Small Business Size Standards: Inflation Adjustment to Monetary Based Size Standards
This Rule document was issued by the Small Business Administration (SBA)
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SMALL BUSINESS ADMINISTRATION
13 CFR Part 121
Small Business Size Standards: Inflation Adjustment to Monetary Based Size Standards
U.S. Small Business Administration.
Interim Final Rule with request for comments.
The U.S. Small Business Administration (SBA or Agency) is adjusting the monetary based industry size standards (i.e., receipts, assets, net worth, and net income) for inflation that has occurred since the last adjustment in 2008. These adjustments are in addition to the recent revisions to size standards as part of the current comprehensive size standards review, as mandated by the Small Business Jobs Act of 2010 (Jobs Act). Also adjusted for inflation are program based size standards, with the exception of the new alternative size standard for SBA's 7(a) and 504 loan programs that was established under the Jobs Act. The new alternative size standard will remain in effect until SBA establishes a permanent alternative size standard for the 7(a) and 504 loan programs. SBA is also deleting references to Surety Bond Guarantee size standards for contracts awarded in 2005 in the Presidentially declared disaster areas following Hurricanes Katrina, Rita, and Wilma. In addition, SBA is deleting the determination date for eligibility under the Agency's Economic Injury Disaster Loan (EIDL) Program in connection with the same 2005 hurricanes. Finally, SBA is clarifying that footnote 9 to its table of size standards is not limited to NAICS 531190, but rather applies to all industries in Industry Group 5311, Lessors of Real Estate.
Effective Date: This rule is effective July 14, 2014.
Comment Date: Comments must be received on or before August 11, 2014.
You may submit comments, identified by RIN 3245-AG60, by any of the following methods: (1) Federal Rulemaking Portal: , following the specific 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 not accept comments submitted by email to this rule.
SBA will post all comments to this interim final rule on . If you wish to submit confidential business information (CBI) as defined in the User Notice at , you must submit such information to the 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 . 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., Office of Size Standards, (202) 205-6618 or .
As explained in the SBA's “Size Standard Methodology” White paper available at , SBA reviews small business size standards and makes necessary adjustments to them for two reasons: (i) Changes in industry structure and Federal market conditions; and (ii) inflation. Recently, SBA reviewed all monetary based industry size standards with respect to industry structure and Federal market conditions. SBA published a series of rules to revise many of them as part of its ongoing comprehensive size standards review. In this rule, SBA is adjusting its monetary based industry size standards for inflation that has occurred since the last inflation adjustment, published in July 2008 (73 FR 41237). These include receipts based size standards for 476 industries and 11 subindustries (i.e., “exceptions” in SBA Table of Size Standards) and assets based size standards for five industries. Additionally, SBA is adjusting three program specific receipts based size standards, namely, (1) Sales or Leases of Government Property (other than manufacturing); (2) stockpile purchases; and (3) the alternative size standard for the Small Business Investment Company (SBIC) Program that is based on tangible net worth and net income. As explained elsewhere in this rule, SBA is not adjusting the new tangible net worth and net income based alternative size standard established under the Jobs Act for its 7(a) and 504 Loan Programs. Also not adjusted is the $750,000 receipts based size standard set by statute for agricultural industries.
SBA is required to assess the impact of inflation on its monetary based size standards at least once every five years (see SBA Interim Final Rule: Small Business Size Standards; Inflation Adjustment to Size Standards (67 FR 3041 (January 23, 2002)) and 13 CFR 121.102). Although the provision does not mandate that SBA actually adjust size standards for inflation every five years, it does provide assurances to the public that the Agency is monitoring inflation and is making a decision on whether or not to adjust size standards within a reasonable period of time since its last inflation adjustment. Previous inflation adjustments to size standards were in SBA Final Rule: Small Business Size Standards; Inflation Adjustment to Size Standards July 2008 (73 FR 41237 (July 18, 2008)); SBA Interim Final Rule: Small Business Size Standards; Inflation Adjustment to Size Standards; Business Loan Program; Disaster Assistance Loan Program (70 FR 72577 (December 6, 2005)); SBA Final Rule: Small Business Size Standards; Inflation Adjustment to Size Standards (67 FR 65285 (October 24, 2002)); SBA Interim Final Rule: Small Business Size Standards; Inflation Adjustment to Size Standards (67 FR 3041 (January 23, 2002)); SBA Final Rule: Small Business Size Standards; Inflation Adjustment to Size Standards (59 FR 616513 (April 7, 1994)); SBA Final Rule: Small Business Size Standards; Inflation Adjustment to Size Standards (49 FR 5025 (February 9, 1984)); and SBA Final Rule: Small Business Size Standards (39 FR 44423 (December 24, 1974)).
Many businesses may have lost small business eligibility for Federal assistance under SBA's monetary based size standards simply because of inflation that has occurred since the 2008 adjustment. This rule aims to reinstate those firms' eligibility for Federal assistance.
As mentioned above, the adjustment for inflation in this rule applies to all monetary based industry size standards, except for the $750,000 receipts based size standard for agricultural industries (which is set by the statute). Adjustments in this rule are in addition to revisions that were part of SBA's ongoing comprehensive size standards review, as mandated by the Jobs Act. SBA's comprehensive size standards review primarily focused on industry structure (i.e., average firm size, startup costs and entry barriers, industry concentration, and distribution of firms by business size) and Federal contracting trends. It did not consider the impacts of inflation on size standards.
Rather than reviewing all size standards at one time, for the comprehensive review, SBA reviewed size standards on a Sector by Sector basis over a period of several years. The objective of the comprehensive size standards review is to review all size standards and make necessary adjustments so that they are consistent with current industry structure and Federal market conditions. Including inflation as an additional factor in the analysis would have meant applying different inflation rates to different sectors at different times. For example, the applicable inflation would be lower for sectors reviewed earlier in the cycle and higher for those reviewed later, resulting in inconsistent size standards across sectors and industries. To avoid this, SBA decided to evaluate all monetary based size standards for inflation separately at one time upon completion of the comprehensive review. As mentioned above, SBA recently completed reviewing all monetary based industry size standards.
Updating size standards based on inflation, in addition to latest industry and Federal contracting data under the comprehensive review, not only satisfies the Jobs Act's mandate that SBA review all size standards, but also is consistent with Executive Order 13563 on improving regulation and regulatory review.
SBA's Inflation Adjustment Methodology
For this interim final rule, SBA has used the same methodology it has described in its “Size Standards Methodology” White Paper, available at . SBA had also applied the same methodology in its previous inflation adjustments, including the last adjustment in 2008. This methodology involves the following steps.
1. Selecting an inflation measure.
2. Selecting a base period.
3. Selecting an end period.
4. Calculating the inflation rate.
5. Adjusting the monetary based size standards.
Selecting an Inflation Measure
SBA establishes small business size standards to determine eligibility of businesses for a wide variety of SBA's and other Federal programs. The majority of businesses participating in those programs are engaged in multiple industries producing a wide range of goods and services. Therefore, it is important that the Agency use a broad measure of inflation to adjust its size standards. In the past, SBA's preferred measure of inflation had been the chain-type price index for the U.S. Gross Domestic Product (GDP price index), published by the U.S. Department of Commerce, Bureau of Economic Analysis (BEA) on a quarterly basis as part of its National Income and Product Accounts (NIPA), available at .
There are a number of other price indexes that the Federal Government produces to measure inflation. In its “Size Standards Methodology,” SBA has stated that, besides the GDP price index used in the previous adjustments, it may also consider using alternative inflation measures to adjust size standards in future inflation adjustments, including industry specific inflation indices that will better capture the variation in inflation levels across industries. Accordingly, for the current inflation adjustment, SBA reviewed some possible industry specific inflation measures. These included chain-type GDP price indices by industry from BEA and consumer and producer prices by industry from the U.S. Bureau of Labor Statistics (BLS). Additionally, in recent years, SBA received comments from the public suggesting that the Agency should consider using alternative measures of price indexes to adjust size standards for inflation (see SBA Final Rule: Small Business Size Standards; Business Loan Program and Disaster Assistance Loan Program 73 FR 41237 (July 18, 2008)). The commenters argued that the GDP price index underestimates inflation and that it does not account for cost increases that are unique to certain industries that may have experienced a higher rate of inflation than the one suggested by GDP price index. In response, besides the GDP price index, in this rule, SBA also reviewed data on several alternative inflation measures published by the Federal Government, namely the consumer price index (CPI), the personal consumption expenditures price index (PCEPI), the producer price index (PPI), and the employment cost index (ECI). The Agency compared the performance of these indexes with the performance of the GDP price index to determine the appropriateness of using the GDP price index to adjust size standards for inflation. Below are brief descriptions of each of these indexes.
GDP chain-type price index (GDP price index): The GDP price index measures the prices of final goods and services produced by the U.S. economy. BEA produces this index on a quarterly basis. It is derived from the prices of personal consumption expenditures, gross private domestic investment, net exports, and government consumption expenditures, and gross investment. Therefore, it is a very broad measure of inflation in the economy. It is used to adjust for inflation the gross value of the output of the U.S. economy in NIPA during a period considered. For more information, refer to the BEA Web site at .
Consumer price index (CPI): The CPI, produced monthly by the BLS, is a measure of the average change in the prices paid by urban consumers for a market basket of goods and services, including imports. The federal government, Federal Reserve Bank, and the private sector use this index as an economic indicator to assess inflationary pressures in the economy. The CPI and its components are also used to adjust other economic series (including various components of NIPA by the BEA) for price change and to convert these series to inflation-free or constant dollars. Finally, the CPI is used to adjust social security and other Government payments. For a detailed explanation, refer to the BLS Web site at .
Personal consumption expenditures price index (PCEPI): Similar to the CPI, the PCEPI measures the change in prices paid for goods and services purchased by consumers, and is produced by the BEA on a quarterly basis. The two indexes are similar, but they differ in terms of coverage, weighting, and calculation procedures (see ). Given its low volatility, comprehensive coverage of goods and services, and historical revision of the data, the Federal Reserve Bank uses the PCEPI to measure inflation for policy considerations.
Producers' price index (PPI): Also published by the BLS on a monthly basis, the PPI is a family of indexes that measure the average change over time in the prices domestic producers receive for their goods and services. Like the CPI, the PPIs data are used to adjust other economic time series for price changes and to translate those series into inflation-free or constant dollars. For example, constant-dollar GDP series are derived using deflators based on PPI data. The PPIs capture price movements of goods and services prior to the retail level. Therefore, they may not account for subsequent price changes experienced by businesses and final consumers. The U.S. government and the Federal Reserve Bank use PPI data in formulating fiscal and monetary policies. Finally, PPI data are also commonly used in escalating purchase and sales contracts. For more information, refer to the BLS Web site at .
Employment cost index (ECI): Produced by the BLS, ECI provides a quarterly measure of changes in labor costs (i.e. wages and salaries and other benefit costs), as well as changes in total compensation. It is one of the principal indicators used by the Federal Reserve Bank in assessing inflationary conditions in the economy. The ECI is also widely used by both Government and private sector. Some examples of its uses are to formulate and assess public policy, to aid collective bargaining negotiations, to evaluate benefit packages, to index Medicare payments, and to adjust wages in long-term contracts. For more information, refer to the BLS Web site at .
Industry specific inflation measures: Additionally, SBA evaluated if the differences between inflation for individual industries and the overall measure of inflation, as measured by the GDP price index, are significant. For this, SBA examined the value added price indexes (VAPI) and Gross Output price indexes (GOPI) by industry contained in BEA's GDP-by-industry accounts tables (see ). Value added by industry is the contribution of individual industries to the nation's GDP. Gross Output by Industry measures goods and services produced by an industry, valued at producers' prices (i.e., the prices received by producers, including excise and sales taxes). The VAPI and GOPI data are published only annually and the latest data available are for 2012. The level of industry disaggregation is not as detailed as in the Economic Census data. SBA calculated the inflation by industry between the calendar years 2008 and 2012 using VAPI and GOPI, and computed the average inflation rate over all industries for which the data were available.
SBA also compared the inflation rates based on CPI, PCEPI, PPI, ECI, and the GDP price index for the period between the first quarter of 2008 and the second quarter of 2013. The results indicated that, although these price indexes tend to show some variations in the short run, they all move in the same direction in the long run, but in different magnitudes. Inflation based on the CPI and PCEPI measures was more or less similar to the one based on the GDP price index and it was somewhat higher based on the PPI and ECI measures. With some variations among industries, SBA found that, on average, inflation rate by industry based on VAPI and GOPI was also more or less similar to the overall inflation rate based on the GDP price index.
The above discussion shows that there exist differences among various price indexes with respect to what they measure and how they are derived. However, generally speaking, all indexes measure changes in some types of price levels in the economy and they all are used by the Government, Federal Reserve and private sector to assess inflationary pressures in the economy, deflate other economic data series, and adjust social security and other income payments. Each price index has its own limitations and advantages and there is no universal preference of one index to others.
As stated above, SBA requires a broad measure of inflation for adjusting its size standards for inflation. In general, the majority of firms participating in the SBA's and other Federal programs receive income or receipts from multiple industries. Among the various inflation measures SBA reviewed, the GDP price index appears to be the most comprehensive measure of movements in the general price level in the economy. It incorporates price changes for all sectors of the economy, including consumer products and services, capital goods, exports, and government services. It is also the most stable measure of inflation overtime relative to other price indexes, especially PPI and ECI. Besides, the GDP price index is widely used as a measure of inflation for policy purposes, and has historical validity and gained acceptance of the small business community. SBA believes that using some other price indexes (such as PPI and ECI) that yield higher inflation than the GDP price index will overestimate the adjustments for inflation and may affect the competitiveness of smaller businesses for Federal opportunities. Most importantly, the GDP price index seems to incorporate information from most other indexes, including PPI, CPI, and ECI, since the BEA uses several subcomponents of these price indexes to deflate various components of GDP (see BEA, “Concepts and Methods of the U.S. National Income and Product Accounts” at ).
For these reasons, SBA continues to prefer using the GDP price index as the best aggregate measure of inflation for the U.S. economy. Thus, as in the previous inflation adjustments, SBA has decided to use the GDP price index to adjust monetary based size standards for the current inflation adjustment as well.
Selecting the Base and End Periods
For this rule, SBA selected the first quarter of 2008 as the base period, because it was the end period for the July 2008 adjustment. SBA selected the fourth quarter of 2013 as the end period for this inflation adjustment.
Calculating the Rate of Inflation
The GDP price index for the base period was 98.5 and the GDP price index for the end period was 107.1. Accordingly, inflation increased 8.73 percent from the first quarter of 2008 to the fourth quarter of 2013 ((107.1 ÷ 98.5) −1.00) × 100 percent = 8.73 percent. During this period, inflation has been relatively subdued, principally because of a weak and slow economic recovery from the 2007-2009 recession of the U.S. economy, despite some bursts of sharp rises in energy and commodity prices at different times during the period.
Making Adjustments to Size Standards
Adjustment to receipts based industry size standards: Receipts based size standards were adjusted by multiplying their current levels by 1.0873, and rounding the results to the nearest $500,000. Table 1, Inflation Adjustment to Receipts Based Size Standards, summarizes the results of the analysis for 16 different receipts based size standards levels, ranging from $5 million to $35.5 million. As stated elsewhere in the rule, the $750,000 receipts based size standard for agricultural industries was not adjusted because it was set by the statute. The first column of Table 1 shows the current receipts based size standards, the second column shows their inflation-adjusted values but not rounded, the third column shows their inflation-adjusted values rounded to the nearest $500,000, and the fourth column shows the count of industries and subindustries that are associated with each of the receipts based size standards levels. The results lead to adjustment to 487 size standards, including 476 industries and 11 subindustries or “exceptions.”
Adjustment to assets based size standard: Currently, five industries in North American Classification Systems (NAICS) Sector 52, Finance and Insurance, have the size standard of $500 million in average assets. Similar to the receipts based size standards, the assets based size standard was adjusted by multiplying the current value by 1.0873. The result was $543.7 million, but it was rounded to $550 million.
Adjustment to program based size standards: Most SBA and other Federal programs apply size standards established for industries, as defined by the NAICS. SBA has also established a few size standards on a program basis rather than on an industry basis. These size standards were also adjusted for inflation in the same manner as the receipts based industry size standards. Table 2, Inflation Adjustment to Program Based Size Standards, shows the program based size standards and their corresponding inflation-adjusted values. The size standard for “smaller enterprises” under the Small Business Investment Company (SBIC) Program is set by statute (see 13 CFR 107.710(a)) and, therefore, not adjusted.
New Alternative Size Standard for 7(a) and 504 Loan Programs: Effective September 27, 2010, the Jobs Act established a new temporary alternative size standard of tangible net worth of not more than $15 million and net income of not more than $5 million for SBA's 7(a) and 504 Loan Programs. On September 29, 2010, SBA issued Notice 5000-1175 advising lenders and the public that, effective September 27, 2010, the new statutory alternative size standard will apply for its 7(a) and 504 Loan Programs, thereby replacing the existing alternative size standard of $8.5 million in tangible net worth and $3 million in net income, then set forth in 13 CFR 121.301(b)(2). The Jobs Act also provided the new temporary alternative size standard would remain in effect for the 7(a) and CDC/504 Loan Programs until the SBA's Administrator has established a different size standard through rulemaking. For this reason, in this rule, SBA is not adjusting the new alternative size standard for its 7(a) and 504 Loan programs for inflation. SBA will issue a different rule to establish a permanent alternative size standard for those programs.
Size Standards for Surety Bond Guarantee Assistance: SBA has decided to remove 13 CFR 121.301(d)(2). Currently, 13 CFR 121.301(d) reads as follows:
(1) A business concern, combined with its affiliates, must meet the size standard for the primary industry in which such business concern, combined with its affiliates, is engaged.
(2) For any contract or subcontract, public or private, to be performed in the Presidentially-declared disaster areas resulting from the 2005 Hurricanes Katrina, Rita or Wilma, a construction (general or special trade) concern or concern performing a contract for services is small if it meets the size standard set forth in paragraph (d)(1) of this section, or the average annual receipts of the concern, together with its affiliates, do not exceed $7 million, whichever is higher.
SBA believes that paragraph (2) is no longer necessary for two reasons. First, given paragraph (1), paragraph (2) is now mostly redundant, because the inflation adjusted receipts based size standards for all industries, except for four, are higher than $7 million (see Table 1, Inflation Adjustment to Receipts Based Size Standards, above). Second, SBA would not expect, after more than eight years since the Hurricanes Katrina, Rita, and Wilma occurred, small businesses in these disaster areas would be in need of a separate size standard, which now has only limited application. Paragraph (2) made sense when the size standard for a construction concern (general or special trade) for Surety Bond Guarantee was $7 million or less in average receipts, but the size standards for all industries in construction are now higher than $7 million. On August 11, 2010, SBA issued a direct final rule to amend small business size standards for its Surety Bond Guarantee Program (75 FR 48549). Specifically, the direct final rule provided that a business concern is small if such concern, combined with its affiliates, does not exceed the size standard for the NAICS code that corresponds to the primary industry of the business concern, combined with its affiliates.
Size Standards for Economic Injury Disaster Loan (EIDL) Assistance: Since it has been more than eight years since the Hurricanes Katrina, Rita, and Wilma occurred, SBA has decided to remove the text relating to when the Agency determines size status for EIDL assistance under disaster declarations for the Hurricanes Katrina, Rita, and Wilma from 13 CFR 121.302(c).
Size Standard for Leasing of Building Space to Federal Government by Owners—Footnote 9: It has come to SBA's attention that there can be some confusion concerning to what NAICS code(s) footnote 9 and the size standard for the “Leasing of Building Space to Federal Government by Owners” exception apply. Specifically, footnote 9 states, “NAICS code 531190—Leasing of building space to the Federal Government by Owners: For Government procurement, a size standard of $35.5 million in gross receipts applies to the owners of building space leased to the Federal Government. The standard does not apply to an agent.” In the SBA's table of size standards, this “exception” follows immediately after NAICS 531190, Lessors of Other Real Estate Property. This has been understood by some to mean that the exception and footnote 9 apply only to NAICS 531190.
However, the size standard exception for “Leasing of Building Space to Federal Government by Owners” is meant to apply to all industries in NAICS Industry Group 5311, Lessors of Real Estate. That is consistent with SBA's original application of the footnote to Standard Industrial Classification (SIC) Major Group 651, Real Estate Operators (Except Developers) and Lessors, when the SBA's table of size standards was based on the SIC system.
To clarify this, SBA is adding the footnote 9 superscript to each of the four NAICS Industry codes within NAICS Industry Group 5311 and removing from the table the exception that follows NAICS 531190. The new inflation-adjusted size standard for the Leasing of Building Space to Federal Government by Owners exception will be $38.5 million in average annual receipts.
Justification for Updating Size Standards for Inflation as an Interim Final Rule
In general, to revise or update size standards, SBA publishes a proposed rule for public comment before issuing a final rule, in accordance with the Administrative Procedure Act (APA), 5 U.S.C. 553 and SBA regulations, 13 CFR 101.108. The APA provides an exception to this standard rulemaking process, however, in situations where an agency finds good cause to adopt a rule without prior public participation. (See 5 U.S.C. 553(b)(3)(B)). The good cause requirement is satisfied when prior public participation is impracticable, unnecessary, or contrary to the public interest. Under those conditions, an agency may publish an interim final rule without first soliciting public comment. In applying the good cause exception to the standard rulemaking process, Congress recognized that special circumstances (such as a response to a natural disaster or an economic situation) might arise justifying issuance of a rule without prior public participation.
As stated above, the last time SBA made inflation adjustments to size standards was 2008. Many businesses may have lost small business eligibility for Federal assistance under SBA's monetary based size standards simply as a result of the inflation that has occurred since that time. This rule is necessary to make those businesses eligible for Federal assistance. Any delay in the adoption of inflation adjusted size standards could cause serious harm to those businesses and others that are about to exceed current size standards. Immediate implementation of this rule would enable those businesses to benefit from Federal assistance programs and help them create jobs. SBA believes that the job creation under the current economic environment of high unemployment is in the best interest of the public.
The standard notice and comment rulemaking would delay the implementation of this rule by at least eight to twelve months. Such a delay would be contrary to the public interest as it would delay the eligibility of those businesses for Federal small business assistance, perhaps forcing some of them to cease operations before a final rule could be promulgated under the standard rulemaking process. Furthermore, the inflation adjustment will become outdated by the time the final rule is published under notice and comment rulemaking.
SBA believes that delaying the adoption of updated size standards for inflation is not in the best interest of small businesses in the current economic environment. The U.S. economy was in recession from December 2007 to June 2009, the longest and deepest of any recessions since before World War II. The economy lost more than eight million non-farm jobs during 2008-2009. In response, Congress passed and the President signed into law the American Recovery and Reinvestment Act of 2009 (Recovery Act) to promote economic recovery and to preserve and create jobs. Although the recession officially ended in June 2009, the unemployment rate is still at 6.7 percent in March 2014 () and is forecast to remain around this level at least through the end of 2014. (). In 2010, Congress passed and the President signed the Jobs Act to promote small business job creation. The Jobs Act included several measures to help small businesses create jobs. Delaying the adoption of updated size standards would prevent businesses that have exceeded size standards due to inflation from participating in Federal financial and procurement assistance programs for small businesses. This would be contrary to the expressed will of the President and the Congress.
For the above reasons, SBA finds that good cause exists to publish this rule as an interim final rule. SBA's rationale for preparing this action as an interim final rule and giving it immediate effect is consistent with the Agency's statutory obligation to act in the public interest in determining eligibility for Federal assistance under the Small Business Act, 15 U.S.C. 633(d). SBA had also implemented inflation adjustments to size standards through an interim final rule in 2002 and 2005 without any controversies.
By publishing this rule as an interim final rule, SBA is not excluding public participation in the rulemaking process. SBA is soliciting comments from interested parties on this interim final rule on a number of issues, including SBA's methodology for inflation adjustment and alternative measures of inflation. SBA will evaluate all comments and revise, if necessary, this rule, and publish a final rule on a later date.
Request for Comments
SBA seeks comments on this rule, specifically on the following issues.
1. SBA welcomes comments from the interested parties on SBA's size standards methodology for inflation adjustment to its size standards. Specifically, SBA seeks comment on whether the GDP price index is an appropriate measure of inflation for adjusting size standards. The Agency invites suggestions, along with supporting data and analysis, if a different measure of inflation would be more appropriate.
2. SBA also invites comments on whether it should adjust employee based size standards for changes in labor productivity and technical change, similar to adjusting monetary based size standards for inflation.
3. SBA also invites comments on any other aspects of this rulemaking, such as the changes to size standards for business loan programs, disaster loan programs, and the surety bond guarantee program.
Compliance With Executive Orders 12866, 13563, 12988, and 13132, the Paperwork Reduction Act (44 U.S.C., Ch. 35), and the Regulatory Flexibility Act (
The Office of Management and Budget (OMB) has determined that this interim final rule is not a “significant regulatory action” for purposes of Executive Order 12866. In order to help explain the need for this rule and the rule's potential benefits and costs, SBA is providing a Cost Benefit Analysis in this section of the rule. This is also not a “major rule” under the Congressional Review Act (5 U.S.C. 800).
Cost Benefit Analysis
1. Is there a need for the regulatory action?
SBA's statutory mission is to aid and assist small businesses through a variety of financial, procurement, business development, and advocacy programs. To assist the intended beneficiaries of these programs effectively, SBA must establish distinct definitions of which businesses are deemed small businesses. The Small Business Act (15 U.S.C. 632(a)) (Act) delegates to the SBA Administrator the responsibility for establishing small business definitions. The Act also requires that small business definitions vary to reflect industry differences. The supplementary information to this interim final rule explains how SBA adjusts size standards for inflation. SBA is required to assess the impact of inflation on its monetary based size standards at least once every five years (67 FR 3041 and 13 CFR 102(c)). Many businesses may have lost small business eligibility for Federal assistance under SBA's monetary based size standards simply because of inflation that has occurred since the last inflation adjustment to size standards in 2008. This interim final rule aims to make those businesses eligible again for Federal assistance.
2. What are the potential benefits and costs of this regulatory action?
The most significant benefit to businesses of this interim final rule is to enable businesses that have exceeded size standards simply due to inflation to regain eligibility for Federal small business assistance programs. This will also help businesses to retain small business eligibility for Federal programs for a longer period. These programs include SBA's financial assistance programs, economic injury disaster loans, and Federal procurement programs intended for small businesses. Federal procurement programs provide targeted opportunities for small businesses under SBA's business development programs, such as 8(a), Small Disadvantaged Businesses (SDB), small businesses located in Historically Underutilized Business Zones (HUBZone), women-owned small businesses (WOSB), economically disadvantaged women-owned small businesses (EDWOSB), and service-disabled veteran-owned small businesses (SDVOSB). Federal agencies may also use SBA's size standards for a variety of other regulatory and program purposes. These programs assist small businesses to become more knowledgeable, stable, and competitive. SBA estimates that this rule will enable approximately 8,500 firms in industries and subindustries with receipts based size standards and about 170 firms in industries with assets based size standards, currently above SBA's size standards, to gain small business status and become eligible for these programs. This will increase the small business share of total receipts in industries and subindustries with receipts based size standards from 31.2 percent to 31.8 percent and the small business share of total assets in industries with assets based size standards from 8.8 percent to 9.4 percent.
Three groups will benefit from the revisions of size standards in this rule: (1) Some businesses that are above the current size standards may gain small business status under the higher, inflation-adjusted size standards, thereby enabling them to participate in Federal small business assistance programs; (2) growing small businesses that are close to exceeding the current size standards will be able to retain their small business status under the higher size standards, thereby enabling them to continue their participation in the programs; and (3) Federal agencies will have a larger pool of small businesses from which to draw for their small business procurement programs.
SBA estimates that firms gaining small business status under the inflation adjusted size standards could receive Federal contracts totaling $150 million to $200 million annually under SBA's small business, 8(a), SDB, HUBZone, WOSB, EDWOSB, and SDVOSB Programs, and unrestricted procurements. The added competition for many of these procurements can also result in lower prices to the Government for procurements reserved for small businesses, but SBA cannot quantify this benefit.
Based on the fiscal years 2010-2012 data, SBA estimates about 80 additional loans totaling about $30 million could be made to these newly defined small businesses under SBA's 7(a) and 504 Loan Programs under the adjusted size standards. Increasing the size standards will likely result in more small business guaranteed loans to businesses in these industries, but it is impractical to try to estimate the exact number and total amount of loans. There are two reasons for this: (1) Under the Jobs Act, SBA can now guarantee substantially larger loans than in the past; and (2) as described above, the Jobs Act established an alternative size standard ($15 million in tangible net worth and $5 million in net income after income taxes) for business concerns that do not meet the size standards for their industry. Therefore, SBA finds it difficult to quantify the actual impact of these inflation adjusted size standards on its 7(a) and 504 Loan Programs.
Newly defined small businesses will also benefit from SBA's Economic Injury Disaster Loan (EIDL) Program. Since this program is contingent on the occurrence and severity of a disaster in the future, SBA cannot make a meaningful estimate of this impact.
In addition, newly defined small businesses will also benefit through reduced fees, less paperwork, and fewer compliance requirements that are available to small businesses through Federal government.
To the extent that those nearly 8,700 additional small firms could become active in Federal procurement programs, the adjusted size standards in this final interim rule may entail some additional administrative costs to the government as a result of more businesses being eligible for Federal small business programs. For example, there will be more firms seeking SBA's guaranteed loans, more firms eligible for enrollment in the System of Award Management (SAM) database, and more firms seeking certification as 8(a) or HUBZone firms or qualifying for small business, WOSB, EDWOSB, SDVOSB, and SDB status. Among those newly defined small businesses seeking SBA's assistance, there could be some additional costs associated with compliance and verification of small business status and protests of small business status. However, SBA believes that these added administrative costs will be minimal because mechanisms are already in place to handle these requirements.
In some cases, Federal government contracts may have higher costs. With a greater number of businesses defined as small, Federal agencies may choose to set aside more contracts for competition among small businesses only rather than using full and open competition. The movement from unrestricted to small business set-aside contracting might result in competition among fewer total bidders, although there will be more small businesses eligible to submit offers. However, the additional costs associated with fewer bidders are expected to be minor since, by law, procurements may be set aside for small businesses or reserved for the 8(a), HUBZone, WOSB, EDWOSB, or SDVOSB Programs only if awards are expected to be made at fair and reasonable prices. In addition, there may be higher costs when more full and open contracts are awarded to HUBZone businesses that receive price evaluation preferences.
The size standards adjustments in this interim final rule may have some distributional effects among large and small businesses. Although SBA cannot estimate with certainty the actual outcome of the gains and losses among small and large businesses, it can identify several probable impacts. There may be a transfer of some Federal contracts to small businesses from large businesses. Large businesses may have fewer Federal contract opportunities as Federal agencies decide to set aside more contracts for small businesses. In addition, some Federal contracts may be awarded to HUBZone concerns instead of large businesses since these firms may be eligible for a price evaluation preference for contracts when they compete on a full and open basis.
Similarly, some businesses defined small under the current size standards may obtain fewer Federal contracts due to the increased competition from more businesses defined as small under the proposed size standards. This transfer may be offset by a greater number of Federal procurements set aside for all small businesses. The number of newly defined and expanding small businesses that are willing and able to sell to the Federal Government will limit the potential transfer of contracts from large and currently defined small businesses. SBA cannot estimate the potential distributional impacts of these transfers with any degree of precision.
The revision to the current monetary based industry size standards for 481 industries and 11 subindustries, and to the monetary based size standards for other specific programs are consistent with SBA's statutory mandate to assist small business. This regulatory action promotes the Administration's objectives. One of SBA's goals in support of the Administration's objectives is to help individual small businesses succeed through fair and equitable access to capital and credit, Government contracts, and management and technical assistance. Reviewing and modifying size standards, when appropriate, including periodic inflation adjustments, ensure that intended beneficiaries have access to small business programs designed to assist them.
A description of the need for this regulatory action and benefits and costs associated with this action including possible distributions impacts that relate to Executive Order 13563 is included above in the Cost Benefit Analysis under Executive Order 12866.
In an effort to engage interested parties in this action, SBA gave appropriate consideration to all input, suggestions, recommendations, and relevant information obtained from industry groups, individual businesses, and Federal agencies in preparing this interim final rule.
The review of size standards in industries and financial assistance programs covered in this interim final rule is consistent with Executive Order 13563, Section 6, calling for retrospective analyses of existing rules. The last inflationary adjustment of monetary based size standards occurred in July 2008.
Additionally to the inflationary adjustment of monetary based size standards of this final interim rule, SBA finalized a comprehensive review of all the receipts and assets based industry size standards to ensure that they have supportable bases.
This action meets applicable standards set forth in Sections 3(a) and 3(b)(2) of Executive Order 12988, Civil Justice Reform, to minimize litigation, eliminate ambiguity, and reduce burden. The action does not have retroactive or preemptive effect.
For purposes of Executive Order 13132, SBA has determined that this interim final 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 interim final 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 interim final rule will not impose any new reporting or record keeping requirements.
Initial Regulatory Flexibility Analysis
Under the Regulatory Flexibility Act (RFA), this interim final rule may have a significant impact on a substantial number of small businesses in the industries and subindustries covered by this rule. As described above, this rule may affect small businesses seeking Federal contracts, loans under SBA's 7(a), 504 and Economic Injury Disaster Loan Programs, and assistance under other Federal small business programs.
Immediately below, SBA sets forth an initial regulatory flexibility analysis (IRFA) of this interim final rule addressing the following questions: (1) What are the need for and objective of the rule? (2) What are SBA's description and estimate of the number of small businesses to which the rule will apply? (3) What are the projected reporting, record keeping, and other compliance requirements of the rule? (4) What are the relevant Federal rules that may duplicate, overlap, or conflict with the rule? and (5) What alternatives will allow the Agency to accomplish its regulatory objectives while minimizing the impact on small businesses?
1. What are the need for and objective of the rule?
As discussed in the supplemental information, the revision to the monetary based size standards for inflation more appropriately defines small businesses. This interim final rule merely restores small business eligibility in real terms to businesses that have grown above the size standard due to inflation rather than due to increased business activity. A review of the latest inflation indexes indicates that inflation has increased a sufficient amount to warrant an increase to the current monetary based size standards.
Section 3(a) of the Small Business Act (15 U.S.C. 632(a)) gives SBA the authority to establish and change size standards. Within its administrative discretion, SBA implemented a policy in its regulations to review the effect of inflation on size standards at least once every five years (13 CFR 121.102(c)) and make any changes as appropriate. As discussed in the supplementary information, inflation has increases at a sufficient level since the time of the 2008 final rule to warrant a further adjustment to size standards at this time.
2. What are SBA's description and estimate of the number of small businesses to which the rule will apply?
SBA estimates that about 8,500 additional firms will become small because of increased receipts based size standards of 476 industries and 11 subindustries. That represents 0.2 percent of total firms that are small under current monetary based size standards. This will result in an increase in the small business share of total industry receipts in those industries and subindustries from 31.2 percent under the current size standards to 31.8 percent under the inflation-adjusted size standards. Due to the adjustment of assets based size standards in five industries, about 170 additional firms will gain small business status in those industries. This will increase the small business share of total assets in those industries from 8.8 percent to 9.4 percent. The size standards adopted in this interim final rule will enable businesses that have exceeded the size standards for their industries to regain small business status. It will also help currently small businesses to retain their small business status for a longer period. Many firms may have lost their eligibility and find it difficult to compete at current size standards with companies that are significantly larger than they are. SBA believes the competitive impact will be positive for existing small businesses and for those that exceed the size standards but are on the very low end of those that are not small. They might otherwise be called or referred to as mid-sized businesses, although SBA only defines what is small; entities that are not small are “other than small.”
3. What are the projected reporting, recordkeeping and other compliance requirements of the rule?
The inflation adjustment to size standards imposes no additional reporting or record keeping requirements on small businesses. However, qualifying for Federal procurement and a number of other programs requires that businesses register in the SAM database and certify in SAM that they are small at least once annually. Therefore, newly eligible small businesses opting to participate in those programs must comply with SAM requirements. Businesses whose status changes in SAM from other than small to small must update their SAM profiles and complete the “representations and certifications” sections of SAM. However, there are no costs associated with SAM registration or certification. Changing size standards alters the access to SBA's programs that assist small businesses, but does not impose a regulatory burden because they neither regulate nor control business behavior.
4. What are the relevant Federal rules, which may duplicate, overlap, or conflict with the rule?
Under section 3(a)(2)(C) of the Small Business Act, 15 U.S.C. 632(a)(2)(c), Federal agencies must use SBA's size standards to define a small business, unless specifically authorized by statute to do otherwise. In 1995, SBA published in the Federal Register a list of statutory and regulatory size standards that identified the application of SBA's size standards as well as other size standards used by Federal agencies (60 FR 57988 (November 24, 1995)). SBA is not aware of any Federal rule that would duplicate or conflict with establishing size standards.
However, the Small Business Act and SBA's regulations allow Federal agencies to develop different size standards if they believe that SBA's size standards are not appropriate for their programs, with the approval of SBA's Administrator (13 CFR 121.903). The Regulatory Flexibility Act authorizes an Agency to establish an alternative small business definition for Regulatory Flexibility Analysis purposes, 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.
SBA's only other consideration was whether to adopt the size standards presented in the interim final rule with no further increase for the inflation. However, SBA believes that the additional 8.73 percent inflation that has occurred since the time of the final rule published in July 2008 sufficiently affects the real value of the size standards to warrant applying an increase at this time.
List of Subjects In
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 amends 13 CFR part 121 as follows:
Part 121 Small Business Size Regulations
1. The authority citation for part 121 continues to read as follows:
15 U.S.C. 632, 634(b)(6), 662, and 694a(9).
2. In § 121.201, amend the table “Small Business Size Standards by NAICS Industry” as follows:
a. Revise the entries for “112112”, “112310”, “113110”, “113210”, “114111”, “114112”, “114119”, “114210”, “115111”, “115112”, “115113”, “115114”, “115115”, “115116”, “115210”, “115310”, “115310 first and second sub-entry”, “213112”, “213113”, “213114”, “213115”, “221310”,”221320”, “221330”, “236115”, “236116”, “236117”, “236118”, “236210”, “236220”, “237110”, “237120”, “237130”, “237210”, “237310”, “237990”, “237990 first sub-entry”, “238110”, “238120”, “238130”, “238140”, “238150”, “238160”, “238170”, “238190”, “238210”, “238220”, “238290”, “238310”, “238320”, “238330”, “238340”, “238350”, “238390”, “238910”, “238990”, “238990 first sub-entry “, “441120”, “441210”, “441222”, “441228”, “441310”, “441320”, “442110”, “442210”, “442291”, “442299”, “443141”, “443142”, “444110”, “444120”, “444130”, “444190”, “444210”, “444220”, “445110”, “445120”, “445210”, “445220”, “445230”, “445291”, “445292”, “445299”, “445310”, “446110”, “446120”, “446130”, “446191”, “446199”, “447110”, “447190”, “448110”, “448120”, “448130”, “448140”, “448150”, “448190”, “448210”, “448310”, “448320”, “451110”, “451120”, “451130”, “451140”, “451211”, “451212”, “452111”, “452112”, “452910”, “452990”, “453110”, “453210”, “453220”, “453310”, “453910”, “453920”, “453930”, “453991”, “453998”, “454111”, “454112”, “454113”, “454210”, “454390”, “481211”, “481211 first sub-entry”, “481212”, “481212 first sub-entry”, “481219”, “484110”, “484121”, “484122”, “484210”, “484220”, “484230”, “485111”, “485112”, “485113”, “485119”, “485210”, “485310”, “485320”, “485410”, “485510”, “485991”, “485999”, “486210”, “486990”, “487110”, “487210”, “487990”, “488111”, “488119”, “488190”, “488210”, “488310”, “488320”, “488330”, “488390”, “488410”, “488490”, “488510”, “488510 first sub-entry”, “488991”, “488999”, “491110”, “492210”, “493110”, “493120”, “493130”, “493190”, “511210”, “512110”, “512120”, “512131”, “512132”, “512191”, “512199”, “512210”, “512240”, “512290”, “515111”, “515112”, “515120”, “515210”, “517410”, “517919”, “518210”, “519110”, “519120”, “519190”, “522110”, “522120”, “522130”, “522190”, “522210”, “522220”, “522291”, “522292”, “522293”, “522294”, “522298”, “522310”, “522320”, “522390”, “523110”, “523120”, “523130”, “523140”, “523210”, “523910”, “523920”, “523930”, “523991”, “523999”, “524113”, “524114”, “524127”, “524128”, “524130”, “524210”, “524291”, “524292”, “524298”, “525110”, “525120”, “525190”, “525910”, “525920”, “525990”, “531110”, “531120”, “531130”, “531190”, “531210”, “531311”, “531312”, “531320”, “531390”, “532111”, “532112”, “532120”, “532210”, “532220”, “532230”, “532291”, “532292”, “532299”, “532310”, “532411”, “532412”, “532420”, “532490”, “533110”, “541110”, “541191”, “541199”, “541211”, “541213”, “541214”, “541219”, “541310”, “541320”, “541330”, “541330 first, second and third sub-entry”, “541340”, “541350”, “541360”, “541370”, “541380”, “541410”, “541420”, “541430”, “541490”, “541511”, “541512”, “541513”, “541519”, “541519 first-sub entry”, “541611”, “541612”, “541613”, “541614”, “541618”, “541620”, “541690”, “541720”, “541810”, “541820”, “541830”, “541840”, “541850”, “541860”, “541870”, “541890”, “541910”, “541921”, “541922”, “541930”, “541940”, “541990”, “551111”, “551112”, “561110”, “561210”, “561311”, “561312”, “561320”, “561330”, “561410”, “561421”, “561422”, “561431”, “561439”, “561440”, “561450”, “561491”, “561492”, “561499”, “561510”, “561520”, “561591”, “561599”, “561611”, “561612”, “561613”, “561621”, “561622”, “561710”, “561720”, “561730”, “561740”, “561790”, “561910”, “561920”, “561990”, “562111”, “562112”, “562119”, “562211”, “562212”, “562213”, “562219”, “562910”, “562920”, “562991”, “562998”, “611110”, “611210”, “611310”, “611410”, “611420”, “611430”, “611511”, “611512”, “611513”, “611519”, “611519 first sub-entry”, “611610”, “611620”, “611630”, “611691”, “611692”, “611699”, “611710”, “621111”, “621112”, “621210”, “621310”, “621320”, “621330”, “621340”, “621391”, “621399”, “621410”, “621420”, “621491”, “621492”, “621493”, “621498”, “621511”, “621512”, “621610”, “621910”, “621991”, “621999”, “622110”, “622210”, “622310”, “623110”, “623210”, “623220”, “623311”, “623312”, “623990”, “624110”, “624120”, “624190”, “624210”, “624221”, “624229”, “624230”, “624310”, “624410”, “711110”, “711120”, “711130”, “711190”, “711211”, “711212”, “711219”, “711310”, “711320”, “711410”, “711510”, “712110”, “712120”, “712130”, “712190”, “713110”, “713120”, “713210”, “713290”, “713910”, “713920”, “713930”, “713940”, “713950”, “713990”, “721110”, “721120”, “721191”, “721199”, “721211”, “721214”, “721310”, “722310”, “722320”, “722330”, “722410”, “722511”, “722513”, “722514”, “722515”, “811111”, “811112”, “811113”, “811118”, “811121”, “811122”, “811191”, “811192”, “811198”, “811211”, “811212”, “811213”, “811219”, “811310”, “811411”, “811412”, “811420”, “811430”, “811490”, “812111”, “812112”, “812113”, “812191”, “812199”, “812210”, “812220”, “812310”, “812320”, “812331”, “812332”, “812910”, “812921”, “812922”, “812930”, “812990”, “813110”, “813211”, “813212”, “813219”, “813311”, “813312”, “813319”, “813410”, “813910”, “813920”, “813930”, “813940”, and”813990”.
b. For entries “531110”, “531120”, “531130”, and “531190” add superscript “9” to the entry in the columns “NAICS U.S. industry title” and “Size standards in millions of dollars”.
c. Remove “sub-entry” (or “except”) under entry “531190”.
d. Add “sub-entry” (or “except”) under entry “562910.”
d. Revise footnotes 9 and 15
The revisions read as follows:
§ 121.201 What size standards has SBA identified by North American Industry Classification System codes?
* * * * *
* * * * *
2. NAICS code 237990—Dredging: To be considered small for purposes of Government procurement, a firm must perform at least 40 percent of the volume dredged with its own equipment or equipment owned by another small dredging concern.
* * * * *
8. NAICS codes 522110, 522120, 522130, 522190, and 522210—A financial institution's assets are determined by averaging the assets reported on its four quarterly financial statements for the preceding year. “Assets” for the purposes of this size standard means the assets defined according to the Federal Financial Institutions Examination Council 041 call report form for NAICS codes 522110, 522120, 522190, and 522210 and the National Credit Union Administration 5300 call report form for NAICS code 522130.
9. NAICS codes 531110, 531120, 531130, and 531190—Leasing of Building Space to the Federal Government by Owners: For Government procurement, a size standard of $38.5 million in gross receipts applies to the owners of building space leased to the Federal Government. The standard does not apply to an agent.
10. NAICS codes 488510 (part), 531210, 541810, 561510, 561520, and 561920—As measured by total revenues, but excluding funds received in trust for an unaffiliated third party, such as bookings or sales subject to commissions. The commissions received are included as revenue.
* * * * *
12. NAICS code 561210—Facilities Support Services:
(a) If one or more activities of Facilities Support Services as defined in paragraph (b) (below in this footnote) can be identified with a specific industry and that industry accounts for 50% or more of the value of an entire procurement, then the proper classification of the procurement is that of the specific industry, not Facilities Support Services.
(b) “Facilities Support Services” requires the performance of three or more separate activities in the areas of services or specialty trade contractors industries. If services are performed, these service activities must each be in a separate NAICS industry. If the procurement requires the use of specialty trade contractors (plumbing, painting, plastering, carpentry, etc.), all such specialty trade contractors activities are considered a single activity and classified as “Building and Property Specialty Trade Services. Since” Building and Property Specialty Trade Services” is only one activity, two additional activities of separate NAICS industries are required for a procurement to be classified as “Facilities Support Services.”
13. NAICS code 238990—Building and Property Specialty Trade Services:
If a procurement requires the use of multiple specialty trade contractors (i.e., plumbing, painting, plastering, carpentry, etc.), and no specialty trade accounts for 50% or more of the value of the procurement, all such specialty trade contractors activities are considered a single activity and classified as Building and Property Specialty Trade Services.
14. NAICS code 562910—Environmental Remediation Services:
(a) For SBA assistance as a small business concern in the industry of Environmental Remediation Services, other than for Government procurement, a concern must be engaged primarily in furnishing a range of services for the remediation of a contaminated environment to an acceptable condition including, but not limited to, preliminary assessment, site inspection, testing, remedial investigation, feasibility studies, remedial design, containment, remedial action, removal of contaminated materials, storage of contaminated materials and security and site closeouts. If one of such activities accounts for 50 percent or more of a concern's total revenues, employees, or other related factors, the concern's primary industry is that of the particular industry and not the Environmental Remediation Services Industry.
(b) For purposes of classifying a Government procurement as Environmental Remediation Services, the general purpose of the procurement must be to restore or directly support the restoration of a contaminated environment (such as preliminary assessment, site inspection, testing, remedial investigation, feasibility studies, remedial design, remediation services, containment, removal of contaminated materials or security and site closeouts), although the general purpose of the procurement need not necessarily include remedial actions. Also, the procurement must be composed of activities in three or more separate industries with separate NAICS codes or, in some instances (e.g., engineering), smaller components of NAICS codes with separate and distinct size standards. These activities may include, but are not limited to, separate activities in industries such as: Heavy Construction; Special Trade Contractors; Engineering Services; Architectural Services; Management Consulting Services; Hazardous and Other Waster Collection; Remediation Services; Testing Laboratories; and Research and Development in the Physical, Engineering, and Life Sciences. If any activity in the procurement can be identified with a separate NAICS code, or component of a code with a separate distinct size standard, and that industry accounts for 50 percent or more of the value of the entire procurement, then the proper size standard is the one for that particular industry, and not the Environmental Remediation Service size standard.
15. Subsector 483—Water Transportation—Offshore Marine Services: The applicable size standard shall be $30.5 million for firms furnishing specific transportation services to concerns engaged in offshore oil and/or natural gas exploration, drilling production, or marine research; such services encompass passenger and freight transportation, anchor handling, and related logistical services to and from the work site or at sea.
16. NAICS code 611519—Job Corps Centers. For classifying a Federal procurement, the purpose of the solicitation must be for the management and operation of a U.S. Department of Labor Job Corps Center. The activities involved include admissions activities, life skills training, educational activities, comprehensive career preparation activities, career development activities, career transition activities, as well as the management and support functions and services needed to operate and maintain the facility. For SBA assistance as a small business concern, other than for Federal Government procurements, a concern must be primarily engaged in providing the services to operate and maintain Federal Job Corps Centers.
17. NAICS code 115310—Support Activities for Forestry—Forest Fire Suppression and Fuels Management Services are two components of Support Activities for Forestry. Forest Fire Suppression includes establishments which provide services to fight forest fires. These firms usually have fire-fighting crews and equipment. Fuels Management Services firms provide services to clear land of hazardous materials that would fuel forest fires. The treatments used by these firms may include prescribed fire, mechanical removal, establishing fuel breaks, thinning, pruning, and piling.
18. NAICS code 541519—An Information Technology Value Added Reseller provides a total solution to information technology acquisitions by providing multi-vendor hardware and software along with significant services. Significant value added services consist of, but are not limited to, configuration consulting and design, systems integration, installation of multi-vendor computer equipment, customization of hardware or software, training, product technical support, maintenance, and end user support. For purposes of Government procurement, an information technology procurement classified under this industry category must consist of at least 15% and not more than 50% of value added services as measured by the total price less the cost of information technology hardware, computer software, and profit. If the contract consists of less than 15% of value added services, then it must be classified under a NAICS manufacturing industry. If the contract consists of more than 50% of value added services, then it must be classified under the NAICS industry that best describes the predominate service of the procurement. To qualify as an Information Technology Value Added Reseller for purposes of SBA assistance, other than for Government procurement, a concern must be primarily engaged in providing information technology equipment and computer software and provide value added services which account for at least 15% of its receipts but not more than 50% of its receipts.
* * * * *
3. Amend § 121.301 by revising paragraphs (c)(2) introductory text and (d), to read as follows:
§ 121.301 What size standards are applicable to financial assistance programs?
* * * * *
(c) * * *
(2) Including its affiliates, tangible net worth not in excess of $19.5 million, and average net income after Federal income taxes (excluding any carry-over losses) for the preceding two completed fiscal years not in excess of $6.5 million. If the applicant is not required by law to pay Federal income taxes at the enterprise level, but is required to pass income through to its shareholders, partners, beneficiaries, or other equitable owners, the applicant's “net income after Federal income taxes” will be its net income reduced by an amount computed as follows:
* * * * *
(d) For Surety Bond Guarantee assistance—a business concern, combined with its affiliates, must meet the size standard for the primary industry in which such business concern, combined with its affiliates, is engaged.
* * * * *
4. Amend § 121.302 by revising paragraph (c) to read as follows:
§ 121.302 When does SBA determine the size status of the applicant?
* * * * *
(c) For disaster loan assistance (other than physical disaster loans), size status is determined as of the date the disaster commenced, as set forth in the Disaster Declaration. For pre-disaster mitigation loans, size status is determined as of the date SBA accepts a complete Pre-Disaster Mitigation Small Business Loan Application for processing. Refer to § 123.408 of this chapter to find out what SBA considers to be a complete Pre-Disaster Mitigation Small Business Loan Application.
* * * * *
5. Amend § 121.502 by revising paragraph (a)(2) to read as follows:
§ 121.502 What size standards are applicable to programs for sales and leases of Government property?
(a) * * *
(2) A concern not primarily engaged in manufacturing is small for sales or leases of Government property if it has annual receipts not exceeding $7.5 million.
* * * * *
6. Amend § 121.512 by revising paragraph (b) to read as follows:
§ 121.512 What is the size standard for stockpile purchases?
* * * * *
(b) Its annual receipts, together with its affiliates, do not exceed $62.5 million.
Dated: May 21, 2014.
[FR Doc. 2014-12868 Filed 6-11-14; 8:45 am]
BILLING CODE 8205-01-P
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Comment Period Closed
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Date Posted: Jun 12, 2014
CFR: 13 CFR Part 121
Federal Register Number: 2014-12868
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Mr. Sharma, Please see the attached comment letter from the Small Business Investor Alliance (SBIA). Regards, Brett Palmer
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