Small Business Size Standards: Wholesale Trade; Retail Trade, 28012-28038 [2021-10487]
Download as PDF
jbell on DSKJLSW7X2PROD with PROPOSALS
28012
Federal Register / Vol. 86, No. 99 / Tuesday, May 25, 2021 / Proposed Rules
require you to provide your name and
contact information. Your contact
information will be viewable to DOE
Building Technologies staff only. Your
contact information will not be publicly
viewable except for your first and last
names, organization name (if any), and
submitter representative name (if any).
If your comment is not processed
properly because of technical
difficulties, DOE will use this
information to contact you. If DOE
cannot read your comment due to
technical difficulties and cannot contact
you for clarification, DOE may not be
able to consider your comment.
However, your contact information
will be publicly viewable if you include
it in the comment or in any documents
attached to your comment. Any
information that you do not want to be
publicly viewable should not be
included in your comment, nor in any
document attached to your comment.
Following this instruction, persons
viewing comments will see only first
and last names, organization names,
correspondence containing comments,
and any documents submitted with the
comments.
Do not submit to https://
www.regulations.gov information for
which disclosure is restricted by statute,
such as trade secrets and commercial or
financial information (hereinafter
referred to as Confidential Business
Information (‘‘CBI’’)). Comments
submitted through https://
www.regulations.gov cannot be claimed
as CBI. Comments received through the
website will waive any CBI claims for
the information submitted. For
information on submitting CBI, see the
Confidential Business Information
section.
DOE processes submissions made
through https://www.regulations.gov
before posting. Normally, comments
will be posted within a few days of
being submitted. However, if large
volumes of comments are being
processed simultaneously, your
comment may not be viewable for up to
several weeks. Please keep the comment
tracking number that https://
www.regulations.gov provides after you
have successfully uploaded your
comment.
Submitting comments via email.
Comments and documents submitted
via email also will be posted to https://
www.regulations.gov. If you do not want
your personal contact information to be
publicly viewable, do not include it in
your comment or any accompanying
documents. Instead, provide your
contact information on a cover letter.
Include your first and last names, email
address, telephone number, and
VerDate Sep<11>2014
17:12 May 24, 2021
Jkt 253001
optional mailing address. The cover
letter will not be publicly viewable as
long as it does not include any
comments.
Include contact information each time
you submit comments, data, documents,
and other information to DOE. Faxes
will not be accepted.
Comments, data, and other
information submitted to DOE
electronically should be provided in
PDF (preferred), Microsoft Word or
Excel, WordPerfect, or text (ASCII) file
format. Provide documents that are not
secured, written in English and free of
any defects or viruses. Documents
should not contain special characters or
any form of encryption and, if possible,
they should carry the electronic
signature of the author.
Campaign form letters. Please submit
campaign form letters by the originating
organization in batches of between 50 to
500 form letters per PDF or as one form
letter with a list of supporters’ names
compiled into one or more PDFs. This
reduces comment processing and
posting time.
Confidential Business Information.
According to 10 CFR 1004.11, any
person submitting information that he
or she believes to be confidential and
exempt by law from public disclosure
should submit via email two wellmarked copies: One copy of the
document marked confidential
including all the information believed to
be confidential, and one copy of the
document marked ‘‘non-confidential’’
with the information believed to be
confidential deleted. DOE will make its
own determination about the
confidential status of the information
and treat it according to its
determination.
It is DOE’s policy that all comments
may be included in the public docket,
without change and as received,
including any personal information
provided in the comments (except
information deemed to be exempt from
public disclosure).
DOE considers public participation to
be a very important part of the process
for developing test procedures and
energy conservation standards. DOE
actively encourages the participation
and interaction of the public during the
comment period in each stage of this
process. Interactions with and between
members of the public provide a
balanced discussion of the issues and
assist DOE in the process. Anyone who
wishes to be added to the DOE mailing
list to receive future notices and
information about this process should
contact Appliance and Equipment
Standards Program staff at (202) 287–
1445 or via email at
PO 00000
Frm 00012
Fmt 4702
Sfmt 4702
ApplianceStandardsQuestions@
ee.doe.gov.
Signing Authority
This document of the Department of
Energy was signed on May 15, 2021, by
Kelly Speakes-Backman, Principal
Deputy Assistant Secretary and Acting
Assistant Secretary for Energy Efficiency
and Renewable Energy, pursuant to
delegated authority from the Secretary
of Energy. That document with the
original signature and date is
maintained by DOE. For administrative
purposes only, and in compliance with
requirements of the Office of the Federal
Register, the undersigned DOE Federal
Register Liaison Officer has been
authorized to sign and submit the
document in electronic format for
publication, as an official document of
the Department of Energy. This
administrative process in no way alters
the legal effect of this document upon
publication in the Federal Register.
Signed in Washington, DC, on May 15,
2021.
Treena V. Garrett,
Federal Register Liaison Officer, U.S.
Department of Energy.
[FR Doc. 2021–10770 Filed 5–24–21; 8:45 am]
BILLING CODE 6450–01–P
SMALL BUSINESS ADMINISTRATION
13 CFR Part 121
RIN 3245–AH10
Small Business Size Standards:
Wholesale Trade; Retail Trade
U.S. Small Business
Administration.
ACTION: Proposed rule.
AGENCY:
The U.S. Small Business
Administration (SBA or the Agency)
proposes to increase its receipts-based
and employee-based small business size
definitions (commonly referred to as
‘‘size standards’’) for North American
Industry Classification System (NAICS)
sectors related to Wholesale Trade and
Retail Trade. SBA proposes to increase
size standards for 49 industries in those
sectors, including 14 industries in
NAICS Sector 42 (Wholesale Trade) and
35 industries in NAICS Sector 44–45
(Retail Trade). SBA’s proposed revisions
rely 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.
SUMMARY:
E:\FR\FM\25MYP1.SGM
25MYP1
28013
Federal Register / Vol. 86, No. 99 / Tuesday, May 25, 2021 / Proposed Rules
SBA must receive comments to
this proposed rule on or before July 26,
2021.
ADDRESSES: Identify your comments by
RIN 3245–AH10 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:
DATES:
Discussion of Size Standards
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/CDC), 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 Small Business Jobs Act of 2010
(Pub. L. 111–240, 124 Stat. 2504,
September 27, 2010) (‘‘Jobs Act’’),
requiring SBA to review all size
standards every 5 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 this comprehensive review of
size standards, SBA is reviewing
industry size standards by groups of
NAICS sectors. During the previous 5year comprehensive review, SBA
generally reviewed NAICS sectors
independently and by their employeebased or receipt-based size standard.
Thus, during the previous
comprehensive review, the review of
size standards for the industries covered
by this proposed rule was conducted
under two separate rulemakings: One
for receipts-based size standards in
Sector 44–45 (75 FR 61597, October 6,
2010) and one for employee-based size
standards in Sector 42 and two
employee-based industries in Sector 44–
45 (81 FR 3941, January 25, 1016).
Under these rulemakings, SBA reviewed
the size standards for 71 industries
within NAICS Sector 42 (Wholesale
Trade) and 74 industries within NAICS
Sector 44–45 (Retail Trade). These
reviews of size standards occurred
during October 2009 to January 2016.
SBA’s analyses of the relevant industry
data available at that time supported
increasing employee-based size
standards for 46 industries and
maintaining current size standards for
25 industries in Sectors 42 and 44–45
(81 FR 3941) and increasing receiptsbased size standards for 46 industries,
maintaining current size standards for
27 industries and replacing the type of
size standard from receipts-based to
employee-based size standards for 1
industry in Sector 44–45 (75 FR 61597).
Table 1, Size Standards Revisions
During the First 5-Year Review,
provides a summary of these revisions
by NAICS sector.
TABLE 1—SIZE STANDARDS REVISIONS DURING THE FIRST 5-YEAR REVIEW
Number of
type of size
standards
changed
Number of
size standards
reviewed
Number of
size standards
increased
Number of
size standards
decreased
Number of
size standards
maintained
Wholesale Trade ................
Retail Trade * ......................
71
74
46
46
0
0
25
27
0
1
.............................................
145
92
0
52
1
Sector
Sector name
42 ........................................
44–45 ..................................
Total .............................
jbell on DSKJLSW7X2PROD with PROPOSALS
* The evaluation of this sector used the 2007 NAICS structure.
Currently, there are 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). Of these
size levels, 16 are based on average
annual receipts, 9 are based on average
number of employees, and 2 are based
on other measures.
SBA also adjusts its monetary-based
size standards for inflation at least once
every 5 years. An interim final rule on
SBA’s latest inflation adjustment to size
standards, effective August 19, 2019,
VerDate Sep<11>2014
17:12 May 24, 2021
Jkt 253001
was published in the Federal Register
on July 18, 2019 (84 FR 34261). SBA
also updates its size standards every 5
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
PO 00000
Frm 00013
Fmt 4702
Sfmt 4702
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 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,
it issues for public comment a proposed
rule to revise size standards for those
E:\FR\FM\25MYP1.SGM
25MYP1
28014
Federal Register / Vol. 86, No. 99 / Tuesday, May 25, 2021 / Proposed Rules
jbell on DSKJLSW7X2PROD with PROPOSALS
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 employeebased 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 $20.0 million or
more in average annual Federal contract
dollars, the small business share of
Federal contract dollars relative to the
small business share of total industry
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 cited
above.
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
VerDate Sep<11>2014
17:12 May 24, 2021
Jkt 253001
‘‘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 in the Industry Analysis
section of 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 of Federal contract
dollars and the small business share of
total industry 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 in the industry analysis
section below.
SBA does not apply all aspects of its
Methodology to all proposed rules
because not all features are relevant for
every industry covered by each
proposed rule. For example, since
NAICS codes in the Wholesale Trade
and Retail Trade sectors cannot be used
to classify Government acquisitions for
supplies, and only the applicable
manufacturing code can be applied (13
CFR 121.402(b)(2)), the Federal
contracting factor is not considered in
evaluating industry based size standards
for these sectors. 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
PO 00000
Frm 00014
Fmt 4702
Sfmt 4702
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, $7.0
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 receiptsbased standards, including the Retail
Trade industries, the second
comparison group consisted of
industries with size standards between
$23.0 million and $35.5 million, with
the weighted average size standard for
the group equaling $29.0 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
E:\FR\FM\25MYP1.SGM
25MYP1
jbell on DSKJLSW7X2PROD with PROPOSALS
Federal Register / Vol. 86, No. 99 / Tuesday, May 25, 2021 / Proposed Rules
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.
For Wholesale Trade and Retail Trade
industries using the employee-based
size standards, SBA used a different
approach. The anchor approach was
difficult to implement in reviewing the
size standards of industries in
Wholesale Trade because all the
industries in the sector were sharing the
same 100-employee size standard. SBA
used a quintile approach in which
industries were ranked and compared
using each industry factor based on
where the factor of that industry falls
within the five ranked quintiles. The
five implied size standard levels were
50 employees, 100 employees, 150
employees, 200 employees, and 250
employees. If the value of an industry
factor fell in the first quintile (i.e., less
than the 20th percentile), that factor
would support a size standard of 50
employees. If the value fell in the
second quintile (i.e., the 20th to less
than the 40th percentile), it would
support 100 employees. Similarly, if the
value falls in the fifth quintile (i.e., the
80th or higher percentile), the factor
would support 250 employees. 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
VerDate Sep<11>2014
17:12 May 24, 2021
Jkt 253001
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, and 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
PO 00000
Frm 00015
Fmt 4702
Sfmt 4702
28015
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.
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
E:\FR\FM\25MYP1.SGM
25MYP1
jbell on DSKJLSW7X2PROD with PROPOSALS
28016
Federal Register / Vol. 86, No. 99 / Tuesday, May 25, 2021 / Proposed Rules
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.
terms of the share of total Federal
contract dollars awarded to small
businesses relative to the small business
share of the 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 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 industrywide small business share, SBA
includes in its size standards analysis
the latest Federal market conditions. In
addition to the impact on Federal
contracting, SBA also examines impacts
on SBA’s loan programs both under the
current and revised size standards.
As explained above, the Federal
contracting factor is not evaluated for
Sectors 42 and 44–45, because the
NAICS codes in these sectors cannot be
used to classify Government
acquisitions for supplies, and only the
applicable manufacturing NAICS codes
can be applied (13 CFR 121.402(b)(2)).
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
Sources of Industry and Program Data
SBA used a tabulation of the
Economic Census from the U.S. Census
Bureau as its primary source of industry
data to evaluate industry characteristics
and develop size standards for this
proposed rule (www.census.gov/
programs-surveys/economiccensus.html). The tabulation based on
the 2012 Economic Census was the
latest available at the time this proposed
rule was developed. 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
VerDate Sep<11>2014
17:12 May 24, 2021
Jkt 253001
PO 00000
Frm 00016
Fmt 4702
Sfmt 4702
(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
either estimated missing values using
available relevant data or examined data
at a higher level of industry aggregation,
such as at the NAICS Sector (2-digit),
Subsector (3-digit), or Industry Group
(4-digit) 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 asset-based size standards, SBA
examines the data from the Statistics on
Depository Institutions (SDI) database
(www5.fdic.gov/sdi/main.asp) of the
Federal Depository Insurance
Corporation (FDIC) data. 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).
E:\FR\FM\25MYP1.SGM
25MYP1
Federal Register / Vol. 86, No. 99 / Tuesday, May 25, 2021 / Proposed Rules
To calculate average assets, SBA used
sales to total assets ratios from the Risk
Management Association’s Annual
eStatement Studies (https://rmau.org).
To evaluate Federal contracting trends
and evaluate exceptions or subindustries under different 6-digit NAICS
industries, SBA examined the data on
Federal prime contract awards from the
Federal Procurement Data System—
Next Generation (FPDS–NG)
(www.fpds.gov). To assess the impact on
financial assistance to small businesses,
SBA examined its internal data on 7(a)
and 504 loan programs. For some
portion of impact analysis, SBA also
evaluated the data from the System of
Award Management (SAM)
(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.
jbell on DSKJLSW7X2PROD with PROPOSALS
Dominance in Field of Operation
Section 3(a) of the Small Business Act
(15 U.S.C. 632(a)) defines a small
business concern as one that is: (1)
Independently owned and operated; (2)
not dominant in its field of operation;
and (3) within a specific small business
definition or size standard established
by the SBA Administrator. SBA
considers as part of its evaluation
whether a business concern at a
proposed size standard would be
dominant in its field of operation. For
this, SBA generally examines the
industry’s market share of firms at the
proposed 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, which 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 has
relaxed the limitation on the number of
VerDate Sep<11>2014
17:12 May 24, 2021
Jkt 253001
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. Similarly, the calculated
value for an employee-based size
standard is rounded to the nearest 50
employees for industries in
manufacturing and other sectors (except
Wholesale Trade and Retail Trade) and
to the nearest 25 employees for
industries in Wholesale Trade and
Retail Trade. 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 employee-based size
standards, SBA has established 250
employees and 1,500 employees,
respectively, as the minimum and
maximum size standard levels for
Manufacturing and other industries
(excluding Wholesale and Retail Trade).
The industry data suggests that a 250
employee minimum and 1,500
employee maximum size standards
would be too high for Wholesale and
Retail Trade industries. Accordingly,
SBA has established 50 employees as
the minimum size standard and 250
employees as the maximum size
PO 00000
Frm 00017
Fmt 4702
Sfmt 4702
28017
standard for Wholesale and Retail Trade
industries.
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:
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
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 an employee-based size
standard is rounded to the nearest 50
employees for industries in
manufacturing and other sectors (except
Wholesale Trade and Retail Trade) and
to the nearest 25 employees for
industries in Wholesale Trade and
Retail Trade. SBA rounds the calculated
size standard value for a receipts-based
E:\FR\FM\25MYP1.SGM
25MYP1
28018
Federal Register / Vol. 86, No. 99 / Tuesday, May 25, 2021 / Proposed Rules
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 $250,000.
Table 2, 20th and 80th Percentiles of
Industry Factors for Receipts-Based Size
Standards, and Table 3, 20th and 80th
Percentiles of Industry Factors for
Employee-Based Size Standards, show
the 20th percentile and 80th percentile
values for average firm size (simple and
weighted), average assets size, 4-firm
concentration ratio, and Gini coefficient
for industries with receipt-based and
employee-based size standards,
respectively.
TABLE 2—20TH AND 80TH PERCENTILES OF INDUSTRY FACTORS FOR RECEIPTS-BASED SIZE STANDARDS
Simple average
receipts size
($ million)
Industries/percentiles
Industries, excluding Subsectors 111
and 112:
20th percentile ................................
80th percentile ................................
Industries in Subsectors 111 and 112:
20th percentile ................................
80th percentile ................................
Weighted
average
receipts size
($ million)
Average
assets size
($ million)
Four-firm
concentration
ratio
(%)
Gini coefficient
0.83
7.52
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
TABLE 3—20TH AND 80TH PERCENTILES OF INDUSTRY FACTORS FOR EMPLOYEE-BASED SIZE STANDARDS
Simple average
firm size (no.
of employees)
Industries/percentiles
Manufacturing and other industries, excluding Sectors 42 and 44–45:
20th percentile ................................
80th percentile ................................
Industries in Sectors 42 and 44–45:
20th percentile ................................
80th percentile ................................
jbell on DSKJLSW7X2PROD with PROPOSALS
Estimation of Size Standards Based on
Industry Factors
Receipts-Based Size Standards
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 $12.5
million. According to Table 2, the 20th
VerDate Sep<11>2014
17:12 May 24, 2021
Jkt 253001
Weighted
average firm
size (no. of
employees)
Average assets
size
($ million)
Gini coefficient
29.5
118.3
250.7
1,629.0
4.18
45.4
24.7
61.3
0.760
0.853
12.6
27.9
199.8
1,693.8
3.19
11.99
16.1
38.9
0.794
0.865
percentile and 80th percentile values of
average receipts are $0.83 million and
$7.52 million, respectively. The $1.9
million is 15.9% 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.
Employee-Based Size Standards
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
PO 00000
Four-firm
concentration
ratio
(%)
Frm 00018
Fmt 4702
Sfmt 4702
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 50 employees for Sector
42, Wholesale Trade and 2 industries
from sector 44–45, Retail Trade that
have employee-based size standards. 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
250 employees. 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 firm size in number of
employees is 19 employees, that would
support a size standard of 125
employees. According to Table 3, the
20th percentile and 80th percentile
values of average number of employees
are 12.6 and 27.9 employees,
respectively. The 19 employee average
firm size is 41.8% between the 20th
percentile value (12.6 employees) and
E:\FR\FM\25MYP1.SGM
25MYP1
28019
Federal Register / Vol. 86, No. 99 / Tuesday, May 25, 2021 / Proposed Rules
the 80th percentile value (27.9
employees) of simple average firm size
in number of employees ((19 employees
¥ 12.6 employees) ÷ (250 employees ¥
50 employees) = 0.4183 or 41.8%).
Applying this percentage to the
difference between the 20th percentile
value (50 employees) and 80th
percentile (250 employees) value of size
standards and then adding the result to
the 20th percentile size standard value
(50 employees) yields a calculated size
standard value of 125 employees ([{250
employees ¥ 50 employees} * 0.4183]
+ 50 employees = 134 employees). The
final step is to round the calculated 134
employee size standard to the nearest 25
employees, which in this example
yields 125 employees. 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 on its
website 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 $20.0 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. However, since
NAICS codes in the Wholesale Trade
and Retail Trade sectors cannot be used
to classify Government acquisitions for
supplies, and only the applicable
manufacturing code can be applied, the
Federal contracting factor is not
considered in evaluating industry-based
size standards for these sectors (13 CFR
121.402(b)). For a detail explanation of
the evaluation of the Federal
Contracting Factor, see the SBA
Methodology at www.sba.gov/size.
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). As discussed in more detail
above, the Federal contracting factor is
not considered in evaluating the
Wholesale Trade and Retail Trade
sectors. 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 Factors
Table 5 and Table 6 below, Size
Standards Supported by Each Factor for
Each Industry (Employees) and Size
Standards Supported by Each Factor for
Each Industry (Receipts), show the
results of analyses of industry by
measure of size for each industry
covered by this proposed rule. NAICS
industries in columns 3, 4, 5, 6 and 7
show two numbers. The upper number
is the value for the industry factor on
the top of the column and the lower
number is the size standard supported
by that factor (number of employees in
Table 5 and receipts in Table 6).
Column 8 shows a calculated new size
standard for each industry. This is the
average of the size standards supported
by each factor (the size standard for
average firm size is an average of size
standards supported by simple average
firm size, and weighted average firm
size), rounded to the nearest 25
employees for industries using
employee-based size standards in
Wholesale Trade and Retail Trade, and
to the nearest $500,000 for industries in
retail trade using receipts-based size
standards. Analytical details involved in
the averaging procedure are described in
SBA’s Methodology, which is available
on its website at www.sba.gov/size. For
comparison with the calculated new
size standards, the current size
standards are in column 9 of Table 5
and Table 6.
TABLE 5—SIZE STANDARDS SUPPORTED BY EACH FACTOR FOR EACH INDUSTRY (EMPLOYEES)
jbell on DSKJLSW7X2PROD with PROPOSALS
[For Columns 3–7: Upper value = Calculated factor; Lower value = size standard supported by that factor]
Type
Simple
average
firm size
(number of
employees)
Weighted
average firm
size
(number of
employees)
Average
assets size
($ million)
Four-firm
ratio
(%)
Gini
coefficient
Calculated
size
standard
(number of
employees)
Current size
standard
(number of
employees)
(1)
(2)
(3)
(4)
(5)
(6)
(7)
(9)
(10)
423110 Automobile and
Other Motor Vehicle
Merchant Wholesalers.
423120 Motor Vehicle
Supplies and New
Parts Merchant Wholesalers.
423130 Tire and Tube
Merchant Wholesalers.
423140 Motor Vehicle
Parts (Used) Merchant
Wholesalers.
423210 Furniture Merchant Wholesalers.
423220 Home Furnishing
Merchant Wholesalers.
423310 Lumber, Plywood,
Millwork, and Wood
Panel Merchant Wholesalers.
Factor .........
Size Std. .....
21.4
175
657.2
100
37.1
250
47.4
250
0.883
250
225
250
Factor .........
Size Std. .....
21.5
175
749.6
125
7.8
150
19.4
75
0.847
200
150
200
Factor .........
Size Std. .....
Factor .........
Size Std. .....
28.2
250
9.9
50
580.6
100
767.5
125
9.5
200
1.0
50
24.8
125
39.3
250
0.828
150
0.759
50
175
200
125
100
Factor .........
Size Std. .....
Factor .........
Size Std. .....
Factor .........
Size Std. .....
12.0
50
14.1
75
18.8
125
103.0
50
225.1
50
396.0
75
2.3
50
3.8
75
4.3
75
16.1
50
17.7
75
13.0
50
0.798
75
0.794
50
0.802
75
50
100
75
100
75
150
NAICS code
NAICS industry title
VerDate Sep<11>2014
17:12 May 24, 2021
Jkt 253001
PO 00000
Frm 00019
Fmt 4702
Sfmt 4702
E:\FR\FM\25MYP1.SGM
25MYP1
28020
Federal Register / Vol. 86, No. 99 / Tuesday, May 25, 2021 / Proposed Rules
TABLE 5—SIZE STANDARDS SUPPORTED BY EACH FACTOR FOR EACH INDUSTRY (EMPLOYEES)—Continued
jbell on DSKJLSW7X2PROD with PROPOSALS
[For Columns 3–7: Upper value = Calculated factor; Lower value = size standard supported by that factor]
Type
Simple
average
firm size
(number of
employees)
Weighted
average firm
size
(number of
employees)
Average
assets size
($ million)
Four-firm
ratio
(%)
Gini
coefficient
Calculated
size
standard
(number of
employees)
Current size
standard
(number of
employees)
(1)
(2)
(3)
(4)
(5)
(6)
(7)
(9)
(10)
423320 Brick, Stone, and
Related Construction
Material Merchant
Wholesalers.
423330 Roofing, Siding,
and Insulation Material
Merchant Wholesalers.
423390 Other Construction Material Merchant
Wholesalers.
423410 Photographic
Equipment and Supplies Merchant Wholesalers.
423420 Office Equipment
Merchant Wholesalers.
423430 Computer and
Computer Peripheral
Equipment and Software Merchant Wholesalers.
423440 Other Commercial Equipment Merchant Wholesalers.
423450 Medical, Dental,
and Hospital Equipment
and Supplies Merchant
Wholesalers.
423460 Ophthalmic
Goods Merchant
Wholesalers.
423490 Other Professional Equipment and
Supplies Merchant
Wholesalers.
423510 Metal Service
Centers and Other
Metal Merchant Wholesalers.
423520 Coal and Other
Mineral and Ore Merchant Wholesalers.
423610 Electrical Apparatus and Equipment,
Wiring Supplies, and
Related Equipment
Merchant Wholesalers.
423620 Household Appliances, Electric
Housewares, and Consumer Electronics Merchant Wholesalers.
423690 Other Electronic
Parts and Equipment
Merchant Wholesalers.
423710 Hardware Merchant Wholesalers.
423720 Plumbing and
Heating Equipment and
Supplies (Hydronics)
Merchant Wholesalers.
Factor .........
Size Std. .....
12.7
50
220.9
50
4.7
75
30.1
175
0.815
100
100
150
Factor .........
Size Std. .....
32.6
250
1403.0
200
11.5
250
46.6
250
0.847
200
225
200
Factor .........
Size Std. .....
14.9
75
168.2
50
2.4
50
18.5
75
0.749
50
75
100
Factor .........
Size Std. .....
17.8
125
399.7
75
6.2
125
56.1
250
0.832
150
150
200
Factor .........
Size Std. .....
Factor .........
Size Std. .....
49.4
250
31.0
250
10864.6
250
4333.1
250
5.2
100
10.1
200
49.2
250
31.9
200
0.849
200
0.872
250
200
200
225
250
Factor .........
Size Std. .....
12.8
50
164.2
50
2.2
50
12.4
50
0.775
50
50
100
Factor .........
Size Std. .....
26.9
225
2500.2
250
8.4
175
22.6
100
0.873
250
200
200
Factor .........
Size Std. .....
24.3
200
1532.8
225
4.0
75
35.0
225
0.839
175
175
150
Factor .........
Size Std. .....
17.0
100
417.9
75
3.5
50
36.7
225
0.823
125
125
150
Factor .........
Size Std. .....
19.7
150
653.7
100
12.0
250
15.9
50
0.842
175
150
200
Factor .........
Size Std. .....
8.5
50
64.6
50
27.0
250
58.9
250
0.866
250
200
100
Factor .........
Size Std. .....
20.7
150
1693.8
250
5.5
100
16.1
50
0.836
175
125
200
Factor .........
Size Std. .....
20.8
150
442.3
75
14.4
250
36.0
225
0.870
250
225
200
Factor .........
Size Std. .....
31.5
250
6181.3
250
11.4
225
32.8
200
0.871
250
225
250
Factor .........
Size Std. .....
Factor .........
Size Std. .....
15.9
100
24.2
200
425.2
75
2136.3
250
3.6
50
5.6
100
19.8
75
32.6
200
0.812
100
0.811
100
75
150
150
200
NAICS code
NAICS industry title
VerDate Sep<11>2014
17:12 May 24, 2021
Jkt 253001
PO 00000
Frm 00020
Fmt 4702
Sfmt 4702
E:\FR\FM\25MYP1.SGM
25MYP1
28021
Federal Register / Vol. 86, No. 99 / Tuesday, May 25, 2021 / Proposed Rules
TABLE 5—SIZE STANDARDS SUPPORTED BY EACH FACTOR FOR EACH INDUSTRY (EMPLOYEES)—Continued
jbell on DSKJLSW7X2PROD with PROPOSALS
[For Columns 3–7: Upper value = Calculated factor; Lower value = size standard supported by that factor]
Type
Simple
average
firm size
(number of
employees)
Weighted
average firm
size
(number of
employees)
Average
assets size
($ million)
Four-firm
ratio
(%)
Gini
coefficient
Calculated
size
standard
(number of
employees)
Current size
standard
(number of
employees)
(1)
(2)
(3)
(4)
(5)
(6)
(7)
(9)
(10)
423730 Warm Air Heating
and Air-Conditioning
Equipment and Supplies Merchant Wholesalers.
423740 Refrigeration
Equipment and Supplies Merchant Wholesalers.
423810 Construction and
Mining (except Oil Well)
Machinery and Equipment Merchant Wholesalers.
423820 Farm and Garden
Machinery and Equipment Merchant Wholesalers.
423830 Industrial Machinery and Equipment
Merchant Wholesalers.
423840 Industrial Supplies Merchant Wholesalers.
423850 Service Establishment Equipment and
Supplies Merchant
Wholesalers.
423860 Transportation
Equipment and Supplies (except Motor Vehicle) Merchant Wholesalers.
423910 Sporting and
Recreational Goods
and Supplies Merchant
Wholesalers.
423920 Toy and Hobby
Goods and Supplies
Merchant Wholesalers.
423930 Recyclable Material Merchant Wholesalers.
423940 Jewelry, Watch,
Precious Stone, and
Precious Metal Merchant Wholesalers.
423990 Other Miscellaneous Durable Goods
Merchant Wholesalers.
424110 Printing and Writing Paper Merchant
Wholesalers.
424120 Stationery and
Office Supplies Merchant Wholesalers.
424130 Industrial and
Personal Service Paper
Merchant Wholesalers.
424210 Drugs and Druggists’ Sundries Merchant Wholesalers.
Factor .........
Size Std. .....
28.3
250
1400.6
200
6.4
125
39.2
250
0.821
125
175
150
Factor .........
Size Std. .....
18.5
125
431.0
75
3.7
50
29.5
175
0.790
50
100
100
Factor .........
Size Std. .....
30.4
250
603.3
100
18.2
250
32.7
200
0.840
175
200
250
Factor .........
Size Std. .....
19.0
125
168.8
50
8.3
175
22.6
100
0.794
50
100
100
Factor .........
Size Std. .....
15.1
75
498.3
100
4.1
75
10.8
50
0.795
50
75
100
Factor .........
Size Std. .....
17.6
125
654.3
100
5.1
100
18.5
75
0.805
75
100
100
Factor .........
Size Std. .....
14.9
75
885.3
150
1.9
50
27.9
150
0.789
50
100
100
Factor .........
Size Std. .....
17.2
100
223.1
50
10.4
225
34.9
225
0.829
150
175
150
Factor .........
Size Std. .....
10.9
50
199.8
50
3.1
50
11.0
50
0.806
75
50
100
Factor .........
Size Std. .....
16.2
100
559.8
100
6.2
125
37.8
250
0.841
175
175
150
Factor .........
Size Std. .....
16.0
100
291.3
50
4.5
75
19.9
75
0.816
125
100
100
Factor .........
Size Std. .....
7.1
50
183.5
50
4.0
75
27.4
150
0.817
125
100
100
Factor .........
Size Std. .....
9.5
50
273.5
50
1.9
50
16.8
50
0.805
75
50
100
Factor .........
Size Std. .....
22.4
175
589.6
100
12.5
250
42.5
250
0.876
250
225
200
Factor .........
Size Std. .....
18.6
125
2997.2
250
3.1
50
29.5
175
0.845
200
150
150
Factor .........
Size Std. .....
16.4
100
267.5
50
5.3
100
29.7
175
0.832
150
125
150
Factor .........
Size Std. .....
44.8
250
3002.2
250
36.8
250
43.5
250
0.890
250
250
250
NAICS code
NAICS industry title
VerDate Sep<11>2014
17:12 May 24, 2021
Jkt 253001
PO 00000
Frm 00021
Fmt 4702
Sfmt 4702
E:\FR\FM\25MYP1.SGM
25MYP1
28022
Federal Register / Vol. 86, No. 99 / Tuesday, May 25, 2021 / Proposed Rules
TABLE 5—SIZE STANDARDS SUPPORTED BY EACH FACTOR FOR EACH INDUSTRY (EMPLOYEES)—Continued
jbell on DSKJLSW7X2PROD with PROPOSALS
[For Columns 3–7: Upper value = Calculated factor; Lower value = size standard supported by that factor]
Type
Simple
average
firm size
(number of
employees)
Weighted
average firm
size
(number of
employees)
Average
assets size
($ million)
Four-firm
ratio
(%)
Gini
coefficient
Calculated
size
standard
(number of
employees)
Current size
standard
(number of
employees)
(1)
(2)
(3)
(4)
(5)
(6)
(7)
(9)
(10)
424310 Piece Goods, Notions, and Other Dry
Goods Merchant
Wholesalers.
424320 Men’s and Boys’
Clothing and Furnishings Merchant
Wholesalers.
424330 Women’s, Children’s, and Infants’
Clothing and Accessories Merchant Wholesalers.
424340 Footwear Merchant Wholesalers.
424410 General Line
Grocery Merchant
Wholesalers.
424420 Packaged Frozen
Food Merchant Wholesalers.
424430 Dairy Product
(except Dried or
Canned) Merchant
Wholesalers.
424440 Poultry and Poultry Product Merchant
Wholesalers.
424450 Confectionery
Merchant Wholesalers.
424460 Fish and Seafood
Merchant Wholesalers.
424470 Meat and Meat
Product Merchant
Wholesalers.
424480 Fresh Fruit and
Vegetable Merchant
Wholesalers.
424490 Other Grocery
and Related Products
Merchant Wholesalers.
424510 Grain and Field
Bean Merchant Wholesalers.
424520 Livestock Merchant Wholesalers.
424590 Other Farm Product Raw Material Merchant Wholesalers.
424610 Plastics Materials
and Basic Forms and
Shapes Merchant
Wholesalers.
424690 Other Chemical
and Allied Products
Merchant Wholesalers.
424710 Petroleum Bulk
Stations and Terminals.
424720 Petroleum and
Petroleum Products
Merchant Wholesalers
(except Bulk Stations
and Terminals).
424810 Beer and Ale
Merchant Wholesalers.
Factor .........
Size Std. .....
9.0
50
83.8
50
2.3
50
15.4
50
0.775
50
50
100
Factor .........
Size Std. .....
15.7
100
281.1
50
5.8
100
21.3
100
0.836
175
125
150
Factor .........
Size Std. .....
12.4
50
182.2
50
3.4
50
15.9
50
0.814
100
75
100
Factor .........
Size Std. .....
Factor .........
Size Std. .....
17.8
125
62.9
250
439.7
75
9786.9
250
9.6
200
16.6
250
41.0
250
38.2
250
0.849
200
0.883
250
200
200
250
250
Factor .........
Size Std. .....
27.5
250
871.9
150
8.3
175
21.4
100
0.822
125
150
200
Factor .........
Size Std. .....
27.9
250
952.2
150
8.7
175
28.4
150
0.862
250
200
200
Factor .........
Size Std. .....
24.5
200
334.4
75
4.9
100
26.5
150
0.783
50
125
150
Factor .........
Size Std. .....
Factor .........
Size Std. .....
Factor .........
Size Std. .....
30.5
250
11.2
50
19.9
150
11213.6
250
90.0
50
271.3
50
7.7
150
2.0
50
4.3
75
60.3
250
10.9
50
22.7
100
0.873
250
0.725
50
0.813
100
225
200
50
100
100
150
Factor .........
Size Std. .....
24.0
200
293.2
75
3.2
50
12.2
50
0.767
50
75
100
Factor .........
Size Std. .....
27.7
250
7804.5
250
8.9
175
25.8
125
0.874
250
200
250
Factor .........
Size Std. .....
21.8
175
375.0
75
42.3
250
31.6
175
0.831
150
175
200
Factor .........
Size Std. .....
Factor .........
Size Std. .....
7.9
50
9.6
50
31.8
50
54.3
50
4.4
75
10.2
200
21.5
100
35.0
225
0.817
125
0.857
225
100
100
175
100
Factor .........
Size Std. .....
12.6
50
117.2
50
5.9
100
26.4
150
0.825
150
125
150
Factor .........
Size Std. .....
18.6
125
1443.2
225
9.9
200
13.7
50
0.857
225
175
150
Factor .........
Size Std. .....
Factor .........
Size Std. .....
26.1
225
15.4
75
425.6
75
253.7
50
58.6
250
49.9
250
38.9
250
33.6
200
0.865
250
0.881
250
225
200
200
200
Factor .........
Size Std. .....
70.4
250
498.2
100
14.7
250
14.5
50
0.733
50
125
200
NAICS code
NAICS industry title
VerDate Sep<11>2014
17:12 May 24, 2021
Jkt 253001
PO 00000
Frm 00022
Fmt 4702
Sfmt 4702
E:\FR\FM\25MYP1.SGM
25MYP1
28023
Federal Register / Vol. 86, No. 99 / Tuesday, May 25, 2021 / Proposed Rules
TABLE 5—SIZE STANDARDS SUPPORTED BY EACH FACTOR FOR EACH INDUSTRY (EMPLOYEES)—Continued
[For Columns 3–7: Upper value = Calculated factor; Lower value = size standard supported by that factor]
Type
Simple
average
firm size
(number of
employees)
Weighted
average firm
size
(number of
employees)
Average
assets size
($ million)
Four-firm
ratio
(%)
Gini
coefficient
Calculated
size
standard
(number of
employees)
Current size
standard
(number of
employees)
(1)
(2)
(3)
(4)
(5)
(6)
(7)
(9)
(10)
424820 Wine and Distilled Alcoholic Beverage Merchant Wholesalers.
424910 Farm Supplies
Merchant Wholesalers.
424920 Book, Periodical,
and Newspaper Merchant Wholesalers.
424930 Flower, Nursery
Stock, and Florists’
Supplies Merchant
Wholesalers.
424940 Tobacco and Tobacco Product Merchant Wholesalers.
424950 Paint, Varnish,
and Supplies Merchant
Wholesalers.
424990 Other Miscellaneous Nondurable
Goods Merchant
Wholesalers.
425110 Business to Business Electronic Markets.
425120 Wholesale Trade
Agents and Brokers.
441110 New Car Dealers
Factor .........
Size Std. .....
40.9
250
3125.0
250
15.2
250
31.7
175
0.872
250
225
250
Factor .........
Size Std. .....
Factor .........
Size Std. .....
20.2
150
24.8
200
1343.1
200
1541.6
225
15.0
250
4.7
75
20.3
75
41.9
250
0.838
175
0.868
250
175
200
200
200
Factor .........
Size Std. .....
14.9
75
200.8
50
1.2
50
9.2
50
0.749
50
50
100
Factor .........
Size Std. .....
41.4
250
2419.0
250
11.6
250
55.4
250
0.859
225
250
250
Factor .........
Size Std. .....
16.7
100
359.6
75
5.4
100
41.0
250
0.829
150
150
150
Factor .........
Size Std. .....
7.2
50
92.2
50
1.4
50
14.4
50
0.799
75
50
100
Factor .........
Size Std. .....
Factor .........
Size Std. .....
Factor .........
Size Std. .....
Factor .........
Size Std. .....
3.8
50
6.9
50
54.5
250
14.8
75
20.1
50
5713.0
250
870.2
150
1890.5
250
3.0
50
4.3
75
12.1
250
2.1
50
33.7
200
24.9
125
5.8
50
17.4
50
0.792
50
0.834
150
0.632
50
0.723
50
100
100
125
100
150
200
75
100
NAICS code
NAICS industry title
454310 Fuel Dealers .......
TABLE 6—SIZE STANDARDS SUPPORTED BY EACH FACTOR FOR EACH INDUSTRY (RECEIPTS)
[For columns 3–7: Upper value = Calculated factor; Lower value = size standard supported by that factor]
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
Calculated
size standard
($ million)
Current size
standard
($ million)
(1)
(2)
(3)
(4)
(5)
(6)
(7)
(9)
(10)
441120 Used Car Dealers
Factor .........
Size Std. .....
Factor .........
Size Std. .....
Factor .........
Size Std. .....
Factor .........
Size Std. .....
jbell on DSKJLSW7X2PROD with PROPOSALS
441210 Recreational Vehicle Dealers.
441222 Boat Dealers ......
441228 Motorcycle, ATV,
and All Other Motor Vehicle Dealers.
441310 Automotive Parts Factor .........
and Accessories Stores. Size Std. .....
441320 Tire Dealers ........ Factor .........
Size Std. .....
442110 Furniture Stores
Factor .........
Size Std. .....
442210 Floor Covering
Factor .........
Stores.
Size Std. .....
442291 Window TreatFactor .........
ment Stores.
Size Std. .....
442299 All Other Home
Factor .........
Furnishings Stores.
Size Std. .....
VerDate Sep<11>2014
17:12 May 24, 2021
Jkt 253001
3.0
16.5
6.4
30.5
2.7
15.5
3.4
18.5
1,604.2
41.5
219.3
14.5
79.2
10.0
25.8
8.0
0.8
10.5
2.8
21.5
1.3
13.0
1.5
14.5
18.0
16.0
18.8
16.5
14.4
13.0
4.4
6.0
0.704
11.5
0.724
15.0
0.677
6.5
0.656
6.0
....................
17.0
....................
19.0
....................
11.5
....................
10.0
....................
27.0
....................
35.0
....................
35.0
....................
35.0
2.7
15.5
3.0
16.5
3.3
18.0
1.5
10.5
0.6
7.0
2.9
16.0
2,949.6
41.5
1,312.0
41.5
631.2
28.5
18.1
8.0
17.2
8.0
3,614.3
41.5
1.0
12.0
1.0
11.5
1.2
13.0
0.4
8.5
0.2
7.5
1.1
12.0
45.1
37.0
33.7
28.0
17.3
15.5
4.7
6.0
21.7
19.0
59.8
41.5
0.767
22.5
0.759
21.5
0.774
24.0
0.616
6.0
0.621
6.0
0.836
35.5
....................
25.0
....................
22.5
....................
19.0
....................
7.5
....................
10.0
....................
29.5
....................
16.5
....................
16.5
....................
22.0
....................
8.0
....................
8.0
....................
22.0
PO 00000
Frm 00023
Fmt 4702
Sfmt 4702
E:\FR\FM\25MYP1.SGM
25MYP1
28024
Federal Register / Vol. 86, No. 99 / Tuesday, May 25, 2021 / Proposed Rules
TABLE 6—SIZE STANDARDS SUPPORTED BY EACH FACTOR FOR EACH INDUSTRY (RECEIPTS)—Continued
[For columns 3–7: Upper value = Calculated factor; Lower value = size standard supported by that factor]
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
Calculated
size standard
($ million)
Current size
standard
($ million)
(1)
(2)
(3)
(4)
(5)
(6)
(7)
(9)
(10)
443141 Household Appliance Stores.
443142 Electronics
Stores.
444110 Home Centers ....
Factor .........
Size Std. .....
Factor .........
Size Std. .....
Factor .........
Size Std. .....
Factor .........
Size Std. .....
Factor .........
Size Std. .....
Factor .........
Size Std. .....
Factor .........
Size Std. .....
Factor .........
Size Std. .....
2.5
14.5
4.4
22.5
61.9
41.5
5.1
25.5
1.9
12.5
3.3
18.0
1.5
11.0
3.0
17.0
513.0
24.5
15,362.2
41.5
....................
....................
....................
....................
493.3
24.0
271.8
16.5
17.9
8.0
755.2
32.5
0.8
10.5
1.3
13.0
23.8
41.5
1.8
16.0
0.9
11.0
1.1
12.5
0.7
10.0
1.2
12.5
28.2
24.0
63.8
41.5
....................
....................
....................
....................
25.9
22.0
9.1
9.0
8.2
8.0
21.6
18.5
0.767
23.0
0.854
38.5
....................
....................
....................
....................
0.674
6.0
0.729
16.0
0.612
6.0
0.749
19.5
....................
19.5
....................
31.5
....................
41.5
....................
21.0
....................
14.5
....................
14.0
....................
8.5
....................
19.0
....................
12.0
....................
35.0
....................
41.5
....................
30.0
....................
8.0
....................
22.0
....................
8.0
....................
12.0
Factor .........
Size Std. .....
12.7
41.5
20,298.0
41.5
2.5
20.0
31.1
26.0
0.863
40.0
....................
32.0
....................
35.0
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. .....
1.0
8.5
1.2
9.5
1.1
9.0
1.3
10.0
0.6
7.0
0.9
8.5
0.7
7.5
1.5
10.5
12.1
41.5
2.1
13.0
126.3
11.5
9.2
7.5
6.0
7.5
13.0
8.0
83.7
10.0
104.7
11.0
23.8
8.0
163.9
13.0
41,475.3
41.5
1,347.4
41.5
0.2
7.0
0.3
7.5
0.3
7.5
0.2
7.0
0.2
7.0
0.3
8.0
0.2
7.5
0.5
8.5
2.5
19.5
0.8
10.5
12.5
11.5
5.5
6.0
5.8
6.5
7.9
8.0
35.8
30.0
37.6
31.0
15.6
14.0
10.1
9.5
69.5
41.5
56.3
41.5
0.606
6.0
0.583
6.0
0.622
6.0
0.677
6.5
0.694
9.5
0.741
18.0
0.659
6.0
0.607
6.0
0.797
28.5
0.817
32.0
....................
8.5
....................
7.0
....................
7.0
....................
7.5
....................
14.0
....................
17.0
....................
9.0
....................
9.0
....................
33.0
....................
28.0
....................
32.0
....................
8.0
....................
8.0
....................
8.0
....................
8.0
....................
8.0
....................
8.0
....................
8.0
....................
30.0
....................
30.0
Factor .........
Size Std. .....
Factor .........
Size Std. .....
Factor .........
Size Std. .....
2.0
13.0
1.2
9.5
1.4
10.5
1,672.9
41.5
518.0
24.5
28.4
8.5
0.6
9.5
0.4
8.0
0.5
8.5
57.2
41.5
45.0
37.0
7.6
8.0
0.780
25.0
0.734
17.0
0.681
7.0
....................
26.0
....................
20.0
....................
8.5
....................
22.0
....................
16.5
....................
8.0
Factor .........
Size Std. .....
7.7
36.0
3,327.0
41.5
1.5
14.5
13.2
12.0
0.746
19.0
....................
21.0
....................
32.0
Factor .........
Size Std. .....
Factor .........
Size Std. .....
Factor .........
Size Std. .....
Factor .........
Size Std. .....
Factor .........
Size Std. .....
Factor .........
Size Std. .....
Factor .........
Size Std. .....
10.5
41.5
2.0
13.0
3.2
17.5
4.4
22.5
12.8
41.5
2.3
14.0
2.0
12.5
7,328.2
41.5
495.9
24.0
1,087.6
41.5
1,116.2
41.5
6,648.7
41.5
1,314.2
41.5
1,894.8
41.5
2.2
18.0
0.9
11.0
1.2
12.5
1.7
15.5
5.1
34.5
1.0
11.5
0.8
10.5
38.7
32.0
42.4
35.0
25.8
22.0
61.1
41.5
49.6
40.5
58.3
41.5
51.3
41.5
0.784
26.0
0.780
25.0
0.839
36.0
0.871
41.5
0.882
41.5
0.840
36.0
0.806
30.0
....................
29.5
....................
22.5
....................
25.0
....................
32.5
....................
39.5
....................
29.5
....................
27.5
....................
16.5
....................
12.0
....................
30.0
....................
35.0
....................
41.5
....................
16.5
....................
22.0
444120 Paint and Wallpaper Stores.
444130 Hardware Stores
jbell on DSKJLSW7X2PROD with PROPOSALS
444190 Other Building
Material Dealers.
444210 Outdoor Power
Equipment Stores.
444220 Nursery, Garden
Center, and Farm Supply Stores.
445110 Supermarkets
and Other Grocery (except Convenience)
Stores.
445120 Convenience
Stores.
445210 Meat Markets .....
445220 Fish and Seafood
Markets.
445230 Fruit and Vegetable Markets.
445291 Baked Goods
Stores.
445292 Confectionery
and Nut Stores.
445299 All Other Specialty Food Stores.
445310 Beer, Wine, and
Liquor Stores.
446110 Pharmacies and
Drug Stores.
446120 Cosmetics, Beauty Supplies, and Perfume Stores.
446130 Optical Goods
Stores.
446191 Food (Health)
Supplement Stores.
446199 All Other Health
and Personal Care
Stores.
447110 Gasoline Stations
with Convenience
Stores.
447190 Other Gasoline
Stations.
448110 Men’s Clothing
Stores.
448120 Women’s Clothing Stores.
448130 Children’s and Infants’ Clothing Stores.
448140 Family Clothing
Stores.
448150 Clothing Accessories Stores.
448190 Other Clothing
Stores.
VerDate Sep<11>2014
17:12 May 24, 2021
Jkt 253001
PO 00000
Frm 00024
Fmt 4702
Sfmt 4702
E:\FR\FM\25MYP1.SGM
25MYP1
28025
Federal Register / Vol. 86, No. 99 / Tuesday, May 25, 2021 / Proposed Rules
TABLE 6—SIZE STANDARDS SUPPORTED BY EACH FACTOR FOR EACH INDUSTRY (RECEIPTS)—Continued
[For columns 3–7: Upper value = Calculated factor; Lower value = size standard supported by that factor]
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
Calculated
size standard
($ million)
Current size
standard
($ million)
(1)
(2)
(3)
(4)
(5)
(6)
(7)
(9)
(10)
448210 Shoe Stores .......
Factor .........
Size Std. .....
Factor .........
Size Std. .....
Factor .........
Size Std. .....
Factor .........
Size Std. .....
Factor .........
Size Std. .....
Factor .........
Size Std. .....
5.2
25.5
1.7
11.5
5.0
24.5
2.5
15.0
3.5
18.5
1.1
9.0
1,301.1
41.5
580.1
26.5
983.0
40.0
1,481.1
41.5
3,091.1
41.5
1,257.0
41.5
2.2
18.0
1.0
12.0
3.1
23.0
1.0
12.0
1.4
14.0
0.5
8.5
34.3
28.5
24.0
20.5
75.0
41.5
32.6
27.5
77.4
41.5
....................
....................
0.841
36.5
0.752
20.0
0.848
37.5
0.782
25.5
0.851
38.0
0.776
24.5
....................
29.0
....................
18.0
....................
33.5
....................
23.5
....................
31.0
....................
19.5
....................
30.0
....................
16.5
....................
30.0
....................
16.5
....................
30.0
....................
30.0
Factor .........
Size Std. .....
1.4
10.5
536.2
25.0
0.7
10.0
41.8
34.5
0.734
17.0
....................
20.0
....................
12.0
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. .....
Factor .........
Size Std. .....
Factor .........
Size Std. .....
Factor .........
Size Std. .....
Factor .........
Size Std. .....
3.9
20.5
1.0
8.5
11,030.9
41.5
44,853.1
41.5
7.1
33.0
0.3
6.0
5.0
24.5
0.8
8.0
0.9
8.5
2.8
16.0
1.4
10.0
2.4
14.5
1.2
9.5
1.2
9.5
3,005.3
41.5
242.4
15.5
25,982.4
41.5
210,447.9
41.5
7,543.1
41.5
1.5
7.5
4,645.9
41.5
165.7
13.0
73.6
10.0
3,479.3
41.5
55.3
9.0
235.3
15.0
17.1
8.0
55.7
9.0
1.6
14.5
0.4
8.5
5,014.0
41.5
15,466.6
41.5
2.4
19.5
0.1
6.5
1.4
14.0
0.3
8.0
0.4
8.5
0.8
10.5
0.7
10.0
1.4
14.0
0.4
8.0
0.4
8.5
69.7
41.5
57.3
41.5
82.7
41.5
93.6
41.5
66.1
41.5
1.6
6.0
85.1
41.5
18.8
16.5
12.7
11.5
69.0
41.5
14.4
13.0
31.4
26.5
5.7
6.5
10.1
9.5
0.853
38.5
0.742
18.0
0.555
6.0
....................
....................
0.876
41.5
0.527
6.0
0.862
40.0
0.713
13.0
0.756
21.0
0.814
31.0
0.779
25.0
0.696
10.0
0.656
6.0
0.712
13.0
....................
31.5
....................
20.0
....................
32.5
....................
41.5
....................
35.0
....................
6.5
....................
32.0
....................
12.0
....................
12.5
....................
28.0
....................
14.5
....................
16.5
....................
7.5
....................
10.0
....................
30.0
....................
8.0
....................
35.0
....................
32.0
....................
35.0
....................
8.0
....................
35.0
....................
8.0
....................
8.0
....................
22.0
....................
8.0
....................
16.5
....................
8.0
....................
8.0
Factor .........
Size Std. .....
11.4
41.5
9,493.0
41.5
3.3
24.5
30.2
25.5
0.868
41.0
....................
33.0
....................
41.5
Factor .........
Size Std. .....
Factor .........
Size Std. .....
1.6
11.0
1.1
9.0
254.9
16.0
202.5
14.0
0.6
9.5
0.4
8.0
28.2
24.0
15.1
13.5
0.787
26.5
0.749
19.5
....................
18.5
....................
13.0
....................
12.0
....................
8.0
448310 Jewelry Stores ....
448320 Luggage and
Leather Goods Stores.
451110 Sporting Goods
Stores.
451120 Hobby, Toy, and
Game Stores.
451130 Sewing, Needlework, and Piece Goods
Stores.
451140 Musical Instrument and Supplies
Stores.
451211 Book Stores ........
451212 News Dealers
and Newsstands.
452210 Department
Stores.
452311 Warehouse Clubs
and Supercenters.
452319 All Other General
Merchandise Stores.
453110 Florists ................
453210 Office Supplies
and Stationery Stores.
453220 Gift, Novelty, and
Souvenir Stores.
453310 Used Merchandise Stores.
453910 Pet and Pet Supplies Stores.
453920 Art Dealers .........
453930 Manufactured
(Mobile) Home Dealers.
453991 Tobacco Stores ..
453998 All Other Miscellaneous Store Retailers (except Tobacco
Stores).
454110 Electronic Shopping and Mail-Order
Houses.
454210 Vending Machine
Operators.
454390 Other Direct Selling Establishments.
jbell on DSKJLSW7X2PROD with PROPOSALS
Summary of Calculated Size Standards
Of the 137 industries reviewed in this
proposed rule, the results from analyses
of the latest available data on the four
primary industry factors (i.e., average
VerDate Sep<11>2014
17:12 May 24, 2021
Jkt 253001
firm size, average assets size, four-firm
ratio, and Gini coefficient) from Table 5
and Table 6 above support increasing
size standards for 49 industries,
decreasing size standards for 66
PO 00000
Frm 00025
Fmt 4702
Sfmt 4702
industries, and maintaining size
standards for 22 industries. Table 7,
Summary of Calculated Size Standards,
summarizes these results by NAICS
sector.
E:\FR\FM\25MYP1.SGM
25MYP1
28026
Federal Register / Vol. 86, No. 99 / Tuesday, May 25, 2021 / Proposed Rules
TABLE 7—SUMMARY OF CALCULATED SIZE STANDARDS
Number of
size standards
reviewed
Number of
size standards
increased
Number of
size standards
decreased
Number of
size standards
maintained
Wholesale Trade ..................................................
Retail Trade .........................................................
71
66
14
35
38
28
19
3
..............................................................................
137
49
66
22
Sector
Sector name
42 ..................................
44–45 ............................
Total .......................
jbell on DSKJLSW7X2PROD with PROPOSALS
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 5
and Table 6 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 96.9% of 7(a) and 504 loans in
fiscal years 2016–2018 went to
businesses below the current or
proposed size standards.
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. In addition, based
on the advice of public health officials,
other measures, such as keeping a safe
distance from others or even stay-athome 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% of 7(a) loans under a new program
titled the Paycheck Protection Program
(PPP). Section 1106 of the Act provides
VerDate Sep<11>2014
17:12 May 24, 2021
Jkt 253001
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 by
COVID–19. On April 24, 2020,
additional funding for the CARES Act,
including for the PPP, was provided (see
The Paycheck Protection Program and
Health Care Enhancement Act, Pub. L.
116–139). On December 27, 2020,
Congress passed the Economic Aid to
Hard-Hit Small Businesses, Nonprofits,
and Venues Act as part of the
Consolidation Appropriations Act,
approving additional funding for the
PPP loans program and allowing the
hardest-hit small businesses to receive a
second draw PPP loan (Pub. L. 116–
260). Additionally, the law approved
grants for shuttered-venue operators. On
March 11, 2021, the American Rescue
Plan Act of 2021 (Pub. L. 117–2) was
signed into law. This act provides
additional relief for the nation’s small
businesses and hard-hit industries by
adding new support to the recovery
effort, including additional funding for
the Paycheck Protection Program and
the Shuttered Venue Operators Grant
program. The act also adds additional
funding for targeted Economic Injury
Disaster Loan (EIDL) Advance
payments.
The Agency is following closely the
development of the pandemic and the
economic situation. A variety of
economic indicators such as the Gross
Domestic Product (GDP) and the
unemployment rate show that this
recession is significantly worse than any
other recession since World War II.
According to the Bureau of Economic
Analysis (BEA), real GDP decreased 5%
and real personal consumption in goods
and services decreased 6.9% in the first
quarter of 2020. In the second quarter,
real GDP decreased 31.4% and real
personal consumption in goods and
services decreased 33.2%. In the third
quarter, real GDP increased 33.4%, and
real personal consumption in goods and
services increased 41.0%. Real GDP
showed a more moderate increase of
4.3% and real personal consumption
expenditures increased 2.3% in the
PO 00000
Frm 00026
Fmt 4702
Sfmt 4702
fourth quarter of 2020. Real GDP
decreased 3.5% in 2020 from 2019 (from
the 2019 annual level to the 2020
annual level), compared with an
increase of 2.2 percent in 2019 from
2018. According to the BEA’s ‘advance’
estimate, real GDP increased 6.4% and
real personal consumption expenditures
increased 10.7% in the first quarter of
2021.
In April 2021, both the
unemployment rate, at 6.1%, and the
number of unemployed persons, at 9.8
million, were little changed from the
previous month. These measures are
down considerably from their April
2020 highs (14.8% and 23.1 million,
respectively) but remain well above
their pre-pandemic levels in February
2020 (3.5% and 5.7 million,
respectively). Specifically, for the
sectors evaluated in this proposed rule,
in April 2021, the unemployment rate
for the Wholesale Trade sector was
3.3%, and the unemployment rate for
the Retail Trade sector was 6.8%. In
April 2020, the unemployment rates for
these sectors were 9.9% and 18.6%,
respectively. The Federal Reserve
Board’s Monetary Policy Report,
published in June 2020, shows that, in
general, the most impacted firms in
these sectors are small businesses.1
Proposed Changes to Size Standards
Accordingly, in view of the analytical
data discussed above and the economic
impacts of the COVID–19 pandemic,
SBA proposes to adopt increases to size
standards for 49 industries and to retain
the current size standards for 88
industries.
The proposed size standards are
presented by measure of size in Table 8,
Proposed Size Standards Revisions
(Employees) and Table 9, Proposed Size
1 See the special section titled ‘‘Small Businesses
during the COVID–19 Crisis’’ on page 24 of the
Monetary Policy Report prepared by the Board of
Governors of the Federal Reserve System in June
2020. (https://www.federalreserve.gov/
monetarypolicy/files/20200612_mprfullreport.pdf).
The latest publication of the Monetary Policy
Report was published on February 19, 2021. Also,
see https://portal.census.gov/pulse/data. This
report is a recent survey created by the Census
Bureau to provide high-frequency, detailed
information on participation in small businessspecific initiatives such as the PPP.
E:\FR\FM\25MYP1.SGM
25MYP1
28027
Federal Register / Vol. 86, No. 99 / Tuesday, May 25, 2021 / Proposed Rules
Standards Revisions (Receipts). Also
presented in Table 8 and Table 9 are
current and calculated size standards for
comparison.
TABLE 8—PROPOSED SIZE STANDARDS REVISIONS (EMPLOYEES)
NAICS code
423140
423330
423460
423520
423620
................
................
................
................
................
423730 ................
423860 ................
423920
424110
424450
424590
424690
424710
425120
................
................
................
................
................
................
................
Calculated
size standard
(employees)
NAICS industry title
Motor Vehicle Parts (Used) Merchant Wholesalers ..................................
Roofing, Siding, and Insulation Material Merchant Wholesalers ...............
Ophthalmic Goods Merchant Wholesalers ................................................
Coal and Other Mineral and Ore Merchant Wholesalers ..........................
Household Appliances, Electric Housewares, and Consumer Electronics
Merchant Wholesalers.
Warm Air Heating and Air-Conditioning Equipment and Supplies Merchant Wholesalers.
Transportation Equipment and Supplies (except Motor Vehicle) Merchant Wholesalers.
Toy and Hobby Goods and Supplies Merchant Wholesalers ...................
Printing and Writing Paper Merchant Wholesalers ....................................
Confectionery Merchant Wholesalers ........................................................
Other Farm Product Raw Material Merchant Wholesalers ........................
Other Chemical and Allied Products Merchant Wholesalers ....................
Petroleum Bulk Stations and Terminals ....................................................
Wholesale Trade Agents and Brokers .......................................................
Proposed size
standard
(employees)
Current size
standard
(employees)
125
225
175
200
225
125
225
175
200
225
100
200
150
100
200
175
175
150
175
175
150
175
225
225
175
175
225
125
175
225
225
175
175
225
125
150
200
200
100
150
200
100
TABLE 9—PROPOSED SIZE STANDARDS REVISIONS (RECEIPTS)
jbell on DSKJLSW7X2PROD with PROPOSALS
NAICS code
441310
441320
442291
442299
443141
444130
444210
444220
445291
445292
445299
445310
446110
446130
446191
446199
447190
448110
448150
448190
448310
448320
451110
451120
451140
451211
451212
452311
453220
453310
453910
453920
453998
454210
454390
................
................
................
................
................
................
................
................
................
................
................
................
................
................
................
................
................
................
................
................
................
................
................
................
................
................
................
................
................
................
................
................
................
................
................
VerDate Sep<11>2014
Calculated
size standard
($ million)
NAICS industry title
Automotive Parts and Accessories Stores ................................................
Tire Dealers ................................................................................................
Window Treatment Stores .........................................................................
All Other Home Furnishings Stores ...........................................................
Household Appliance Stores ......................................................................
Hardware Stores ........................................................................................
Outdoor Power Equipment Stores .............................................................
Nursery, Garden Center, and Farm Supply Stores ...................................
Baked Goods Stores ..................................................................................
Confectionery and Nut Stores ....................................................................
All Other Specialty Food Stores ................................................................
Beer, Wine, and Liquor Stores ..................................................................
Pharmacies and Drug Stores .....................................................................
Optical Goods Stores .................................................................................
Food (Health) Supplement Stores .............................................................
All Other Health and Personal Care Stores ..............................................
Other Gasoline Stations .............................................................................
Men’s Clothing Stores ................................................................................
Clothing Accessories Stores ......................................................................
Other Clothing Stores ................................................................................
Jewelry Stores ............................................................................................
Luggage and Leather Goods Stores .........................................................
Sporting Goods Stores ...............................................................................
Hobby, Toy, and Game Stores ..................................................................
Musical Instrument and Supplies Stores ...................................................
Book Stores ................................................................................................
News Dealers and Newsstands .................................................................
Warehouse Clubs and Supercenters .........................................................
Gift, Novelty, and Souvenir Stores ............................................................
Used Merchandise Stores ..........................................................................
Pet and Pet Supplies Stores ......................................................................
Art Dealers .................................................................................................
All Other Miscellaneous Store Retailers (except Tobacco Stores) ...........
Vending Machine Operators ......................................................................
Other Direct Selling Establishments ..........................................................
17:12 May 24, 2021
Jkt 253001
PO 00000
Frm 00027
Fmt 4702
Sfmt 4702
E:\FR\FM\25MYP1.SGM
Proposed size
standard
($ million)
25.0
22.5
10.0
29.5
19.5
14.5
8.5
19.0
14.0
17.0
9.0
9.0
33.0
26.0
20.0
8.5
29.5
22.5
29.5
27.5
18.0
33.5
23.5
31.0
20.0
31.5
20.0
41.5
12.0
12.5
28.0
14.5
10.0
18.5
13.0
25MYP1
25.0
22.5
10.0
29.5
19.5
14.5
8.5
19.0
14.0
17.0
9.0
9.0
33.0
26.0
20.0
8.5
29.5
22.5
29.5
27.5
18.0
33.5
23.5
31.0
20.0
31.5
20.0
41.5
12.0
12.5
28.0
14.5
10.0
18.5
13.0
Current size
standard
($ million)
16.5
16.5
8.0
22.0
12.0
8.0
8.0
12.0
8.0
8.0
8.0
8.0
30.0
22.0
16.5
8.0
16.5
12.0
16.5
22.0
16.5
30.0
16.5
30.0
12.0
30.0
8.0
32.0
8.0
8.0
22.0
8.0
8.0
12.0
8.0
28028
Federal Register / Vol. 86, No. 99 / Tuesday, May 25, 2021 / Proposed Rules
Table 10, Summary of Proposed Size
Standards Revisions by Sector, below,
summarizes the proposed changes to
size standards by NAICS sector.
TABLE 10—SUMMARY OF PROPOSED SIZE STANDARDS REVISIONS BY SECTOR
Number of
size standards
reviewed
Number of
size standards
increased
Number of
size standards
decreased
Number of
size standards
maintained
Wholesale Trade ...........................................................
Retail Trade ...................................................................
71
66
14
35
0
0
57
31
........................................................................................
137
49
0
88
Sector
Sector name
42 .........................
44–45 ...................
Total ..............
Evaluation of Dominance in Field of
Operation
SBA has determined that for the
industries that 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
would be, on average, 0.4%, varying
from 0.01% to 3.4%.
jbell on DSKJLSW7X2PROD with PROPOSALS
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 1
was to propose changes exactly as
suggested by the analytical results. In
other words, Option 1 would entail
increasing size standards for 49
industries, decreasing them for 66
industries, and retaining them at their
current levels for 22 industries.
Alternative Option 2 was to retain all
current size standards.
Alternative Option 1 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,
VerDate Sep<11>2014
17:12 May 24, 2021
Jkt 253001
especially SBA’s financial assistance in
some cases.
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 1 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 as the
economic situation evolves.
Under Option 2, 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 before adopting changes to
size standards. However, SBA is not
adopting Option 2 because the
Regulatory Impact Analysis conducted
for this rule in accordance with
Executive Order 12866 (see below)
shows that retaining all size standards at
their current levels is more onerous for
the small businesses than the option of
adopting 49 increases and retaining 88
size standards. 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 49 size
standards and retain 88 size standards is
appropriate given the results from the
latest available industry and Federal
contracting data of each industry and
PO 00000
Frm 00028
Fmt 4702
Sfmt 4702
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 the 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
Congress’s and the Federal
Government’s efforts 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 at all.
4. In calculating the overall industry
size standard, SBA has assigned equal
weight to each of the four 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 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.
5. 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
E:\FR\FM\25MYP1.SGM
25MYP1
Federal Register / Vol. 86, No. 99 / Tuesday, May 25, 2021 / Proposed Rules
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.
Compliance With Executive Order
12866, 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. However, this rule is not a
‘‘major rule’’ under the Congressional
Review Act, 5 U.S.C. 800. 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 evaluation of the benefits
and costs—both quantitative and
qualitative—of the proposed action, and
(3) an examination of the alternative
approaches considered.
Regulatory Impact Analysis
jbell on DSKJLSW7X2PROD with PROPOSALS
1. What is a need for this regulatory
action?
Under the Small Business Act, 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 5 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 49 industries or
subindustries in NAICS Sectors 42 and
44–45 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
28029
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 analyses of
latest industry 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 economic
activity, of the total of 137 industries in
Sectors 42 and 44–45, SBA proposes to
increase size standards for 49 industries
and maintain current size standards for
remaining 88 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 SBA’s loans, disaster
assistance, etc.) they receive under the
current size standards, 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
975,569 businesses in industries in
Sectors 42 and 44–45, 97.4% are
considered small under the current size
standards. That percentage varies from
96.6% in Sector 42 to 97.9% in Sector
44–45. 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 11,666 7(a) and 504 loans in
that period, totaling about $5.5 billion,
of which 84.7% was issued through the
7(a) program and 15.3% was issued
through the 504/CDC program. During
fiscal years 2016–2018, small businesses
in those industries also received 667
loans through the SBA’s EIDL program,
totaling about $63.2 million on an
annual basis. Table 11, Baseline for All
Industries, below, provides these
baseline results by sector.
TABLE 11—BASELINE FOR ALL INDUSTRIES
Sector 42
Baseline All Industries (current size standards) ........................................................
Total firms (Economic Census) .................................................................................
Total small firms under current size standards (Economic Census) ........................
Small firms as % of total firms ..................................................................................
VerDate Sep<11>2014
17:12 May 24, 2021
Jkt 253001
PO 00000
Frm 00029
Fmt 4702
Sfmt 4702
Sector 44–45
71
319,716
308,710
96.6
E:\FR\FM\25MYP1.SGM
66
655,853
641,995
97.9
25MYP1
Total
137
975,569
950,705
97.5
28030
Federal Register / Vol. 86, No. 99 / Tuesday, May 25, 2021 / Proposed Rules
TABLE 11—BASELINE FOR ALL INDUSTRIES—Continued
Sector 42
No. of 7(a) and 504/CDC loans (FY 2016–2018) .....................................................
Amount of 7(a) and 504 loans ($ million) (FY 2016–2018) ......................................
No. of EIDL loans (FY 2016–2018) ...........................................................................
Amount of EIDL loans ($ million) (FY 2016–2018) ...................................................
Sector 44–45
3,249
$1,836.7
137
$16.7
Total
8,417
$3,692.9
530
$46.6
11,666
$5,529.6
667
$63.2
Totals may not sum due to rounding.
Increases to Size Standards
As stated above, of the 137 employeebased and receipts-based size standards
in Sectors 42 and 44–45 that were
reviewed in preparation for this rule,
based on the results from analyses of
latest industry data as well as impacts
of size standards changes on small
businesses, SBA proposes to increase 49
size standards. Below are descriptions
of the benefits, costs, and transfer
impacts of these proposed increases to
size standards.
A. Benefits of Increases to Size
Standards
The most significant benefit to
businesses from proposed increases to
size standards would be gaining
eligibility for Federal small business
assistance programs or retaining that
eligibility for a longer period. These
include SBA’s business loan programs,
such as the 7(a) and EIDL loan
programs. SBA’s regulations specify that
NAICS codes for the Wholesale and
Retail Trade industries shall not be used
to classify Government acquisition for
supplies (13 CFR 121.402(b)). As such,
for purposes of federal contracts setaside for small businesses the size
standard for all industries included in
the Wholesale Trade and Retail Trade
sectors is 500 employees under the
nonmanufacturer rule (see 13 CFR
121.406). SBA is not evaluating the size
standard for the nonmanufacturer rule
in this rulemaking. Thus, SBA estimates
that the proposed increases to size
standards as part of this rulemaking will
not impact the market for federal
contracts using small business setasides.
Besides the access to SBA financial
assistance programs discussed above,
small businesses also benefit through
reduced fees, less paperwork, and fewer
compliance requirements that are
available to small businesses through
the 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
49 industries in NAICS Sectors 42 and
44–45 for which it has proposed to
increase size standards, 1,839 firms (see
Table 12, below) not considered small
under the current size standards will
become small under the proposed size
standards increases and therefore would
become eligible for SBA assistance
programs. That represents about 0.5% of
all firms classified as small under the
current size standards in industries for
which SBA has proposed increasing size
standards. If the proposed increase is
adopted, SBA estimates that this would
result in an increase to the small
business share of total receipts in those
industries from 30.4% to 31.5%.
Based on the data for fiscal years
2016–2018, SBA estimates up to 29 SBA
7(a) and 504 loans totaling about $10.9
million could be made to these newly
qualified small businesses. That
represents a 0.6% increase to the loan
amount compared to the Group
baseline.2
Newly qualified small businesses
could 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 3 EIDL loans, totaling
about $0.31 million.3
Additionally, the newly defined small
businesses would also benefit through
reduced fees, less paperwork, and fewer
compliance requirements that are
available to small businesses through
the Federal Government, but SBA has
no data to quantify this impact. Table
12, Impacts of Proposed Increases to
Size Standards, provides these results
by NAICS sector.
TABLE 12—IMPACTS OF PROPOSED INCREASES TO SIZE STANDARDS
jbell on DSKJLSW7X2PROD with PROPOSALS
Sector 42
No. of industries with proposed increases to size standards ...................................
Total current small businesses in industries with Proposed increases to size
standards (Economic Census 2012) ......................................................................
Additional firms qualifying as small under proposed standards (2012 Economic
Census) ..................................................................................................................
Percentage of additional firms qualifying as small relative to current small businesses in industries with proposed increases to size standards ..........................
Total no. of 7(a) and 504 loans to small business in industries with proposed increases to size standards (FY 2016–2018) ...........................................................
Total amount of 7(a) and 504 loans to small businesses in industries with proposed increases to size standards ($ million) (FY 2016–2018) ............................
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 ......................
2 Note that these figures refer to the standard 7(a)
and 504 loans, not the Paycheck Protection Program
(PPP) under the CARES Act, the Economic Aid to
Hard-Hit Small Businesses, Non-Profits, and
VerDate Sep<11>2014
17:12 May 24, 2021
Jkt 253001
Venues Act, and the American Rescue Plan Act of
2021.
3 Note that these figures refer to the standard EIDL
loans, not COVID EIDL loans under the CARES Act,
PO 00000
Frm 00030
Fmt 4702
Sfmt 4702
Sector 44–45
Total
14
35
49
63,984
286,758
350,742
145
1,694
1,839
0.2
0.6
0.5
349
4,510
4,859
$182.8
1
$0.5
$1,633.1
28
$10.3
$1,815.9
29
$10.9
0.3
0.6
0.6
the Economic Aid to Hard-Hit Small Businesses,
Non-Profits, and Venues Act, and the American
Rescue Plan Act of 2021.
E:\FR\FM\25MYP1.SGM
25MYP1
28031
Federal Register / Vol. 86, No. 99 / Tuesday, May 25, 2021 / Proposed Rules
TABLE 12—IMPACTS OF PROPOSED INCREASES TO SIZE STANDARDS—Continued
Sector 42
Total no. of EIDL loans to small businesses in industries with proposed increases
to size standards (FY 2016–2018) ........................................................................
Total amount of EIDL loans to small businesses in industries with proposed increases to size standards ($ million) (FY 2016–2018) ..........................................
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 44–45
Total
12
288
300
$1.9
1
$0.15
$21.5
2
$0.15
$23.4
3
$0.31
8.3
0.7
1.3
Totals may not sum due to rounding.
jbell on DSKJLSW7X2PROD with PROPOSALS
B. Costs of Increases to Size Standards
To the extent that newly qualified
small businesses could seek assistance
from SBA’s financial assistance
programs, the proposed increases to size
standards, if adopted, may entail some
additional administrative costs to the
Government. However, small business
lenders have an option of using the
tangible net worth and net incomebased alternative size standard instead
of using the industry-based size
standards to establish eligibility for
SBA’s loans. Moreover, this proposed
rule does not establish 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. For these reasons,
SBA believes that these added
administrative costs will be minor
because necessary mechanisms are
already in place to handle the additional
burden.
C. Transfer Impacts of Increases to Size
Standards
The proposed increases to size
standards, if adopted, may result in
some redistribution of SBA loans
between the newly qualified small
businesses and small businesses under
the current size standards. However,
SBA estimates this impact to be de
minimus because the vast majority of
the SBA loans go to small businesses
that are much smaller than the current
size standards. Moreover, SBA estimates
that this rule would not have any
impact on Federal contract dollars
awarded to small businesses since
SBA’s regulations specify that NAICS
codes for the Wholesale and Retail
Trade industries shall not be used to
classify Government acquisition for
supplies.
3. What alternatives have been
considered?
Under OMB Circular A–4, SBA is
required to consider alternative
regulatory approaches. In this section,
SBA describes and analyzes two such
VerDate Sep<11>2014
17:12 May 24, 2021
Jkt 253001
alternatives to the proposed rule. Under
Alternative Option 1, SBA would
propose adopting size standards based
solely on the analytical results. In other
words, SBA would raise the size
standards of 49 industries for which the
analytical results suggest raising size
standards and would lower the size
standards of 66 industries for which the
analytical results suggest lowering size
standards. For the 22 remaining
industries, size standards would be
maintained at their current levels.
Under Alternative Option 2, SBA 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 1: Consider
Adopting All Calculated Size Standards
As discussed before, in this proposed
rule, Alternative Option 1 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,
including SBA’s financial assistance in
some cases. Because we have discussed
already the benefits and costs of
increasing 49 size standards, here we
will emphasize the discussion on the
benefits and costs of decreasing 66 size
standards.
The primary benefit of adopting
Alternative Option 1 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.
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
PO 00000
Frm 00031
Fmt 4702
Sfmt 4702
contracts awarded to small businesses,
and may adopt different results with the
intention of mitigating potential
negative impacts.
A. Benefits of Decreases to Size
Standards
The most significant benefit to
businesses from decreases to size
standards when SBA’s analysis suggests
such decreases, is that it may help
ensure that size standards are more
reflective of latest industry structure
and that Federal small business
assistance is more effectively targeted to
its intended beneficiaries. The adoption
of smaller size standards when the
results support them diminishes the risk
of providing assistance to firms that are
not small anymore.
Decreasing size standards may reduce
the administrative costs of the
Government, because the risk of
providing assistance to other than small
businesses may diminish when the size
standards better reflect the structure of
the market. The risks of providing SBA’s
loans to firms that are not in need of
financial assistance will provide for a
better chance for smaller firms to benefit
from the opportunities available to them
through the Federal Government.
Although SBA did not quantify the
impact associated with this risk, SBA
considers the impacts associated with
this risk to be small since the majority
of firms receiving financial assistance
from SBA are below the calculated size
standards.
B. Costs of Decreases to Size Standards
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,
SBA estimates that 67 of SBA’s 7(a) and
504 loans, totaling $38.0 million, could
not be made to those small businesses
that would lose eligibility under the
reduced size standards (before
E:\FR\FM\25MYP1.SGM
25MYP1
28032
Federal Register / Vol. 86, No. 99 / Tuesday, May 25, 2021 / Proposed Rules
mitigation). That represents a 1.2%
decrease of the loan amounts compared
to the baseline. Table 13, 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 incomebased alternative size standard.
Businesses losing small business
status would also be impacted in terms
of access to loans through the 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,
the majority of 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.
However, based on the historical trends
of the available EIDL data, SBA
estimates that, on an annual basis, 5
EIDL loans, totaling about $0.5 million,
would be made unavailable to firms that
no longer qualify as small based on the
industry size standard.
Small businesses becoming other than
small if size standards were decreased
might lose the benefits of reduced fees,
paperwork and compliance
requirements that are available to small
businesses through the Federal
Government, but SBA has no data to
quantify this impact. However, if
agencies determine that SBA’s size
standards do not adequately serve their
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.
SBA may adopt mitigating measures
to reduce the negative impact under the
assumptions of Option 1. SBA could
adopt one or more of the following three
actions: 1. To accept decreases in size
standards as suggested by the analytical
results; 2. to decrease size standards by
a smaller amount than the calculated
values; and 3. to retain the size
standards at their current levels. For
example, in response to the 2008
Financial Crisis, 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.
Nevertheless, the impact on the
overall loan activity is likely to be de
minimus because SBA estimates that the
majority of firms currently eligible for
its loan programs would continue to
remain eligible under the reduced size
standards. SBA’s regulations specify
that NAICS codes for the Wholesale and
Retail Trade industries shall not be used
to classify Government acquisition for
supplies (13 CFR 121.402(b)). As such,
for purposes of federal contracting, the
size standard for all industries included
in the Wholesale and Retail Trade
industries is 500 employees (13 CFR
121.406). Thus, SBA estimates that any
decreases to size standards as part of
this rulemaking will not impact the
market for federal contracts.
TABLE 13—IMPACTS OF DECREASES TO SIZE STANDARDS UNDER ALTERNATIVE OPTION 1
Sector 42
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 (2012 Economic Census) ..............................................................
Estimated no. of firms losing small status for which SBA considered decreasing
size standards (2012 Economic Census) ..............................................................
% of Firms losing small status relative to current small businesses 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 (FY 2016–2018) .......................................
Total amount of 7(a) and 504 loans to small businesses in industries for which
SBA considered decreasing size standards ($ million) (FY 2016–2018) ..............
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 business status ($ million) ............................................................................
% 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 (FY 2016–2018) .................................................
Total amount of EIDL loans to small businesses in industries for which SBA considered decreasing size standards ($ million) (FY 2016–2018) ............................
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 44–45
Total
38
28
66
184,837
343,639
528,476
2,735
2,774
5,509
1.5
0.8
1.0
2,236
3,859
6,095
$1,300.2
$1,931.0
$3,231.2
34
33
67
$19.8
$18.2
$38.0
1.5
0.9
1.2
86
239
325
$10.0
$24.4
$34.4
2
3
5
$0.23
2.3
$0.27
1.1
$0.50
1.5
jbell on DSKJLSW7X2PROD with PROPOSALS
Totals may not sum due to rounding.
C. Transfer Impacts of Decreases to Size
Standards
If the size standards were decreased
under Alternative Option 1, it may
result in a redistribution of loans
VerDate Sep<11>2014
17:12 May 24, 2021
Jkt 253001
between the newly qualified small
businesses and large businesses and
between the newly qualified small
businesses and small businesses under
the current standards. However, SBA
PO 00000
Frm 00032
Fmt 4702
Sfmt 4702
estimates this impact to be de minimus.
Moreover, SBA estimates that this rule
would not have an impact on Federal
contract dollars awarded to small
businesses since SBA’s regulations
E:\FR\FM\25MYP1.SGM
25MYP1
Federal Register / Vol. 86, No. 99 / Tuesday, May 25, 2021 / Proposed Rules
specify that NAICS codes for the
Wholesale and Retail Trade industries
shall not be used to classify Government
acquisition for supplies. While SBA
cannot estimate with certainty the
actual outcome of the gains and losses
among different groups of businesses
from this redistribution, it can identify
several probable impacts. With a smaller
pool of small businesses under the
decreases to size standards, some
Federal assistance to be otherwise
awarded to small businesses may be
diverted to other uses or programs.
However, since the total benefit
provided through this program is
contingent on the availability of funds
and the occurrence and severity of a
disaster in the future, SBA cannot make
a meaningful estimate of this impact.
D. Net Impact of Alternative Option 1
To estimate the net impacts of
Alternative Option 1, SBA followed the
same methodology used to evaluate the
impacts of the proposed size standards
(see Table 12 above). However, under
Alternative Option 1, 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 size standards
were already shown in Table 12 above.
Table 13, above, and Table 14, Net
Impacts of Size Standards Changes
under Alternative Option 1, below,
present the impact of the decreases of
size standards and the net impact of
adopting the calculated results under
Alternative Option 1, respectively.
Based on the 2012 Economic Census,
SBA estimates that in 100 industries in
NAICS Sectors 42 and 44–45 for which
the analytical results suggested to
change size standards, about 3,625 firms
(see Table 14, below), would become
other-than-small under Alternative One.
That represents about 0.4% of all firms
28033
classified as small under the current
size standards.
Based on the SBA’s loan data for
fiscal years 2016–2018, the total number
of 7(a) and 504 loans may decrease by
38 loans, and the loan amounts by about
$27.1 million. This represents a 0.5%
decrease of the loan amounts relative to
the Group baseline.
Firms’ participation under 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 the total number of EIDL
loans may decrease by about 2 loans,
and the loan amount by about $0.19
million. This represents a 0.3% decrease
of the loan amounts relative to the
Group baseline. Table 14, below,
provides these results by NAICS sector.
TABLE 14—NET IMPACTS OF SIZE STANDARDS CHANGES UNDER ALTERNATIVE OPTION 1
Sector 42
No. of industries with proposed changes to size standards .....................................
Total no. of small businesses under the current size standards (2012 Economic
Census) ..................................................................................................................
Additional firms qualifying as small (2012 Economic Census) .................................
% of additional firms qualifying as small relative to total current small businesses
Total no. of 7(a) and 504 loans to small businesses (FY 2016–2018) ....................
Total amount of 7(a) and 504 loans to small businesses (FY 2016–2018) .............
Estimated no. of additional 7(a) and 504 loans to newly qualified small firms ........
Estimated additional 7(a) and 504 loan amount to newly qualified small firms ($
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 (FY 2016–2018) .................................
Total amount of EIDL loans to small businesses (FY 2016–2018) ..........................
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 44–45
Total
52
63
115
248,821
¥2,591
¥1.0
3,249
$1,836.7
¥33
630,396
¥1,079
¥0.2
8,417
$3,692.9
¥5
879,217
¥3,670
¥0.4
11,666
$5,529.6
¥38
¥$19.2
¥$7.9
¥$27.1
¥1.0
137
$16.7
¥1
¥$0.08
¥0.2
530
$46.6
¥1
¥$0.12
¥0.5
667
$63.2
¥2
¥$0.19
¥0.5
¥0.3
¥0.3
jbell on DSKJLSW7X2PROD with PROPOSALS
Totals may not sum due to rounding.
Alternative Option 2: To Retain All
Current Size Standards
benefits. Thus, SBA is not proposing
Alternative Option 2.
As discussed elsewhere in this rule,
SBA considered retaining the current
levels of all size standards, despite the
results of its analytical data, due to the
ongoing pandemic. SBA considered this
option because it would provide the
opportunity to reassess the economic
situation once the economic recovery
starts. Under this option, SBA would be
able to assess new data on economic
indicators, federal procurement, and
SBA loans before making any changes to
size standards. When compared to the
baseline, Alternative Option 2 has a net
impact of zero. As described previously,
SBA believes the proposed increases in
size standards will generate positive net
Initial Regulatory Flexibility Analysis
VerDate Sep<11>2014
17:12 May 24, 2021
Jkt 253001
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
financial assistance under SBA’s 7(a),
504 and EIDL Programs, and assistance
under other Federal small business
programs.
PO 00000
Frm 00033
Fmt 4702
Sfmt 4702
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 is 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?
E:\FR\FM\25MYP1.SGM
25MYP1
28034
Federal Register / Vol. 86, No. 99 / Tuesday, May 25, 2021 / Proposed Rules
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.
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)).
2. What is 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 350,742 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 1,839
businesses will be defined as small.
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
49 size standards and maintain 88 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 49 industries for
which the analytical results suggest
raising size standards would be raised.
However, the size standards of 66
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.
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
49 size standards and decreasing 66.
Retaining all size standards at their
current levels would be more onerous
for small businesses than the option of
adopting increases to size standards in
49 industries and retaining the current
size standards for the rest of the
industries, because the net benefit from
adopting the proposal is greater than the
net benefit of maintaining all size
standards at their current levels.
jbell on DSKJLSW7X2PROD with PROPOSALS
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. Changing size standards
alters the access to SBA’s programs that
assist small businesses but does not
impose a regulatory burden because size
standards neither regulate nor control
business behavior. Moreover, SBA’s
regulations specify that NAICS codes for
the Wholesale Trade and Retail Trade
sectors shall not be used to classify
Government acquisition for supplies (13
CFR 121.402(b)). As such, SBA
estimates that there will be no
additional costs as a result of this rule
for firms to update their entity
registrations in the Federal
Government’s System for Award
Management (SAM).
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
VerDate Sep<11>2014
17:12 May 24, 2021
Jkt 253001
Executive Order 13563
Executive Order 13563 emphasizes
the importance of quantifying both costs
PO 00000
Frm 00034
Fmt 4702
Sfmt 4702
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 5 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 2016. 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 was available for public
review and comments. The ‘‘Size
Standards Methodology’’ White Paper
explains how SBA establishes, reviews,
and modifies its receipts-based and
employee-based small business size
standards. 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,
E:\FR\FM\25MYP1.SGM
25MYP1
28035
Federal Register / Vol. 86, No. 99 / Tuesday, May 25, 2021 / Proposed Rules
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:
■
‘‘423520,’’ ‘‘423620,’’ ‘‘423730,’’
‘‘423860,’’ ‘‘423920,’’ 424110,’’
‘‘424450,’’ ‘‘424590,’’ ‘‘424690,’’
‘‘424710,’’ ‘‘425120,’’ ‘‘441310,’’
‘‘441320,’’ ‘‘442291,’’ ‘‘442299,’’
‘‘443141,’’ ‘‘444130,’’ ‘‘444210,’’
‘‘444220,’’ ‘‘445291,’’ ‘‘445292,’’
‘‘445299,’’ ‘‘445310,’’ ‘‘446110,’’
‘‘446130,’’ ‘‘446191,’’ ‘‘446199,’’
‘‘447190,’’ ‘‘448110,’’ ‘‘448150,’’
‘‘448190,’’ ‘‘448310,’’ ‘‘448320,’’
‘‘451110,’’ ‘‘451120,’’ ‘‘451140,’’
‘‘451211,’’ ‘‘451212,’’ ‘‘452311,’’
‘‘453220,’’ ‘‘453310,’’ ‘‘453910,’’
‘‘453920,’’ ‘‘453998,’’ ‘‘454210,’’ and
‘‘454390’’ 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.
§ 121.201 What size standards has SBA
identified by North American Industry
Classification System codes?
2. In § 121.201, amend the table
‘‘Small Business Size Standards by
NAICS Industry’’ by revising entries
‘‘423140,’’ ‘‘423330,’’ ‘‘423460,’’
*
■
*
*
*
*
SMALL BUSINESS SIZE STANDARDS BY NAICS INDUSTRY
NAICS
*
Size standards in
millions of dollars
Size standards in
number of
employees
*
*
*
*
*
*
*
*
NAICS U.S. industry title
*
*
*
Sector 42—Wholesale Trade
*
*
*
*
Subsector 423—Merchant Wholesalers, Durable Goods
*
423140 .........
*
423330 .........
*
423460 .........
*
423520 .........
*
423620 .........
jbell on DSKJLSW7X2PROD with PROPOSALS
*
423730 .........
*
423860 .........
VerDate Sep<11>2014
*
*
*
*
Motor Vehicle Parts (Used) Merchant Wholesalers ..........................................................
*
*
*
*
Roofing, Siding, and Insulation Material Merchant Wholesalers ......................................
*
*
*
*
*
*
*
*
*
*
*
*
18:18 May 24, 2021
Jkt 253001
PO 00000
Frm 00035
Fmt 4702
*
Sfmt 4702
E:\FR\FM\25MYP1.SGM
225
*
175
*
..............................
*
200
*
..............................
*
225
*
..............................
*
Transportation Equipment and Supplies (except Motor Vehicle) Merchant Wholesalers
*
..............................
*
Warm Air Heating and Air-Conditioning Equipment and Supplies Merchant Wholesalers.
*
*
*
Household Appliances, Electric Housewares, and Consumer Electronics Merchant
Wholesalers.
125
..............................
*
Coal and Other Mineral and Ore Merchant Wholesalers .................................................
*
*
*
Ophthalmic Goods Merchant Wholesalers ........................................................................
*
..............................
*
..............................
25MYP1
175
*
175
28036
Federal Register / Vol. 86, No. 99 / Tuesday, May 25, 2021 / Proposed Rules
SMALL BUSINESS SIZE STANDARDS BY NAICS INDUSTRY—Continued
NAICS
*
423920 .........
*
NAICS U.S. industry title
*
*
*
*
Size standards in
number of
employees
*
*
*
Toy and Hobby Goods and Supplies Merchant Wholesalers ...........................................
*
Size standards in
millions of dollars
*
..............................
*
*
175
*
Subsector 424—Merchant Wholesalers, Nondurable Goods
424110 .........
*
424450 .........
*
424590 .........
*
424690 .........
424710 .........
*
Printing and Writing Paper Merchant Wholesalers ...........................................................
*
*
*
*
Confectionery Merchant Wholesalers ...............................................................................
*
*
*
*
*
*
*
225
*
..............................
*
225
*
..............................
*
Other Chemical and Allied Products Merchant Wholesalers ............................................
Petroleum Bulk Stations and Terminals ............................................................................
*
*
*
Other Farm Product Raw Material Merchant Wholesalers ...............................................
*
..............................
*
175
*
..............................
..............................
*
175
225
*
*
*
*
Subsector 425—Wholesale Electronic Markets and Agents and Brokers
*
425120 .........
*
*
*
*
Wholesale Trade Agents and Brokers ..............................................................................
..............................
125
Sector 44–45—Retail Trade
*
*
*
*
*
*
*
*
*
Subsector 441—Motor Vehicle and Parts Dealers
*
441310 .........
441320 .........
*
*
*
*
Automotive Parts and Accessories Stores ........................................................................
Tire Dealers .......................................................................................................................
25.0
22.5
..............................
..............................
Subsector 442—Furniture and Home Furnishings Stores
*
442291 .........
442299 .........
*
*
*
*
*
Window Treatment Stores .................................................................................................
All Other Home Furnishings Stores ..................................................................................
*
10.0
29.5
..............................
..............................
19.5
..............................
Subsector 443—Electronics and Appliance Stores
443141 .........
*
Household Appliance Stores .............................................................................................
*
*
*
*
*
*
jbell on DSKJLSW7X2PROD with PROPOSALS
Subsector 444—Building Material and Garden Equipment and Supplies Dealers
*
*
*
*
*
444130 .........
Hardware Stores ...............................................................................................................
*
444210 .........
444220 .........
*
*
*
*
Outdoor Power Equipment Stores ....................................................................................
Nursery, Garden Center, and Farm Supply Stores ..........................................................
VerDate Sep<11>2014
17:12 May 24, 2021
Jkt 253001
PO 00000
Frm 00036
Fmt 4702
Sfmt 4702
E:\FR\FM\25MYP1.SGM
*
*
14.5
..............................
8.5
19.0
*
..............................
..............................
*
25MYP1
28037
Federal Register / Vol. 86, No. 99 / Tuesday, May 25, 2021 / Proposed Rules
SMALL BUSINESS SIZE STANDARDS BY NAICS INDUSTRY—Continued
NAICS
NAICS U.S. industry title
Size standards in
millions of dollars
Size standards in
number of
employees
*
*
Subsector 445—Food and Beverage Stores
*
445291
445292
445299
445310
.........
.........
.........
.........
*
*
*
*
Baked Goods Stores .........................................................................................................
Confectionery and Nut Stores ...........................................................................................
All Other Specialty Food Stores ........................................................................................
Beer, Wine, and Liquor Stores ..........................................................................................
14.0
17.0
9.0
9.0
..............................
..............................
..............................
..............................
33.0
..............................
26.0
20.0
8.5
*
..............................
..............................
..............................
Subsector 446—Health and Personal Care Stores
446110 .........
Pharmacies and Drug Stores ............................................................................................
*
446130 .........
446191 .........
446199 .........
*
*
*
*
Optical Goods Stores ........................................................................................................
Food (Health) Supplement Stores ....................................................................................
All Other Health and Personal Care Stores ......................................................................
*
Subsector 447—Gasoline Stations
*
447190 .........
*
*
*
*
*
Other Gasoline Stations ....................................................................................................
*
29.5
..............................
22.5
..............................
29.5
27.5
*
..............................
..............................
18.0
33.5
*
..............................
..............................
Subsector 448—Clothing and Clothing Accessories Stores
448110 .........
Men’s Clothing Stores .......................................................................................................
*
448150 .........
448190 .........
*
*
*
*
Clothing Accessories Stores .............................................................................................
Other Clothing Stores ........................................................................................................
*
*
448310 .........
448320 .........
*
*
*
*
Jewelry Stores ...................................................................................................................
Luggage and Leather Goods Stores .................................................................................
*
Subsector 451—Sporting Good, Hobby, Book and Music Stores
451110 .........
Sporting Goods Stores ......................................................................................................
23.5
..............................
451120 .........
Hobby, Toy, and Game Stores .........................................................................................
31.0
..............................
*
451140 .........
451211 .........
451212 .........
*
*
*
*
Musical Instrument and Supplies Stores ...........................................................................
Book Stores .......................................................................................................................
News Dealers and Newsstands ........................................................................................
20.0
31.5
20.0
*
..............................
..............................
..............................
*
Subsector 452—General Merchandise Stores
*
jbell on DSKJLSW7X2PROD with PROPOSALS
452311 .........
453220
453310
453910
453920
*
*
*
*
VerDate Sep<11>2014
*
*
*
Warehouse Clubs and Supercenters ................................................................................
*
.........
.........
.........
.........
*
41.5
*
*
*
Subsector 453—Miscellaneous Store Retailers
*
*
*
Gift, Novelty, and Souvenir Stores ....................................................................................
Used Merchandise Stores .................................................................................................
Pet and Pet Supplies Stores .............................................................................................
Art Dealers ........................................................................................................................
17:12 May 24, 2021
Jkt 253001
PO 00000
Frm 00037
Fmt 4702
Sfmt 4702
E:\FR\FM\25MYP1.SGM
*
*
*
*
*
12.0
12.5
28.0
14.5
25MYP1
..............................
..............................
..............................
..............................
..............................
28038
Federal Register / Vol. 86, No. 99 / Tuesday, May 25, 2021 / Proposed Rules
SMALL BUSINESS SIZE STANDARDS BY NAICS INDUSTRY—Continued
NAICS
NAICS U.S. industry title
Size standards in
millions of dollars
Size standards in
number of
employees
*
453998 .........
*
*
*
*
All Other Miscellaneous Store Retailers (except Tobacco Stores) ...................................
*
*
..............................
10.0
Subsector 454—Nonstore Retailers
*
*
*
*
*
454210 .........
Vending Machine Operators .............................................................................................
*
454390 .........
*
*
*
*
Other Direct Selling Establishments .................................................................................
*
*
*
Dated: May 13, 2021.
Isabella Casillas Guzman,
Administrator.
[FR Doc. 2021–10487 Filed 5–24–21; 8:45 am]
BILLING CODE 8026–03–P
DEPARTMENT OF TRANSPORTATION
Federal Aviation Administration
14 CFR Part 39
[Docket No. FAA–2021–0377; Project
Identifier MCAI–2021–00380–R]
RIN 2120–AA64
Airworthiness Directives; Bell Textron
Canada Limited Helicopters
Federal Aviation
Administration (FAA), DOT.
ACTION: Notice of proposed rulemaking
(NPRM).
AGENCY:
The FAA proposes to adopt a
new airworthiness directive (AD) for
certain Bell Textron Canada Limited
Model 505 helicopters. This proposed
AD was prompted by three occurrences
of metallic debris in the engine oil
lubrication system causing the 12 volts
direct current (VDC) reference voltage to
be shorted to ground and loss of
important flight information to the pilot.
This proposed AD would require
replacing a certain part-numbered relay
panel assembly. The FAA is proposing
this AD to address the unsafe condition
on these products.
DATES: The FAA must receive comments
on this proposed AD by July 9, 2021.
ADDRESSES: You may send comments,
using the procedures found in 14 CFR
11.43 and 11.45, by any of the following
methods:
• Federal eRulemaking Portal: Go to
https://www.regulations.gov. Follow the
instructions for submitting comments.
SUMMARY:
jbell on DSKJLSW7X2PROD with PROPOSALS
*
VerDate Sep<11>2014
17:12 May 24, 2021
Jkt 253001
*
Examining the AD Docket
You may examine the AD docket at
https://www.regulations.gov by
searching for and locating Docket No.
FAA–2021–0377; or in person at Docket
Operations between 9 a.m. and 5 p.m.,
Monday through Friday, except Federal
holidays. The AD docket contains this
NPRM, the Transport Canada AD, any
comments received, and other
information. The street address for
Docket Operations is listed above.
Hal
Jensen, Aerospace Engineer, Operational
Safety Branch, Compliance &
Airworthiness Division, FAA, 950
L’Enfant Plaza N SW, Washington, DC
20024; telephone (202) 267–9167; email
hal.jensen@faa.gov.
FOR FURTHER INFORMATION CONTACT:
SUPPLEMENTARY INFORMATION:
PO 00000
Frm 00038
Fmt 4702
Sfmt 4702
18.5
..............................
13.0
*
..............................
*
*
• Fax: (202) 493–2251.
• Mail: U.S. Department of
Transportation, Docket Operations,
M–30, West Building Ground Floor,
Room W12–140, 1200 New Jersey
Avenue SE, Washington, DC 20590.
• Hand Delivery: Deliver to Mail
address between 9 a.m. and 5 p.m.,
Monday through Friday, except Federal
holidays.
For service information identified in
this NPRM, contact Bell Textron Canada
Limited, 12,800 Rue de l’Avenir,
Mirabel, Quebec J7J1R4, Canada;
telephone (450) 437–2862 or (800) 363–
8023; fax (450) 433–0272; or at https://
www.bellcustomer.com. You may view
this service information at the FAA,
Office of the Regional Counsel,
Southwest Region, 10101 Hillwood
Pkwy., Room 6N–321, Fort Worth, TX
76177. For information on the
availability of this material at the FAA,
call (817) 222–5110.
*
*
*
Comments Invited
The FAA invites you to send any
written relevant data, views, or
arguments about this proposal. Send
your comments to an address listed
under ADDRESSES. Include ‘‘Docket No.
FAA–2021–0377; Project Identifier
MCAI–2021–00380–R’’ at the beginning
of your comments. The most helpful
comments reference a specific portion of
the proposal, explain the reason for any
recommended change, and include
supporting data. The FAA will consider
all comments received by the closing
date and may amend this proposal
because of those comments.
Except for Confidential Business
Information (CBI) as described in the
following paragraph, and other
information as described in 14 CFR
11.35, the FAA will post all comments
received, without change, to https://
www.regulations.gov, including any
personal information you provide. The
agency will also post a report
summarizing each substantive verbal
contact received about this NPRM.
Confidential Business Information
CBI is commercial or financial
information that is both customarily and
actually treated as private by its owner.
Under the Freedom of Information Act
(FOIA) (5 U.S.C. 552), CBI is exempt
from public disclosure. If your
comments responsive to this NPRM
contain commercial or financial
information that is customarily treated
as private, that you actually treat as
private, and that is relevant or
responsive to this NPRM, it is important
that you clearly designate the submitted
comments as CBI. Please mark each
page of your submission containing CBI
as ‘‘PROPIN.’’ The FAA will treat such
marked submissions as confidential
under the FOIA, and they will not be
placed in the public docket of this
E:\FR\FM\25MYP1.SGM
25MYP1
Agencies
[Federal Register Volume 86, Number 99 (Tuesday, May 25, 2021)]
[Proposed Rules]
[Pages 28012-28038]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2021-10487]
=======================================================================
-----------------------------------------------------------------------
SMALL BUSINESS ADMINISTRATION
13 CFR Part 121
RIN 3245-AH10
Small Business Size Standards: Wholesale Trade; Retail Trade
AGENCY: U.S. Small Business Administration.
ACTION: Proposed rule.
-----------------------------------------------------------------------
SUMMARY: The U.S. Small Business Administration (SBA or the Agency)
proposes to increase its receipts-based and employee-based small
business size definitions (commonly referred to as ``size standards'')
for North American Industry Classification System (NAICS) sectors
related to Wholesale Trade and Retail Trade. SBA proposes to increase
size standards for 49 industries in those sectors, including 14
industries in NAICS Sector 42 (Wholesale Trade) and 35 industries in
NAICS Sector 44-45 (Retail Trade). SBA's proposed revisions rely 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.
[[Page 28013]]
DATES: SBA must receive comments to this proposed rule on or before
July 26, 2021.
ADDRESSES: Identify your comments by RIN 3245-AH10 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:
Discussion of Size Standards
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/CDC), 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 Small Business Jobs Act of
2010 (Pub. L. 111-240, 124 Stat. 2504, September 27, 2010) (``Jobs
Act''), requiring SBA to review all size standards every 5 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 this comprehensive review of size standards, SBA is
reviewing industry size standards by groups of NAICS sectors. During
the previous 5-year comprehensive review, SBA generally reviewed NAICS
sectors independently and by their employee- based or receipt-based
size standard. Thus, during the previous comprehensive review, the
review of size standards for the industries covered by this proposed
rule was conducted under two separate rulemakings: One for receipts-
based size standards in Sector 44-45 (75 FR 61597, October 6, 2010) and
one for employee-based size standards in Sector 42 and two employee-
based industries in Sector 44-45 (81 FR 3941, January 25, 1016). Under
these rulemakings, SBA reviewed the size standards for 71 industries
within NAICS Sector 42 (Wholesale Trade) and 74 industries within NAICS
Sector 44-45 (Retail Trade). These reviews of size standards occurred
during October 2009 to January 2016. SBA's analyses of the relevant
industry data available at that time supported increasing employee-
based size standards for 46 industries and maintaining current size
standards for 25 industries in Sectors 42 and 44-45 (81 FR 3941) and
increasing receipts-based size standards for 46 industries, maintaining
current size standards for 27 industries and replacing the type of size
standard from receipts-based to employee-based size standards for 1
industry in Sector 44-45 (75 FR 61597). Table 1, Size Standards
Revisions During the First 5-Year Review, provides a summary of these
revisions by NAICS sector.
Table 1--Size Standards Revisions During the First 5-Year Review
--------------------------------------------------------------------------------------------------------------------------------------------------------
Number of type
Number of size Number of size Number of size Number of size of size
Sector Sector name standards standards standards standards standards
reviewed increased decreased maintained changed
--------------------------------------------------------------------------------------------------------------------------------------------------------
42........................................ Wholesale Trade............. 71 46 0 25 0
44-45..................................... Retail Trade *.............. 74 46 0 27 1
-------------------------------------------------------------------------------
Total................................. ............................ 145 92 0 52 1
--------------------------------------------------------------------------------------------------------------------------------------------------------
* The evaluation of this sector used the 2007 NAICS structure.
Currently, there are 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). Of these size levels,
16 are based on average annual receipts, 9 are based on average number
of employees, and 2 are based on other measures.
SBA also adjusts its monetary-based size standards for inflation at
least once every 5 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 5 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 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, it issues for public comment a proposed rule to
revise size standards for those
[[Page 28014]]
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 employee-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 $20.0 million or more in average annual
Federal contract dollars, the small business share of Federal contract
dollars relative to the small business share of total industry
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 cited above.
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 in the Industry
Analysis section of 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 of Federal contract dollars and the
small business share of total industry 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 in the industry analysis
section below.
SBA does not apply all aspects of its Methodology to all proposed
rules because not all features are relevant for every industry covered
by each proposed rule. For example, since NAICS codes in the Wholesale
Trade and Retail Trade sectors cannot be used to classify Government
acquisitions for supplies, and only the applicable manufacturing code
can be applied (13 CFR 121.402(b)(2)), the Federal contracting factor
is not considered in evaluating industry based size standards for these
sectors. 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, $7.0 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, including the Retail Trade
industries, the second comparison group consisted of industries with
size standards between $23.0 million and $35.5 million, with the
weighted average size standard for the group equaling $29.0 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
[[Page 28015]]
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.
For Wholesale Trade and Retail Trade industries using the employee-
based size standards, SBA used a different approach. The anchor
approach was difficult to implement in reviewing the size standards of
industries in Wholesale Trade because all the industries in the sector
were sharing the same 100-employee size standard. SBA used a quintile
approach in which industries were ranked and compared using each
industry factor based on where the factor of that industry falls within
the five ranked quintiles. The five implied size standard levels were
50 employees, 100 employees, 150 employees, 200 employees, and 250
employees. If the value of an industry factor fell in the first
quintile (i.e., less than the 20th percentile), that factor would
support a size standard of 50 employees. If the value fell in the
second quintile (i.e., the 20th to less than the 40th percentile), it
would support 100 employees. Similarly, if the value falls in the fifth
quintile (i.e., the 80th or higher percentile), the factor would
support 250 employees. 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, and
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. 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
[[Page 28016]]
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 the
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 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. In
addition to the impact on Federal contracting, SBA also examines
impacts on SBA's loan programs both under the current and revised size
standards.
As explained above, the Federal contracting factor is not evaluated
for Sectors 42 and 44-45, because the NAICS codes in these sectors
cannot be used to classify Government acquisitions for supplies, and
only the applicable manufacturing NAICS codes can be applied (13 CFR
121.402(b)(2)).
Sources of Industry and Program Data
SBA used a tabulation of the Economic Census from the U.S. Census
Bureau as its primary source of industry data to evaluate industry
characteristics and develop size standards for this proposed rule
(www.census.gov/programs-surveys/economic-census.html). The tabulation
based on the 2012 Economic Census was the latest available at the time
this proposed rule was developed. 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 either estimated
missing values using available relevant data or examined data at a
higher level of industry aggregation, such as at the NAICS Sector (2-
digit), Subsector (3-digit), or Industry Group (4-digit) 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 asset-
based size standards, SBA examines the data from the Statistics on
Depository Institutions (SDI) database (www5.fdic.gov/sdi/main.asp) of
the Federal Depository Insurance Corporation (FDIC) data. 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).
[[Page 28017]]
To calculate average assets, SBA used sales to total assets ratios
from the Risk Management Association's Annual eStatement Studies
(https://rmau.org). To evaluate Federal contracting trends and evaluate
exceptions or sub-industries under different 6-digit NAICS industries,
SBA examined the data on Federal prime contract awards from the Federal
Procurement Data System--Next Generation (FPDS-NG) (www.fpds.gov). To
assess the impact on financial assistance to small businesses, SBA
examined its internal data on 7(a) and 504 loan programs. For some
portion of impact analysis, SBA also evaluated the data from the System
of Award Management (SAM) (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 the
SBA Administrator. SBA considers as part of its evaluation whether a
business concern at a proposed size standard would be dominant in its
field of operation. For this, SBA generally examines the industry's
market share of firms at the proposed 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, which 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 has 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. Similarly, the
calculated value for an employee-based size standard is rounded to the
nearest 50 employees for industries in manufacturing and other sectors
(except Wholesale Trade and Retail Trade) and to the nearest 25
employees for industries in Wholesale Trade and Retail Trade. 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 employee-based size standards, SBA has established
250 employees and 1,500 employees, respectively, as the minimum and
maximum size standard levels for Manufacturing and other industries
(excluding Wholesale and Retail Trade).
The industry data suggests that a 250 employee minimum and 1,500
employee maximum size standards would be too high for Wholesale and
Retail Trade industries. Accordingly, SBA has established 50 employees
as the minimum size standard and 250 employees as the maximum size
standard for Wholesale and Retail Trade industries.
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: 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 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
an employee-based size standard is rounded to the nearest 50 employees
for industries in manufacturing and other sectors (except Wholesale
Trade and Retail Trade) and to the nearest 25 employees for industries
in Wholesale Trade and Retail Trade. SBA rounds the calculated size
standard value for a receipts-based
[[Page 28018]]
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 $250,000.
Table 2, 20th and 80th Percentiles of Industry Factors for
Receipts-Based Size Standards, and Table 3, 20th and 80th Percentiles
of Industry Factors for Employee-Based Size Standards, show the 20th
percentile and 80th percentile values for average firm size (simple and
weighted), average assets size, 4-firm concentration ratio, and Gini
coefficient for industries with receipt-based and employee-based size
standards, respectively.
Table 2--20th and 80th Percentiles of Industry Factors for Receipts-Based Size Standards
--------------------------------------------------------------------------------------------------------------------------------------------------------
Simple average Weighted average Four-firm
Industries/percentiles receipts size ($ receipts size ($ Average assets concentration Gini coefficient
million) million) size ($ 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
--------------------------------------------------------------------------------------------------------------------------------------------------------
Table 3--20th and 80th Percentiles of Industry Factors for Employee-Based Size Standards
--------------------------------------------------------------------------------------------------------------------------------------------------------
Simple average Weighted average Four-firm
Industries/percentiles firm size (no. of firm size (no. of Average assets concentration Gini coefficient
employees) employees) size ($ million) ratio (%)
--------------------------------------------------------------------------------------------------------------------------------------------------------
Manufacturing and other industries, excluding Sectors 42
and 44-45:
20th percentile...................................... 29.5 250.7 4.18 24.7 0.760
80th percentile...................................... 118.3 1,629.0 45.4 61.3 0.853
Industries in Sectors 42 and 44-45:
20th percentile...................................... 12.6 199.8 3.19 16.1 0.794
80th percentile...................................... 27.9 1,693.8 11.99 38.9 0.865
--------------------------------------------------------------------------------------------------------------------------------------------------------
Estimation of Size Standards Based on Industry Factors
Receipts-Based Size Standards
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% 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.
Employee-Based Size Standards
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 50 employees for Sector 42, Wholesale Trade
and 2 industries from sector 44-45, Retail Trade that have employee-
based size standards. 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 250 employees. 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 firm size in number of
employees is 19 employees, that would support a size standard of 125
employees. According to Table 3, the 20th percentile and 80th
percentile values of average number of employees are 12.6 and 27.9
employees, respectively. The 19 employee average firm size is 41.8%
between the 20th percentile value (12.6 employees) and
[[Page 28019]]
the 80th percentile value (27.9 employees) of simple average firm size
in number of employees ((19 employees - 12.6 employees) / (250
employees - 50 employees) = 0.4183 or 41.8%). Applying this percentage
to the difference between the 20th percentile value (50 employees) and
80th percentile (250 employees) value of size standards and then adding
the result to the 20th percentile size standard value (50 employees)
yields a calculated size standard value of 125 employees ([{250
employees - 50 employees{time} * 0.4183] + 50 employees = 134
employees). The final step is to round the calculated 134 employee size
standard to the nearest 25 employees, which in this example yields 125
employees. 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 on its website 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
$20.0 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. However, since
NAICS codes in the Wholesale Trade and Retail Trade sectors cannot be
used to classify Government acquisitions for supplies, and only the
applicable manufacturing code can be applied, the Federal contracting
factor is not considered in evaluating industry-based size standards
for these sectors (13 CFR 121.402(b)). For a detail explanation of the
evaluation of the Federal Contracting Factor, see the SBA Methodology
at www.sba.gov/size.
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). As discussed in
more detail above, the Federal contracting factor is not considered in
evaluating the Wholesale Trade and Retail Trade sectors. 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 Factors
Table 5 and Table 6 below, Size Standards Supported by Each Factor
for Each Industry (Employees) and Size Standards Supported by Each
Factor for Each Industry (Receipts), show the results of analyses of
industry by measure of size for each industry covered by this proposed
rule. NAICS industries in columns 3, 4, 5, 6 and 7 show two numbers.
The upper number is the value for the industry factor on the top of the
column and the lower number is the size standard supported by that
factor (number of employees in Table 5 and receipts in Table 6). Column
8 shows a calculated new size standard for each industry. This is the
average of the size standards supported by each factor (the size
standard for average firm size is an average of size standards
supported by simple average firm size, and weighted average firm size),
rounded to the nearest 25 employees for industries using employee-based
size standards in Wholesale Trade and Retail Trade, and to the nearest
$500,000 for industries in retail trade using receipts-based size
standards. Analytical details involved in the averaging procedure are
described in SBA's Methodology, which is available on its website at
www.sba.gov/size. For comparison with the calculated new size
standards, the current size standards are in column 9 of Table 5 and
Table 6.
Table 5--Size Standards Supported by Each Factor for Each Industry (Employees)
[For Columns 3-7: Upper value = Calculated factor; Lower value = size standard supported by that factor]
--------------------------------------------------------------------------------------------------------------------------------------------------------
Simple Weighted Calculated Current
average average Average size size
NAICS code NAICS industry title Type firm size firm size assets size Four-firm Gini standard standard
(number of (number of ($ million) ratio (%) coefficient (number of (number of
employees) employees) employees) employees)
(1) (2).................... (3) (4) (5) (6) (7) (9) (10)
--------------------------------------------------------------------------------------------------------------------------------------------------------
423110 Automobile and Other Motor Factor................. 21.4 657.2 37.1 47.4 0.883 225 250
Vehicle Merchant Wholesalers. Size Std............... 175 100 250 250 250
423120 Motor Vehicle Supplies and Factor................. 21.5 749.6 7.8 19.4 0.847 150 200
New Parts Merchant Wholesalers. Size Std............... 175 125 150 75 200
423130 Tire and Tube Merchant Factor................. 28.2 580.6 9.5 24.8 0.828 175 200
Wholesalers. Size Std............... 250 100 200 125 150
423140 Motor Vehicle Parts (Used) Factor................. 9.9 767.5 1.0 39.3 0.759 125 100
Merchant Wholesalers. Size Std............... 50 125 50 250 50
423210 Furniture Merchant Factor................. 12.0 103.0 2.3 16.1 0.798 50 100
Wholesalers. Size Std............... 50 50 50 50 75
423220 Home Furnishing Merchant Factor................. 14.1 225.1 3.8 17.7 0.794 75 100
Wholesalers. Size Std............... 75 50 75 75 50
423310 Lumber, Plywood, Millwork, Factor................. 18.8 396.0 4.3 13.0 0.802 75 150
and Wood Panel Merchant Wholesalers. Size Std............... 125 75 75 50 75
[[Page 28020]]
423320 Brick, Stone, and Related Factor................. 12.7 220.9 4.7 30.1 0.815 100 150
Construction Material Merchant Size Std............... 50 50 75 175 100
Wholesalers.
423330 Roofing, Siding, and Factor................. 32.6 1403.0 11.5 46.6 0.847 225 200
Insulation Material Merchant Size Std............... 250 200 250 250 200
Wholesalers.
423390 Other Construction Material Factor................. 14.9 168.2 2.4 18.5 0.749 75 100
Merchant Wholesalers. Size Std............... 75 50 50 75 50
423410 Photographic Equipment and Factor................. 17.8 399.7 6.2 56.1 0.832 150 200
Supplies Merchant Wholesalers. Size Std............... 125 75 125 250 150
423420 Office Equipment Merchant Factor................. 49.4 10864.6 5.2 49.2 0.849 200 200
Wholesalers. Size Std............... 250 250 100 250 200
423430 Computer and Computer Factor................. 31.0 4333.1 10.1 31.9 0.872 225 250
Peripheral Equipment and Software Size Std............... 250 250 200 200 250
Merchant Wholesalers.
423440 Other Commercial Equipment Factor................. 12.8 164.2 2.2 12.4 0.775 50 100
Merchant Wholesalers. Size Std............... 50 50 50 50 50
423450 Medical, Dental, and Hospital Factor................. 26.9 2500.2 8.4 22.6 0.873 200 200
Equipment and Supplies Merchant Size Std............... 225 250 175 100 250
Wholesalers.
423460 Ophthalmic Goods Merchant Factor................. 24.3 1532.8 4.0 35.0 0.839 175 150
Wholesalers. Size Std............... 200 225 75 225 175
423490 Other Professional Equipment Factor................. 17.0 417.9 3.5 36.7 0.823 125 150
and Supplies Merchant Wholesalers. Size Std............... 100 75 50 225 125
423510 Metal Service Centers and Factor................. 19.7 653.7 12.0 15.9 0.842 150 200
Other Metal Merchant Wholesalers. Size Std............... 150 100 250 50 175
423520 Coal and Other Mineral and Factor................. 8.5 64.6 27.0 58.9 0.866 200 100
Ore Merchant Wholesalers. Size Std............... 50 50 250 250 250
423610 Electrical Apparatus and Factor................. 20.7 1693.8 5.5 16.1 0.836 125 200
Equipment, Wiring Supplies, and Size Std............... 150 250 100 50 175
Related Equipment Merchant
Wholesalers.
423620 Household Appliances, Factor................. 20.8 442.3 14.4 36.0 0.870 225 200
Electric Housewares, and Consumer Size Std............... 150 75 250 225 250
Electronics Merchant Wholesalers.
423690 Other Electronic Parts and Factor................. 31.5 6181.3 11.4 32.8 0.871 225 250
Equipment Merchant Wholesalers. Size Std............... 250 250 225 200 250
423710 Hardware Merchant Wholesalers Factor................. 15.9 425.2 3.6 19.8 0.812 75 150
Size Std............... 100 75 50 75 100
423720 Plumbing and Heating Factor................. 24.2 2136.3 5.6 32.6 0.811 150 200
Equipment and Supplies (Hydronics) Size Std............... 200 250 100 200 100
Merchant Wholesalers.
[[Page 28021]]
423730 Warm Air Heating and Air- Factor................. 28.3 1400.6 6.4 39.2 0.821 175 150
Conditioning Equipment and Supplies Size Std............... 250 200 125 250 125
Merchant Wholesalers.
423740 Refrigeration Equipment and Factor................. 18.5 431.0 3.7 29.5 0.790 100 100
Supplies Merchant Wholesalers. Size Std............... 125 75 50 175 50
423810 Construction and Mining Factor................. 30.4 603.3 18.2 32.7 0.840 200 250
(except Oil Well) Machinery and Size Std............... 250 100 250 200 175
Equipment Merchant Wholesalers.
423820 Farm and Garden Machinery and Factor................. 19.0 168.8 8.3 22.6 0.794 100 100
Equipment Merchant Wholesalers. Size Std............... 125 50 175 100 50
423830 Industrial Machinery and Factor................. 15.1 498.3 4.1 10.8 0.795 75 100
Equipment Merchant Wholesalers. Size Std............... 75 100 75 50 50
423840 Industrial Supplies Merchant Factor................. 17.6 654.3 5.1 18.5 0.805 100 100
Wholesalers. Size Std............... 125 100 100 75 75
423850 Service Establishment Factor................. 14.9 885.3 1.9 27.9 0.789 100 100
Equipment and Supplies Merchant Size Std............... 75 150 50 150 50
Wholesalers.
423860 Transportation Equipment and Factor................. 17.2 223.1 10.4 34.9 0.829 175 150
Supplies (except Motor Vehicle) Size Std............... 100 50 225 225 150
Merchant Wholesalers.
423910 Sporting and Recreational Factor................. 10.9 199.8 3.1 11.0 0.806 50 100
Goods and Supplies Merchant Size Std............... 50 50 50 50 75
Wholesalers.
423920 Toy and Hobby Goods and Factor................. 16.2 559.8 6.2 37.8 0.841 175 150
Supplies Merchant Wholesalers. Size Std............... 100 100 125 250 175
423930 Recyclable Material Merchant Factor................. 16.0 291.3 4.5 19.9 0.816 100 100
Wholesalers. Size Std............... 100 50 75 75 125
423940 Jewelry, Watch, Precious Factor................. 7.1 183.5 4.0 27.4 0.817 100 100
Stone, and Precious Metal Merchant Size Std............... 50 50 75 150 125
Wholesalers.
423990 Other Miscellaneous Durable Factor................. 9.5 273.5 1.9 16.8 0.805 50 100
Goods Merchant Wholesalers. Size Std............... 50 50 50 50 75
424110 Printing and Writing Paper Factor................. 22.4 589.6 12.5 42.5 0.876 225 200
Merchant Wholesalers. Size Std............... 175 100 250 250 250
424120 Stationery and Office Factor................. 18.6 2997.2 3.1 29.5 0.845 150 150
Supplies Merchant Wholesalers. Size Std............... 125 250 50 175 200
424130 Industrial and Personal Factor................. 16.4 267.5 5.3 29.7 0.832 125 150
Service Paper Merchant Wholesalers. Size Std............... 100 50 100 175 150
424210 Drugs and Druggists' Sundries Factor................. 44.8 3002.2 36.8 43.5 0.890 250 250
Merchant Wholesalers. Size Std............... 250 250 250 250 250
[[Page 28022]]
424310 Piece Goods, Notions, and Factor................. 9.0 83.8 2.3 15.4 0.775 50 100
Other Dry Goods Merchant Size Std............... 50 50 50 50 50
Wholesalers.
424320 Men's and Boys' Clothing and Factor................. 15.7 281.1 5.8 21.3 0.836 125 150
Furnishings Merchant Wholesalers. Size Std............... 100 50 100 100 175
424330 Women's, Children's, and Factor................. 12.4 182.2 3.4 15.9 0.814 75 100
Infants' Clothing and Accessories Size Std............... 50 50 50 50 100
Merchant Wholesalers.
424340 Footwear Merchant Wholesalers Factor................. 17.8 439.7 9.6 41.0 0.849 200 200
Size Std............... 125 75 200 250 200
424410 General Line Grocery Merchant Factor................. 62.9 9786.9 16.6 38.2 0.883 250 250
Wholesalers. Size Std............... 250 250 250 250 250
424420 Packaged Frozen Food Merchant Factor................. 27.5 871.9 8.3 21.4 0.822 150 200
Wholesalers. Size Std............... 250 150 175 100 125
424430 Dairy Product (except Dried Factor................. 27.9 952.2 8.7 28.4 0.862 200 200
or Canned) Merchant Wholesalers. Size Std............... 250 150 175 150 250
424440 Poultry and Poultry Product Factor................. 24.5 334.4 4.9 26.5 0.783 125 150
Merchant Wholesalers. Size Std............... 200 75 100 150 50
424450 Confectionery Merchant Factor................. 30.5 11213.6 7.7 60.3 0.873 225 200
Wholesalers. Size Std............... 250 250 150 250 250
424460 Fish and Seafood Merchant Factor................. 11.2 90.0 2.0 10.9 0.725 50 100
Wholesalers. Size Std............... 50 50 50 50 50
424470 Meat and Meat Product Factor................. 19.9 271.3 4.3 22.7 0.813 100 150
Merchant Wholesalers. Size Std............... 150 50 75 100 100
424480 Fresh Fruit and Vegetable Factor................. 24.0 293.2 3.2 12.2 0.767 75 100
Merchant Wholesalers. Size Std............... 200 75 50 50 50
424490 Other Grocery and Related Factor................. 27.7 7804.5 8.9 25.8 0.874 200 250
Products Merchant Wholesalers. Size Std............... 250 250 175 125 250
424510 Grain and Field Bean Merchant Factor................. 21.8 375.0 42.3 31.6 0.831 175 200
Wholesalers. Size Std............... 175 75 250 175 150
424520 Livestock Merchant Factor................. 7.9 31.8 4.4 21.5 0.817 100 100
Wholesalers. Size Std............... 50 50 75 100 125
424590 Other Farm Product Raw Factor................. 9.6 54.3 10.2 35.0 0.857 175 100
Material Merchant Wholesalers. Size Std............... 50 50 200 225 225
424610 Plastics Materials and Basic Factor................. 12.6 117.2 5.9 26.4 0.825 125 150
Forms and Shapes Merchant Size Std............... 50 50 100 150 150
Wholesalers.
424690 Other Chemical and Allied Factor................. 18.6 1443.2 9.9 13.7 0.857 175 150
Products Merchant Wholesalers. Size Std............... 125 225 200 50 225
424710 Petroleum Bulk Stations and Factor................. 26.1 425.6 58.6 38.9 0.865 225 200
Terminals. Size Std............... 225 75 250 250 250
424720 Petroleum and Petroleum Factor................. 15.4 253.7 49.9 33.6 0.881 200 200
Products Merchant Wholesalers Size Std............... 75 50 250 200 250
(except Bulk Stations and
Terminals).
424810 Beer and Ale Merchant Factor................. 70.4 498.2 14.7 14.5 0.733 125 200
Wholesalers. Size Std............... 250 100 250 50 50
[[Page 28023]]
424820 Wine and Distilled Alcoholic Factor................. 40.9 3125.0 15.2 31.7 0.872 225 250
Beverage Merchant Wholesalers. Size Std............... 250 250 250 175 250
424910 Farm Supplies Merchant Factor................. 20.2 1343.1 15.0 20.3 0.838 175 200
Wholesalers. Size Std............... 150 200 250 75 175
424920 Book, Periodical, and Factor................. 24.8 1541.6 4.7 41.9 0.868 200 200
Newspaper Merchant Wholesalers. Size Std............... 200 225 75 250 250
424930 Flower, Nursery Stock, and Factor................. 14.9 200.8 1.2 9.2 0.749 50 100
Florists' Supplies Merchant Size Std............... 75 50 50 50 50
Wholesalers.
424940 Tobacco and Tobacco Product Factor................. 41.4 2419.0 11.6 55.4 0.859 250 250
Merchant Wholesalers. Size Std............... 250 250 250 250 225
424950 Paint, Varnish, and Supplies Factor................. 16.7 359.6 5.4 41.0 0.829 150 150
Merchant Wholesalers. Size Std............... 100 75 100 250 150
424990 Other Miscellaneous Factor................. 7.2 92.2 1.4 14.4 0.799 50 100
Nondurable Goods Merchant Size Std............... 50 50 50 50 75
Wholesalers.
425110 Business to Business Factor................. 3.8 20.1 3.0 33.7 0.792 100 100
Electronic Markets. Size Std............... 50 50 50 200 50
425120 Wholesale Trade Agents and Factor................. 6.9 5713.0 4.3 24.9 0.834 125 100
Brokers. Size Std............... 50 250 75 125 150
441110 New Car Dealers.............. Factor................. 54.5 870.2 12.1 5.8 0.632 150 200
Size Std............... 250 150 250 50 50
454310 Fuel Dealers................. Factor................. 14.8 1890.5 2.1 17.4 0.723 75 100
Size Std............... 75 250 50 50 50
--------------------------------------------------------------------------------------------------------------------------------------------------------
Table 6--Size Standards Supported by Each Factor for Each Industry (Receipts)
[For columns 3-7: Upper value = Calculated factor; Lower value = size standard supported by that factor]
--------------------------------------------------------------------------------------------------------------------------------------------------------
Simple Weighted Calculated Current
average average Average Four-firm Gini size size
NAICS code NAICS industry title Type firm size firm size assets size ratio (%) coefficient standard ($ standard ($
($ million) ($ million) ($ million) million) million)
(1) (2).................... (3) (4) (5) (6) (7) (9) (10)
--------------------------------------------------------------------------------------------------------------------------------------------------------
441120 Used Car Dealers............. Factor................. 3.0 1,604.2 0.8 18.0 0.704 ........... ...........
Size Std............... 16.5 41.5 10.5 16.0 11.5 17.0 27.0
441210 Recreational Vehicle Dealers. Factor................. 6.4 219.3 2.8 18.8 0.724 ........... ...........
Size Std............... 30.5 14.5 21.5 16.5 15.0 19.0 35.0
441222 Boat Dealers................. Factor................. 2.7 79.2 1.3 14.4 0.677 ........... ...........
Size Std............... 15.5 10.0 13.0 13.0 6.5 11.5 35.0
441228 Motorcycle, ATV, and All Factor................. 3.4 25.8 1.5 4.4 0.656 ........... ...........
Other Motor Vehicle Dealers. Size Std............... 18.5 8.0 14.5 6.0 6.0 10.0 35.0
441310 Automotive Parts and Factor................. 2.7 2,949.6 1.0 45.1 0.767 ........... ...........
Accessories Stores. Size Std............... 15.5 41.5 12.0 37.0 22.5 25.0 16.5
441320 Tire Dealers................. Factor................. 3.0 1,312.0 1.0 33.7 0.759 ........... ...........
Size Std............... 16.5 41.5 11.5 28.0 21.5 22.5 16.5
442110 Furniture Stores............. Factor................. 3.3 631.2 1.2 17.3 0.774 ........... ...........
Size Std............... 18.0 28.5 13.0 15.5 24.0 19.0 22.0
442210 Floor Covering Stores........ Factor................. 1.5 18.1 0.4 4.7 0.616 ........... ...........
Size Std............... 10.5 8.0 8.5 6.0 6.0 7.5 8.0
442291 Window Treatment Stores...... Factor................. 0.6 17.2 0.2 21.7 0.621 ........... ...........
Size Std............... 7.0 8.0 7.5 19.0 6.0 10.0 8.0
442299 All Other Home Furnishings Factor................. 2.9 3,614.3 1.1 59.8 0.836 ........... ...........
Stores. Size Std............... 16.0 41.5 12.0 41.5 35.5 29.5 22.0
[[Page 28024]]
443141 Household Appliance Stores... Factor................. 2.5 513.0 0.8 28.2 0.767 ........... ...........
Size Std............... 14.5 24.5 10.5 24.0 23.0 19.5 12.0
443142 Electronics Stores........... Factor................. 4.4 15,362.2 1.3 63.8 0.854 ........... ...........
Size Std............... 22.5 41.5 13.0 41.5 38.5 31.5 35.0
444110 Home Centers................. Factor................. 61.9 ........... 23.8 ........... ........... ........... ...........
Size Std............... 41.5 ........... 41.5 ........... ........... 41.5 41.5
444120 Paint and Wallpaper Stores... Factor................. 5.1 ........... 1.8 ........... ........... ........... ...........
Size Std............... 25.5 ........... 16.0 ........... ........... 21.0 30.0
444130 Hardware Stores.............. Factor................. 1.9 493.3 0.9 25.9 0.674 ........... ...........
Size Std............... 12.5 24.0 11.0 22.0 6.0 14.5 8.0
444190 Other Building Material Factor................. 3.3 271.8 1.1 9.1 0.729 ........... ...........
Dealers. Size Std............... 18.0 16.5 12.5 9.0 16.0 14.0 22.0
444210 Outdoor Power Equipment Factor................. 1.5 17.9 0.7 8.2 0.612 ........... ...........
Stores. Size Std............... 11.0 8.0 10.0 8.0 6.0 8.5 8.0
444220 Nursery, Garden Center, and Factor................. 3.0 755.2 1.2 21.6 0.749 ........... ...........
Farm Supply Stores. Size Std............... 17.0 32.5 12.5 18.5 19.5 19.0 12.0
445110 Supermarkets and Other Factor................. 12.7 20,298.0 2.5 31.1 0.863 ........... ...........
Grocery (except Convenience) Stores. Size Std............... 41.5 41.5 20.0 26.0 40.0 32.0 35.0
445120 Convenience Stores........... Factor................. 1.0 126.3 0.2 12.5 0.606 ........... ...........
Size Std............... 8.5 11.5 7.0 11.5 6.0 8.5 32.0
445210 Meat Markets................. Factor................. 1.2 9.2 0.3 5.5 0.583 ........... ...........
Size Std............... 9.5 7.5 7.5 6.0 6.0 7.0 8.0
445220 Fish and Seafood Markets..... Factor................. 1.1 6.0 0.3 5.8 0.622 ........... ...........
Size Std............... 9.0 7.5 7.5 6.5 6.0 7.0 8.0
445230 Fruit and Vegetable Markets.. Factor................. 1.3 13.0 0.2 7.9 0.677 ........... ...........
Size Std............... 10.0 8.0 7.0 8.0 6.5 7.5 8.0
445291 Baked Goods Stores........... Factor................. 0.6 83.7 0.2 35.8 0.694 ........... ...........
Size Std............... 7.0 10.0 7.0 30.0 9.5 14.0 8.0
445292 Confectionery and Nut Stores. Factor................. 0.9 104.7 0.3 37.6 0.741 ........... ...........
Size Std............... 8.5 11.0 8.0 31.0 18.0 17.0 8.0
445299 All Other Specialty Food Factor................. 0.7 23.8 0.2 15.6 0.659 ........... ...........
Stores. Size Std............... 7.5 8.0 7.5 14.0 6.0 9.0 8.0
445310 Beer, Wine, and Liquor Stores Factor................. 1.5 163.9 0.5 10.1 0.607 ........... ...........
Size Std............... 10.5 13.0 8.5 9.5 6.0 9.0 8.0
446110 Pharmacies and Drug Stores... Factor................. 12.1 41,475.3 2.5 69.5 0.797 ........... ...........
Size Std............... 41.5 41.5 19.5 41.5 28.5 33.0 30.0
446120 Cosmetics, Beauty Supplies, Factor................. 2.1 1,347.4 0.8 56.3 0.817 ........... ...........
and Perfume Stores. Size Std............... 13.0 41.5 10.5 41.5 32.0 28.0 30.0
446130 Optical Goods Stores......... Factor................. 2.0 1,672.9 0.6 57.2 0.780 ........... ...........
Size Std............... 13.0 41.5 9.5 41.5 25.0 26.0 22.0
446191 Food (Health) Supplement Factor................. 1.2 518.0 0.4 45.0 0.734 ........... ...........
Stores. Size Std............... 9.5 24.5 8.0 37.0 17.0 20.0 16.5
446199 All Other Health and Personal Factor................. 1.4 28.4 0.5 7.6 0.681 ........... ...........
Care Stores. Size Std............... 10.5 8.5 8.5 8.0 7.0 8.5 8.0
447110 Gasoline Stations with Factor................. 7.7 3,327.0 1.5 13.2 0.746 ........... ...........
Convenience Stores. Size Std............... 36.0 41.5 14.5 12.0 19.0 21.0 32.0
447190 Other Gasoline Stations...... Factor................. 10.5 7,328.2 2.2 38.7 0.784 ........... ...........
Size Std............... 41.5 41.5 18.0 32.0 26.0 29.5 16.5
448110 Men's Clothing Stores........ Factor................. 2.0 495.9 0.9 42.4 0.780 ........... ...........
Size Std............... 13.0 24.0 11.0 35.0 25.0 22.5 12.0
448120 Women's Clothing Stores...... Factor................. 3.2 1,087.6 1.2 25.8 0.839 ........... ...........
Size Std............... 17.5 41.5 12.5 22.0 36.0 25.0 30.0
448130 Children's and Infants' Factor................. 4.4 1,116.2 1.7 61.1 0.871 ........... ...........
Clothing Stores. Size Std............... 22.5 41.5 15.5 41.5 41.5 32.5 35.0
448140 Family Clothing Stores....... Factor................. 12.8 6,648.7 5.1 49.6 0.882 ........... ...........
Size Std............... 41.5 41.5 34.5 40.5 41.5 39.5 41.5
448150 Clothing Accessories Stores.. Factor................. 2.3 1,314.2 1.0 58.3 0.840 ........... ...........
Size Std............... 14.0 41.5 11.5 41.5 36.0 29.5 16.5
448190 Other Clothing Stores........ Factor................. 2.0 1,894.8 0.8 51.3 0.806 ........... ...........
Size Std............... 12.5 41.5 10.5 41.5 30.0 27.5 22.0
[[Page 28025]]
448210 Shoe Stores.................. Factor................. 5.2 1,301.1 2.2 34.3 0.841 ........... ...........
Size Std............... 25.5 41.5 18.0 28.5 36.5 29.0 30.0
448310 Jewelry Stores............... Factor................. 1.7 580.1 1.0 24.0 0.752 ........... ...........
Size Std............... 11.5 26.5 12.0 20.5 20.0 18.0 16.5
448320 Luggage and Leather Goods Factor................. 5.0 983.0 3.1 75.0 0.848 ........... ...........
Stores. Size Std............... 24.5 40.0 23.0 41.5 37.5 33.5 30.0
451110 Sporting Goods Stores........ Factor................. 2.5 1,481.1 1.0 32.6 0.782 ........... ...........
Size Std............... 15.0 41.5 12.0 27.5 25.5 23.5 16.5
451120 Hobby, Toy, and Game Stores.. Factor................. 3.5 3,091.1 1.4 77.4 0.851 ........... ...........
Size Std............... 18.5 41.5 14.0 41.5 38.0 31.0 30.0
451130 Sewing, Needlework, and Piece Factor................. 1.1 1,257.0 0.5 ........... 0.776 ........... ...........
Goods Stores. Size Std............... 9.0 41.5 8.5 ........... 24.5 19.5 30.0
451140 Musical Instrument and Factor................. 1.4 536.2 0.7 41.8 0.734 ........... ...........
Supplies Stores. Size Std............... 10.5 25.0 10.0 34.5 17.0 20.0 12.0
451211 Book Stores.................. Factor................. 3.9 3,005.3 1.6 69.7 0.853 ........... ...........
Size Std............... 20.5 41.5 14.5 41.5 38.5 31.5 30.0
451212 News Dealers and Newsstands.. Factor................. 1.0 242.4 0.4 57.3 0.742 ........... ...........
Size Std............... 8.5 15.5 8.5 41.5 18.0 20.0 8.0
452210 Department Stores............ Factor................. 11,030.9 25,982.4 5,014.0 82.7 0.555 ........... ...........
Size Std............... 41.5 41.5 41.5 41.5 6.0 32.5 35.0
452311 Warehouse Clubs and Factor................. 44,853.1 210,447.9 15,466.6 93.6 ........... ........... ...........
Supercenters. Size Std............... 41.5 41.5 41.5 41.5 ........... 41.5 32.0
452319 All Other General Merchandise Factor................. 7.1 7,543.1 2.4 66.1 0.876 ........... ...........
Stores. Size Std............... 33.0 41.5 19.5 41.5 41.5 35.0 35.0
453110 Florists..................... Factor................. 0.3 1.5 0.1 1.6 0.527 ........... ...........
Size Std............... 6.0 7.5 6.5 6.0 6.0 6.5 8.0
453210 Office Supplies and Factor................. 5.0 4,645.9 1.4 85.1 0.862 ........... ...........
Stationery Stores. Size Std............... 24.5 41.5 14.0 41.5 40.0 32.0 35.0
453220 Gift, Novelty, and Souvenir Factor................. 0.8 165.7 0.3 18.8 0.713 ........... ...........
Stores. Size Std............... 8.0 13.0 8.0 16.5 13.0 12.0 8.0
453310 Used Merchandise Stores...... Factor................. 0.9 73.6 0.4 12.7 0.756 ........... ...........
Size Std............... 8.5 10.0 8.5 11.5 21.0 12.5 8.0
453910 Pet and Pet Supplies Stores.. Factor................. 2.8 3,479.3 0.8 69.0 0.814 ........... ...........
Size Std............... 16.0 41.5 10.5 41.5 31.0 28.0 22.0
453920 Art Dealers.................. Factor................. 1.4 55.3 0.7 14.4 0.779 ........... ...........
Size Std............... 10.0 9.0 10.0 13.0 25.0 14.5 8.0
453930 Manufactured (Mobile) Home Factor................. 2.4 235.3 1.4 31.4 0.696 ........... ...........
Dealers. Size Std............... 14.5 15.0 14.0 26.5 10.0 16.5 16.5
453991 Tobacco Stores............... Factor................. 1.2 17.1 0.4 5.7 0.656 ........... ...........
Size Std............... 9.5 8.0 8.0 6.5 6.0 7.5 8.0
453998 All Other Miscellaneous Store Factor................. 1.2 55.7 0.4 10.1 0.712 ........... ...........
Retailers (except Tobacco Stores). Size Std............... 9.5 9.0 8.5 9.5 13.0 10.0 8.0
454110 Electronic Shopping and Mail- Factor................. 11.4 9,493.0 3.3 30.2 0.868 ........... ...........
Order Houses. Size Std............... 41.5 41.5 24.5 25.5 41.0 33.0 41.5
454210 Vending Machine Operators.... Factor................. 1.6 254.9 0.6 28.2 0.787 ........... ...........
Size Std............... 11.0 16.0 9.5 24.0 26.5 18.5 12.0
454390 Other Direct Selling Factor................. 1.1 202.5 0.4 15.1 0.749 ........... ...........
Establishments. Size Std............... 9.0 14.0 8.0 13.5 19.5 13.0 8.0
--------------------------------------------------------------------------------------------------------------------------------------------------------
Summary of Calculated Size Standards
Of the 137 industries reviewed in this proposed rule, the results
from analyses of the latest available data on the four primary industry
factors (i.e., average firm size, average assets size, four-firm ratio,
and Gini coefficient) from Table 5 and Table 6 above support increasing
size standards for 49 industries, decreasing size standards for 66
industries, and maintaining size standards for 22 industries. Table 7,
Summary of Calculated Size Standards, summarizes these results by NAICS
sector.
[[Page 28026]]
Table 7--Summary of Calculated Size Standards
----------------------------------------------------------------------------------------------------------------
Number of size Number of size Number of size Number of size
Sector Sector name standards standards standards standards
reviewed increased decreased maintained
----------------------------------------------------------------------------------------------------------------
42............................ Wholesale Trade. 71 14 38 19
44-45......................... Retail Trade.... 66 35 28 3
---------------------------------------------------------------
Total..................... ................ 137 49 66 22
----------------------------------------------------------------------------------------------------------------
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 5 and Table 6 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 96.9% of 7(a)
and 504 loans in fiscal years 2016-2018 went to businesses below the
current or proposed size standards.
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. 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% 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 by COVID-19. On April 24,
2020, additional funding for the CARES Act, including for the PPP, was
provided (see The Paycheck Protection Program and Health Care
Enhancement Act, Pub. L. 116-139). On December 27, 2020, Congress
passed the Economic Aid to Hard-Hit Small Businesses, Nonprofits, and
Venues Act as part of the Consolidation Appropriations Act, approving
additional funding for the PPP loans program and allowing the hardest-
hit small businesses to receive a second draw PPP loan (Pub. L. 116-
260). Additionally, the law approved grants for shuttered-venue
operators. On March 11, 2021, the American Rescue Plan Act of 2021
(Pub. L. 117-2) was signed into law. This act provides additional
relief for the nation's small businesses and hard-hit industries by
adding new support to the recovery effort, including additional funding
for the Paycheck Protection Program and the Shuttered Venue Operators
Grant program. The act also adds additional funding for targeted
Economic Injury Disaster Loan (EIDL) Advance payments.
The Agency is following closely the development of the pandemic and
the economic situation. A variety of economic indicators such as the
Gross Domestic Product (GDP) and the unemployment rate show that this
recession is significantly worse than any other recession since World
War II. According to the Bureau of Economic Analysis (BEA), real GDP
decreased 5% and real personal consumption in goods and services
decreased 6.9% in the first quarter of 2020. In the second quarter,
real GDP decreased 31.4% and real personal consumption in goods and
services decreased 33.2%. In the third quarter, real GDP increased
33.4%, and real personal consumption in goods and services increased
41.0%. Real GDP showed a more moderate increase of 4.3% and real
personal consumption expenditures increased 2.3% in the fourth quarter
of 2020. Real GDP decreased 3.5% in 2020 from 2019 (from the 2019
annual level to the 2020 annual level), compared with an increase of
2.2 percent in 2019 from 2018. According to the BEA's `advance'
estimate, real GDP increased 6.4% and real personal consumption
expenditures increased 10.7% in the first quarter of 2021.
In April 2021, both the unemployment rate, at 6.1%, and the number
of unemployed persons, at 9.8 million, were little changed from the
previous month. These measures are down considerably from their April
2020 highs (14.8% and 23.1 million, respectively) but remain well above
their pre-pandemic levels in February 2020 (3.5% and 5.7 million,
respectively). Specifically, for the sectors evaluated in this proposed
rule, in April 2021, the unemployment rate for the Wholesale Trade
sector was 3.3%, and the unemployment rate for the Retail Trade sector
was 6.8%. In April 2020, the unemployment rates for these sectors were
9.9% and 18.6%, respectively. The Federal Reserve Board's Monetary
Policy Report, published in June 2020, shows that, in general, the most
impacted firms in these sectors are small businesses.\1\
---------------------------------------------------------------------------
\1\ See the special section titled ``Small Businesses during the
COVID-19 Crisis'' on page 24 of the Monetary Policy Report prepared
by the Board of Governors of the Federal Reserve System in June
2020. (https://www.federalreserve.gov/monetarypolicy/files/20200612_mprfullreport.pdf). The latest publication of the Monetary
Policy Report was published on February 19, 2021. Also, see https://portal.census.gov/pulse/data. This report 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.
---------------------------------------------------------------------------
Proposed Changes to Size Standards
Accordingly, in view of the analytical data discussed above and the
economic impacts of the COVID-19 pandemic, SBA proposes to adopt
increases to size standards for 49 industries and to retain the current
size standards for 88 industries.
The proposed size standards are presented by measure of size in
Table 8, Proposed Size Standards Revisions (Employees) and Table 9,
Proposed Size
[[Page 28027]]
Standards Revisions (Receipts). Also presented in Table 8 and Table 9
are current and calculated size standards for comparison.
Table 8--Proposed Size Standards Revisions (Employees)
----------------------------------------------------------------------------------------------------------------
Calculated Proposed size Current size
NAICS code NAICS industry title size standard standard standard
(employees) (employees) (employees)
----------------------------------------------------------------------------------------------------------------
423140............................. Motor Vehicle Parts (Used) 125 125 100
Merchant Wholesalers.
423330............................. Roofing, Siding, and 225 225 200
Insulation Material
Merchant Wholesalers.
423460............................. Ophthalmic Goods Merchant 175 175 150
Wholesalers.
423520............................. Coal and Other Mineral and 200 200 100
Ore Merchant Wholesalers.
423620............................. Household Appliances, 225 225 200
Electric Housewares, and
Consumer Electronics
Merchant Wholesalers.
423730............................. Warm Air Heating and 175 175 150
Air[dash]Conditioning
Equipment and Supplies
Merchant Wholesalers.
423860............................. Transportation Equipment 175 175 150
and Supplies (except Motor
Vehicle) Merchant
Wholesalers.
423920............................. Toy and Hobby Goods and 175 175 150
Supplies Merchant
Wholesalers.
424110............................. Printing and Writing Paper 225 225 200
Merchant Wholesalers.
424450............................. Confectionery Merchant 225 225 200
Wholesalers.
424590............................. Other Farm Product Raw 175 175 100
Material Merchant
Wholesalers.
424690............................. Other Chemical and Allied 175 175 150
Products Merchant
Wholesalers.
424710............................. Petroleum Bulk Stations and 225 225 200
Terminals.
425120............................. Wholesale Trade Agents and 125 125 100
Brokers.
----------------------------------------------------------------------------------------------------------------
Table 9--Proposed Size Standards Revisions (Receipts)
----------------------------------------------------------------------------------------------------------------
Calculated Proposed size Current size
NAICS code NAICS industry title size standard standard ($ standard ($
($ million) million) million)
----------------------------------------------------------------------------------------------------------------
441310............................. Automotive Parts and 25.0 25.0 16.5
Accessories Stores.
441320............................. Tire Dealers............... 22.5 22.5 16.5
442291............................. Window Treatment Stores.... 10.0 10.0 8.0
442299............................. All Other Home Furnishings 29.5 29.5 22.0
Stores.
443141............................. Household Appliance Stores. 19.5 19.5 12.0
444130............................. Hardware Stores............ 14.5 14.5 8.0
444210............................. Outdoor Power Equipment 8.5 8.5 8.0
Stores.
444220............................. Nursery, Garden Center, and 19.0 19.0 12.0
Farm Supply Stores.
445291............................. Baked Goods Stores......... 14.0 14.0 8.0
445292............................. Confectionery and Nut 17.0 17.0 8.0
Stores.
445299............................. All Other Specialty Food 9.0 9.0 8.0
Stores.
445310............................. Beer, Wine, and Liquor 9.0 9.0 8.0
Stores.
446110............................. Pharmacies and Drug Stores. 33.0 33.0 30.0
446130............................. Optical Goods Stores....... 26.0 26.0 22.0
446191............................. Food (Health) Supplement 20.0 20.0 16.5
Stores.
446199............................. All Other Health and 8.5 8.5 8.0
Personal Care Stores.
447190............................. Other Gasoline Stations.... 29.5 29.5 16.5
448110............................. Men's Clothing Stores...... 22.5 22.5 12.0
448150............................. Clothing Accessories Stores 29.5 29.5 16.5
448190............................. Other Clothing Stores...... 27.5 27.5 22.0
448310............................. Jewelry Stores............. 18.0 18.0 16.5
448320............................. Luggage and Leather Goods 33.5 33.5 30.0
Stores.
451110............................. Sporting Goods Stores...... 23.5 23.5 16.5
451120............................. Hobby, Toy, and Game Stores 31.0 31.0 30.0
451140............................. Musical Instrument and 20.0 20.0 12.0
Supplies Stores.
451211............................. Book Stores................ 31.5 31.5 30.0
451212............................. News Dealers and Newsstands 20.0 20.0 8.0
452311............................. Warehouse Clubs and 41.5 41.5 32.0
Supercenters.
453220............................. Gift, Novelty, and Souvenir 12.0 12.0 8.0
Stores.
453310............................. Used Merchandise Stores.... 12.5 12.5 8.0
453910............................. Pet and Pet Supplies Stores 28.0 28.0 22.0
453920............................. Art Dealers................ 14.5 14.5 8.0
453998............................. All Other Miscellaneous 10.0 10.0 8.0
Store Retailers (except
Tobacco Stores).
454210............................. Vending Machine Operators.. 18.5 18.5 12.0
454390............................. Other Direct Selling 13.0 13.0 8.0
Establishments.
----------------------------------------------------------------------------------------------------------------
[[Page 28028]]
Table 10, Summary of Proposed Size Standards Revisions by Sector,
below, summarizes the proposed changes to size standards by NAICS
sector.
Table 10--Summary of Proposed Size Standards Revisions by Sector
----------------------------------------------------------------------------------------------------------------
Number of size Number of size Number of size Number of size
Sector Sector name standards standards standards standards
reviewed increased decreased maintained
----------------------------------------------------------------------------------------------------------------
42............................ Wholesale Trade. 71 14 0 57
44-45......................... Retail Trade.... 66 35 0 31
---------------------------------------------------------------
Total..................... ................ 137 49 0 88
----------------------------------------------------------------------------------------------------------------
Evaluation of Dominance in Field of Operation
SBA has determined that for the industries that 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 would be, on average, 0.4%, varying
from 0.01% to 3.4%.
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 1 was to propose changes exactly as suggested by the analytical
results. In other words, Option 1 would entail increasing size
standards for 49 industries, decreasing them for 66 industries, and
retaining them at their current levels for 22 industries. Alternative
Option 2 was to retain all current size standards.
Alternative Option 1 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 SBA's
financial assistance in some cases.
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 1 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 as the economic situation evolves.
Under Option 2, 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 before adopting changes to size
standards. However, SBA is not adopting Option 2 because the Regulatory
Impact Analysis conducted for this rule in accordance with Executive
Order 12866 (see below) shows that retaining all size standards at
their current levels is more onerous for the small businesses than the
option of adopting 49 increases and retaining 88 size standards. 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 49 size
standards and retain 88 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 the 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 Congress's and the Federal
Government's efforts 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 at all.
4. In calculating the overall industry size standard, SBA has
assigned equal weight to each of the four 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
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.
5. 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
[[Page 28029]]
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.
Compliance With Executive Order 12866, 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. However, this rule is not a ``major rule'' under
the Congressional Review Act, 5 U.S.C. 800. 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 evaluation of the benefits and costs--both quantitative and
qualitative--of the proposed action, and (3) an examination of the
alternative approaches considered.
Regulatory Impact Analysis
1. What is a need for this regulatory action?
Under the Small Business Act, 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 5 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 49
industries or subindustries in NAICS Sectors 42 and 44-45 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 analyses of latest industry 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 economic activity, of the total of 137
industries in Sectors 42 and 44-45, SBA proposes to increase size
standards for 49 industries and maintain current size standards for
remaining 88 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 SBA's loans, disaster assistance, etc.) they receive
under the current size standards, 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 975,569 businesses in industries in Sectors 42 and 44-
45, 97.4% are considered small under the current size standards. That
percentage varies from 96.6% in Sector 42 to 97.9% in Sector 44-45.
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 11,666 7(a) and 504 loans in that period, totaling
about $5.5 billion, of which 84.7% was issued through the 7(a) program
and 15.3% was issued through the 504/CDC program. During fiscal years
2016-2018, small businesses in those industries also received 667 loans
through the SBA's EIDL program, totaling about $63.2 million on an
annual basis. Table 11, Baseline for All Industries, below, provides
these baseline results by sector.
Table 11--Baseline for All Industries
----------------------------------------------------------------------------------------------------------------
Sector 42 Sector 44-45 Total
----------------------------------------------------------------------------------------------------------------
Baseline All Industries (current size standards)....... 71 66 137
Total firms (Economic Census).......................... 319,716 655,853 975,569
Total small firms under current size standards 308,710 641,995 950,705
(Economic Census).....................................
Small firms as % of total firms........................ 96.6 97.9 97.5
[[Page 28030]]
No. of 7(a) and 504/CDC loans (FY 2016-2018)........... 3,249 8,417 11,666
Amount of 7(a) and 504 loans ($ million) (FY 2016-2018) $1,836.7 $3,692.9 $5,529.6
No. of EIDL loans (FY 2016-2018)....................... 137 530 667
Amount of EIDL loans ($ million) (FY 2016-2018)........ $16.7 $46.6 $63.2
----------------------------------------------------------------------------------------------------------------
Totals may not sum due to rounding.
Increases to Size Standards
As stated above, of the 137 employee-based and receipts-based size
standards in Sectors 42 and 44-45 that were reviewed in preparation for
this rule, based on the results from analyses of latest industry data
as well as impacts of size standards changes on small businesses, SBA
proposes to increase 49 size standards. Below are descriptions of the
benefits, costs, and transfer impacts of these proposed increases to
size standards.
A. Benefits of Increases to Size Standards
The most significant benefit to businesses from proposed increases
to size standards would be gaining eligibility for Federal small
business assistance programs or retaining that eligibility for a longer
period. These include SBA's business loan programs, such as the 7(a)
and EIDL loan programs. SBA's regulations specify that NAICS codes for
the Wholesale and Retail Trade industries shall not be used to classify
Government acquisition for supplies (13 CFR 121.402(b)). As such, for
purposes of federal contracts set-aside for small businesses the size
standard for all industries included in the Wholesale Trade and Retail
Trade sectors is 500 employees under the nonmanufacturer rule (see 13
CFR 121.406). SBA is not evaluating the size standard for the
nonmanufacturer rule in this rulemaking. Thus, SBA estimates that the
proposed increases to size standards as part of this rulemaking will
not impact the market for federal contracts using small business set-
asides.
Besides the access to SBA financial assistance programs discussed
above, small businesses also benefit through reduced fees, less
paperwork, and fewer compliance requirements that are available to
small businesses through the 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 49 industries in NAICS Sectors 42 and 44-45 for which it has
proposed to increase size standards, 1,839 firms (see Table 12, below)
not considered small under the current size standards will become small
under the proposed size standards increases and therefore would become
eligible for SBA assistance programs. That represents about 0.5% of all
firms classified as small under the current size standards in
industries for which SBA has proposed increasing size standards. If the
proposed increase is adopted, SBA estimates that this would result in
an increase to the small business share of total receipts in those
industries from 30.4% to 31.5%.
Based on the data for fiscal years 2016-2018, SBA estimates up to
29 SBA 7(a) and 504 loans totaling about $10.9 million could be made to
these newly qualified small businesses. That represents a 0.6% increase
to the loan amount compared to the Group baseline.\2\
---------------------------------------------------------------------------
\2\ Note that these figures refer to the standard 7(a) and 504
loans, not the Paycheck Protection Program (PPP) under the CARES
Act, the Economic Aid to Hard-Hit Small Businesses, Non-Profits, and
Venues Act, and the American Rescue Plan Act of 2021.
---------------------------------------------------------------------------
Newly qualified small businesses could 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 3 EIDL loans,
totaling about $0.31 million.\3\
---------------------------------------------------------------------------
\3\ Note that these figures refer to the standard EIDL loans,
not COVID EIDL loans under the CARES Act, the Economic Aid to Hard-
Hit Small Businesses, Non-Profits, and Venues Act, and the American
Rescue Plan Act of 2021.
---------------------------------------------------------------------------
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 12, Impacts of
Proposed Increases to Size Standards, provides these results by NAICS
sector.
Table 12--Impacts of Proposed Increases to Size Standards
----------------------------------------------------------------------------------------------------------------
Sector 42 Sector 44-45 Total
----------------------------------------------------------------------------------------------------------------
No. of industries with proposed increases to size 14 35 49
standards.............................................
Total current small businesses in industries with 63,984 286,758 350,742
Proposed increases to size standards (Economic Census
2012).................................................
Additional firms qualifying as small under proposed 145 1,694 1,839
standards (2012 Economic Census)......................
Percentage of additional firms qualifying as small 0.2 0.6 0.5
relative to current small businesses in industries
with proposed increases to size standards.............
Total no. of 7(a) and 504 loans to small business in 349 4,510 4,859
industries with proposed increases to size standards
(FY 2016-2018)........................................
Total amount of 7(a) and 504 loans to small businesses $182.8 $1,633.1 $1,815.9
in industries with proposed increases to size
standards ($ million) (FY 2016-2018)..................
Estimated no. of 7(a) and 504 loans to newly qualified 1 28 29
small firms...........................................
Estimated 7(a) and 504 loan amount to newly qualified $0.5 $10.3 $10.9
small firms ($ million)...............................
% increase to 7(a) and 504 loan amount relative to the 0.3 0.6 0.6
total amount of 7(a) and 504 loans in industries with
proposed increases to size standards..................
[[Page 28031]]
Total no. of EIDL loans to small businesses in 12 288 300
industries with proposed increases to size standards
(FY 2016-2018)........................................
Total amount of EIDL loans to small businesses in $1.9 $21.5 $23.4
industries with proposed increases to size standards
($ million) (FY 2016-2018)............................
Estimated no. of EIDL loans to newly qualified small 1 2 3
firms.................................................
Estimated EIDL loan amount to newly qualified small $0.15 $0.15 $0.31
firms ($ million).....................................
% increase to EIDL loan amount relative to the total 8.3 0.7 1.3
amount of EIDL loans in industries with proposed
increases to size standards...........................
----------------------------------------------------------------------------------------------------------------
Totals may not sum due to rounding.
B. Costs of Increases to Size Standards
To the extent that newly qualified small businesses could seek
assistance from SBA's financial assistance programs, the proposed
increases to size standards, if adopted, may entail some additional
administrative costs to the Government. 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. Moreover, this
proposed rule does not establish 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. For these reasons, SBA believes that these added
administrative costs will be minor because necessary mechanisms are
already in place to handle the additional burden.
C. Transfer Impacts of Increases to Size Standards
The proposed increases to size standards, if adopted, may result in
some redistribution of SBA loans between the newly qualified small
businesses and small businesses under the current size standards.
However, SBA estimates this impact to be de minimus because the vast
majority of the SBA loans go to small businesses that are much smaller
than the current size standards. Moreover, SBA estimates that this rule
would not have any impact on Federal contract dollars awarded to small
businesses since SBA's regulations specify that NAICS codes for the
Wholesale and Retail Trade industries shall not be used to classify
Government acquisition for supplies.
3. What alternatives have been considered?
Under OMB Circular A-4, SBA is required to consider alternative
regulatory approaches. In this section, SBA describes and analyzes two
such alternatives to the proposed rule. Under Alternative Option 1, SBA
would propose adopting size standards based solely on the analytical
results. In other words, SBA would raise the size standards of 49
industries for which the analytical results suggest raising size
standards and would lower the size standards of 66 industries for which
the analytical results suggest lowering size standards. For the 22
remaining industries, size standards would be maintained at their
current levels. Under Alternative Option 2, SBA 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 1: Consider Adopting All Calculated Size Standards
As discussed before, in this proposed rule, Alternative Option 1
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, including SBA's financial assistance in some
cases. Because we have discussed already the benefits and costs of
increasing 49 size standards, here we will emphasize the discussion on
the benefits and costs of decreasing 66 size standards.
The primary benefit of adopting Alternative Option 1 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.
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.
A. Benefits of Decreases to Size Standards
The most significant benefit to businesses from decreases to size
standards when SBA's analysis suggests such decreases, is that it may
help ensure that size standards are more reflective of latest industry
structure and that Federal small business assistance is more
effectively targeted to its intended beneficiaries. The adoption of
smaller size standards when the results support them diminishes the
risk of providing assistance to firms that are not small anymore.
Decreasing size standards may reduce the administrative costs of
the Government, because the risk of providing assistance to other than
small businesses may diminish when the size standards better reflect
the structure of the market. The risks of providing SBA's loans to
firms that are not in need of financial assistance will provide for a
better chance for smaller firms to benefit from the opportunities
available to them through the Federal Government. Although SBA did not
quantify the impact associated with this risk, SBA considers the
impacts associated with this risk to be small since the majority of
firms receiving financial assistance from SBA are below the calculated
size standards.
B. Costs of Decreases to Size Standards
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, SBA estimates that 67 of SBA's 7(a) and 504 loans,
totaling $38.0 million, could not be made to those small businesses
that would lose eligibility under the reduced size standards (before
[[Page 28032]]
mitigation). That represents a 1.2% decrease of the loan amounts
compared to the baseline. Table 13, 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 the 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, the majority of 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. However, based on the historical trends of the
available EIDL data, SBA estimates that, on an annual basis, 5 EIDL
loans, totaling about $0.5 million, would be made unavailable to firms
that no longer qualify as small based on the industry size standard.
Small businesses becoming other than small if size standards were
decreased might lose the benefits of reduced fees, paperwork and
compliance requirements that are available to small businesses through
the Federal Government, but SBA has no data to quantify this impact.
However, if agencies determine that SBA's size standards do not
adequately serve their 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.
SBA may adopt mitigating measures to reduce the negative impact
under the assumptions of Option 1. SBA could adopt one or more of the
following three actions: 1. To accept decreases in size standards as
suggested by the analytical results; 2. to decrease size standards by a
smaller amount than the calculated values; and 3. to retain the size
standards at their current levels. For example, in response to the 2008
Financial Crisis, 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.
Nevertheless, the impact on the overall loan activity is likely to
be de minimus because SBA estimates that the majority of firms
currently eligible for its loan programs would continue to remain
eligible under the reduced size standards. SBA's regulations specify
that NAICS codes for the Wholesale and Retail Trade industries shall
not be used to classify Government acquisition for supplies (13 CFR
121.402(b)). As such, for purposes of federal contracting, the size
standard for all industries included in the Wholesale and Retail Trade
industries is 500 employees (13 CFR 121.406). Thus, SBA estimates that
any decreases to size standards as part of this rulemaking will not
impact the market for federal contracts.
Table 13--Impacts of Decreases to Size Standards Under Alternative Option 1
----------------------------------------------------------------------------------------------------------------
Sector 42 Sector 44-45 Total
----------------------------------------------------------------------------------------------------------------
No. of industries for which SBA considered decreasing 38 28 66
size standards (2012 Economic Census).................
Total current small businesses in industries for which 184,837 343,639 528,476
SBA considered decreasing size standards (2012
Economic Census)......................................
Estimated no. of firms losing small status for which 2,735 2,774 5,509
SBA considered decreasing size standards (2012
Economic Census)......................................
% of Firms losing small status relative to current 1.5 0.8 1.0
small businesses in industries for which SBA
considered decreasing size standards..................
Total no. of 7(a) and 504 loans to small businesses in 2,236 3,859 6,095
industries for which SBA considered decreasing size
standards (FY 2016-2018)..............................
Total amount of 7(a) and 504 loans to small businesses $1,300.2 $1,931.0 $3,231.2
in industries for which SBA considered decreasing size
standards ($ million) (FY 2016-2018)..................
Estimated no. of 7(a) and 504 loans not available to 34 33 67
firms that would have lost small business status......
Estimated 7(a) and 504 loan amount not available to $19.8 $18.2 $38.0
firms that would have lost small business status ($
million)..............................................
% decrease to 7(a) and 504 loan amount relative to the 1.5 0.9 1.2
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 86 239 325
industries for which SBA considered decreasing size
standards (FY 2016-2018)..............................
Total amount of EIDL loans to small businesses in $10.0 $24.4 $34.4
industries for which SBA considered decreasing size
standards ($ million) (FY 2016-2018)..................
Estimated no. of EIDL loans not available to firms that 2 3 5
would have lost small business status.................
Estimated EIDL loan amount not available to firms that $0.23 $0.27 $0.50
would have lost small business status ($ million).....
% decrease to EIDL loan amount relative to the baseline 2.3 1.1 1.5
----------------------------------------------------------------------------------------------------------------
Totals may not sum due to rounding.
C. Transfer Impacts of Decreases to Size Standards
If the size standards were decreased under Alternative Option 1, it
may result in a redistribution of loans between the newly qualified
small businesses and large businesses and between the newly qualified
small businesses and small businesses under the current standards.
However, SBA estimates this impact to be de minimus. Moreover, SBA
estimates that this rule would not have an impact on Federal contract
dollars awarded to small businesses since SBA's regulations
[[Page 28033]]
specify that NAICS codes for the Wholesale and Retail Trade industries
shall not be used to classify Government acquisition for supplies.
While SBA cannot estimate with certainty the actual outcome of the
gains and losses among different groups of businesses from this
redistribution, it can identify several probable impacts. With a
smaller pool of small businesses under the decreases to size standards,
some Federal assistance to be otherwise awarded to small businesses may
be diverted to other uses or programs. However, since the total benefit
provided through this program is contingent on the availability of
funds and the occurrence and severity of a disaster in the future, SBA
cannot make a meaningful estimate of this impact.
D. Net Impact of Alternative Option 1
To estimate the net impacts of Alternative Option 1, SBA followed
the same methodology used to evaluate the impacts of the proposed size
standards (see Table 12 above). However, under Alternative Option 1,
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 size standards were already shown in Table 12 above.
Table 13, above, and Table 14, Net Impacts of Size Standards Changes
under Alternative Option 1, below, present the impact of the decreases
of size standards and the net impact of adopting the calculated results
under Alternative Option 1, respectively.
Based on the 2012 Economic Census, SBA estimates that in 100
industries in NAICS Sectors 42 and 44-45 for which the analytical
results suggested to change size standards, about 3,625 firms (see
Table 14, below), would become other-than-small under Alternative One.
That represents about 0.4% of all firms classified as small under the
current size standards.
Based on the SBA's loan data for fiscal years 2016-2018, the total
number of 7(a) and 504 loans may decrease by 38 loans, and the loan
amounts by about $27.1 million. This represents a 0.5% decrease of the
loan amounts relative to the Group baseline.
Firms' participation under 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 the total number
of EIDL loans may decrease by about 2 loans, and the loan amount by
about $0.19 million. This represents a 0.3% decrease of the loan
amounts relative to the Group baseline. Table 14, below, provides these
results by NAICS sector.
Table 14--Net Impacts of Size Standards Changes Under Alternative Option 1
----------------------------------------------------------------------------------------------------------------
Sector 42 Sector 44-45 Total
----------------------------------------------------------------------------------------------------------------
No. of industries with proposed changes to size 52 63 115
standards.............................................
Total no. of small businesses under the current size 248,821 630,396 879,217
standards (2012 Economic Census)......................
Additional firms qualifying as small (2012 Economic -2,591 -1,079 -3,670
Census)...............................................
% of additional firms qualifying as small relative to -1.0 -0.2 -0.4
total current small businesses........................
Total no. of 7(a) and 504 loans to small businesses (FY 3,249 8,417 11,666
2016-2018)............................................
Total amount of 7(a) and 504 loans to small businesses $1,836.7 $3,692.9 $5,529.6
(FY 2016-2018)........................................
Estimated no. of additional 7(a) and 504 loans to newly -33 -5 -38
qualified small firms.................................
Estimated additional 7(a) and 504 loan amount to newly -$19.2 -$7.9 -$27.1
qualified small firms ($ million).....................
% increase to 7(a)and 504 loan amount relative to the -1.0 -0.2 -0.5
total amount of 7(a) and 504 loans to small businesses
Total no. of EIDL loans to small businesses (FY 2016- 137 530 667
2018).................................................
Total amount of EIDL loans to small businesses (FY 2016- $16.7 $46.6 $63.2
2018).................................................
Estimated no. of additional EIDL loans to newly -1 -1 -2
qualified small firms.................................
Estimated additional EIDL loan amount to newly -$0.08 -$0.12 -$0.19
qualified small firms ($ million).....................
% increase to EIDL loan amount relative to the total -0.5 -0.3 -0.3
amount of EIDL loans to small businesses..............
----------------------------------------------------------------------------------------------------------------
Totals may not sum due to rounding.
Alternative Option 2: To Retain All Current Size Standards
As discussed elsewhere in this rule, SBA considered retaining the
current levels of all size standards, despite the results of its
analytical data, due to the ongoing pandemic. SBA considered this
option because it would provide the opportunity to reassess the
economic situation once the economic recovery starts. Under this
option, SBA would be able to assess new data on economic indicators,
federal procurement, and SBA loans before making any changes to size
standards. When compared to the baseline, Alternative Option 2 has a
net impact of zero. As described previously, SBA believes the proposed
increases in size standards will generate positive net benefits. Thus,
SBA is not proposing Alternative Option 2.
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 financial assistance 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 is 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?
[[Page 28034]]
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 is 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 350,742 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
1,839 businesses will be defined as 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. Changing size
standards alters the access to SBA's programs that assist small
businesses but does not impose a regulatory burden because size
standards neither regulate nor control business behavior. Moreover,
SBA's regulations specify that NAICS codes for the Wholesale Trade and
Retail Trade sectors shall not be used to classify Government
acquisition for supplies (13 CFR 121.402(b)). As such, SBA estimates
that there will be no additional costs as a result of this rule for
firms to update their entity registrations in the Federal Government's
System for Award Management (SAM).
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 49 size standards and maintain 88 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 49 industries for which the analytical results
suggest raising size standards would be raised. However, the size
standards of 66 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. 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 49 size standards
and decreasing 66. Retaining all size standards at their current levels
would be more onerous for small businesses than the option of adopting
increases to size standards in 49 industries and retaining the current
size standards for the rest of the industries, because the net benefit
from adopting the proposal is greater than the net benefit of
maintaining all size standards at their current levels.
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 5 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 2016. 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 was
available for public review and comments. The ``Size Standards
Methodology'' White Paper explains how SBA establishes, reviews, and
modifies its receipts-based and employee-based small business size
standards. 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,
[[Page 28035]]
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'' by revising entries ``423140,'' ``423330,''
``423460,'' ``423520,'' ``423620,'' ``423730,'' ``423860,'' ``423920,''
424110,'' ``424450,'' ``424590,'' ``424690,'' ``424710,'' ``425120,''
``441310,'' ``441320,'' ``442291,'' ``442299,'' ``443141,'' ``444130,''
``444210,'' ``444220,'' ``445291,'' ``445292,'' ``445299,'' ``445310,''
``446110,'' ``446130,'' ``446191,'' ``446199,'' ``447190,'' ``448110,''
``448150,'' ``448190,'' ``448310,'' ``448320,'' ``451110,'' ``451120,''
``451140,'' ``451211,'' ``451212,'' ``452311,'' ``453220,'' ``453310,''
``453910,'' ``453920,'' ``453998,'' ``454210,'' and ``454390'' to 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 in Size standards in
NAICS NAICS U.S. industry title millions of number of
dollars employees
----------------------------------------------------------------------------------------------------------------
* * * * * * *
----------------------------------------------------------------------------------------------------------------
Sector 42--Wholesale Trade
----------------------------------------------------------------------------------------------------------------
* * * * * * *
----------------------------------------------------------------------------------------------------------------
Subsector 423--Merchant Wholesalers, Durable Goods
----------------------------------------------------------------------------------------------------------------
* * * * * * *
----------------------------------------------------------------------------------------------------------------
423140............................ Motor Vehicle Parts (Used) Merchant ................. 125
Wholesalers.
* * * * * * *
----------------------------------------------------------------------------------------------------------------
423330............................ Roofing, Siding, and Insulation ................. 225
Material Merchant Wholesalers.
* * * * * * *
----------------------------------------------------------------------------------------------------------------
423460............................ Ophthalmic Goods Merchant Wholesalers. ................. 175
* * * * * * *
----------------------------------------------------------------------------------------------------------------
423520............................ Coal and Other Mineral and Ore ................. 200
Merchant Wholesalers.
* * * * * * *
----------------------------------------------------------------------------------------------------------------
423620............................ Household Appliances, Electric ................. 225
Housewares, and Consumer Electronics
Merchant Wholesalers.
* * * * * * *
----------------------------------------------------------------------------------------------------------------
423730............................ Warm Air Heating and Air-Conditioning ................. 175
Equipment and Supplies Merchant
Wholesalers.
* * * * * * *
----------------------------------------------------------------------------------------------------------------
423860............................ Transportation Equipment and Supplies ................. 175
(except Motor Vehicle) Merchant
Wholesalers.
[[Page 28036]]
* * * * * * *
----------------------------------------------------------------------------------------------------------------
423920............................ Toy and Hobby Goods and Supplies ................. 175
Merchant Wholesalers.
* * * * * * *
----------------------------------------------------------------------------------------------------------------
Subsector 424--Merchant Wholesalers, Nondurable Goods
----------------------------------------------------------------------------------------------------------------
424110............................ Printing and Writing Paper Merchant ................. 225
Wholesalers.
* * * * * * *
----------------------------------------------------------------------------------------------------------------
424450............................ Confectionery Merchant Wholesalers.... ................. 225
* * * * * * *
----------------------------------------------------------------------------------------------------------------
424590............................ Other Farm Product Raw Material ................. 175
Merchant Wholesalers.
* * * * * * *
----------------------------------------------------------------------------------------------------------------
424690............................ Other Chemical and Allied Products ................. 175
Merchant Wholesalers.
424710............................ Petroleum Bulk Stations and Terminals. ................. 225
* * * * * * *
----------------------------------------------------------------------------------------------------------------
Subsector 425--Wholesale Electronic Markets and Agents and Brokers
----------------------------------------------------------------------------------------------------------------
* * * * * * *
----------------------------------------------------------------------------------------------------------------
425120............................ Wholesale Trade Agents and Brokers.... ................. 125
----------------------------------------------------------------------------------------------------------------
Sector 44-45--Retail Trade
----------------------------------------------------------------------------------------------------------------
* * * * * * *
----------------------------------------------------------------------------------------------------------------
Subsector 441--Motor Vehicle and Parts Dealers
----------------------------------------------------------------------------------------------------------------
* * * * * * *
----------------------------------------------------------------------------------------------------------------
441310............................ Automotive Parts and Accessories 25.0 .................
Stores.
441320............................ Tire Dealers.......................... 22.5 .................
----------------------------------------------------------------------------------------------------------------
Subsector 442--Furniture and Home Furnishings Stores
----------------------------------------------------------------------------------------------------------------
* * * * * * *
----------------------------------------------------------------------------------------------------------------
442291............................ Window Treatment Stores............... 10.0 .................
442299............................ All Other Home Furnishings Stores..... 29.5 .................
----------------------------------------------------------------------------------------------------------------
Subsector 443--Electronics and Appliance Stores
----------------------------------------------------------------------------------------------------------------
443141............................ Household Appliance Stores............ 19.5 .................
* * * * * * *
----------------------------------------------------------------------------------------------------------------
Subsector 444--Building Material and Garden Equipment and Supplies Dealers
----------------------------------------------------------------------------------------------------------------
* * * * * * *
----------------------------------------------------------------------------------------------------------------
444130............................ Hardware Stores....................... 14.5 .................
* * * * * * *
444210............................ Outdoor Power Equipment Stores........ 8.5 .................
444220............................ Nursery, Garden Center, and Farm 19.0 .................
Supply Stores.
----------------------------------------------------------------------------------------------------------------
[[Page 28037]]
Subsector 445--Food and Beverage Stores
----------------------------------------------------------------------------------------------------------------
* * * * * * *
----------------------------------------------------------------------------------------------------------------
445291............................ Baked Goods Stores.................... 14.0 .................
445292............................ Confectionery and Nut Stores.......... 17.0 .................
445299............................ All Other Specialty Food Stores....... 9.0 .................
445310............................ Beer, Wine, and Liquor Stores......... 9.0 .................
----------------------------------------------------------------------------------------------------------------
Subsector 446--Health and Personal Care Stores
----------------------------------------------------------------------------------------------------------------
446110............................ Pharmacies and Drug Stores............ 33.0 .................
* * * * * * *
446130............................ Optical Goods Stores.................. 26.0 .................
446191............................ Food (Health) Supplement Stores....... 20.0 .................
446199............................ All Other Health and Personal Care 8.5 .................
Stores.
----------------------------------------------------------------------------------------------------------------
Subsector 447--Gasoline Stations
----------------------------------------------------------------------------------------------------------------
* * * * * * *
----------------------------------------------------------------------------------------------------------------
447190............................ Other Gasoline Stations............... 29.5 .................
----------------------------------------------------------------------------------------------------------------
Subsector 448--Clothing and Clothing Accessories Stores
----------------------------------------------------------------------------------------------------------------
448110............................ Men's Clothing Stores................. 22.5 .................
----------------------------------------------------------------------------------------------------------------
* * * * * * *
448150............................ Clothing Accessories Stores........... 29.5 .................
448190............................ Other Clothing Stores................. 27.5 .................
* * * * * * *
448310............................ Jewelry Stores........................ 18.0 .................
448320............................ Luggage and Leather Goods Stores...... 33.5 .................
----------------------------------------------------------------------------------------------------------------
Subsector 451--Sporting Good, Hobby, Book and Music Stores
----------------------------------------------------------------------------------------------------------------
451110............................ Sporting Goods Stores................. 23.5 .................
----------------------------------------------------------------------------------------------------------------
451120............................ Hobby, Toy, and Game Stores........... 31.0 .................
----------------------------------------------------------------------------------------------------------------
* * * * * * *
451140............................ Musical Instrument and Supplies Stores 20.0 .................
451211............................ Book Stores........................... 31.5 .................
451212............................ News Dealers and Newsstands........... 20.0 .................
----------------------------------------------------------------------------------------------------------------
Subsector 452--General Merchandise Stores
----------------------------------------------------------------------------------------------------------------
* * * * * * *
----------------------------------------------------------------------------------------------------------------
452311............................ Warehouse Clubs and Supercenters...... 41.5 .................
----------------------------------------------------------------------------------------------------------------
----------------------------------------------------------------------------------------------------------------
* * * * * * *
Subsector 453--Miscellaneous Store Retailers
----------------------------------------------------------------------------------------------------------------
* * * * * * *
----------------------------------------------------------------------------------------------------------------
453220............................ Gift, Novelty, and Souvenir Stores.... 12.0 .................
453310............................ Used Merchandise Stores............... 12.5 .................
453910............................ Pet and Pet Supplies Stores........... 28.0 .................
453920............................ Art Dealers........................... 14.5 .................
[[Page 28038]]
* * * * * * *
453998............................ All Other Miscellaneous Store 10.0 .................
Retailers (except Tobacco Stores).
----------------------------------------------------------------------------------------------------------------
Subsector 454--Nonstore Retailers
----------------------------------------------------------------------------------------------------------------
* * * * * * *
----------------------------------------------------------------------------------------------------------------
454210............................ Vending Machine Operators............. 18.5 .................
* * * * * * *
454390............................ Other Direct Selling Establishments... 13.0 .................
* * * * * * *
----------------------------------------------------------------------------------------------------------------
Dated: May 13, 2021.
Isabella Casillas Guzman,
Administrator.
[FR Doc. 2021-10487 Filed 5-24-21; 8:45 am]
BILLING CODE 8026-03-P