businesses below the current or
proposed size standards.
Proposed Changes to Size Standards
Based on the analytical results in Table 4 and considerations of
impacts of calculated size standards in terms of access by currently
small businesses to SBA's loans, as discussed above, of a total of one
hundred three (103) industries or subindustries (exceptions) with
receipts-based size standards in Sectors 11, 21, 22 and 23 that are
covered by this rule, and considering the current situation due to the
COVID-19 related national emergency and its impacts on small businesses
and the overall economy, SBA proposes to increase size standards for 68
industries or subindustries, and retain the current size standards for
the remaining 35 industries.
Special Considerations
On March 13, 2020, the ongoing Coronavirus Disease 2019 (COVID-19)
was declared a pandemic of enough severity and magnitude to warrant an
emergency declaration for all states, territories, and the District of
Columbia. With the COVID-19 emergency, many small businesses nationwide
are experiencing economic hardship as a direct result of the Federal,
State, and local public health measures that are being taken to
minimize the public's exposure to the virus. These measures, some of
which are government-mandated, are being implemented nationwide and
include the closures of restaurants, bars, and gyms. In addition, based
on the advice of public health officials, other measures, such as
keeping a safe distance from others or even stay-at-home orders, are
being implemented, resulting in a dramatic decrease in economic
activity as the public avoids malls, retail stores, and other
businesses.
The Coronavirus Aid, Relief, and Economic Security Act (the CARES
Act or the Act) (Pub. L. 116-136) was signed on March 27, 2020, to
provide emergency assistance and health care response for individuals,
families, and businesses affected by the coronavirus pandemic. Section
1102 of the Act temporarily permits SBA to guarantee 100 percent of
7(a) loans under a new program titled the Paycheck Protection Program
(PPP). Section 1106 of the Act provides for forgiveness of up to the
full principal amount of qualifying loans guaranteed under the PPP. The
PPP and loan forgiveness are intended to provide economic relief to
small businesses nationwide adversely impacted under the COVID-19. On
April 24, 2020, additional funding for the CARES Act, including for the
PPP, was provided.
The Agency is following closely the development of the pandemic and
the economic situation and recovery. The consequence of the initial
response of the public to the COVID-19 pandemic as well as the
different measures taken by the Government to contain it (e.g. stay at
home orders, social distancing, etc.) have resulted in the present
economic decline. A variety of economic indicators such as the Gross
Domestic Product (GDP) and the unemployment rate shows that this
recession is significantly worse than any other recession since World
War II. The GDP decreased nearly 5 percent, and the Personal
consumption in goods and services decreased 6.8 percent in the first
quarter of 2020; in May 2020, personal income decreased 4.2 percent and
the unemployment rate increased from 3.5 percent in February 2020 to
11.1 percent in June 2020, and, also for the month of June 2020, Non-
farm payroll decreased by 15 million since February 2020. Specifically
for the sectors evaluated in this proposed rule, more recent data in
June 2020 shows that the unemployment rate for Agriculture and related
private wage and salary workers was 5.4 percent, but the sector of
Mining, quarrying, and oil and gas extraction shows an unemployment
rate of 17.8 percent and the construction sector, 10.1 percent. In June
2019, the unemployment rates for these sectors were 5.9, 3.2 and 4
percent, respectively. The latest Federal Reserve Board's Monetary
Policy Report shows that in general the most impacted firms in these
sectors are small businesses.\1\
---------------------------------------------------------------------------
\1\ Board of Governors of the Federal Reserve System (June
2020), Monetary Policy Report, p. 24 (see https://www.federalreserve.gov/monetarypolicy/files/20200612_mprfullreport.pdf) and U.S. Census Bureau's Small Business
Pulse Survey (https://portal.census.gov/pulse/data). The latest is a
recent survey created by the Census Bureau to provide high-
frequency, detailed information on participation in small business-
specific initiatives such as the PPP.
---------------------------------------------------------------------------
Accordingly, in view of above impacts on small businesses from the
COVID-19 pandemic and Federal government efforts to provide relief to
small businesses and support to the overall economy, SBA proposes to
adopt increases to size standards for 68 industries and retain the
current size standards for 35 industries for which analytical results
suggested their size standards could be lowered.
The proposed size standards are presented in Table 7, Proposed Size
Standards Revisions. Also presented in Table 7 are current and
calculated size standards for comparison.
Table 7--Proposed Size Standards Revisions
----------------------------------------------------------------------------------------------------------------
Current size Calculated Proposed size
NAICS code NAICS industry title standard ($ size standard standard ($
million) ($ million) million)
----------------------------------------------------------------------------------------------------------------
111110........................... Soybean Farming.............. $1.0 $2.0 $2.0
111120........................... Oilseed (except Soybean) 1.0 2.0 2.0
Farming.
111130........................... Dry Pea and Bean Farming..... 1.0 2.5 2.5
111140........................... Wheat Farming................ 1.0 2.0 2.0
111150........................... Corn Farming................. 1.0 2.25 2.25
111160........................... Rice Farming................. 1.0 2.25 2.25
111191........................... Oilseed and Grain Combination 1.0 2.0 2.0
Farming.
111199........................... All Other Grain Farming...... 1.0 2.0 2.0
[[Page 62252]]
111211........................... Potato Farming............... 1.0 3.75 3.75
111219........................... Other Vegetable (except 1.0 3.25 3.25
Potato) and Melon Farming.
111310........................... Orange Groves................ 1.0 3.5 3.5
111320........................... Citrus (except Orange) Groves 1.0 3.75 3.75
111331........................... Apple Orchards............... 1.0 4.0 4.0
111332........................... Grape Vineyards.............. 1.0 3.5 3.5
111333........................... Strawberry Farming........... 1.0 4.75 4.75
111334........................... Berry (except Strawberry) 1.0 3.25 3.25
Farming.
111335........................... Tree Nut Farming............. 1.0 3.25 3.25
111336........................... Fruit and Tree Nut 1.0 4.5 4.5
Combination Farming.
111339........................... Other Noncitrus Fruit Farming 1.0 3.0 3.0
111411........................... Mushroom Production.......... 1.0 4.0 4.0
111419........................... Other Food Crops Grown Under 1.0 4.0 4.0
Cover.
111421........................... Nursery and Tree Production.. 1.0 2.75 2.75
111422........................... Floriculture Production...... 1.0 3.25 3.25
111910........................... Tobacco Farming.............. 1.0 2.25 2.25
111920........................... Cotton Farming............... 1.0 2.75 2.75
111930........................... Sugarcane Farming............ 1.0 4.5 4.5
111940........................... Hay Farming.................. 1.0 2.25 2.25
111991........................... Sugar Beet Farming........... 1.0 2.25 2.25
111992........................... Peanut Farming............... 1.0 2.25 2.25
111998........................... All Other Miscellaneous Crop 1.0 2.25 2.25
Farming.
112111........................... Beef Cattle Ranching and 1.0 2.25 2.25
Farming.
112112........................... Cattle Feedlots.............. 8.0 19.5 19.5
112120........................... Dairy Cattle and Milk 1.0 3.25 3.25
Production.
112210........................... Hog and Pig Farming.......... 1.0 3.5 3.5
112310........................... Chicken Egg Production....... 16.5 15.5 16.5
112320........................... Broilers and Other Meat Type 1.0 3.0 3.0
Chicken Production.
112330........................... Turkey Production............ 1.0 3.25 3.25
112340........................... Poultry Hatcheries........... 1.0 3.5 3.5
112390........................... Other Poultry Production..... 1.0 3.25 3.25
112410........................... Sheep Farming................ 1.0 3.0 3.0
112420........................... Goat Farming................. 1.0 2.25 2.25
112511........................... Finfish Farming and Fish 1.0 3.25 3.25
Hatcheries.
112512........................... Shellfish Farming............ 1.0 3.25 3.25
112519........................... Other Aquaculture............ 1.0 3.25 3.25
112910........................... Apiculture................... 1.0 2.75 2.75
112920........................... Horses and Other Equine 1.0 2.5 2.5
Production.
112930........................... Fur-Bearing Animal and Rabbit 1.0 3.25 3.25
Production.
112990........................... All Other Animal Production.. 1.0 2.5 2.5
113110........................... Timber Tract Operations...... 12.0 16.5 16.5
113210........................... Forest Nurseries and 12.0 18.0 18.0
Gathering of Forest Products.
114111........................... Finfish Fishing.............. 22.0 20.5 22.0
114112........................... Shellfish Fishing............ 6.0 12.5 12.5
114119........................... Other Marine Fishing......... 8.0 10.0 10.0
114210........................... Hunting and Trapping......... 6.0 7.5 7.5
115111........................... Cotton Ginning............... 12.0 14.0 14.0
115112........................... Soil Preparation, Planting, 8.0 8.5 8.5
and Cultivating.
115113........................... Crop Harvesting, Primarily by 8.0 12.0 12.0
Machine.
115114........................... Postharvest Crop Activities 30.0 27.5 30.0
(except Cotton Ginning).
115115........................... Farm Labor Contractors and 16.50 12.5 16.5
Crew Leaders.
115116........................... Farm Management Services..... 8.0 13.5 13.5
115210........................... Support Activities for Animal 8.0 9.5 9.5
Production.
115310........................... Support Activities for 8.0 10.0 10.0
Forestry.
Except........................... Fire Suppression Services.... 20.5 23.5 25.0
Except........................... Fuels Management Services.... 20.5 23.5 25.0
213112........................... Support Activities for Oil 41.5 38.0 41.5
and Gas Operations.
213113........................... Support Activities for Coal 22.0 24.0 24.0
Mining.
213114........................... Support Activities for Metal 22.0 36.0 36.0
Mining.
213115........................... Support Activities for 8.0 18.0 18.0
Nonmetallic Minerals (except
Fuels) Mining.
221310........................... Water Supply and Irrigation 30.0 36.0 36.0
Systems.
221320........................... Sewage Treatment Facilities.. 22.0 31.0 31.0
221330........................... Steam and Air-Conditioning 16.5 26.5 26.5
Supply.
236115........................... New Single-Family Housing 39.5 8.0 39.5
Construction (except For-
Sale Builders).
236116........................... New Multifamily Housing 39.5 25.5 39.5
Construction (except For-
Sale Builders).
236117........................... New Housing For-Sale Builders 39.5 27.5 39.5
236118........................... Residential Remodelers....... 39.5 13.5 39.5
236210........................... Industrial Building 39.5 29.0 39.5
Construction.
236220........................... Commercial and Institutional 39.5 25.5 39.5
Building Construction.
[[Page 62253]]
237110........................... Water and Sewer Line and 39.5 20.0 39.5
Related Structures
Construction.
237120........................... Oil and Gas Pipeline and 39.5 33.0 39.5
Related Structures
Construction.
237130........................... Power and Communication Line 39.5 31.0 39.5
and Related Structures
Construction.
237210........................... Land Subdivision............. 30.0 22.0 30.0
237310........................... Highway, Street, and Bridge 39.5 28.5 39.5
Construction.
237990........................... Other Heavy and Civil 39.5 29.5 39.5
Engineering Construction.
Except........................... Dredging and Surface Clean-Up 30.0 32.5 32.5
Activities.
238110........................... Poured Concrete Foundation 16.5 12.5 16.5
and Structure Contractors.
238120........................... Structural Steel and Precast 16.5 13.0 16.5
Concrete Contractors.
238130........................... Framing Contractors.......... 16.5 8.5 16.5
238140........................... Masonry Contractors.......... 16.5 10.5 16.5
238150........................... Glass and Glazing Contractors 16.5 8.0 16.5
238160........................... Roofing Contractors.......... 16.5 10.0 16.5
238170........................... Siding Contractors........... 16.5 7.0 16.5
238190........................... Other Foundation, Structure, 16.5 13.0 16.5
and Building Exterior
Contractors.
238210........................... Electrical Contractors and 16.5 13.5 16.5
Other Wiring Installation
Contractors.
238220........................... Plumbing, Heating, and Air- 16.5 12.0 16.5
Conditioning Contractors.
238290........................... Other Building Equipment 16.5 19.5 19.5
Contractors.
238310........................... Drywall and Insulation 16.5 11.5 16.5
Contractors.
238320........................... Painting and Wall Covering 16.5 10.0 16.5
Contractors.
238330........................... Flooring Contractors......... 16.5 10.5 16.5
238340........................... Tile and Terrazzo Contractors 16.5 7.5 16.5
238350........................... Finish Carpentry Contractors. 16.5 7.5 16.5
238390........................... Other Building Finishing 16.5 11.0 16.5
Contractors.
238910........................... Site Preparation Contractors. 16.5 12.0 16.5
238990........................... All Other Specialty Trade 16.5 11.5 16.5
Contractors.
----------------------------------------------------------------------------------------------------------------
Table 8, Summary of Proposed Size Standards Revisions by Sector,
below, summarizes the proposed changes to size standards by NAICS
sector.
Table 8--Summary of Proposed Size Standards Revisions by Sector
----------------------------------------------------------------------------------------------------------------
Size standards Size standards Size standards
NAICS Sector Sector name increased lowered maintained
----------------------------------------------------------------------------------------------------------------
11.................................... Agriculture, Forestry, 60 0 4
Fishing and Hunting.
21.................................... Mining, Quarrying, and 3 0 1
Oil and Gas Extraction.
22.................................... Utilities............... 3 0 0
23.................................... Construction............ 2 0 30
-----------------------------------------------
All Sectors....................... ........................ 68 0 35
----------------------------------------------------------------------------------------------------------------
Evaluation of Dominance in Field of Operation
SBA has determined that for the industries which it has evaluated
in this proposed rule, no individual firm at or below the proposed size
standard would be large enough to dominate its field of operation. At
the proposed size standards levels, if adopted, the small business
share of total industry receipts among those industries would be, on
average, 1.1 percent, varying from 0.003 percent to 30.5 percent. These
market shares effectively preclude a firm at or below the proposed size
standards from exerting control on any of the industries.
Alternatives Considered
By law, SBA is required to develop numerical size standards for
establishing eligibility for Federal small business assistance programs
and to review every five years all size standards and make necessary
adjustments to reflect the current industry structure and Federal
market conditions. Other than varying the levels of size standards by
industry and changing the measures of size standards (e.g., using
annual receipts vs. the number of employees), no practical alternatives
exist to the systems of numerical size standards.
The proposal is to increase size standards where the data suggested
increases are warranted, and to retain, in response to COVID-19
emergency and resultant economic impacts on small businesses, all
current size standards where the data suggested lowering is
appropriate.
Nonetheless, SBA considered two other alternatives. Alternative
option one was to propose changes exactly as suggested by the
analytical results. Alternative option two was to retain all current
size standards.
Alternative option one would cause a substantial number of
currently small businesses to lose their small business status and
hence to lose their access to Federal small business assistance,
especially small business set-aside contracts and SBA's financial
assistance in some cases. During the first 5-year review of size
standards, some commenters had expressed concerns
[[Page 62254]]
about SBA's policy of not lowering size standards based on the
analytical results.
As part of option one, SBA also considered increasing 68 size
standards as suggested by the analytical results and mitigating the
impact of the decreases to size standards by adjusting the calculated
sizes considering the impact on small business access to Federal
contracting and loans. However, in the present situation with the
global COVID-19 pandemic resulting in high levels of risk and dramatic
reductions in economic activity of unprecedented nature, SBA presents
the impacts of adopting the analytical results without adjustment in
alternative option one and proposes to retain all size standards for
which the evaluation of principal factors suggested reductions, and to
adopt only the increases suggested by the evaluation. SBA will adopt
this approach temporarily and may reevaluate this approach as the
economic situation evolves.
Under option two, given the current COVID-19 Pandemic, SBA
considered retaining the current level of all size standards even
though the current analysis may suggest changing them. SBA considers
that the option of retaining all size standards at this moment provides
the opportunity to reassess the economic situation once the economic
recovery starts. Under this option, as the current situation develops,
SBA will be able to assess new data available on economic indicators,
federal procurement, and SBA loans as well, before adopting changes to
size standards. However, SBA is not adopting option two because the
Regulatory Impact Analysis shows that retaining all size standards at
their current levels is more onerous for the small businesses than the
option of adopting 68 increases and retaining 35 size standards.
Additionally, SBA regards size standards evaluation of 46 agricultural
industries for the first time as one of the most important
contributions of our current comprehensive size standards review, and
postponing the adoption of the calculated size standards should be
detrimental for the small businesses within those industries. Finally,
given the inherent uncertainty of occurrences of fires, the recent
surges in forest fire incidents and the extended fire seasons, SBA
believes that not proposing the increases in size standards for the
NAICS 115310 in general and its two exceptions will adversely affect
the availability of small businesses for these tasks, especially in the
worst-case scenarios. SBA may reevaluate this approach as the current
economic situation evolves.
Request for Comments
SBA invites public comments on this proposed rule, especially on
the following issues:
1. SBA seeks feedback on whether SBA's proposal to increase 68 size
standards and retain 35 size standards is appropriate given the results
from the latest available industry and Federal contracting data of each
industry and subindustry (exception) reviewed in this proposed rule,
along with ongoing uncertainty and dramatic contraction in economic
activity due to the global COVID-19 pandemic. SBA also seeks
suggestions, along with supporting facts and analysis, for alternative
standards, if they would be more appropriate than the proposed size
standards.
2. SBA also seeks comments on whether SBA should not lower any size
standards in view of COVID-19 pandemic and its adverse impacts on small
businesses as well as on the overall economic situation when analytical
results suggest some size standards could be lowered. SBA believes that
lowering size standards under the current economic environment would
run counter to what Congress and the Federal government are doing to
aid and provide relief to the nation's small businesses impacted by the
COVID-19 pandemic.
3. Given the uncertainty produced by the global COVID-19 pandemic
and the economic consequences, SBA would like to receive comments from
the public on the possibility of lowering size standards while
mitigating the consequences of the lower standards, instead of not
lowering any size standards.
4. In accordance with NDAA 2017, in this proposed rule, SBA has
evaluated 46 agricultural industries for which the size standards were
previously established directly by Congress and proposed a new size
standard for each of those industries. SBA seeks comments on the
methodology and data sources it used to develop such proposed standards
as well as on the appropriateness of the proposed size standards
levels.
5. In calculating the overall industry size standard, SBA has
assigned equal weight to each of the five primary factors in all
industries and subindustries covered by this proposed rule. SBA seeks
feedback on whether it should assign equal weight to each factor or on
whether it should give more weight to one or more factors for certain
industries or subindustries. Recommendations to weigh some factors
differently than others should include suggested weights for each
factor along with supporting facts and analysis.
6. For evaluating the size standards for the Forest Fire
Suppression and Fuel Management Services subindustries (``exceptions'')
within NAICS 115310, SBA used PSC F003 (Forest/Range Fire Suppression/
Presuppression Services) within NAICS 115310 in FPDS-NG to identify
firms engaged in the Forest Fire Suppression and Fuel Management
Services exceptions during fiscal years 2016-2018. Using the receipts
and employment data for those firms, SBA analyzed the industry and
Federal contracting factors for these subindustries. SBA seeks
suggestions or comments on data sources it used and its proposal to
increase the current $20.5 million size standard for both exceptions to
$25 million even if the analysis supported an increase to $23.5
million. SBA is also interested in comments on the possible elimination
of the Forest Fire Suppression and Fuel Management Services as
``exceptions'' to NAICS 115310, and the application of the same general
size standard for NAICS 115310. Comments on applying the same NAICS
115310 size standard for Forest Fire Suppression and Fuel management
Services should address why the same size standard is more suitable
than separate size standards for Forest Fire Suppression and Fuel
Management Services or why firms engaged in Forest Fire Suppression and
Fuel Management Services should continue to be treated as separate
activities from the rest of NAICS 115310 for SBA's size standards
purposes.
7. For evaluating the size standard for the Dredging and Surface
Cleanup Activities (Dredging), a subindustry (``exception'') category
within NAICS code 237990, SBA used relevant PSCs within NAICS code
237990 to identify Dredging contracts in FPDS-NG and firms receiving
such contracts during fiscal years 2016-2018. Using the receipts and
employment data for those firms from FPDS-NG, SBA analyzed the industry
and Federal contracting factor for this subindustry. SBA seeks
suggestions or comments on the use of the data sources and the proposed
size standard. SBA is also interested in comments on the elimination of
the subindustry category for Dredging, and the application of the same
size standard as for overall NAICS 237990. Comments on applying the
same NAICS 237990 size standard for Dredging should address the basis
for why that industry size standard is more suitable than a specific
dredging subindustry size standard or why dredging firms
[[Page 62255]]
should continue to be evaluated as a discrete subindustry for SBA's
size standards purposes.
8. In addition to comments on its proposal to increase the size
standard for the Dredging exception from the current $30.0 million to
$33.0 million, SBA also seeks comments regarding the requirement for a
dredging concern to qualify as small on a Federal procurement that it
or its similarly situated subcontractors must perform at least 40
percent of the volume dredged with its own equipment or equipment owned
by another small dredging concern (see Footnote 2 in 13 CFR 121.201).
This requirement has been in SBA's small business size regulations
since 1974 (see 30 FR 24669, July 5, 1974 and 39 FR 31302, August 28,
1974) and was interpreted by SBA's Office of Hearings and Appeals to
encompass subcontractors in Size Appeal of U.S. Army Corps of
Engineers, SBA No. SIZ-5915 (2018). This proposed rule retains the
requirement set forth in Footnote 2 in order to ensure that small
Dredging firms or their similarly situated subcontractors perform a
significant and meaningful portion of a Dredging project set aside for
small business. However, SBA requests comments as to whether that
footnote is still necessary. Comments pertaining to this requirement
should address: (1) Whether there continues to be a need to retain the
current 40 percent equipment requirement under current industry
practices; (2) whether the 40 percent equipment requirement should be
revised, and if so, the rationale for an alternative percentage; and
(3) whether a different and more verifiable requirement based on an
alternative measure (such as value of contract or personnel involved)
may achieve the same objective of ensuring that small businesses
perform significant and meaningful work on dredging contracts set aside
for small businesses.
9. Finally, SBA seeks comments on data sources it used to examine
industry and Federal market conditions, as well as suggestions on
relevant alternative data sources that the Agency should evaluate in
reviewing or modifying size standards for industries covered by this
proposed rule.
Public comments on the above issues are very valuable to SBA for
validating its proposed size standards revisions in this proposed rule.
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 the application of
size standards for Federal procurement programs, SBA suggests that
commenters provide information on the size of contracts in their
industries, 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 and 13771, the Regulatory
Flexibility Act (5 U.S.C. 601-612), Executive Orders 13563, 12988, and
13132, and the Paperwork Reduction Act (44 U.S.C. Ch. 35)
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, in the next section SBA provides a
Regulatory Impact Analysis of this proposed rule, including: (1) A
statement of the need for the proposed action, (2) an examination of
alternative approaches, and (3) an evaluation of the benefits and
costs--both quantitative and qualitative--of the proposed action and
the alternatives considered. However, this rule is not a ``major rule''
under the Congressional Review Act, 5 U.S.C. 800.
Regulatory Impact Analysis
1. What is a need for this regulatory action?
Under the Small Business Act (Act) (15 U.S.C. 632(a)), SBA's
Administrator is responsible for establishing small business size
definitions (or ``size standards'') and ensuring that such definitions
vary from industry to industry to reflect differences among various
industries. The Jobs Act requires SBA to review every five years all
size standards and make necessary adjustments to reflect current
industry and Federal market conditions. This proposed rule is part of
the second 5-year review of size standards in accordance with the Jobs
Act. The first 5-year review of size standards was completed in early
2016. Such periodic reviews of size standards provide SBA with an
opportunity to incorporate ongoing changes to industry structure and
Federal market environment into size standards and to evaluate the
impacts of prior revisions to size standards on small businesses. This
also provides SBA with an opportunity to seek and incorporate public
input to the size standards review and analysis. SBA believes that
proposed size standards revisions for industries being reviewed in this
rule will make size standards more reflective of the current economic
characteristics of businesses in those industries and the latest trends
in Federal marketplace.
SBA's mission is to aid and assist small businesses through a
variety of financial, procurement, business development and counseling,
and disaster assistance programs. To determine the actual intended
beneficiaries of these programs, SBA establishes numerical size
standards by industry to identify businesses that are deemed small.
The proposed revisions to the existing size standards for 103
industries in NAICS Sectors 11, 21, 22 and 23 are consistent with SBA's
statutory mandates to help small businesses grow and create jobs and to
review and adjust size standards every five years. This regulatory
action promotes the Administration's goals and objectives as well as
meets the SBA's statutory responsibility. One of SBA's goals in support
of promoting the Administration's objectives is to help small
businesses succeed through fair and equitable access to capital and
credit, Federal Government contracts and purchases, and management and
technical assistance. Reviewing and modifying size standards, when
appropriate, ensures that intended beneficiaries are able to access
Federal small business programs that are designed to assist them to
become competitive and create jobs.
2. What are the potential benefits and costs of this regulatory
action?
OMB directs agencies to establish an appropriate baseline to
evaluate any benefits, costs, or transfer impacts of regulatory actions
and alternative approaches considered. The baseline should represent
the agency's best assessment of what the world would look like absent
the regulatory action. For a new regulatory action promulgating
modifications to an existing regulation (such as modifying the existing
size standards), a baseline assuming no change to the regulation (i.e.,
making no changes to current size standards) generally provides an
appropriate benchmark for evaluating benefits, costs, or transfer
impacts of proposed regulatory changes and their alternatives.
Proposed Changes to Size Standards
Based on the results from analysis of latest industry and Federal
contracting data, as well as consideration of impact of size standards
changes on small businesses and significant adverse impacts of the
COVID-19 emergency on small businesses and the overall
[[Page 62256]]
economic activity, of the total of 103 industries in Sectors 11, 21, 22
and 23 that have receipts-based size standards, SBA proposes to
increase size standards for 68 industries (including exceptions), and
maintain current size standards for the remaining 35 industries.
The Baseline
For purposes of this regulatory action, the baseline represents
maintaining the ``status quo,'' i.e., making no changes to the current
size standards. Using the number of small businesses and levels of
benefits (such as set-aside contracts, SBA's loans, disaster
assistance, etc.) they receive under the current size standards as a
baseline, one can examine the potential benefits, costs and transfer
impacts of proposed changes to size standards on small businesses and
on the overall economy.
Based on the 2012 Economic Census (the latest available), of a
total of about 2.7 million businesses in industries in Sectors 11, 21,
22, and 23 for which SBA proposes to increase their receipts-based size
standards, 96.9 percent are considered small under the current size
standards. That percentage varies from 95.5 percent in Sector 21 to
98.5 percent in Sector 23. Based on the data from FPDS-NG for fiscal
years 2016-2018, about 17,300 unique firms in those industries received
at least one Federal contract during that period, of which 86.4 percent
were small under the current size standards. A total of $30.2 billion
in average annual contract dollars were awarded to businesses in those
industries during the period of evaluation, and 51.2 percent of the
dollars awarded went to small businesses. For these sectors, providing
contract dollars to small business through set asides is quite
important. From the total small business contract dollars awarded
during the period considered, 83.4 percent were awarded through various
small business set-aside programs and 16.6 percent were awarded through
non-set aside contracts. Based on the SBA's internal data on its loan
programs for fiscal years 2016-2018, small businesses in those
industries received, on an annual basis, a total of nearly 8,300 7(a)
and 504 loans in that period, totaling about $2.4 billion, of which 89
percent was issued through the 7(a) program and 11 percent was issued
through the 504/CDC program. During fiscal years 2016-2018, small
businesses in those industries also received 318 loans through the
SBA's Economic Injury Disaster Loan (EIDL) program, totaling about
$25.0 million on an annual basis. Table 9, Baseline for All Industries,
below, provides these baseline results by sector.
Table 9--Baseline for All Industries
----------------------------------------------------------------------------------------------------------------
Sector 11 Sector 21 Sector 22 Sector 23 Total
----------------------------------------------------------------------------------------------------------------
Baseline All Industries (current 64 4 3 32 103
size standards)................
Total firms (Economic 2,122,631 8,196 3,673 587,173 2,721,673
Census)....................
Total small firms under 2,046,316 7,828 3,586 578,430 2,636,160
current size standards
(Economic Census)..........
Small firms as % of total 96.4 95.5 97.6 98.5 96.9
firms......................
Total contract dollars ($ $591.2 $90.0 $311.1 $29,178 $30,170.0
million) (FPDS-NG FY2016-
2018)......................
Total small business $459.1 $31.3 $67.0 $14,879 $15,436.4
contract dollars under
current standards ($
million) (FPDS-NG FY2016-
2018)......................
Small business dollars as % 77.6 34.8 21.5 51.0 51.2
of total dollars (FPDS-NG
FY2016-2018)...............
Total No. of unique firms 3,557 298 624 13,290 17,300
getting contracts (FPDS-NG
FY2016-2018)...............
Total No. of unique small 3,174 221 488 11,422 14,933
firms getting small
business contracts (FPDS-NG
FY2016-2018)...............
Small business firms as % of 89.2 74.2 78.2 85.9 86.4
total firms................
No. of 7(a) and 504/CDC 843 73 36 7,334 8,286
loans (FY2016-2018)........
Amount of 7(a) and 504 loans $620.7 $34.2 $6.5 $1,705.3 $2,366.7
($ million) (FY2016-2018)..
No. of EIDL loans (FY2016- 90 3 3 222 318
2018)......................
Amount of EIDL loans ($ $5.6 $0.6 $0.7 $18.0 $25.0
million) (FY2016-2018).....
----------------------------------------------------------------------------------------------------------------
Increases to Size Standards
As stated above, of 103 receipts-based size standards in Sectors
11, 21, 22 and 23 that are reviewed in this rule, based on the results
from analyses of latest industry and Federal market data as well as
impacts of size standards changes on small businesses, SBA proposes to
increase 68 size standards. Below are descriptions of the benefits,
costs and transfer impacts of these proposed increases to size
standards.
Benefits of Increases to Size Standards
The most significant benefit to businesses from proposed increases
to size standards is gaining eligibility for Federal small business
assistance programs or retaining that eligibility for a longer period.
These include SBA's business loan programs, EIDL program, and Federal
procurement programs intended for small businesses. Federal procurement
programs provide targeted, set-aside opportunities for small businesses
under SBA's various business development and contracting programs.
These include the 8(a)/BD(business development) Program, the Small
Disadvantaged Businesses (SDB) Program, the Historically Underutilized
Business Zones (HUBZone) Program, the Women-Owned Small Businesses
(WOSB) Program, the Economically Disadvantaged Women-Owned Small
Businesses (EDWOSB) Program, and the Service-Disabled Veteran-Owned
Small Businesses (SDVOSB) Program.
Besides set-aside contracting and financial assistance discussed
above, small businesses also benefit through reduced fees, less
paperwork, and fewer compliance requirements that are available to
small businesses through Federal government. However, SBA has no data
to estimate the number of small businesses receiving such benefits.
Based on the 2012 Economic Census (latest available), SBA estimates
that in 68 industries in NAICS Sectors 11, 21, 22 and 23 for which it
has proposed to increase size standards, more than 49,400 firms (see
Table 10, below) not small under the current size standards will become
small under the proposed
[[Page 62257]]
size standards increases and therefore become eligible for these
programs. That represents about 2.4 percent of all firms classified as
small under the current size standards in industries for which SBA has
proposed increasing size standards. If adopted, proposed size standards
would result in an increase to the small business share of total
receipts in those industries from 35.6 percent to 55.2 percent.
With more businesses qualifying as small under the proposed
increases to size standards, Federal agencies will have a larger pool
of small businesses from which to draw for their small business
procurement programs. Growing small businesses that are close to
exceeding the current size standards will be able to retain their small
business status for a longer period under the higher size standards,
thereby enabling them to continue to benefit from the small business
programs.
Based on the FPDS-NG data for fiscal years 2016-2018, SBA estimates
that about 90 firms that are active in Federal contracting in those
industries would gain small business status under the proposed size
standards. Based on the same data, SBA estimates that those newly
qualified small businesses under the proposed increases to size
standards, if adopted, could receive Federal small business contracts
totaling about $9.8 million annually. That represents a 1.6 percent
increase to small business dollars from the sector baseline.
The added competition from more businesses qualifying as small can
result in lower prices to the government for procurements set aside or
reserved for small businesses, but SBA cannot quantify this impact.
Costs could be higher when full and open contracts are awarded to
HUBZone businesses that receive price evaluation preferences. However,
with agencies likely setting aside more contracts for small businesses
in response to the availability of a larger pool of small businesses
under the proposed increases to size standards, HUBZone firms might
actually end up getting more set-aside contracts and fewer full and
open contracts, thereby resulting in some cost savings to agencies.
While SBA cannot estimate such costs savings as it is impossible to
determine the number and value of unrestricted contracts to be
otherwise awarded to HUBZone firms will be awarded as set-asides, such
cost savings are likely to be relatively small as only a small fraction
of full and open contracts are awarded to HUBZone businesses.
Under SBA's 7(a) and 504 loan programs, based on the data for
fiscal years 2016-2018, SBA estimates up to about 21 7(a) and 504 loans
totaling about $14.4 million could be made to these newly qualified
small businesses in those industries under the proposed size standards.
That represents a 0.6 percent increase to the loan amount compared to
the Group baseline.
Newly qualified small businesses will also benefit from the SBA's
EIDL program. Since the benefit provided through this program is
contingent on the occurrence and severity of a disaster in the future,
SBA cannot make a meaningful estimate of this impact. However, based on
the historical trends of the EIDL data, SBA estimates that, on an
annual basis, the newly defined small businesses under the proposed
increases to size standards, if adopted, could receive four (4) EIDL
loans, totaling about $0.5 million. Additionally, the newly defined
small businesses would also benefit through reduced fees, less
paperwork, and fewer compliance requirements that are available to
small businesses through the Federal government, but SBA has no data to
quantify this impact. Table 10, Impacts of Proposed Increases to Size
Standards, provides these results by NAICS sector.
Table 10--Impacts of Proposed Increases to Size Standards
----------------------------------------------------------------------------------------------------------------
Sector 11 Sector 21 Sector 22 Sector 23 Total
----------------------------------------------------------------------------------------------------------------
No. of industries with proposed 60 3 3 2 68
increases to size standards....
Total current small businesses 2,016,066 536 3,586 5,413 2,025,601
in industries with Proposed
increases to size standards
(Economic Census 2012).........
Additional firms qualifying as 49,352 21 9 34 49,415
small under proposed standards
(2012 Economic Census).........
Percentage of additional firms 2.4% 3.9% 0.2% 0.6% 2.4%
qualifying as small relative to
current small businesses in
industries with proposed
increases to size standards....
No. of current unique small 3,143 171 488 576 4,346
firms getting small business
contracts in industries with
proposed increases to size
standards (FPDS-NG FY2016-2018)
\1\............................
Additional small business firms 66 1 12 12 88
getting small business status
(FPDS-NG FY2016-2018)..........
% increase to small businesses 2.1% 0.6% 2.5% 2.1% 2.0%
relative to current unique
small firms getting small
business contracts in
industries with proposed
increases to size standards
(FPDS-NG FY2016-2018) \1\......
Total small business contract $455.7 $4.5 $67.0 $90.8 $618.0
dollars under current standards
in industries with proposed
increases to size standards ($
million) (FPDS-NG FY2016-2018).
Estimated small business dollars $5.1 $0.2 $2.7 $1.8 $9.8
available to newly qualified
small firms (Using avg dollars
obligated to SBs) ($ million)
(FPDS-NG FY 2016-2018) \1\.....
% increase to small business 1.1 5.1 4.1 2.0 1.26
dollars relative to total small
business contract dollars under
current standards in industries
with proposed increases to size
standards......................
Total no. of 7(a) and 504 loans 779 4 36 96 915
to small business in industries
with proposed increases to size
standards (FY2016-2018)........
Total amount of 7(a) and 504 $582.5 $1.5 $6.5 $33.7 $624.3
loans to small businesses in
industries with proposed
increases to size standards ($
million) (FY2016-2018).........
[[Page 62258]]
Estimated no. of 7(a) and 504 18 1 1 1 21
loans to newly qualified small
firms..........................
Estimated 7(a) and 504 loan $13.5 $0.4 $0.2 $0.4 $14.4
amount to newly qualified small
firms ($ million)..............
% increase to 7(a) and 504 loan 2.3 25.0 2.8 1.0 2.3
amount relative to the total
amount of 7(a) and 504 loans in
industries with proposed
increases to size standards....
Total no. of EIDL loans to small 73 0 3 3 79
businesses in industries with
proposed increases to size
standards (FY2016-2018)........
Total amount of EIDL loans to $4.7 $0.0 $0.7 $0.3 $5.8
small businesses in industries
with proposed increases to size
standards ($ million) (FY2016-
2018)..........................
Estimated no. of EIDL loans to 2 0 1 1 4
newly qualified small firms....
Estimated EIDL loan amount to $0.13 $0.0 $0.3 $0.10 $0.5
newly qualified small firms ($
million).......................
% increase to EIDL loan amount 2.3 0.0 33.3 33.3 8.2
relative to the total amount of
EIDL loans in industries with
proposed increases to size
standards......................
----------------------------------------------------------------------------------------------------------------
1. Additional dollars are calculated multiplying average small business dollars obligated per DUNS times change
in number of firms. Numbers of firms are calculated using the SBA current size standard, not the contracting
officer's size designation.
2. Total impact represents total unique number of firms impacted to avoid double counting as some firms are
participating in more than one industry.
Costs of Increases to Size Standards
Besides having to register in SAM to be able to participate in
Federal contracting and update the SAM profile annually, small
businesses incur no direct costs to gain or retain their small business
status as a result of increases to size standards. All businesses
willing to do business with the Federal government must register in SAM
and update their SAM profiles annually, regardless of their size
status. SBA believes that a vast majority of businesses that are
willing to participate in Federal contracting are already registered in
SAM and update their SAM profiles annually. More importantly, this
proposed rule does not establish the new size standards for the very
first time; rather it intends to modify the existing size standards in
accordance with a statutory requirement and the latest data and other
relevant factors.
To the extent that the newly qualified small businesses could
become active in Federal procurement, the proposed increases to size
standards, if adopted, may entail some additional administrative costs
to the government as a result of more businesses qualifying as small
for Federal small business programs. For example, there will be more
firms seeking SBA's loans, more firms eligible for enrollment in the
Dynamic Small Business Search (DSBS) database or in certify.sba.gov,
more firms seeking certification as 8(a)/BD or HUBZone firms or
qualifying for small business, SDB, WOSB, EDWOSB, and SDVOSB status,
and more firms applying for SBA's 8(a)/BD and all small business
mentor-prot[eacute]g[eacute] programs. With an expanded pool of small
businesses, it is likely that Federal agencies would set aside more
contracts for small businesses under the proposed increases to size
standards. One may surmise that this might result in a higher number of
small business size protests and additional processing costs to
agencies. However, the SBA's historical data on size protests shows
that the number of size protests decreased following the increases to
receipts-based size standards as part of the first 5-year review of
size standards. Specifically, on an annual basis, the number of size
protests fell from about 600 during fiscal years 2011-2013 (review of
most receipts-based size standards was completed by the end of FY
2013), as compared to about 500 during fiscal years 2014-2016 when size
standards increases were in effect. That represents a 17 percent
decline. Among those newly defined small businesses seeking SBA's
loans, there could be some additional costs associated with
verification of their small business status. However, small business
lenders have an option of using the tangible net worth and net income
based alternative size standard instead of using the industry-based
size standards to establish eligibility for SBA's loans. For these
reasons, SBA believes that these added administrative costs will be
minor because necessary mechanisms are already in place to handle these
added requirements.
Additionally, some Federal contracts may possibly have higher
costs. With a greater number of businesses defined as small due to the
proposed increases to size standards, Federal agencies may choose to
set aside more contracts for competition among small businesses only
instead of using a full and open competition. The movement of contracts
from unrestricted competition to small business set-aside contracts
might result in competition among fewer total bidders, although there
will be more small businesses eligible to submit offers under the
proposed size standards. However, the additional costs associated with
fewer bidders are expected to be minor since, by law, procurements may
be set aside for small businesses under the 8(a)/BD, SDB, HUBZone,
WOSB, EDWOSB, or SDVOSB programs only if awards are expected to be made
at fair and reasonable prices.
Costs may also be higher when full and open contracts are awarded
to HUBZone businesses that receive price evaluation preferences.
However, with agencies likely setting aside more contracts for small
businesses in response to the availability of a larger pool of small
businesses under the proposed increases to size standards, HUBZone
firms might actually end up getting fewer full and open contracts,
thereby resulting in some cost savings to agencies. However, such cost
savings are likely to be minimal as only a small fraction of
unrestricted contracts are awarded to HUBZone businesses.
[[Page 62259]]
Transfer Impacts of Increases to Size Standards
The proposed increases to size standards, if adopted, may result in
some redistribution of Federal contracts between the newly qualified
small businesses and large businesses and between the newly qualified
small businesses and small businesses under the current standards.
However, it would have no impact on the overall economic activity since
total Federal contract dollars available for businesses to compete for
will not change with changes to size standards. While SBA cannot
quantify with certainty the actual outcome of the gains and losses from
the redistribution contracts among different groups of businesses, it
can identify several probable impacts in qualitative terms. With the
availability of a larger pool of small businesses under the proposed
increases to size standards, some unrestricted Federal contracts which
would otherwise be awarded to large businesses may be set aside for
small businesses. As a result, large businesses may lose some Federal
contracting opportunities. Similarly, some small businesses under the
current size standards may obtain a fewer set aside contracts due to
the increased competition from more advanced businesses qualifying as
small under the proposed increases to size standards. This impact may
be offset by a greater number of procurements being set aside for all
small businesses. With larger businesses qualifying as small under the
higher size standards, smaller small businesses could face some
disadvantage in competing for set aside contracts against their larger
counterparts. However, SBA cannot quantify these impacts.
3. What alternatives have been considered?
Under OMB Circular A-4, SBA is required to consider regulatory
alternatives to the proposed changes in the proposed rule. In this
section, SBA describes and analyzes two such alternatives to the
proposed rule. Alternative Option One to the proposed rule, a more
stringent alternative to the proposed rule, would propose adopting size
standards based solely on the analytical results. In other words, the
size standards of 68 industries for which the analytical results
suggest raising size standards would be raised. However, the size
standards of 35 industries for which the analytical results suggest
lowering size standards would be lowered. Alternative Option Two would
propose retaining all size standards for all industries, given the
uncertainty generated by the ongoing COVID-19 pandemic. Below, SBA
discusses and presents the net impacts of each option.
Alternative Option One: Consider Adopting All Calculated Size Standards
As discussed elsewhere in this proposed rule, Alternative Option
One would cause a substantial number of currently small businesses to
lose their small business status and hence to lose their access to
Federal small business assistance, especially small business set-aside
contracts and SBA's financial assistance in some cases. These
consequences could be mitigated. For example, in response to the 2008
Financial Crisis and economic conditions that followed, SBA adopted a
general policy in the first 5-year comprehensive size standards review
to not lower any size standard (except to exclude one or more dominant
firms) even when the analytical results suggested the size standard
should be lowered. Currently, because of the economic challenges
presented by the COVID-19 pandemic and the measures taken to protect
public health, SBA has decided to propose the same general policy of
not lowering size standards in the ongoing second 5-year comprehensive
size standards review as well.
The primary benefit of adopting this alternative is that SBA's
procurement, management, technical and financial assistance resources
would be targeted to the most appropriate beneficiaries of such
programs according to the analytical results. Adopting the size
standards suggested by the analytical results would also promote
consistency with analytical results in SBA's exercise of its authority
to determine size standards. SBA seeks public comment on the impact of
adopting the size standard as suggested by the analytical results.
As explained in the Size Standards Methodology White Paper, in
addition to adopting all results of the primary analysis, SBA evaluates
other relevant factors as needed such as the impact of the reductions
or increases of size standards on the distribution of contracts awarded
to small businesses, and may adopt different results with the intention
of mitigating potential negative impacts.
We have discussed already the benefits and costs of increasing 68
size standards. Below we discuss the benefits and costs of decreasing
35 size standards.
Benefits of Decreases to Size Standards
The most significant benefit to businesses from decreases to size
standards when the SBA's analysis suggests such decreases is to ensure
that size standards are more reflective of latest industry structure
and Federal market trends and that Federal small business assistance is
more effectively targeted to its intended beneficiaries. These include
SBA's loan programs, EIDL program, and Federal procurement programs
intended for small businesses. Federal procurement programs provide
targeted, set-aside opportunities for small businesses under SBA's
business development programs, such as small business, 8(a)/BD, SDB
HUBZone, WOSB, EDWOSB, and SDVOSB programs. The adoption of smaller
size standards when the results support them diminishes the risk of
awarding contracts to firms which are not small anymore.
Decreasing size standards may reduce the administrative costs of
the government, because the risk of awarding contracts to other than
small businesses may diminish when the size standards reflect better
the structure of the market. The risks of providing SBA's loans to
firms that are not needing them the most, or allowing firms that are
not eligible for small business set-asides or to participate on the SBA
procurement programs will provide for a better chance for smaller firms
to grow and benefit from the opportunities available on the Federal
market, and strengthen the small business industrial base for the
Federal Government.
Costs of Decreases to Size Standards
With fewer businesses qualifying as small under the decreases to
size standards, Federal agencies will have a smaller pool of small
businesses from which to draw for their small business procurement
programs. For example, in Option One, during fiscal years 2016-2018,
agencies awarded, on an annual basis, about $14,818 million in small
business contracts in those 35 industries for which this Option
considered decreasing size standards. Table 11 below shows that
lowering 35 size standards would reduce Federal contract dollars
awarded to small businesses by $865.4 million or about 5.8 percent
relative to the baseline level, of which 99 percent are accounted for
by the Construction Sector (NAICS 23). Because of the importance of the
construction sector for Federal procurement and the immediate impact on
businesses that will see their status as small changed relatively fast,
SBA would adopt mitigating measures to reduce the negative impact under
the assumptions of Option One. SBA could adopt one or more of the
following three actions: (1) To accept decreases in size standards as
suggested by the analytical
[[Page 62260]]
results, (2) to decrease size standards by a smaller amount than the
calculated threshold, and (3) to retain the size standards at their
current levels.
Nevertheless, since Federal agencies are still required to meet the
statutory small business contracting goal of 23 percent, actual impacts
on the overall set aside activity is likely to be smaller as agencies
are likely to award more set aside contracts to small businesses that
continue to remain small under the reduced size standards.
With fewer businesses qualifying as small, the decreased
competition can also result in higher prices to the Government for
procurements set aside or reserved for small businesses, but SBA cannot
quantify this impact. However, SBA estimates an almost null impact or
non-significant reduction in dollars obligated to small businesses, if
mitigation measures are adopted. Decreases to size standards would have
a very minor impact on small businesses applying for SBA's 7(a) and 504
loans because a vast majority of such loans are issued to businesses
that are far below the reduced size standards. For example, based on
the loan data for fiscal years 2016-2018, Option One estimates that
about 71 7(a) and 504 loans with total amounts of $16.8 million could
not be made to those small businesses that would lose eligibility under
the reduced size standards (before mitigation). That represents about
one (1.0) percent decrease of the loan amounts compared to the
baseline. Table 11, Impacts of Decreases to Size Standards Under
Alternative Option One, below, shows these results by sector. However,
the actual impact could be much less as businesses losing small
business eligibility under the decreases to industry based size
standards could still qualify for SBA's loans under the tangible net
worth and net income based alternative size standard.
Businesses losing small business status would also be impacted in
terms of access to loans through SBA's EIDL program. However, SBA
expects such impact to be minimal as only a small number of businesses
in those industries received such loans during fiscal years 2016-2018.
Additionally, all those businesses were below the reduced size
standards. Since this program is contingent on the occurrence and
severity of a disaster in the future, SBA cannot make a meaningful
estimate of this impact.
Small businesses becoming other than small if size standards were
decreased might lose benefits through reduced fees, less paperwork, and
fewer compliance requirements that are available to small businesses
through Federal government, but SBA has no data to quantify this
impact. However, if agencies determine that SBA's size standards do not
adequately serve such purposes, they can establish a different size
standard with an approval from SBA if they are required to use SBA's
size standards for their programs.
Table 11--Impacts of Decreases to Size Standards Under Alternative Option One
----------------------------------------------------------------------------------------------------------------
Sector 11 Sector 21 Sector 22 Sector 23 Total
----------------------------------------------------------------------------------------------------------------
No. of industries for which SBA 4 1 0 30 35
considered decreasing size
standards (2012 Economic
Census)........................
Total current small businesses 30,250 7,292 0 573,017 610,559
in industries for which SBA
considered decreasing size
standards (EC 2012)............
Estimated no. of firms losing 17 16 0 5,479 5,512
small status for which SBA
considered decreasing size
standards (EC 2012)............
% of Firms losing small status 0.1 0.2 0.0 1.0 0.9
relative to current small
businesses in industries for
which SBA considered decreasing
size standards.................
No. of current unique small 33 50 0 11,087 11,157
firms getting small business
contracts in industries for
which SBA considered decreasing
size standards (FPDS-NG FY2016-
2018) \1\......................
Estimated number of small 0 2 0 518 518
business firms that would have
lost small business status in
the decreases that SBA
considered.....................
% decrease to small business 0 4.0 0 4.7 4.6
firms relative to current
unique small firms getting
small business contracts in
industries for which SBA
considered decreasing size
standards (FPDS-NG FY2016-
2018)\ 1\......................
Total small business contract $3.3 $26.9 $0 $14,790 $14,818
dollars under current size
standards in industries for
which SBA considered decreasing
size standards ($ million)
(FPDS-NG FY2016-2018)..........
Estimated small business dollars $0 $1.1 $0 $864.4 $865.4
not available to firms losing
small business status (Using
avg dollars obligated to SBs)
($ million)\ 1\ (FPDS-NG FY
2016-2018).....................
% decrease to small business 0 4.1 0 5.8 5.8
dollars relative to total small
business contract dollars under
current size standards in
industries for which SBA
considered decreasing size
standards......................
Total no. of 7(a) and 504 loans 64 69 0 7,328 7,371
to small businesses in
industries for which SBA
considered decreasing size
standards (FY2016-2018)........
Total amount of 7(a) and 504 $38.2 $32.7 $0.0 $1,671.5 $1,742.4
loans to small businesses in
industries for which SBA
considered decreasing size
standards ($ million) (FY2016-
2018)..........................
Estimated no. of 7(a) and 504 1 0 0 70 71
loans not available to firms
that would have lost small
business status................
Estimated 7(a) and 504 loan $0.6 $0.0 $0.0 $16.2 $16.8
amount not available to firms
that would have lost small
status ($ million).............
[[Page 62261]]
% decrease to 7(a) and 504 loan 1.6% 0.0% 0.0% 1.0% 1.0%
amount relative to the total
amount of 7(a) and 504 loans in
industries for which SBA
considered decreasing size
standards......................
Total no. of EIDL loans to small 17 3 0 219 239
businesses in industries for
which SBA considered decreasing
size standards (FY2016-2018)...
Total amount of EIDL loans to $0.9 $0.6 $0.0 $17.8 $19.2
small businesses in industries
for which SBA considered
decreasing size standards ($
million) (FY2016-2018).........
Estimated no. of EIDL loans not -1 0 0 -3 -4
available to firms that would
have lost small business status
Estimated EIDL loan amount not -$0.1 $0.0 $0.0 -$0.2 $0
available to firms that would
have lost small business status
($ million)....................
% decrease to EIDL loan amount 5.9% 0.0% 0.0% 1.4% 1.5%
relative to the baseline.......
----------------------------------------------------------------------------------------------------------------
1. Additional dollars are calculated multiplying average small business dollars obligated per DUNS times change
in number of firms.
2. Total impact represents total unique industries impacted to avoid double counting as some industries have
large firms gaining small business status and small firms extending small business status.
Transfer Impacts of Decreases to Size Standards
If the size standards were decreased under Alternative Option One,
it may result in a redistribution of Federal contracts between small
businesses losing their small business status and large businesses and
between small businesses losing their small business status and small
businesses remaining small under the reduced size standards. However,
as under the proposed increases to size standards, it would have no
impact on the overall economic activity since total Federal contract
dollars available for businesses to compete for will stay the same.
While SBA cannot estimate with certainty the actual outcome of the
gains and losses among different groups of businesses from contract
redistribution resulting from decreases to size standards, it can
identify several probable impacts. With a smaller pool of small
businesses under the decreases to size standards, some set-aside
Federal contracts to be otherwise awarded to small businesses may be
competed in unrestricted basis. As a result, large businesses may have
more Federal contracting opportunities. However, because agencies are
still required by law to award 23 percent of dollars to small
businesses, SBA expects the movement of set-aside contracts to
unrestricted competition to be limited. For the same reason, small
businesses remaining small under the reduced size standards are likely
to obtain more set aside contracts due to the reduced competition from
fewer businesses qualifying as small under the decreases to size
standards. With some larger small businesses losing small business
status under the decreases to size standards, smaller small businesses
would likely become more competitive in obtaining set aside contracts.
However, SBA cannot quantify these impacts.
Net Impact of Alternative Option One
To estimate the net impacts of Alternative Option One, SBA followed
the same methodology used to evaluate the impacts of the proposed size
standards (see Table 10 above). However, under Alternative Option One,
SBA used the calculated size standards instead of the proposed ones to
determine the impacts of changes to current thresholds. The impact of
the increases of the calculated size standards were already shown in
Table 10 above. Table 11 (above) and Table 12, Net Impacts of Size
Standards Changes under Alternative Option One, below, present the
impact of the decreases of size standards and the net impact of
adopting the calculated results under Alternative Option One,
respectively.
Based on the 2012 Economic Census, SBA estimates that in 103
industries in NAICS Sectors 11, 21, 22 and 23 for which the analytical
results suggested to change size standards, about 43,900 firms (see
Table 12, below), would become small under the Option One. That
represents about 1.7 percent of all firms classified as small under the
current size standards.
Based on the FPDS-NG data for fiscal years 2016-2018, SBA estimates
that about 433 active firms in Federal contracting in those industries
would lose small business status under Option One, most of them from
the Construction Sector. This represents a decrease of about 2.9
percent of the total number of small businesses participating in
Federal contracting under the current size standards. Based on the same
data, SBA estimates that about $855.6 million of Federal procurement
dollars would not be available to firms losing their small status. This
represents a decrease of 5.5 percent from the Group's baseline. Again,
a large amount of the loses are accounted for by the Construction
Sector.
Based on the SBA's loan data for fiscal years 2016-2018, the total
number of 7(a) and 504 loans may decrease by about 50 loans, and the
loan amounts by about $2.4 million. This represents a 0.1 percent
decrease of the loan amounts relative to the Group baseline.
Firms' Participation under the SBA's EIDL program will be affected
as well. Since the benefit provided through this program is contingent
on the occurrence and severity of a disaster in the future, SBA cannot
make a meaningful estimate of this impact. However, based on the
historical trends of the EIDL data, SBA estimates that, on an annual
basis, the net impact of the Option One on additional firms is zero,
and additional loans amounts total about $0.18 million for the Group
relative to the baseline. Table 12, below, provides these results by
NAICS sector.
Table 12--Net Impacts of Size Standards Changes Under Alternative Option One
----------------------------------------------------------------------------------------------------------------
Sector 11 Sector 21 Sector 22 Sector 23 Total
----------------------------------------------------------------------------------------------------------------
No. of industries with proposed 64 4 3 32 103
changes to size standards......
[[Page 62262]]
Total no. of small business 2,046,316 7,828 3,586 578,430 2,636,160
under the current size
standards (2012 Economic
Census)........................
Additional firms qualifying as 49,335 5 9 -5,445 43,902
small under proposed size
standards (2012 Economic
Census)........................
% of additional firms qualifying 2.4% 0.1% 0.2% -0.9% 1.7%
as small relative to total
current small businesses.......
No. of current unique small 3,174 221 488 11,422 14,933
firms getting small business
contracts (FPDS-NG FY2016-2018)
\1\............................
Additional small firms getting 64 -1 12 -505 -433
small business status (FPDS-NG
FY2016-2018)...................
% increase to small firms 2.0 -0.5 2.5 -4.4 -2.9
relative to current unique
small firms getting small
business contracts (FPDS-NG
FY2016-2018) \1\...............
Total small business contract 459.1 31.3 67.0 14,879.0 15,436.4
dollars under current size
standards ($ million) (FPDS-NG
FY 2016-2018)..................
Estimated small business dollars 5.1 -0.9 2.7 -862.6 -855.6
available to newly qualified
small firms ($ million) (FPDS-
NG FY 2016-2018) \1\...........
% increase to dollars relative 1.1 -2.8 4.1 -5.8 -5.5
to total small business
contract dollars under current
size standards.................
Total no. of 7(a) and 504 loans 843 73 36 7,334 8,286
to small businesses (FY2016-
2018)..........................
Total amount of 7(a) and 504 $620.7 $34.2 $6.5 $1,705.3 $2,366.7
loans to small businesses
(FY2016-2018)..................
Estimated no. of additional 7(a) 17 1 1 -69 -50
and 504 loans to newly
qualified small firms..........
Estimated additional 7(a) and $12.9 $0.4 $0.2 -$15.8 -$2.4
504 loan amount to newly
qualified small firms ($
million).......................
% increase to 7(a)and 504 loan 2.1% 1.1% 2.8% -0.93% -0.1%
amount relative to the total
amount of 7(a) and 504 loans to
small businesses...............
Total no. of EIDL loans to small 90 3 3 222 318
businesses (FY2016-2018).......
Total amount of EIDL loans to $5.6 $0.6 $0.7 $18.0 $25.0
small businesses (FY2016-2018).
Estimated no. of additional EIDL 1 0 1 -2 0
loans to newly qualified small
firms..........................
Estimated additional EIDL loan $0.08 $0.0 $0.2 -$0.1 $0.18
amount to newly qualified small
firms ($ million)..............
% increase to EIDL loan amount 1.4% 0.0% 33.3% -0.8% 0.7%
relative to the total amount of
EIDL loans to small businesses.
----------------------------------------------------------------------------------------------------------------
\1\ Additional dollars are calculated multiplying average small business dollars obligated per DUNS times change
in number of firms.
\2\ Total impact represents total unique industries impacted to avoid double counting as some industries have
large firms gaining small business status and small firms extending small business status.
Alternative Option Two: To Retain All Current Size Standards
Under this option, given the current COVID-19 pandemic, as
discussed elsewhere, SBA considered retaining the current levels of all
size standards even though the analytical results may suggest changing
them. SBA considers that the option of retaining all size standards at
this moment provides the opportunity to reassess the economic situation
once the economic recovery starts. Under this option, as the current
situation develops, SBA will be able to assess new data available on
economic indicators, federal procurement, and SBA loans as well. SBA
estimates a net impact of zero for this option, when compared to the
baseline. However, if we compare the proposal of increasing 68 size
standards and retaining 35 with this alternative approach, the benefits
for small businesses of adopting the proposal will not be attained,
because of which SBA is not proposing the Alternative Option Two.
Executive Order 13771
SBA has determined, subject to the approval of the Office of
Information and Regulatory Affairs (OIRA) of the Office of Management
and Budget (OMB), that this proposed rule is not subject to the
requirements of E.O. 13771, because most of the rule's impacts are
income transfers between small and other than small businesses.
According to the E.O. 13771 guidance in OMB M-17-21, dated April 5,
2017 (``E.O. 13771 Guidance''), ``transfers'' are not covered by E.O.
13771. The E.O. 13771 Guidance also states that ``in some cases,
[transfer rules] may impose requirements apart from transfers, or
transfers may distort markets causing inefficiencies. In those cases,
the actions would need to be offset to the extent they impose more than
de minimis costs.'' SBA estimates that this rulemaking would impose
only de minimis costs on small businesses and would result in
negligible compliance costs. Thus, SBA has determined that this
rulemaking is exempt from the requirements of E.O. 13771. Details on
the estimated costs of this proposed rule can be found in the
Regulatory Impact Analysis above.
Initial Regulatory Flexibility Analysis
According to the Regulatory Flexibility Act (RFA), 5 U.S.C. 601-
612, when an agency issues a rulemaking, it must prepare a regulatory
flexibility analysis to address the impact of the rule on small
entities.
This proposed rule, if adopted, may have a significant impact on a
substantial number of small businesses in the industries covered by
this proposed rule. As described above, this rule may affect small
businesses seeking
[[Page 62263]]
Federal contracts, loans under SBA's 7(a), 504 and EIDL Programs, and
assistance under other Federal small business programs.
Immediately below, SBA sets forth an initial regulatory flexibility
analysis (IRFA) of this proposed rule addressing the following
questions: (1) What is the need for and objective of the rule;? (2)
What are SBA's description and estimate of the number of small
businesses to which the rule will apply;? (3) What are the projected
reporting, record keeping, and other compliance requirements of the
rule;? (4) What are the relevant Federal rules that may duplicate,
overlap, or conflict with the rule;? and (5) What alternatives will
allow the Agency to accomplish its regulatory objectives while
minimizing the impact on small businesses?
1. What is the need for and objective of the rule?
Changes in industry structure, technological changes, productivity
growth, mergers and acquisitions, and updated industry definitions have
changed the structure of many the industries covered by this proposed
rule. Such changes can be enough to support revisions to current size
standards for some industries. Based on the analysis of the latest data
available, SBA believes that the revised standards in this proposed
rule more appropriately reflect the size of businesses that need
Federal assistance. The 2010 Jobs Act also requires SBA to review all
size standards and make necessary adjustments to reflect market
conditions.
2. What are SBA's description and estimate of the number of small
businesses to which the rule will apply?
Based on data from the 2012 Economic Census, SBA estimates that
there are about 2.02 million small firms covered by this rulemaking
under industries with proposed changes to size standards. If the
proposed rule is adopted in its present form, SBA estimates that an
additional 49,415 businesses will become small.
3. What are the projected reporting, record keeping and other
compliance requirements of the rule?
The proposed size standard changes impose no additional reporting
or record keeping requirements on small businesses. However, qualifying
for Federal procurement and a number of other programs requires that
businesses register in SAM and self-certify that they are small at
least once annually. Therefore, businesses opting to participate in
those programs must comply with SAM requirements. There are no costs
associated with SAM registration or certification. Changing size
standards alters the access to SBA's programs that assist small
businesses but does not impose a regulatory burden because 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)). 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.
However, SBA considered two alternatives to its proposal to
increase 68 size standards and maintain 35 size standards at their
current levels. The first alternative SBA considered was adopting size
standards based solely on the analytical results. In other words, the
size standards of 68 industries for which the analytical results
suggest raising size standards would be raised. However, the size
standards of 35 industries for which the analytical results suggest
lowering size standards would be lowered. This would cause a
significant number of small businesses to lose their small business
status, especially in the construction sector. Under the second
alternative, in view of the COVID-19 pandemic, SBA considered retaining
all size standards at the current levels, even though the analytical
results may suggest increasing 68 size standards and decreasing 35.
Retaining all size standards at their current levels would be more
onerous for the small businesses than the option of adopting 68
increases and retaining the rest of size standards. Additionally, for
the first time, SBA evaluated 46 agricultural industries in this
proposed rule, and postponing the adoption of the calculated size
standards would be detrimental for the small businesses within these
industries.
Executive Order 13563
Executive Order 13563 emphasizes the importance of quantifying both
costs and benefits, reducing costs, harmonizing rules, and promoting
flexibility. A description of the need for this regulatory action and
benefits and costs associated with this action including possible
distributional impacts that relate to Executive Order 13563 is included
above in the Regulatory Impact Analysis under Executive Order 12866.
Additionally, Executive Order 13563, section 6, calls for retrospective
analyses of existing rules.
The review of size standards in the industries covered by this
proposed rule is consistent with section 6 of Executive Order 13563 and
the 2010 Jobs Act which requires SBA to review all size standards and
make necessary adjustments to reflect market conditions. Specifically,
the 2010 Jobs Act requires SBA to review at least one-third of all size
standards during every 18-month period from the date of its enactment
(September 27, 2010) and to review all size standards not less
frequently than once every five years, thereafter. SBA had already
launched a comprehensive review of size standards in 2007. In
accordance with the Jobs Act, SBA completed the comprehensive review of
the small business size standard for each industry, except those for
agricultural enterprises previously set by Congress, and made
appropriate adjustments to size standards for a number of industries to
reflect current Federal and industry market conditions. The first
comprehensive review was completed in 2015. Prior to 2007, the last
time SBA conducted a comprehensive review of all size standards was
during the late 1970s and early 1980s.
SBA issued a White Paper entitled ``Size Standards Methodology''
and published a notice in the April 11, 2019, edition of the Federal
Register (84 FR 14587) to advise the public that the document is
available for public review and comments. The ``Size Standards
Methodology'' White Paper explains
[[Page 62264]]
how SBA establishes, reviews, and modifies its receipts-based and
employee-based small business size standards. SBA gave appropriate
consideration to all input, suggestions, recommendations, and relevant
information obtained from industry groups, individual businesses, and
Federal agencies in developing size standards for those industries
covered by this proposed rule.
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 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 will not impose any new reporting or
record keeping requirements.
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 13
CFR part 121 as follows:
PART 121--SMALL BUSINESS SIZE REGULATIONS
0
1. The authority citation for part 121 continues to read as follows:
Authority: 15 U.S.C. 632, 634(b)(6), 636(a)(36), 662, and
694a(9); Pub. L. 116-136, Section 1114.
0
2. In Sec. 121.201 amend the table ``Small Business Size Standards by
NAICS Industry'' as follows:
0
a. Revise Subsector 111, entries ``112111'', ``112112'', ``112120'',
``112210'', ``112320'' through ``112340'', ``112390'', ``112410'',
``112420'', ``112511'', ``112512'', ``112519'', ``112910'' through
``112930'', ``112990'', ``113110'', ``113210'', ``114112'', ``114119'',
``114210'', entries ``115111'' through ``115113'', ``115116'',
``115210'' ``115310'', ``115310 first and second sub-entry'', entries
``213113'' through ``213115'', ``221310'' through ``221330'',
``237990'', ``237990 sub-entry'', and ``238290'';
0
b. Revise footnote 2;
0
c. Redesignate footnote 17 as footnote 1;
0
d. Redesignate footnote 20 as footnote 15;
0
e. Redesignate footnote 19 as footnote 17;
0
f. Revise Editorial Note 1; and
0
g. Remove Editorial Note 2.
The revisions read as follows:
Sec. 121.201 What size standards has SBA identified by North American
Industry Classification System codes?
* * * * *
Small Business Size Standards by NAICS Industry
----------------------------------------------------------------------------------------------------------------
Size standards Size standards
NAICS codes NAICS U.S. industry title in millions of in number of
dollars employees
----------------------------------------------------------------------------------------------------------------
Sector 11--Agriculture, Forestry, Fishing and Hunting
Subsector 111--Crop Production
----------------------------------------------------------------------------------------------------------------
111110...................................... Soybean Farming............... $2.0 ................
111120...................................... Oilseed (except Soybean) 2.0 ................
Farming.
111130...................................... Dry Pea and Bean Farming...... 2.5 ................
111140...................................... Wheat Farming................. 2.0 ................
111150...................................... Corn Farming.................. 2.25 ................
111160...................................... Rice Farming.................. 2.25 ................
111191...................................... Oilseed and Grain Combination 2.0 ................
Farming.
111199...................................... All Other Grain Farming....... 2.0 ................
111211...................................... Potato Farming................ 3.75 ................
111219...................................... Other Vegetable (except 3.25 ................
Potato) and Melon Farming.
111310...................................... Orange Groves................. 3.5 ................
111320...................................... Citrus (except Orange) Groves. 3.75 ................
111331...................................... Apple Orchards................ 4.0 ................
111332...................................... Grape Vineyards............... 3.5 ................
111333...................................... Strawberry Farming............ 4.75 ................
111334...................................... Berry (except Strawberry) 3.25 ................
Farming.
111335...................................... Tree Nut Farming.............. 3.25 ................
111336...................................... Fruit and Tree Nut Combination 4.5 ................
Farming.
111339...................................... Other Noncitrus Fruit Farming. 3.0 ................
111411...................................... Mushroom Production........... 4.0 ................
111419...................................... Other Food Crops Grown Under 4.0 ................
Cover.
111421...................................... Nursery and Tree Production... 2.75 ................
111422...................................... Floriculture Production....... 3.25 ................
111910...................................... Tobacco Farming............... 2.25 ................
111920...................................... Cotton Farming................ 2.75 ................
111930...................................... Sugarcane Farming............. 4.5 ................
111940...................................... Hay Farming................... 2.25 ................
111991...................................... Sugar Beet Farming............ 2.25 ................
111992...................................... Peanut Farming................ 2.25 ................
111998...................................... All Other Miscellaneous Crop 2.25 ................
Farming.
----------------------------------------------------------------------------------------------------------------
[[Page 62265]]
Subsector 112--Animal Production and Aquaculture
----------------------------------------------------------------------------------------------------------------
112111...................................... Beef Cattle Ranching and 2.25 ................
Farming.
112112...................................... Cattle Feedlots............... 19.5 ................
112120...................................... Dairy Cattle and Milk 3.25 ................
Production.
112210...................................... Hog and Pig Farming........... 3.5 ................
* * * * * * *
112320...................................... Broilers and Other Meat Type 3.0 ................
Chicken Production.
112330...................................... Turkey Production............. 3.25 ................
112340...................................... Poultry Hatcheries............ 3.5 ................
112390...................................... Other Poultry Production...... 3.25 ................
112410...................................... Sheep Farming................. 3.0 ................
112420...................................... Goat Farming.................. 2.25 ................
112511...................................... Finfish Farming and Fish 3.25 ................
Hatcheries.
112512...................................... Shellfish Farming............. 3.25 ................
112519...................................... Other Aquaculture............. 3.25 ................
112910...................................... Apiculture.................... 2.75 ................
112920...................................... Horses and Other Equine 2.5 ................
Production.
112930...................................... Fur-Bearing Animal and Rabbit 3.25 ................
Production.
112990...................................... All Other Animal Production... 2.5 ................
----------------------------------------------------------------------------------------------------------------
Subsector 113--Forestry and Logging
----------------------------------------------------------------------------------------------------------------
113110...................................... Timber Tract Operations....... 16.5 ................
113210...................................... Forest Nurseries and Gathering 18.0 ................
of Forest Products.
* * * * * * *
----------------------------------------------------------------------------------------------------------------
Subsector 114--Fishing, Hunting and Trapping
----------------------------------------------------------------------------------------------------------------
* * * * * * *
114112...................................... Shellfish Fishing............. 12.5 ................
114119...................................... Other Marine Fishing.......... 10.0 ................
114210...................................... Hunting and Trapping.......... 7.5 ................
----------------------------------------------------------------------------------------------------------------
Subsector 115--Support Activities for Agriculture and Forestry
----------------------------------------------------------------------------------------------------------------
115111...................................... Cotton Ginning................ 14.0 ................
115112...................................... Soil Preparation, Planting, 8.5 ................
and Cultivating.
115113...................................... Crop Harvesting, Primarily by 12.0 ................
Machine.
* * * * * * *
115116...................................... Farm Management Services...... 13.5 ................
115210...................................... Support Activities for Animal 9.5 ................
Production.
115310...................................... Support Activities for 10.0 ................
Forestry.
115310 (Exception 1)........................ Forest Fire Suppression \1\... 25.0 \1\ ................
115310 (Exception 2)........................ Fuels Management Services \1\. 25.0 \1\ ................
----------------------------------------------------------------------------------------------------------------
Sector 21--Mining, Quarrying, and Oil and Gas Extraction
----------------------------------------------------------------------------------------------------------------
* * * * * * *
----------------------------------------------------------------------------------------------------------------
Subsector 213--Support Activities for Mining
----------------------------------------------------------------------------------------------------------------
* * * * * * *
213113...................................... Support Activities for Coal 24.0 ................
Mining.
213114...................................... Support Activities for Metal 36.0 ................
Mining.
213115...................................... Support Activities for 18.0 ................
Nonmetallic Minerals (except
Fuels) Mining.
----------------------------------------------------------------------------------------------------------------
Sector 22--Utilities
Subsector 221--Utilities
----------------------------------------------------------------------------------------------------------------
* * * * * * *
221310...................................... Water Supply and Irrigation 36.0 ................
Systems.
221320...................................... Sewage Treatment Facilities... 31.0 ................
[[Page 62266]]
221330...................................... Steam and Air-Conditioning 26.5 ................
Supply.
----------------------------------------------------------------------------------------------------------------
Sector 23--Construction
Subsector 236--Construction of Buildings
----------------------------------------------------------------------------------------------------------------
* * * * * * *
----------------------------------------------------------------------------------------------------------------
Subsector 237--Heavy and Civil Engineering Construction
----------------------------------------------------------------------------------------------------------------
* * * * * * *
237990...................................... Other Heavy and Civil 39.5 ................
Engineering Construction.
237990 (Exception).......................... Dredging and Surface Cleanup 33.0 \2\ ................
Activities \2\.
----------------------------------------------------------------------------------------------------------------
Subsector 238--Specialty Trade Contractors
----------------------------------------------------------------------------------------------------------------
* * * * * * *
238290...................................... Other Building Equipment 19.5 ................
Contractors.
* * * * * * *
511210...................................... Software Publishers \15\...... 41.5 \15\ ................
* * * * * * *
Sector 92--Public ................ ................
Administration \17\.
* * * * * * *
----------------------------------------------------------------------------------------------------------------
Footnotes
\1\ NAICS code 115310--Support Activities for Forestry: Forest Fire Suppression and Fuels Management Services
are two components of Support Activities for Forestry. Forest Fire Suppression includes establishments which
provide services to fight forest fires. These firms usually have fire-fighting crews and equipment. Fuels
Management Services firms provide services to clear land of hazardous materials that would fuel forest fires.
The treatments used by these firms may include prescribed fire, mechanical removal, establishing fuel breaks,
thinning, pruning, and piling.
\2\ NAICS code 237990--Dredging: To be considered small for purposes of Government procurement, a firm or its
similarly situated subcontractors must perform at least 40 percent of the volume dredged with its own
equipment or equipment owned by another small dredging concern.
\15\ NAICS code 511210--For purposes of Government procurement, the purchase of software subject to potential
waiver of the nonmanufacturer rule pursuant to Sec. 121.1203(d) should be classified under this NAICS code.
\17\ NAICS Sector 92--Small business size standards are not established for this sector. Establishments in the
Public Administration sector are Federal, State, and local government agencies which administer and oversee
government programs and activities that are not performed by private establishments. Concerns performing
operational services for the administration of a government program are classified under the NAICS private
sector industry based on the activities performed. Similarly, procurements for these types of services are
classified under the NAICS private sector industry that best describes the activities to be performed. For
example, if a government agency issues a procurement for law enforcement services, the requirement would be
classified using one of the NAICS industry codes under NAICS industry 56161, Investigation, Guard, and Armored
Car Services.
* * * * *
Editorial Note: For Federal Register citations affecting Sec.
121.201, see the List of CFR Sections Affected, which appears in the
Finding Aids section of the printed volume and at www.govinfo.gov.
Jovita Carranza,
Administrator.
[FR Doc. 2020-21589 Filed 10-1-20; 8:45 am]
BILLING CODE 8026-03-P
