Final rule.
CFR Part: “13 CFR Part 121”
RIN Number: “RIN 3245-AG90”
Citation: “87 FR 18627”
Page Number: “18627”
“Rules and Regulations”
Agency: “
SUMMARY: The
DATES: This rule is effective
FOR FURTHER INFORMATION CONTACT:
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
In
FOOTNOTE 1 On
This final rule is one of a series of final rules that will revise size standards of industries grouped by various NAICS sectors. Rather than revise all size standards at one time, SBA is revising size standards by grouping industries within various NAICS sectors that use the same size measure (i.e., employees or receipts). In the prior review, SBA revised size standards mostly on a sector-by-sector basis. As part of the second five-year review of size standards, SBA reviewed all receipt-based size standards in NAICS Sectors 48-49, 51, 52, and 53 to determine whether the existing size standards should be retained or revised based on the current industry and Federal market data. After its review, SBA published in the
In conjunction with the current comprehensive size standards review, SBA developed a revised “Size Standards Methodology” (Methodology) for developing, reviewing, and modifying size standards, when necessary. SBA’s revised Methodology provides a detailed description of its analyses of various industry and program factors and data sources, and how the agency uses the results to establish and revise size standards. In the proposed rule itself, SBA detailed how it applied its revised Methodology to review and modify where necessary, the existing size standards for industries covered in this final rule. Prior to finalizing the revised Methodology, SBA issued a notification in the
In evaluating an industry’s size standard, SBA examines its characteristics (such as average firm size, startup costs, industry competition and distribution of firms by size) and the small business level and share of Federal contract dollars in that industry. SBA also examines the potential impact a size standard revision might have on its financial assistance programs, and whether a business concern under a revised size standard would be dominant in its industry. SBA analyzed the characteristics of each receipt-based industry in NAICS Sectors 48-49, 51, 52, and 53, mostly using a special tabulation obtained from the
Table 1-Summary of Calculated Size Standards
NAICS sector Sector name Number of Number of Number of Number of
size standards size standards size standards size standards
reviewed increased decreased unchanged
48-49 Transportation and Warehousing 43 18 23 2
51 Information 19 8 9 2
52 Finance and Insurance * 39 * 10 24 5
53 Real Estate and Rental and 25 9 13 3
Leasing
All Sectors 126 45 69 12
* Includes five assets-based size industries.
In the
In the proposed rule, SBA sought comments on its proposal to increase size standards for 45 industries and retain the current size standards for the remaining 81 industries or subindustries in Sectors 48-49, 51, 52, and 53. Specifically, SBA requested comments on whether the proposed revisions are appropriate for the industries covered by the proposed rule, whether the decision not to lower any size standards is justified by the COVID-19 pandemic, whether the equal weighting of individual factors to derive an industry size standard is appropriate, and whether the data sources used were appropriate or sufficient. SBA also sought comments on its proposal to maintain a common size standard for industries within Subsector 525 and assets-based size standards within NAICS Industry Groups 5221 and 5222. SBA also requested comments on its proposal to retain the size standard for the exception to NAICS 488510 (Non-Vessel Owning Common Carriers and Household Good Forwarders) and NAICS 491110 (
Discussion of Comments
SBA received a total of four comments to the proposed rule from a wide range of entities including an individual, a business, and two trade associations. Of the four comments received, one comment referenced all sectors covered by the proposed rule, one comment referenced NAICS 531210 (Offices of Real Estate Agents and Brokers), one comment referenced NAICS 522130 (Credit Unions), and one comment referenced Sector 23 (construction) which is not covered under this proposed rule. SBA did not evaluate the comment referencing Sector 23 in this final rule, instead, SBA will evaluate that comment under the final rule covering the construction industry (see RIN 3245-AG90 on www.regulations.gov). The four comments to the proposed rule are available at www.regulations.gov (RIN 3245-AG90) and are summarized and discussed below.
Comments on Proposed Changes to All Sectors
One commenter maintained that SBA’s proposed changes to size standards would allow the entry of large businesses to the SBA’s low-interest loan and contracting programs reserved by
SBA Response
In the proposed rule, SBA proposed to increase size standards for 45 industries, including eighteen (18) industries in NAICS Sector 48-49 (Transportation and Warehousing), eight (8) industries in NAICS Sector 51 (Information), ten (10) industries in NAICS Sector 52 (Finance and Insurance), and nine (9) industries in NAICS Sector 53 (Real Estate and Rental and Leasing). With an expanded pool of small businesses, it is likely that Federal agencies would set aside more contracts for small businesses under the increases to size standards, thereby increasing opportunities for all small businesses, including the smaller small businesses. Also, the Administration’s recent decision to increase the Government-wide Small Disadvantaged Business (SDB) goal from the current 5% to 11% in fiscal year 2021 (increasing to 15% by fiscal year 2025) is likely to drive agencies to set aside more contracts to small businesses in coming years.
SBA does not agree with the comment that the proposed rule is contrary to the Congressional mandate given to SBA and should not be issued. Pursuant to section 1344 of the Small Business Jobs Act of 2010 (the Jobs Act) (Pub. Law 111-240), SBA is statutorily mandated to review every five years all size standards and make necessary adjustments to reflect current industry and Federal market conditions. The proposed rule was part of the second five-year review of size standards in accordance with the Jobs Act. 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 the Federal marketplace. For the above reasons, SBA is adopting the proposed size standard without change.
Comments on Proposed Changes to NAICS 531210–Offices of Real Estate Agents and Brokers
SBA received a comment from a small business concern specializing in providing lease brokerage and other transaction services to Federal agencies. This comment was in full support of the proposed increase to the size standard for NAICS 531210 (Offices of Real Estate Agents and Brokers) from
The commenter argued that the proposed increase to the size standard for NAICS 531210 would ensure that small businesses would be able to retain access to the Federal small business assistance programs. It would also ensure that Federal agencies have a larger pool of small businesses from which to draw for their small business procurement programs, thereby increasing competition and lowering prices to the Government. Finally, the commenter believed that the proposed increase would make the size standard for NAICS 531210 more consistent with the growth of the industry in recent years.
SBA Response
SBA agrees with the commenter that the proposed size standard will help to provide maximum practicable opportunities to small businesses in this industry while also expanding the pool of small businesses from which the Federal Government can draw from for their small business procurement programs. Given the expressed support for SBA’s proposed increase to the size standard for NAICS 531210 and the absence of any significant adverse comments opposing the increase, SBA is adopting
Comments on Proposed Changes to NAICS 522130–Credit Unions
SBA received one comment, on behalf of the
SBA Response
SBA agrees with the commenter that the proposed changes to size standards will increase the number of businesses eligible to participate in SBA’s financial assistance programs. SBA also agrees with the commenter that SBA’s financial assistance programs can have wide-ranging positive impacts to individuals, businesses, and communities. Given the expressed support for SBA’s proposed increase to the size standard for NAICS 522130 and the absence of any significant adverse comments opposing the increase, SBA is adopting, as proposed, 750 million in average assets as the size standard for NAICS 522130.
Summary of Adopted Revisions to Size Standards
Based on the evaluation of public comments it received on the proposed rule and on its analyses of industry and Federal contracting factors using the latest available data when the proposed rule was prepared, SBA is adopting the size standards, as proposed in the
Table 2-Summary of Size Standards Revisions in NAICS Sectors 48-49, 51, 52 and 53 NAICS code NAICSU.S. industry title Current Calculated Adopted size size standard size standard standard ( $ million) ( $ million) ( $ million) 481219 Other Nonscheduled Air Transportation 16.5 22.0 22.0 484110General Freight Trucking , Local 30.0 9.0 30.0 484121General Freight Trucking , 30.0 22.0 30.0 Long-Distance, Truckload 484122General Freight Trucking , 30.0 38.0 38.0 Long-Distance, Less Than Truckload 484210 Used Household and Office Goods Moving 30.0 21.0 30.0 484220 Specialized Freight (except Used Goods) 30.0 15.0 30.0 Trucking, Local 484230 Specialized Freight (except Used Goods) 30.0 22.0 30.0 Trucking, Long-Distance 485111 Mixed Mode Transit Systems 16.5 25.5 25.5 485112 Commuter Rail Systems 16.5 41.5 41.5 485113 Bus and Other Motor Vehicle Transit 16.5 28.5 28.5 Systems 485119 Other Urban Transit Systems 16.5 33.0 33.0 485210 Interurban and Rural Bus Transportation 16.5 28.0 28.0 485310 Taxi Service 16.5 13.0 16.5 485320 Limousine Service 16.5 12.5 16.5 485410 School and Employee Bus Transportation 16.5 26.5 26.5 485510 Charter Bus Industry 16.5 13.0 16.5 485991 Special Needs Transportation 16.5 13.0 16.5 485999 All Other Transit and Ground Passenger 16.5 16.0 16.5 Transportation 486210 Pipeline Transportation of Natural Gas 30.0 36.5 36.5 486990 All Other Pipeline Transportation 40.5 31.5 40.5 487110 Scenic and Sightseeing Transportation 8.0 18.0 18.0 Land 487210 Scenic and Sightseeing 8.0 12.5 12.5 TransportationWater 487990 Scenic and Sightseeing Transportation 8.0 22.0 22.0 Other 488111 Air Traffic Control 35.0 30.5 35.0 488119 Other Airport Operations 35.0 25.5 35.0 488190 Other Support Activities for Air 35.0 27.5 35.0 Transportation 488210 Support Activities for Rail 16.5 30.0 30.0 Transportation 488310 Port and Harbor Operations 41.5 38.0 41.5 488320 Marine Cargo Handling 41.5 39.0 41.5 488330 Navigational Services to Shipping 41.5 26.5 41.5 488390 Other Support Activities for Water 41.5 23.5 41.5 Transportation 488410 Motor Vehicle Towing 8.0 7.0 8.0 488490 Other Support Activities for Road 8.0 16.0 16.0 Transportation 488510 Freight Transportation Arrangement 16.5 17.5 17.5 488510 (Exception) Non-Vessel Owning Common Carriers and 30.0 30.0 30.0 Household Goods Forwarders 488991 Packing and Crating 30.0 17.5 30.0 488999 All Other Support Activities for 8.0 22.0 22.0 Transportation 491110 Postal Services 8.0 8.0 8.0 492210 Local Messengers and Local Delivery 30.0 10.5 30.0 493110 General Warehousing and Storage 30.0 25.0 30.0 493120 Refrigerated Warehousing and Storage 30.0 32.0 32.0 493130 Farm Product Warehousing and Storage 30.0 13.5 30.0 493190 Other Warehousing and Storage 30.0 32.0 32.0 511210Software Publishers 41.5 40.0 41.5 512110Motion Picture and Video Production 35.0 33.0 35.0 512120Motion Picture and Video Distribution 34.5 26.0 34.5 512131Motion Picture Theaters (except 41.5 39.5 41.5 Drive-Ins) 512132Drive-In Motion Picture Theaters 8.0 11.0 11.0 512191 Teleproduction and Other Postproduction 34.5 19.5 34.5 Services 512199 OtherMotion Picture and Video 22.0 25.0 25.0 Industries 512240Sound Recording Studios 8.0 9.5 9.5 512290Other Sound Recording Industries 12.0 20.0 20.0 515111 Radio Networks 35.0 41.5 41.5 515112 Radio Stations 41.5 36.0 41.5 515120Television Broadcasting 41.5 41.5 41.5 515210 Cable and Other Subscription 41.5 41.5 41.5 Programming 517410 Satellite Telecommunications 35.0 38.5 38.5 517919 All Other Telecommunications 35.0 33.0 35.0 518210 Data Processing, Hosting, and Related 35.0 33.0 35.0 Services 519110 News Syndicates 30.0 32.0 32.0 519120 Libraries and Archives 16.5 18.5 18.5 519190 All Other Information Services 30.0 26.5 30.0 522110 Commercial Banking 600 million in assets 750 million in assets 750 million in assets. 522120 Savings Institutions 600 million in assets 750 million in assets 750 million in assets. 522130 Credit Unions 600 million in assets 750 million in assets 750 million in assets. 522190 Other Depository Credit Intermediation 600 million in assets 750 million in assets 750 million in assets. 522210 Credit Card Issuing 600 million in assets 750 million in assets 750 million in assets. 522220 Sales Financing 41.5 38.0 41.5 522291 Consumer Lending 41.5 41.5 41.5 522292 Real Estate Credit 41.5 40.0 41.5 522293 International Trade Financing 41.5 31.0 41.5 522294 Secondary Market Financing 41.5 41.5 41.5 522298 All Other Nondepository Credit 41.5 35.5 41.5 Intermediation 522310 Mortgage and Nonmortgage Loan Brokers 8.0 13.0 13.0 522320 Financial Transactions Processing, 41.5 39.5 41.5 Reserve, and Clearinghouse Activities 522390 Other Activities Related to Credit 22.0 25.0 25.0 Intermediation 523110Investment Banking and Securities 41.5 41.0 41.5 Dealing 523120 Securities Brokerage 41.5 37.0 41.5 523130 Commodity Contracts Dealing 41.5 32.5 41.5 523140 Commodity Contracts Brokerage 41.5 26.5 41.5 523210 Securities and Commodity Exchanges 41.5 33.0 41.5 523910 Miscellaneous Intermediation 41.5 27.0 41.5 523920 Portfolio Management 41.5 35.5 41.5 523930 Investment Advice 41.5 27.5 41.5 523991 Trust, Fiduciary, and Custody 41.5 41.5 41.5 Activities 523999Miscellaneous Financial Investment 41.5 41.5 41.5 Activities 524113 Direct Life Insurance Carriers 41.5 37.5 41.5 524114Direct Health and Medical Insurance 41.5 38.5 41.5 Carriers 524127 Direct Title Insurance Carriers 41.5 41.5 41.5 524128Other Direct Insurance (except Life, 41.5 39.0 41.5 Health, and Medical) Carriers 524130 Reinsurance Carriers 41.5 39.5 41.5 524210 Insurance Agencies and Brokerages 8.0 13.0 13.0 524291 Claims Adjusting 22.0 18.0 22.0 524292Third Party Administration of Insurance 35.0 40.0 40.0 and Pension Funds 524298 All Other Insurance Related Activities 16.5 27.0 27.0 525110 Pension Funds 35.0 32.5 35.0 525120 Health and Welfare Funds 35.0 32.5 35.0 525190 Other Insurance Funds 35.0 32.5 35.0 525910 Open-End Investment Funds 35.0 31.5 35.0 525920 Trusts, Estates, and Agency Accounts 35.0 32.5 35.0 525990 Other Financial Vehicles 35.0 32.5 35.0 531110 * Lessors of Residential Buildings and 30.0 23.5 30.0 Dwellings 531120 * Lessors of Nonresidential Buildings 30.0 28.0 30.0 (except Miniwarehouses) 531130 * Lessors of Miniwarehouses and 30.0 20.5 30.0 Self-Storage Units 531190 * Lessors of Other Real Estate Property 30.0 16.0 30.0 531210 Offices of Real Estate Agents and 8.0 13.0 13.0 Brokers 531311 Residential Property Managers 8.0 11.0 11.0 531312 Nonresidential Property Managers 8.0 17.0 17.0 531320 Offices of Real Estate Appraisers 8.0 8.5 8.5 531390 Other Activities Related to Real Estate 8.0 17.0 17.0 532111 Passenger Car Rental 41.5 41.5 41.5 532112Passenger Car Leasing 41.5 41.0 41.5 532120 Truck, Utility Trailer, and RV 41.5 41.5 41.5 (Recreational Vehicle) Rental and Leasing 532210 Consumer Electronics and Appliances 41.5 40.5 41.5 Rental 532281 Formal Wear and Costume Rental 22.0 12.5 22.0 532282 Video Tape and Disc Rental 30.0 31.0 31.0 532283 Home Health Equipment Rental 35.0 36.0 36.0 532284 Recreational Goods Rental 8.0 7.5 8.0 532289 All Other Consumer Goods Rental 8.0 11.0 11.0 532310 General Rental Centers 8.0 7.5 8.0 532411Commercial Air , Rail, and Water 35.0 40.0 40.0 Transportation Equipment Rental and Leasing 532412 Construction, Mining, and Forestry 35.0 34.0 35.0 Machinery and Equipment Rental and Leasing 532420Office Machinery and Equipment Rental 35.0 32.5 35.0 and Leasing 532490 Other Commercial and Industrial 35.0 30.0 35.0 Machinery and Equipment Rental and Leasing 533110 Lessors of Nonfinancial Intangible 41.5 35.0 41.5 Assets (except Copyrighted Works) NAICS codes 531110, 531120, 531130, and 531190-Leasing ofBuilding Space to the Federal Government by Owners: For Government procurement, a size standard of$ 41.5 million in gross receipts applies to the owners of building space leased to the Federal Government. The standard does not apply to an agent. See Footnote 9 to the SBA's Table of Size Standards.
Table 3, Summary of Adopted Size Standards Revisions by Sector, below, summarizes the adopted changes to size standards by NAICS sector.
Table 3-Summary of Adopted Size Standards Revisions by Sector
NAICS sector Sector name Number of size Number of size Number of size Number of size
standards standards standards standards
reviewed increased decreased maintained
48-49 Transportation and Warehousing 43 18 0 25
51 Information 19 8 0 11
52 * Finance and Insurance 39 10 0 29
53 Real Estate and Rental and 25 9 0 16
Leasing
All Sectors 126 45 0 81
Evaluation of Dominance in Field of Operation
SBA determined that for the industries evaluated under this final rule, no individual firm at or below the adopted size standards would be large enough to dominate its field of operation. At the size standard levels adopted in this final rule, the small business share of total industry receipts among those industries would be, on average, 0.4%, varying from 0.005% to 4.8%. These market shares effectively preclude a firm at or below the adopted size standards from exerting control on any of the industries.
Alternatives Considered
In response to the unprecedented economic impacts of the ongoing COVID-19 pandemic on small businesses and Government response, SBA is adopting increases to size standards where the data suggests increases are warranted, and retaining all current size standards where the data suggested lowering of size standards is appropriate. SBA is also retaining all current size standards where the data suggested no changes to the current size standards.
Nonetheless, SBA considered two other alternatives. Alternative Option One was to adopt changes to size standards exactly as suggested by the analytical results. In other words, Alternative Option One would entail increasing size standards for 45 industries, decreasing them for 69 industries, and retaining them at their current levels for 12 industries. Alternative Option Two was to retain all current size standards.
SBA did not adopt Alternative Option One because it would cause a substantial number of currently small businesses to lose their small business status and hence to lose their access to Federal small business assistance, especially small business set-aside contracts and SBA’s financial assistance in some cases. Lowering size standards in the current environment would also run counter to various measures the Federal Government has implemented to help small businesses and the overall economy recover from the ongoing COVID-19 pandemic. Considering the impacts of the Great Recession and Government actions that followed to support small businesses and the overall economy, SBA also adopted a policy of not decreasing size standards during the first five-year review of size standards, even though the data supported decreases.
Under Alternative Option Two, given the current COVID-19 pandemic, SBA considered retaining the current level of all size standards even though the analytical results suggested changing them. 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 Alternative Option Two because the results discussed in the Regulatory Impact Analysis section, below, show that retaining all size standards at their current levels would cause otherwise qualified small businesses to forgo various small business benefits becoming available to them under the option of increasing 45 and retaining 81 size standards. Such benefits would include access to Federal contracts set aside for small businesses and capital through SBA’s loan and SBIC programs, and exemptions from paperwork and other compliance requirements.
Compliance With Executive Orders 12866, the Congressional Review Act (5 U.S.C. 801-808), 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
Regulatory Impact Analysis
1. What is the need for this regulatory action?
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.
Under the Small Business Act (Act) (15 U.S.C. 632(a)), SBA’s Administrator is responsible for establishing small business size definitions (or “size standards”) and ensuring that such definitions vary from industry to industry to reflect differences among various industries. The Jobs Act requires SBA to review every five years all size standards and make necessary adjustments to reflect current industry and Federal market conditions. This final rule is part of the second five-year review of size standards in accordance with the Jobs Act. The first five-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 the size standards revisions adopted for industries being reviewed in this final rule will make size standards more reflective of the current economic characteristics of businesses in those industries and the latest trends in the Federal marketplace.
The revisions to the existing size standards for 45 industries in NAICS Sectors 48-49, 51, 52, and 53 are consistent with SBA’s statutory mandate 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 regulatory changes and their alternatives.
Changes to Size Standards
Based on the results from the analyses of the latest industry and Federal contracting data, as well as consideration of the impact of size standards changes on small businesses and significant adverse impacts of the COVID-19 emergency on small firms and the overall economy, of the total of 126 industries in Sectors 48-49, 51, 52, and 53 that have receipts-based size standards, SBA is adopting increases to size standards for 45 industries and maintaining current size standards for the remaining 81 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 small business benefits (such as set-aside contracts, SBA’s loans, disaster assistance, etc.) they receive under the current size standards as a baseline, one can examine the potential benefits, costs, and transfer impacts of changes to size standards on small businesses and on the overall economy.
Based on the 2012 Economic Census (the latest available when the proposed rule was prepared), of a total of about 700,544 firms in industries in Sectors 48-49, 51, 52 (except assets-based size standards), and 53 for which SBA evaluated their receipt-based size standards, 97.2% are considered small under the current size standards. That percentage varies from 95.8% in Sector 51 to 97.9% in Sector 53. Based on the data from
Based on the SBA’s internal data on its loan programs for fiscal years 2018-2020, small businesses in those industries received, on an annual basis, a total of 6,570 7(a) and 504 loans in that period, totaling about
FOOTNOTE 2 The analysis of the disaster loan data excludes physical disaster loans that are available to anyone regardless of size, disaster loans issued to nonprofit entities, and EIDLs issued under the COVID-19 relief program. Effective
SBA estimates impacts of size standards changes on EIDL loans by calculating the ratio of businesses getting EIDL loans to total small businesses (based on the Economic Census data) and multiplying it by the number of impacted small firms. Due to data limitations, for FY 2019-20, some loans with both physical and EIDL loan components could not be broken into the physical and EIDL loan amounts. In such cases, SBA applied the ratio of EIDL amount to total (physical loan + EIDL) amount using FY 2016-18 data to the FY 2019-20 data to obtain the amount attributable to the EIDL loans. END FOOTNOTE
Increases to Size Standards
As stated above, of 126 receipts-based size standards in NAICS Sectors 48-49, 51, 52, and 53 reviewed, based on the results from analyses of latest industry and Federal market data, impacts of size standards changes on small businesses, and considerations of the impacts of the COVID-19 pandemic and public comments to the proposed rule, SBA is adopting increases to size standards for 45 industries and maintaining size standards for 79 industries and two subindustries (exceptions). Below are descriptions of the benefits, costs, and transfer impacts of the increases to size standards adopted in this final rule.
The results of regulatory impact analyses SBA provided in the
Table 4-Baseline forAll Industries Sector 48-49 Sector 51 Sector 52 Sector 53 Total Baseline All Industries (current 43 19 39 25 126 size standards) Total firms (2012 Economic 162,147 45,821 220,860 271,716 700,544 Census) Total small firms under current 156,173 43,915 214,790 265,977 680,855 size standards (2012 Economic Census) Small firms as % of total firms 96.3% 95.8% 97.3% 97.9% 97.2% Total contract dollars ( $$ 8,205 $ 8,103 $ 3,012 $ 986 $ 20,306 million) (FPDS-NG FY2018-2020) Total small business contract$ 1,492 $ 1,926 $ 410 .$ 520 $ 4,348 dollars under current standards ( $ million) (FPDS-NG FY2020-2018) Small business dollars as % of 18.2% 23.8% 13.6% 52.7% 21.4% total dollars (FPDS-NG FY2018-2020) Total no. of unique firms 3,378 5,119 500 3,351 11,939 getting contracts (FPDS-NG FY2018-2020) Total no. of unique small firms 2,558 3555 258 2,591 8,777 getting small business contracts (FPDS-NG FY2018-2020) Small business firms as % of 75.7% 69.4% 51.6% 77.3% 73.5% total firms No. of 7(a) and 504/CDC loans 3,406 402 1,165 1,597 6,570 (FY 2018-2020) Amount of 7(a) and 504 loans ( $$ 933 $ 190 $ 547 $ 1,079 $ 2,749 million) (FY 2018-2020) No. of EIDL loans (FY 87 19 45 598 749 2018-2020) * Amount of EIDL loans ( $$ 3.9 $ 0.5 $ 1.6 $ 13.2 $ 19.2 million) (FY 2018-2020) * Total Number of Depository 5,415 Institutions (FDIC , SDI) (2018) Number of Small Depository 4,188 Institutions (FDIC , SDI) (2018) Small firms as % of total 77.3% Depository Institutions (2018) Total Assets of Depository$ 18,034,372 Institutions ( $ million) (FDIC , SDI) (2018) Total Assets of Small Depository$ 837,836 Institutions ( $ million) (FDIC , SDI) (2018) SB Assets as % of Total Assets 4.6% Total Number of Credit Unions 5,492 (NCUA) (2018) Number of small Credit Unions 5,010 (NCUA) (2018) Small firms as % of total 91.2% Depository Institutions Total Assets of Credit Unions ($ 1,470,839 $ million) (NCUA) (2018) Total Assets of Small Credit$ 377,619 Unions ( $ million) (NCUA) (2018) SB Assets as % of Total Assets 25.7% of Credit Unions * Excludes COVID-19 related EIDL loans due to their temporary nature. EffectiveJanuary 1, 2022 , SBA stopped accepting applications for new COVID EIDL loans or advances.
Benefits of Increasing Size Standards
The most significant benefit to businesses from increases to size standards is gaining eligibility for Federal small business assistance programs or retaining eligibility for a longer period. These include SBA’s business loan programs, Economic Injury Disaster Loan (EIDL) program, and Federal procurement programs intended for small businesses. Federal procurement programs provide targeted, set-aside opportunities for small businesses under SBA’s various business development and contracting programs. These include the 8(a)/Business Development (BD) Program, the Small Disadvantaged Businesses (SDB) Program, the Historically Underutilized Business Zones (HUBZone) Program, the Women-Owned Small Businesses (WOSB) Program, the Economically Disadvantaged Women-Owned Small Businesses (EDWOSB) Program, and the Service-Disabled Veteran-Owned Small Businesses (SDVOSB) Program.
Besides set-aside contracting and financial assistance discussed above, small businesses also benefit through reduced fees, less paperwork, and fewer compliance requirements that are available to small businesses through the Federal Government programs. 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 45 industries in NAICS Sectors 48-49, 51, 52, and 53 for which it is increasing size standards, about 1,790 firms not small under the current size standards, will become small under the adopted size standards increases and therefore become eligible for these programs. That represents about 0.6% of all firms classified as small under the current size standards in industries for which SBA is adopting increases to size standards. When adopted, SBA’s size standards would result in an increase to the small business share of total receipts in those industries from 29.9% to 32.7%. Table 5, Impacts of Increasing Size Standards, provides impacts of increasing 45 industries by NAICS sector.
With more businesses qualifying as small under the adopted increases to size standards, Federal agencies will have a larger pool of small businesses from which to draw for their small business procurement programs. Growing small businesses that are close to exceeding the current size standards will be able to retain their small business status for a longer period under the higher size standards, thereby enabling them to continue to benefit from the small business programs.
As shown in Table 5, based on the FPDS-NG data for fiscal years 2018-2020, SBA estimates that about 53 firms that are active in Federal contracting in those industries would gain small business status under the adopted size standards. Based on the same data, SBA estimates that those newly-qualified small businesses under the increases to 45 size standards could receive Federal small business contracts totaling about
Based on the
Table 5-Impacts of Increasing Size Standards
Sector 48-49 Sector 51 Sector 52 Sector 53 Total
No. of industries with increases 18 8 10 9 45
to size standards
Total current small businesses 27,255 5,368 135,774 150,404 318,800
in industries with increases to
size standards (2012 Economic
Census)
Additional firms qualifying as 184 13 623 970 1,790
small under standards (2012
Economic Census)
% of additional firms qualifying 0.7% 0.2% 0.5% 0.6% 0.6%
as small relative to current
small businesses in industries
with increases to size standards
No. of current 419 267 93 1173 1,943
unique small firms getting small
business contracts in industries
with increases to size standards
(FPDS-NG FY2018-2020) fn1
Additional small 23 4 5 22 53
business firms getting small
business status (FPDS-NG
FY2018-2020) fn1
% increase to small businesses 5.5% 1.5% 5.4% 1.9% 2.7%
relative to current unique small
firms getting small business
contracts in industries with
increases to size standards
(FPDS-NG FY2018-2020)
Total small business contract $ 331.4 $ 132.1 $ 178.3 $ 245.6 $ 887.3
dollars under current standards
in industries with increases to
size standards ( $ million)
(FPDS-NG FY2018-2020)
Estimated $ 5.9 $ 2.1 $ 3.5 $ 8.7 $ 20.3
additional small business
dollars available to
newly-qualified small firms
(using avg. dollars obligated to
small businesses) ( $ million)
(FPDS-NG FY 2018-2020) fn2
% increase to small business 1.8% 1.6% 2.0% 3.6% 2.3%
dollars relative to total small
business contract dollars under
current standards in industries
with increases to size standards
Total no. of 7(a) and 504 loans 360 49 761 703 1,873
to small business in industries
with increases to size standards
(FY 2018-2020)
Total 7(a) and 504 loan amounts $ 150.6 $ 21.7 $ 301.5 $ 249.8 $ 723.6
to small businesses in
industries with increases to
size standards ( $ million) (FY
2018-2020)
Estimated no. of 7(a) and 504 4 1 4 5 14
loans to newly-qualified small
firms
Estimated 7(a) and 504 loan $ 2.5 $ 0.4 $ 1.6 $ 1.8 $ 6.3
amounts to newly-qualified small
firms ( $ million)
% increase to 7(a) and 504 loan 0.3% 0.2% 0.3% 0.2% 0.2%
amount relative to the total
amount of 7(a) and 504 loans in
industries with increases to
size standards
Total no. of EIDL 59 8 0 98 165
loans to small businesses in
industries with increases to
size standards (FY 2018-2020)
fn3
Total amount of $ 2.7 $ 0.2 $ 1.5 $ 4.3 $ 8.6
EIDL loans to small businesses
in industries with increases to
size standards ( $ million) (FY
2018-2020) fn3
Estimated no. of 2 1 1 1 5
EIDL loans to newly-qualified
small firms fn3
Estimated EIDL $ 0.05 $ 0.02 $ 0.04 $ 0.04 $ 0.2
loan amount to newly-qualified
small firms ( $ million) fn3
% increase to 2.0% 12.5% 2.4% 1.0% 1.8%
EIDL loan amount relative to the
total amount of disaster loans
in industries with increases to
size standards fn3
Total current small businesses 4,188
in industries with increases to
size standards (FDIC) (2018)
Additional firms qualifying as 198
small under adopted standards
(FDIC)
% Increase small institutions 4.7%
with increases to size standards
Total Assets of Small Depository $ 837,836
Institutions ( $ million) (FDIC ,
SDI) (2018)
Estimated increase in total $ 132,440
assets of Small Depository
Institutions ( $ million)
% increase in total assets of 15.8%
small depository institutions
Number of small Credit Unions 5,010
(NCUA) (2018)
Additional small Credit Unions 84
(NCUA)
% Increase small institutions 1.7%
with increases to size standards
Total Assets of Small Credit $ 377,619
Unions ( $ million) (NCUA)
(2018)
Estimated increase in total $ 56,327
assets of Small Credit Unions (
$ million)
% increase in total assets of 14.9%
small Credit Unions
fn1 Total impact represents total unique number of firms impacted to avoid double counting as some firms are participating in more than one industry.
fn2 Additional dollars are calculated multiplying average small business dollars obligated per DUNS times change in number of firms. Numbers of firms are calculated using the SBA current size standard, not the contracting officer's size designation.
fn3 Excludes COVID-19 related EIDL loans due to their temporary nature. Effective January 1, 2022, SBA stopped accepting applications for new COVID EIDL loans or advances.
The added competition from more businesses qualifying as small can result in lower prices to the Federal Government for procurements set aside or reserved for small businesses, but SBA cannot quantify this impact. Costs could be higher when full and open contracts are awarded to HUBZone businesses that receive price evaluation preferences. However, with agencies likely setting aside more contracts for small businesses in response to the availability of a larger pool of small businesses under the adopted increases to size standards, HUBZone firms might receive more set-aside contracts and fewer full and open contracts, thereby resulting in some cost savings to agencies. SBA cannot estimate such costs savings as it is impossible to determine the number and value of unrestricted contracts to be otherwise awarded to HUBZone firms will be awarded as set-asides. However, such cost savings are likely to be relatively small as only a small fraction of full and open contracts are awarded to HUBZone businesses.
Under SBA’s 7(a) and 504 loan programs, based on the data for fiscal years 2018-2020, SBA estimates up to about 14 SBA 7(a) and 504 loans totaling about
Newly-qualified small businesses will also benefit from the SBA’s EIDL program. Because the benefits provided through this program are 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 disaster loan program data, SBA estimates that, on an annual basis, the newly-defined small businesses under the increases to 45 size standards could receive 5 disaster loans (except physical disaster loans), totaling about
Costs Increasing Size Standards
Aside from taking time to register in sam.gov to be eligible to participate in Federal contracting, and update the System for Award Management (SAM) profile annually, small businesses incur no direct costs to gain or retain their small business status as a result of increases to size standards. All businesses willing to do business with the Federal Government must register in SAM and update their SAM profiles annually, regardless of their size status. SBA believes that a vast majority of businesses that are willing to participate in Federal contracting are already registered in SAM and update their SAM profiles annually. This final rule does not establish the new size standards for the very first time; rather it intends to modify the existing size standards in accordance with a statutory requirement, the latest data, and other relevant factors.
To the extent that the newly-qualified small businesses could become active in Federal procurement, the adopted increases to size standards, if adopted, may entail some additional administrative costs to the Government as a result of more businesses qualifying as small for Federal small business programs. For example, there will be more firms seeking SBA’s loans, more firms eligible for enrollment in the Dynamic Small Business Search (DSBS) database or in certify.sba.gov, more firms seeking certification as 8(a)/BD or HUBZone firms or qualifying for small business, SDB, WOSB, EDWOSB, and SDVOSB status, and more firms applying for SBA’s 8(a)/BD mentor-prote’ge’ program. With an expanded pool of small businesses, it is likely that Federal agencies would set-aside more contracts for small businesses under the adopted increases to size standards. One may surmise that this might result in a higher number of small business size protests and additional processing costs to agencies. However, the SBA’s historical data on the number of size protests processed shows that the number of size protests decreased following the increases to receipts-based size standards as part of the first five-year review of size standards. Specifically, on an annual basis, the number of size protests fell from about 600 during fiscal years 2011-2013 (review of most receipts-based size standards was completed by the end of fiscal year 2013), as compared to about 500 during fiscal years 2018-2020 when size standard increases were in effect. That represents a 17% decline.
Among those newly-defined small businesses seeking SBA’s loans, there could be some additional costs associated with verification of their small business status. However, small business lenders have an option of using the tangible net worth and net income-based alternative size standard instead of using the industry-based size standards to establish eligibility for SBA’s loans. For these reasons, SBA believes that these added administrative costs will be minor because necessary mechanisms are already in place to handle these added requirements.
Additionally, some Federal contracts may possibly have higher costs. With a greater number of businesses defined as small due to the adopted increases to size standards, Federal agencies may choose to set aside more contracts for competition among small businesses only instead of using a full and open competition. The movement of contracts from unrestricted competition to small business set-aside contracts might result in competition among fewer total bidders, although there will be more small businesses eligible to submit offers under the adopted size standards. However, the additional costs associated with fewer bidders are expected to be minor because, by law, procurements may be set aside for small businesses under the 8(a)/BD, SDB, HUBZone, WOSB, EDWOSB, or SDVOSB programs only if awards are expected to be made at fair and reasonable prices.
Costs may also be higher when full and open contracts are awarded to HUBZone businesses that receive price evaluation preferences. However, with agencies likely setting aside more contracts for small businesses in response to the availability of a larger pool of small businesses under the adopted increases to size standards, HUBZone firms might receive fewer full and open contracts, thereby resulting in some cost savings to agencies. However, such cost savings are likely to be minimal as only a small fraction of unrestricted contracts are awarded to HUBZone businesses.
Transfer Impacts of Increasing Size Standards
The increases to 45 size standards that are adopted in this final rule may result in some redistribution of Federal contracts between the newly-qualified small businesses and large businesses and between the newly-qualified small businesses and small businesses under the current standards. However, it would have no impact on the overall economic activity because total Federal contract dollars available for businesses to compete for will not change with changes to size standards. Although SBA cannot quantify with certainty the actual outcome of the gains and losses from the redistribution contracts among different groups of businesses, it can identify several probable impacts in qualitative terms. With the availability of a larger pool of small businesses under the adopted increases to size standards, some unrestricted Federal contracts that would otherwise be awarded to large businesses may be set-aside for small businesses. As a result, large businesses may lose some Federal contracting opportunities. Similarly, some small businesses under the current size standards may obtain fewer set-aside contracts due to the increased competition from larger businesses qualifying as small under the adopted increases to size standards. This impact may be offset by a greater number of procurements being set-aside for all small businesses. With larger businesses qualifying as small under the higher size standards, smaller small businesses could face some disadvantage in competing for set-aside contracts against their larger counterparts. However, SBA cannot quantify these impacts.
3. What alternatives have been considered?
Under OMB Circular A-4, SBA is required to consider regulatory alternatives to the adopted changes in this final rule. In this section, SBA describes and analyzes two such alternatives. Alternative Option One to the final rule, a more stringent alternative to the adopted change, would propose adopting size standards based solely on the analytical results. In other words, the size standards of 45 industries for which the analytical results, as presented in Table 4 of the
Alternative Option One: Adopting All Calculated Size Standards
As discussed previously in the Alternatives Considered section of this final rule, Alternative Option One would cause a substantial number of currently small businesses to lose their small business status and hence to lose their access to Federal small business assistance, especially small business set-aside contracts and SBA’s financial assistance in some cases. These consequences could be mitigated. For example, in response to the 2008 Financial Crisis and economic conditions that followed, SBA adopted a general policy in the first five-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 adopt the same general policy of not lowering size standards in the ongoing second five-year comprehensive size standards review as well.
The primary benefits of adopting Alternative Option One would include: (1) 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; (2) Adopting the size standards based on the analytical results would also promote consistency and predictability in SBA’s implementation of its authority to set or adjust size standards; and (3) Firms who would remain small would face less competition from larger small firms for the remaining set-aside opportunities. Specifically, SBA sought public comment on the impact of adopting the size standards based on the analytical results.
As explained in the “Size Standards Methodology” white paper, in addition to adopting all results of the primary analysis, SBA evaluates other relevant factors as needed such as the impact of the reductions or increases of size standards on the distribution of contracts awarded to small businesses, and may adopt different results with the intention of mitigating potential negative impacts.
We have discussed already the benefits, costs, and transfer impacts of increasing 45 size standards. Below we discuss the benefits, costs, and transfer impacts of decreasing 69 size standards based on the analytical results.
Benefits of Decreasing Size Standards Under Alternative Option One
The most significant benefit to businesses from decreases to size standards when SBA’s analysis suggests such decreases is to ensure that size standards are more reflective of latest industry structure and Federal market trends and that Federal small business assistance is more effectively targeted to its intended beneficiaries. These include SBA’s business loan programs, EIDL program, and Federal procurement programs intended for small businesses. Federal procurement programs provide targeted, set-aside opportunities for small businesses under SBA’s business development programs, such as small business, SDB, 8(a)/BD, HUBZone, WOSB, EDWOSB, and SDVOSB programs. The adoption of calculated size standards diminishes the risk of awarding contracts to firms that are not small anymore.
Decreasing size standards may reduce the administrative costs of the Government, because the risk of awarding set-aside contracts to other than small businesses may diminish when the size standards reflect better the structure of the market. This may also diminish the risks of providing SBA’s loans to firms that do not need them the most. This may provide a better chance for smaller small firms to grow and benefit from the opportunities available on the Federal marketplace, and strengthen the small business industrial base for the Federal Government.
Costs of Decreasing Size Standards Under Alternative Option One
Table 6, Impacts of Decreasing Size Standards Under Alternative Option One, below, shows the various impacts of lowering size standards in 69 industries based solely on the analytical results. Based on the 2012 Economic Census, about 5,500 (0.9%) firms would lose their small business status under Alternative Option One. Similarly, based on the FPDS-NG data for fiscal years 2018-2020, nearly 500 (5.0%) small businesses participating in Federal contracting would lose their small status and become ineligible to compete for set-aside contracts. With fewer businesses qualifying as small under the decreases to size standards, Federal agencies will have a smaller pool of small businesses from which to draw for their small business procurement programs. For example, during fiscal years 2018-2020, agencies awarded, on an annual basis, about
Table 6-Impacts of Decreasing Size Standards Under Alternative Option One
Sector 48-49 Sector 51 Sector 52 Sector 53 Total
No. of industries for which SBA 23 9 24 13 69
considered decreasing size
standards (2012 Economic Census)
Total current small businesses 133,032 39,030 76,036 114,495 510,777
in industries for which SBA
considered decreasing size
standards (2012 Economic Census)
Estimated no. of firms losing 1,086 72 246 234 1,738
small status for which SBA
considered decreasing size
standards (2012 Economic Census)
% of Firms losing small status 0.50% 0.19% 0.34% 0.21% 0.92%
relative to current small
businesses in industries for
which SBA considered decreasing
size standards
No. of current 2,188 3,200 131 1,339 6,744
unique small firms getting small
business contracts in industries
for which SBA considered
decreasing size standards
(FPDS-NG FY2018-2020) fn1
Estimated number 110 17 5 28 155
of small business firms that
would have lost small business
status for Federal contracting
in the decreases that SBA
considered fn1
% decrease to small business 5.0% 0.5% 0.0% 2.1% 2.3%
firms relative to current unique
small firms getting small
business contracts in industries
for which SBA considered
decreasing size standards
(FPDS-NG FY2018-2020)
Total small business contract $ 1,157 $ 1,776 $ 145 $ 260 $ 3,338
dollars under current size
standards in industries for
which SBA considered decreasing
size standards ( $ million)
(FPDS-NG FY2018-2020)
Estimated small $ 64.7 $ 11.2 $ 4.0 $ 6.8 $ 86.6
business dollars not available
to firms that would have lost
business status (Using avg
dollars obligated to SBs) ( $
million) fn 2
(FPDS-NG FY 2018-2020)
% decrease to small business 5.6% 0.6% 0.0% 2.6% 2.6%
dollars relative to total small
business contract dollars under
current size standards in
industries for which SBA
considered decreasing to size
standards
Total no. of 7(a) and 504 loans 3,046 346 372 846 4,610
to small businesses in
industries for which SBA
considered decreasing size
standards (FY 2018-2020)
Total amount of 7(a) and 504 $ 782 $ 165 $ 232 $ 807 $ 1,986
loans to small businesses in
industries for which SBA
considered decreasing size
standards ( $ million) (FY
2018-2020)
Estimated no. of 7(a) and 504 5 1 1 1 8
loans not available to firms
that would have lost small
business status
Estimated 7(a) and 504 loan $ 1.6 $ 0.5 $ 0.6 $ 1.0 $ 3.6
amounts not available to firms
that would have small status ( $
million)
% decrease to 7(a)and 504 loan 0.2% 0.3% 0.1% 0.1% 0.3%
amounts relative to the total
amount of 7(a) and 504 loans in
industries for which SBA
considered decreasing size
standards
Total no. of EIDL 110 19 22 868 1,019
loans to small businesses in
industries for which SBA
considered decreasing size
standards (FY 2018-2020) fn3
Total amount of $ 4.6 $ 1.0 $ 0.8 $ 11.6 $ 18.0
EIDL loans to small businesses
in industries for which SBA
considered decreasing size
standards ( $ million) (FY
2018-2020) fn3
Estimated no. of 2 1 1 1 5
EIDL loans not available to
firms that would have lost small
business status fn3
Estimated EIDL $ 0.08 $ 0.05 $ 0.04 $ 0.01 $ 0.18
loan amount not available to
firms that would have lost small
business status ( $ million)
fn3
% decrease to 2.0% 10.7% 2.4% 0.1% 1.4%
EIDL loan amount relative to the
baseline fn3
fn1 Total impact represents total unique number of firms impacted to avoid double counting as some firms are participating in more than one industry.
fn2 Additional dollars are calculated multiplying average small business dollars obligated per DUNS times change in number of firms. Numbers of firms are calculated using the SBA current size standard, not the contracting officer's size designation.
fn3 Excludes COVID-19 related EIDL loans due to their temporary nature. Effective January 1, 2022, SBA stopped accepting applications for new COVID EIDL loans or advances.
Because of the importance of these sectors for the Federal procurement, SBA may adopt mitigating measures to reduce the negative impact under the assumptions of Alternative Option One. SBA could adopt one or more of the following three actions: (1) Accept decreases in size standards as suggested by the analytical results, (2) Decrease size standards by a smaller amount than the calculated threshold, and (3) Retain the size standards at their current levels.
Nevertheless, because Federal agencies are still required to meet the statutory small business contracting goal of 23%, actual impacts on the overall set-aside activity is likely to be smaller as agencies are likely to award more set-aside contracts to small businesses that continue to remain small under the reduced size standards.
With fewer businesses qualifying as small, the decreased competition can also result in higher prices to the Government for procurements set-aside or reserved for small businesses, but SBA cannot quantify this impact. Lowering size standards may cause current small business contract or option holders to lose their small business status, thereby making those dollars unavailable to count toward the agencies’ small business procurement goals. Additionally, impacted small businesses will be unable to compete for upcoming options as small businesses.
As shown in Table 6, decreasing 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 2018-2020, SBA estimates that about 8 of SBA’s 7(a) and 504 loans with total amounts of
Businesses losing small business status would also be impacted by way of access to loans through SBA’s EIDL loan 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 2018-2020. For example, based on the disaster loan data for fiscal years 2018-2020, SBA estimates that, under Alternative Option One, about 5 EIDL loans with total amounts of
Small businesses becoming other than small if size standards were decreased might lose benefits through reduced fees, less paperwork, and fewer compliance requirements that are available to small businesses through the Federal Government programs, but SBA has no data to quantify this impact. However, if agencies determine that SBA’s size standards do not adequately serve such purposes, they can establish a different size standard with an approval from SBA if they are required to use SBA’s size standards for their programs.
Transfer Impacts of Decreasing Size Standards Under Alternative Option One
If the size standards were decreased under Alternative Option One, it may result in a redistribution of Federal contracts between small businesses losing their small business status and large businesses and between small businesses losing their small business status and small businesses remaining small under the reduced size standards. However, as under the adopted increases to size standards, it would have no impact on the overall economic activity because the total Federal contract dollars available for businesses to compete for will stay the same. Although SBA cannot estimate with certainty the actual outcome of the gains and losses among different groups of businesses from contract redistribution resulting from decreases to size standards, it can identify several probable impacts. With a smaller pool of small businesses under the decreases to size standards, some set-aside Federal contracts to be otherwise awarded to small businesses may be competed on an unrestricted basis. As a result, large businesses may have more Federal contracting opportunities. However, because agencies are still required by law to award 23% of Federal dollars to small businesses, SBA expects the movement of set-aside contracts to unrestricted competition to be limited. For the same reason, small businesses under the reduced size standards are likely to obtain more set-aside contracts due to the reduced competition from fewer businesses qualifying as small under the decreases to size standards. With some larger small businesses losing small business status under the decreases to size standards, smaller small businesses would likely become more competitive in obtaining set-aside contracts. However, SBA cannot quantify these impacts.
To estimate the net impacts of Alternative Option One, SBA followed the same methodology used to evaluate the impacts of the increasing size standards (see Table 5). However, under Alternative Option One, SBA used the calculated size standards instead of the adopted ones to determine the impacts of changes to current thresholds. The impact of the increases of size standards were already shown in Table 5. Table 6 and Table 7, Net Impacts of Size Standards Changes under Alternative Option One, below, present the impact of the decreases of size standards and the net impact of adopting the calculated results under Alternative Option One, respectively.
Based on the 2012 Economic Census, SBA estimates that in 114 industries in NAICS Sectors 48-49, 51, 52 and 53 for which the analytical results suggested to change size standards, about 50 firms (see Table 7), would become small under Alternative Option One. That represents about 0.01% of all firms classified as small under the current size standards in those industries. That is about 1,740 fewer firms qualifying as small under Alternative Option One, which represents a 97.0% reduction from about 1,790 firms that would qualify as small (see Table 5) under the proposal being adopted in this final rule (i.e., increasing 45 and retaining 81 size standards).
Table 7-Net Impacts of Size Standards Changes Under Alternative Option One
Sector 48-49 Sector 51 Sector 52 Sector 53 Total
No. of industries with changes 41 17 34 22 114
to size standards
Total no. of small business 156,173 42,803.4 208,456 265,559 669,991
under the current size standards
(2012 Economic Census)
Additional firms qualifying as - 1,002 - 60 377 736 52
small under size standards (2012
Economic Census)
% of additional firms qualifying - 0.6% - 0.1% 0.2% 0.3% 0.01%
as small relative to total
current small businesses
No. of current 2,538 3428 218 2,481 8,504
unique small firms getting small
business contracts (FPDS-NG
FY2018-2020) fn1
Additional small - 88 - 14 0 - 7 - 109
firms getting small business
status (FPDS-NG FY2018-2020)
fn1
% increase to small firms - 3.5% - 0.4% 0.0% - 0.3% - 1.3%
relative to current unique small
firms getting small business
contracts (FPDS-NG FY2018-2020)
Total small business contract $ 1,488 $ 1,908 $ 324 $ 505 $ 4,225
dollars under current size
standards ( $ million) (FPDS-NG
FY2018-2020)
Estimated small - $ 59 - $ 9 - $ 0.5 - $ 2 - $ 66
business dollars available to
newly-qualified small firms ( $
million) (FPDS-NG FY
2018-2020) fn2
% increase to dollars relative - 3.9% - 0.5% - 0.1% 0.4% - 1.6%
to total small business contract
dollars under current size
standards
Total no. of 7(a) and 504 loans 3,406 402 1,165 1,597 6,570
to small businesses (FY
2018-2020)
Total amount of 7(a) and 504 $ 933 $ 190 $ 547 $ 1,079 $ 2,749
loans to small businesses (FY
2018-2020)
Estimated no. of additional 7(a) - 1 0 3 4 6
and 504 loans to newly-qualified
small firms
Estimated additional 7(a) and $ 0.9 $ 0.0 $ 1.0 $ 0.8 $ 2.6
504 loan amount to
newly-qualified small firms ( $
million)
% increase to 7(a)and 504 loan 0.1% 0.0% 0.18% 0.08% 0.08%
amount relative to the total
amount of 7(a) and 504 loans to
small businesses
Total no. of EIDL 87 19 45 598 749
loans to small businesses (FY
2018-2020) fn3
Total amount of $ 3.9 $ 0.5 $ 1.6 $ 13.2 $ 19.2
EIDL loans to small businesses
(FY 2018-2020) fn3
Estimated no. of 0 0 0 0 0
additional EIDL loans to
newly - qualified small firms
fn3
Estimated - $ 0.02 - $ 0.03 $ 0.01 $ 0.03 - $ 0.03
additional EIDL loan amount to
newly-qualified small firms ( $
million) fn3
% increase to - 0.6% - 5.9% - 0.1% 0.2% - 0.1%
EIDL loan amount relative to the
total amount of EIDL loans to
small businesses fn3
Total current small businesses 4,188
in industries with proposed
increases to size standards
(FDIC) (2018)
Additional firms qualifying as 198
small under adopted standards
(FDIC)
% increase small institutions 4.7%
with increases to size standards
Total Assets of Small Depository $ 837,836
Institutions (FDIC , SDI) (2018)
Estimated increase in total $ 132,440
assets of Small Depository
Institutions
% increase in total assets of 15.8%
small depository institutions
Number of small Credit Unions 5,010
(NCUA) (2018)
Additional small Credit Unions 84
(NCUA)
% increase small institutions 1.7%
with increases to size standards
Total Assets of Small Credit $ 377,619
Unions (NCUA) (2018)
Estimated increase in total $ 56,327
assets of Small Credit Unions
% increase in total assets of 14.9%
small Credit Unions
fn1 Total impact represents total unique number of firms impacted to avoid double counting as some firms are participating in more than one industry.
fn2 Additional dollars are calculated multiplying average small business dollars obligated per DUNS times change in number of firms. Numbers of firms are calculated using the SBA current size standard, not the contracting officer's size designation.
fn3 Excludes COVID-19 related EIDL loans due to their temporary nature. Effective January 1, 2022, SBA stopped accepting applications for new COVID EIDL loans or advances.
As shown in Table 7, based on the FPDS-NG data for fiscal years 2018-2020, SBA estimates that, in aggregate, about 109 active firms in Federal contracting in those industries would lose small business status under Alternative Option One, most of them from Sector 48-49. This represents a decrease of about 1.3% of the total number of small businesses participating in Federal contracting under the current size standards. Based on the same data, SBA estimates that about
Based on the SBA’s loan data for fiscal years 2018-2020, the total number of 7(a) and 504 loans will increase by six loans, while the total loan amount will increase by about
Alternative Option Two: Retaining All Current Size Standards
Under this option, given the current COVID-19 pandemic, as discussed elsewhere, SBA considered retaining the current levels of all size standards even though the analytical results suggested changing them. Under this option, as the current situation develops, SBA will be able to assess new data available on economic indicators, federal procurement, and SBA loans as well. When compared to the baseline, there is a net impact of zero (i.e., zero benefit and zero cost) for retaining all size standards. However, this option would cause otherwise qualified small businesses to forgo various small business benefits (e.g., access to set-aside contracts and capital) that become available to them under the option of increasing 45 and retaining 81 size standards adopted in this final rule. Moreover, retaining all size standards under this option would also be contrary to the SBA’s statutory mandate to review and adjust, every five years, all size standards to reflect current industry and Federal market conditions. Retaining all size standards without required periodic adjustments would increasingly exclude otherwise eligible small firms from small business benefits.
Congressional Review Act
Subtitle E of the Small Business Regulatory Enforcement Fairness Act of 1996 (codified at 5 U.S.C. 801-808), also known as the Congressional Review Act or CRA, generally provides that before a rule may take effect, the agency promulgating the rule must submit a rule report, which includes a copy of the rule, to each
Final 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 final rule may have a significant impact on a substantial number of small businesses in the industries covered by this final rule. As described above, this final rule may affect small businesses seeking Federal contracts, loans under SBA’s 7(a), 504 and disaster loan programs, and assistance under other Federal small business programs.
Immediately below, SBA sets forth a final regulatory flexibility analysis (FRFA) of this final 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? (5) What alternatives will allow SBA to accomplish its regulatory objectives while minimizing the impact on small businesses?
1. What is the need for and objective of the rule?
Changes in industry structure, technological changes, productivity growth, mergers and acquisitions, and updated industry definitions have changed the structure of many the industries covered by this final 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 size standards adopted in this final 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 319,000 small firms covered by this rulemaking under industries with changes to size standards. Under this final rule, SBA estimates that an additional 1,790 businesses will be defined as small.
3. What are the projected reporting, record keeping and other compliance requirements of the rule?
The size standard changes in this final rule impose no additional reporting or record keeping requirements on small businesses. However, qualifying for Federal procurement and a number of other programs requires that businesses register in SAM and self-certify that they are small at least once annually (FAR 52.204-13). For existing contracts, small business contractors are required to update their SAM registration as necessary, to ensure that they reflect the Contractor’s current status (FAR 52.219-28). Businesses are also required to verify that their SAM registration is current, accurate, and complete with the submission of an offer for every new contract (FAR 52.204-7 and 52.204-8).). Therefore, businesses opting to participate in those programs must comply with SAM requirements. Changes in small business size standards do not result in additional 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 that 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
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
5. What alternatives will allow SBA 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 increasing 45 and maintaining 81 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 45 industries for which the analytical results suggest raising size standards would be raised. However, the size standards of 69 industries for which the analytical results suggest lowering them would be lowered. This would cause a significant number of small businesses to lose their small business status, particularly in Sector 48-49 (see Table 6). 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 45 and decreasing 69 size standards. SBA believes retaining all size standards at their current levels would be more onerous for small businesses than the option of increasing 45 and retaining 35 size standards. Postponing the adoption of the higher calculated size standards would be detrimental for otherwise small businesses in terms of access to various small business benefits, including access to set-aside contracts and capital through SBA contracting and financial programs, and exemptions from paperwork and other compliance requirements.
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 final 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 (
SBA issued a white paper entitled “Size Standards Methodology” and published a notice in the
Executive Order 12988
This action meets applicable standards set forth in sections 3(a) and 3(b)(2) of Executive Order 12988, Civil Justice Reform, to minimize litigation, eliminate ambiguity, and reduce burden. The action does not have retroactive or preemptive effect.
Executive Order 13132
For purposes of Executive Order 13132, SBA has determined that this 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 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 final 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 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:
Authority:15 U.S.C. 632, 634(b)(6), 636(a)(36), 662, and 694a(9); Pub. L. 116-136, Section 1114.
2. In
a. Revise the entries for “481219”, “484122”, “485111” through “485113”, “485119”, “485210”, “485410”, “486210”, “487110”, “487210”, “487990”, “488210”, “488490”, “488510”, “488510 (Exception)”, “488999”, “493120”, “493190”, “512132”, “512199”, “512240”, “512290”, “515111”, “517410”, “519110”, “519120”, “522110”, “522120”, “522130”, “522190”, “522210”, “522310”, “522390”, “524210”, “524292”, “524298”, “531210”, “531311”, “531312”, “531320”, “531390”, “532282”, “532283”, “532289”, and “532411”, and
b. Revise footnote 10.
The revisions read as follows:
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Small Business Size Standards by NAICS Industry NAICS codes NAICSU.S. industry title Size standards Size standards in millions of dollars in number of employees * * * * * * * Sectors 48-49-Transportation and Warehousing Subsector 481-Air Transportation * * * * * * * 481219 Other Nonscheduled Air Transportation$ 22.0 * * * * * * * Subsector 484-Truck Transportation * * * * * * * 484122General Freight Trucking , Long-Distance, Less 38.0 Than Truckload * * * * * * * Subsector 485-Transit and Ground Passenger Transportation * * * * * * * 485111 Mixed Mode Transit Systems 25.5 485112 Commuter Rail Systems 41.5 485113 Bus and Other Motor Vehicle Transit Systems 28.5 485119 Other Urban Transit Systems 33.0 485210 Interurban and Rural Bus Transportation 28.0 * * * * * * * 485410 School and Employee Bus Transportation 26.5 * * * * * * * Subsector 486-Pipeline Transportation * * * * * * * 486210 Pipeline Transportation of Natural Gas 36.5 * * * * * * * Subsector 487-Scenic and Sightseeing Transportation 487110 Scenic and Sightseeing Transportation, Land 18.0 487210 Scenic and Sightseeing Transportation, Water 12.5 487990 Scenic and Sightseeing Transportation, Other 22.0 Subsector 488-Support Activities for Transportation * * * * * * * 488210 Support Activities for Rail Transportation 30.0 * * * * * * * 488490 Other Support Activities for Road Transportation 16.0 488510 Freight Transportation fn10 17.5 Arrangement fn10 488510 (Exception) Non-Vessel Owning Common Carriers and Household 30.0 Goods Forwarders * * * * * * * 488999 All Other Support Activities for Transportation 22.0 * * * * * * * Subsector 493-Warehousing and Storage * * * * * * * 493120 Refrigerated Warehousing and Storage 32.0 * * * * * * * 493190 Other Warehousing and Storage 32.0 Sector 51-Information * * * * * * * Subsector 512-Motion Picture andSound Recording Industries * * * * * * * 512132Drive-In Motion Picture Theaters 11.0 * * * * * * * 512199Other Motion Picture and Video Industries 25.0 * * * * * * * 512240Sound Recording Studios 9.5 * * * * * * * 512290Other Sound Recording Industries 20.0 Subsector 515-Broadcasting (except Internet) 515111 Radio Networks 41.5 * * * * * * * Subsector 517-Telecommunications * * * * * * * 517410 Satellite Telecommunications 38.5 * * * * * * * Subsector 519-Other Information Services 519110 News Syndicates 32.0 519120 Libraries and Archives 18.5 * * * * * * * Sector 52-Finance and Insurance Subsector 522-Credit Intermediation and Related Activities 522110 Commercial Banking fn8 750 million in assets fn8 522120 Savings Institutions fn8 750 million in assets fn8 522130 Credit Unions fn8 750 million in assets fn8 522190 Other Depository Credit 750 million in assets fn8 Intermediation fn8 522210 Credit Card Issuing fn8 750 million in assets fn8 * * * * * * * 522310 Mortgage and Nonmortgage Loan Brokers 13.0 * * * * * * * 522390 Other Activities Related to Credit Intermediation 25.0 * * * * * * * Subsector 524-Insurance Carriers and Related Activities * * * * * * * 524210 Insurance Agencies and Brokerages 13.0 * * * * * * * 524292Third Party Administration of Insurance and 40.0 Pension Funds 524298 All Other Insurance Related Activities 27.0 * * * * * * * Sector 53-Real Estate and Rental and Leasing Subsector 531-Real Estate * * * * * * * 531210 Offices of Real Estate Agents fn10 13.0 and Brokers fn10 531311 Residential Property Managers 11.0 531312 Nonresidential Property Managers 17.0 531320 Offices of Real Estate Appraisers 8.5 531390 Other Activities Related to Real Estate 17.0 Subsector 532-Rental and Leasing Services * * * * * * * 532282 Video Tape and Disc Rental 31.0 532283 Home Health Equipment Rental 36.0 * * * * * * * 532289 All Other Consumer Goods Rental 11.0 * * * * * * * 532411Commercial Air , Rail, and Water Transportation 40.0 Equipment Rental and Leasing * * * * * * * Footnotes * * * * * * * fn8 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 theFederal Financial Institutions Examination Council 041 call report form for NAICS Codes 522110, 522120, 522190, and 522210 and theNational Credit Union Administration 5300 call report form for NAICS code 522130. * * * * * * * fn10 NAICS codes 488510 (excluding the exception), 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 revenues. * * * * * * *
Administrator.
[FR Doc. 2022-06609 Filed 3-30-22;
BILLING CODE 8026-03-P
