[Federal Register Volume 60, Number 226 (Friday, November 24, 1995)]
[Proposed Rules]
[Pages 57982-58013]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 95-28449]



-----------------------------------------------------------------------


SMALL BUSINESS ADMINISTRATION
13 CFR Part 121


Small Business Size Regulations

AGENCY: Small Business Administration.

ACTION: Proposed rule.

-----------------------------------------------------------------------

SUMMARY: In response to President Clinton's government-wide regulatory 
reform initiative, the Small Business Administration (SBA) has 
completed a page-by-page, line-by-line review of all of its existing 
regulations to determine which might be revised or eliminated. This 
proposed rule would improve the Agency's size program by simplifying 
and clarifying language in the existing rules, conforming these rules 
to present SBA policies and practices, and providing some substantive 
modifications to streamline the delivery of services to the public. The 
revised regulations would be more understandable and much easier to 
use. The proposed rule would reduce the number of sections. It would 
make the definition of ``affiliation'' more concise. While no longer 
recognizing an absolute right to appeal size determinations, it would 
give the Office of Hearings and Appeals (OHA) discretionary authority 
to accept size appeals. The proposed rule would improve language, but 
would not change the existing size standards which apply to particular 
industries.

DATES: Comments must be submitted on or before December 26, 1995.

 
[[Page 57983]]

ADDRESSES: Written comments should be addressed to David R. Kohler, 
Regulatory Reform Initiative Team Leader, Attention: Part 121, Office 
of General Counsel, Small Business Administration, 409 3rd Street, 
S.W., Suite 13, Washington, D.C. 20416.

FOR FURTHER INFORMATION CONTACT: John W. Klein, Chief Counsel for 
Special Programs, Office of General Counsel, at (202) 205-6645.

SUPPLEMENTARY INFORMATION: On March 4, 1995, President Clinton issued a 
Memorandum to federal agencies, directing them to simplify their 
regulations. In response to this directive, SBA has completed a page-
by-page, line-by-line review of all of its existing regulations to 
determine which might be revised or eliminated. This proposed rule 
would amend SBA's regulations governing its size program which was 
authorized to be established by sections 3(a) and 5(b)(6) of the Small 
Business Act, 15 U.S.C. 632(a), 634(b)(6). It is designed to streamline 
the size standards operation by simplifying and clarifying existing 
regulatory language and by eliminating unnecessary, irrelevant, or 
obsolete provisions. SBA examined the purpose of each section of the 
existing regulation in developing this proposal. Where appropriate, it 
eliminated, consolidated, or rewrote sections for ease of use and 
clarity. The proposed unnumbered substantive category headings would 
be: Provisions of General Applicability, Size Standards Used to Define 
Small Business Concerns, Size Eligibility Requirements for SBA 
Financial Assistance, Size Eligibility Requirements for Government 
Procurement, Size Eligibility Requirements for Sales or Lease of 
Government Property, Size Eligibility for the Minority Enterprise 
Development (MED) Program, Size Eligibility Requirements for the Small 
Business Innovation and Research (SBIR) Program, Size Eligibility 
Requirements for Paying Reduced Patent Fees, Size Eligibility 
Requirements for Compliance with Programs of Other Agencies, Procedures 
for Size Protests and Requests for Formal Size Determinations, Appeals 
of Size Determinations and SIC Code Designations, Eligibility of 
Organizations for the Handicapped for Small Business Set-asides, and 
Waivers of the Nonmanufacturer Rule. The proposed rule would amend 
office titles to reflect a previous reorganization of functions within 
the structure of SBA.
    SBA has attempted to rewrite Part 121 in plain English in order to 
make the regulations more readable and less confusing. SBA has 
identified the following eight significant changes proposed by this 
rule.
    Refine the definition of ``affiliation.'' The proposed rule at 
Sec. 121.103(a) would make the definition of ``affiliation'' more 
concise. The intent in revising the provisions pertaining to 
affiliation is to make the definition easier to understand.
    Additional exclusions from ``affiliation'' coverage. Four 
additional exclusions from ``affiliation'' coverage are proposed in 
Sec. 121.103(a)(2): (1) small businesses that are members of approved 
pools for a joint program of research and development, (2) concerns 
that lease employees from a concern whose principal business is leasing 
employees to other businesses, (3) mentor/protege firms participating 
in Federal Mentor-Protege programs, and (4) for purposes of eligibility 
for the Small Business Investment (SBIC) program only, certain 
investors in SBIC portfolio concerns, provided the investors do not 
control the concern other than to the extent that would be permitted 
for SBICs under the SBIC regulations (currently, Sec. 107.801 of this 
title; in the revised SBIC regulations at Sec. 107.865).
    Revision of ``annual receipts'' definition. This definition would 
be simplified by incorporating figures already contained on a concern's 
Federal Income Tax return for purposes of calculating a concern's 
average annual receipts. In addition, amounts collected for another by 
a conference management services provider or an advertising agent would 
be excluded from a concern's annual receipts, similar to that of a 
travel agent.
    Grant OHA discretionary authority to hear size determination 
appeals. Contracting officers for procuring agencies have cited 
unwelcome delays in the procurement process when small business size 
determinations are appealed to the Office of Hearings and Appeals 
(OHA). Under existing SBA regulatory guidelines, a party which is 
adversely affected by a size determination has the right to appeal the 
determination to OHA. However, Federal Acquisition Regulations (48 
C.F.R. 19.302) provide that a contracting officer is not required to 
suspend award after a size determination is made even if the 
determination is appealed to OHA, and further provide that the OHA 
decision applies to a pending acquisition only if the decision is 
received before award. Therefore, if the OHA decision is to have 
relevance, it must be rendered prior to award. In an effort to 
streamline consideration of size determinations and bring more speed to 
the decision-making process, proposed Sec. 121.1101 would eliminate 
appeals to OHA as a matter of right and instead give OHA discretion to 
review such appeals. A size determination rendered by an authorized 
Agency official would be considered final unless OHA agreed to review 
the determination. This would give OHA the latitude to consider those 
cases which have precedential value or which might involve clear error 
of fact or law. Procedures for requesting discretionary review of size 
determinations would be set forth in part 134.
    Change the time when size is determined for MED application 
purposes. Under the present regulations, an applicant to SBA's MED 
program is small if, at the time of its application, it is small under 
the size standard for its primary industry. The proposed regulation 
would change the time for determining the applicant's size to the time 
when SBA issues its eligibility determination. Thus, under the proposed 
regulation, a concern which was small when it applied but which became 
large during SBA's consideration of its application would not be 
permitted to enter the program. SBA does not believe that it should 
admit a concern to the MED program knowing that it is no longer small 
in its primary business. The concern could no longer obtain 8(a) or 
small business set-aside contracts in its primary industry, and the 
concern could be perceived to be other than disadvantaged because of 
that success. In addition, if that were the only business that the 
concern was in, SBA would be put in the awkward position of admitting 
the concern to the program one day, but initiating termination 
proceedings from the program the next.
    Use of size standards for programs of other agencies. This proposed 
rule sets forth the limited circumstances under which the Secretary of 
a department or the head of a Federal agency may prescribe, for the use 
of such department or agency, a size standard other than one which has 
been established by SBA.
    Individual waivers of the ``Nonmanufacturer Rule.'' The proposed 
rule establishes procedures for granting waivers of the Nonmanufacturer 
Rule for individual products on specific solicitations. Procedures for 
granting individual waivers would be combined with provisions 
pertaining to class waivers.
    Other changes to Part 121. This proposed rule would also make 
changes in the size eligibility requirements which are identified below 
in the section-by-section analysis. Several 

[[Page 57984]]
typographical errors or inadvertent omissions would be corrected, and 
several obsolete or irrelevant references would be eliminated. The 
proposed rule would not make any changes in actual size standards 
applicable to specific industries.

Section-by-Section Analysis

    The following is a section by section analysis of each provision of 
SBA's regulations that would be affected by this proposed rule:
    The current Sec. 121.101 is a policy statement reciting 
Congressional intent as set forth in the Small Business Act. SBA 
proposes to revise Sec. 121.101 to state succinctly the purpose of 
small business size standards.
    Section 121.102 would be deleted and the substance of the provision 
moved to the revised Sec. 121.101.
    Present Sec. 121.201 would be deleted and the substance of 
subsection (a) consolidated with proposed Sec. 121.101. Present 
subsection (b) is a philosophical statement relating to Federal 
assistance in general and would be eliminated as unnecessary. The 
general outline of SBA's size program, contained in Sec. 121.202, would 
be deleted as unnecessary since revised Sec. 121.101 would provide 
general guidance as to the purpose of size standards and how SBA 
establishes them. Revised Sec. 121.201 would detail specific size 
standards, and revised Secs. 121.301 through 121.903 would describe the 
relationship of size standards for specific types of Federal 
assistance. Procedures for size protests and requests for size 
determinations would be found in proposed Sec. 121.1001. Appeals of 
size determinations and SIC code designations would be covered in 
proposed Sec. 121.1100.
    Section 121.102 would be amended to explain, in summary fashion, 
how SBA develops or revises an industry size standard. Two criteria for 
size standards have gained general acceptance since SBA's inception and 
are the most widely used definitions of small business. The first is 
the 500 employee size standard, which is the most common size standard 
among the manufacturing and mining industries. Instituted by the 
Smaller War Plants Administration and adopted with the formation of 
SBA, it applies to a majority of these industries. The second is the 
average annual receipts standard, which applies to most retail and 
service industries and also dates back to the inception of SBA. In 
1953, a limit of $1.0 million in average annual receipts was applied to 
many of these industries. Over time, inflation and industry changes 
have increased that original level to $5 million. Size standards for 
particular industries deviate from these ``anchor standards'' depending 
on the structural characteristics of the industry and other factors 
described in SBA's rulemaking actions as important influences on an 
industry's structure. Proposed Sec. 121.102 would identify the factors 
SBA considers in setting any size standard, including degree of 
competition in an industry, average firm size in the industry, start-up 
costs and entry barriers in the industry, and distribution of firms by 
size in the industry.
    Section 121.203 would be deleted and the substance of the provision 
would be contained in revised Sec. 121.1006(h)(3).
    Section 121.204 would be deleted. The substance of the provision 
would be incorporated in revised Secs. 121.1006(h)(3) and 121.1007.
    Section 121.205 would be eliminated as unnecessary.
    The subject of Secs. 121.301(a) and 121.301(b) would be transferred 
to Sec. 121.102(b), with the provision amended for relevance. Section 
121.301(c) would be deleted as unnecessary since proposed Sec. 121.201 
would contain a statement that the general size standard for all 
industries not listed in the table in Sec. 121.201 would be $5 million.
    Sections 121.302 and 121.304 would be eliminated as unnecessary. 
The roles of the Office of General Counsel and OHA are described in 
Part 101 of SBA's regulations. Section 121.303 would be deleted, but 
the address of the Size Policy Board would be contained in the revised 
Sec. 121.102(c).
    Section 121.305 would be eliminated. SBA has materially changed the 
role of its regional offices, transferring to other SBA offices many of 
the functions formerly performed by regional offices. The descriptions 
of responsibilities with respect to size determinations and SIC code 
designations would be transferred to revised Secs. 121.402 and 
121.1002.
    Definitions of terms, presently found in Secs. 121.401 through 407, 
would be transferred to a new Sec. 121.103. Changes in some definitions 
are proposed.
    The definition of affiliation in current Sec. 121.401 would be 
transferred to Sec. 121.103(a) and revised for clarity. Subsection 
(a)(1) would be redesignated as Sec. 121.103(a)(1)(iii). Subsections 
121.401(a)(2)(i) and (ii) would be redesignated as subsection 
121.103(a)(1)(i)(A) and (B). Provisions addressing ``identity of 
interest'' now found in Secs. 401(a)(2)(iii) and 401(d) would be 
transferred to the policy statement contained in proposed 
Sec. 121.103(a)(1)(i)(C). The term is a legitimate concept in 
characterizing affiliation among parties, but it is dependent on 
specific facts in its application and is subject to a high degree of 
subjectivity in much of its implementation. While simpler, the 
designation of a list of family relationships that would always cause 
an ``identity of interest'' would penalize a number of legitimate small 
concerns. Close familial relationships are at times offset by 
estrangement of the parties. Under the circumstances, SBA has 
determined that a flexible approach should be retained in the size 
regulations.
    Section 121.401(b), pertaining to exclusions from the definition of 
affiliation, would be transferred to a new Sec. 121.103(a)(2) which 
would list and describe seven exclusions.
    In addition to the exclusion from affiliation for SBICs or 
Development Companies, the proposed rule would add a second exclusion, 
for purposes of SBIC assistance, for concerns owned by venture capital 
firms, pension funds, and certain charitable entities exempt from 
federal taxation under Sec. 501(c) of the Internal Revenue Code. Like 
SBICs, these entities often make financial investments in small 
companies when they receive ownership positions which can be held for 
subsequent resale. The same control limitations imposed by SBA on SBICs 
would be imposed on the investors covered by this affiliation 
exclusion.
    The exclusion for business concerns owned and controlled by Indian 
Tribes, Alaska Regional or Village Corporations organized pursuant to 
the Alaska Native Claims Settlement Act, or Native Hawaiian 
Organizations would be clarified so that affiliation would not be found 
solely by reason of such ownership, but still could be found where 
other grounds (e.g., common management) exist.
    The exclusion for businesses owned or controlled by Community 
Development Corporations was added to SBA regulations on June 7, 1995, 
and would be retained with only minor editorial adjustments.
    The proposed rule would add an exclusion be for small businesses 
that are members of pools approved by the Administrator, after 
consultation with the Attorney General and the Chairman of the Federal 
Trade Commission, for a joint program of research and development. 
Concerns which are members of such pools would not be considered 
affiliated with other pool members solely by reason of their joint 
participation on pool approved activities. Such pools have been 
statutorily authorized for some time, but there has not been a 
corresponding 

[[Page 57985]]
exclusion from affiliation specifically recognized in the size 
regulations.
    The proposed rule would also add an exclusion from affiliation for 
concerns that lease administrative and/or other employees from a 
concern whose principal business is leasing employees to other 
businesses. The two concerns would not be considered affiliated solely 
by reason of the leasing agreements.
    Finally, the proposed rule would add an exclusion for firms 
participating in Federal Mentor-Protege Programs. Although affiliation 
would not be found based solely on such mentor-protege relationship, 
affiliation could be found to exist based on other factors.
    Section 121.401(c), pertaining to the nature of control, would be 
eliminated in the revised affiliation rule. Affiliation by stock 
ownership and common management would be addressed in proposed 
Secs. 121.103(c) and (d). The non-essential elements of affiliation 
expressed in current subsection 401(c) would be eliminated without 
sacrificing clarity or definitiveness.
    Section Sec. 121.401(e), redesignated as Sec. 121.103(c), would be 
clarified.
    Section 121.401(f), redesignated as Sec. 121.103(d), would clarify 
what constitutes an agreement in principle, and make other minor 
editorial changes.
    Section 121.401(g) now requires SBA to determine whether a voting 
trust was entered into primarily for a ``legitimate purpose.'' Since 
such a requirement is unnecessary and overly subjective, it would be 
eliminated.
    The proposed rule would redesignate Sec. 121.401(h), pertaining to 
common management, as Sec. 121.103(e), and clarify that common 
management must control both the firm whose size status is at issue and 
one or more other concerns in order to constitute affiliation. It would 
eliminate the references to key employees, but provide that affiliation 
can exist where the chief executive officer, one or more general 
partners, or one or more members of the board of directors, control the 
board of directors or management of another concern.
    The proposed rule would eliminate Secs. 121.401(i) and (j) as 
separate bases for affiliation. Most firms simply sharing common 
facilities do not act in concert, and SBA believes that there is little 
likelihood of abuse if this provision is eliminated. Similarly, the 
``newly organized concern'' basis for affiliation seldom appears alone, 
and its elimination as a separate basis for affiliation would not 
eliminate the underlying reasons for finding affiliation on other 
grounds.
    Section 121.401(k) would be eliminated as a separate basis for 
affiliation, but referenced as a factor that may cause affiliation 
under the totality of circumstances in proposed Sec. 121.103(a)(2).
    Affiliation through joint ventures would be moved from 
Sec. 121.401(l) to Sec. 121.103(f). The proposed rule would eliminate a 
specific definition of the term joint venture as unnecessary. The 
current regulations unintentionally define a joint venture as being 
formed for a single, specific contract. SBA believes it to be obvious 
that a joint venture may be formed to carry out more than one contract, 
and the regulation will be so implemented. The revision also would be 
reworded for brevity and clarity.
    The provisions of Secs. 121.401(l)(2) and (3) would be redesignated 
as Secs. 121.103(f)(1) and (2), respectively. The provisions would be 
reworded for clarity, and provisions not affecting the substantive rule 
would be eliminated.
    Section 121.401(l)(4) (proposed Sec. 121.103(f)(3)) would be 
amended in two respects. It would clarify that whether a subcontractor 
should be considered a joint venturer depends on all circumstances 
pertaining to the subcontract arrangement between the parties and does 
not hinge solely on the percentage of subcontracted work. For example, 
the fact that a subcontractor is to perform a relatively large 
percentage of the total value of the contract might not cause SBA to 
consider the arrangement a joint venture where the prime contractor 
would be actively engaged in the performance of the contract and would 
exercise a supervisory role. In addition, subcontractors that supply 
materials may be distinguished from subcontractors that perform work. 
For example, a small business construction contractor would not be 
deemed an affiliate of a large subcontractor from which needed asphalt 
constituting more than 50 percent of the value of the contract was 
purchased where the large business was scheduled to perform no work on 
the contract other than the cost of the asphalt.
    Section 121.401(l)(5) would be reworded for clarity and 
redesignated as Sec. 121.103(f)(4).
    The franchise rule in Sec. 121.401(m) would be rewritten for 
clarity and redesignated as Sec. 121.103(g).
    The proposed rule would revise ``annual receipts'' in proposed 
Sec. 121.104 (current Sec. 121.402) to mean gross or total income plus 
cost of goods sold as reported on a concern's Federal income tax 
return. The term is meant to include revenue from the sale of products 
or services, interest, dividends, rents, royalties, fees, commissions, 
or other income. The same allowances and proceeds collected for another 
concern currently subtracted from receipts would continue to be 
subtracted in the proposed rule. Accordingly, the size of a concern 
would be based upon the information shown on the Federal income tax 
return, as opposed to the present requirement of utilizing its regular 
books of account. SBA specifically requests comments on this proposed 
definition. Because SBA would use a concern's income tax return to 
determine ``receipts,'' the concern would not be required to restate 
its revenue under the accrual basis of accounting if its return was 
filed other than under the accrual method as is presently the case.
    The proposed rule would also exclude from the calculation of annual 
receipts amounts collected for another by conference management 
services firms. This action is being taken to better measure the 
magnitude of operations of conference management services providers. In 
response to a decision of the United States District Court for the 
District of Columbia (Civil Action No. 91-1569), the proposed rule 
would also exclude such ``pass-through'' amounts would also be excluded 
for advertising agents.
    The SBA reviews requests to exclude revenues of certain business 
activities on a case-by-case basis. In an August 25, 1992 proposed rule 
(See 57 FR 38452), SBA noted characteristics under which it might be 
appropriate to exclude from a concern's revenues certain funds received 
from a client firm to be transmitted to an unaffiliated third party. 
These include the following five characteristics:

    (1) A broker or agent-like relationship between a firm and its 
third party provider exists that represents a dominant or crucial 
activity of firms in these industries.
    (2) The pass-through funds associated with the broker or agent-
like relationship is a significant proportion of total receipts.
    (3) As the normal business practice of firms in the industry, a 
firm's income remaining after the pass-through funds are remitted to 
a third party is typically derived from a standard commission or 
fee.
    (4) Firms do not usually consider billings that are reimbursed 
to other firms as their own income, preferring instead to count only 
those receipts that are retained for their own use.
    (5) Federal government agencies which engage in the collection 
of statistics and other industry analysts usually represent receipts 
of the firms on an adjusted receipts basis.

    An analysis of the conference management services industry suggests 
that most of these characteristics are shared by concerns active in 
this industry. Conference management 

[[Page 57986]]
services firms provide a range of services in support of organizing and 
facilitating conferences, such as travel, lodging, ground 
transportation, honoraria and other administrative support services. 
The sponsoring organization is responsible for developing the 
conference and its contents and for all conference expenses. The 
conference management service provider principally acts as an agent on 
behalf of the sponsoring organization by arranging for various support 
services in connection with the conference and provides few, if any, of 
the support services itself. The arrangements made through the 
conference management services provider to a third party provider are 
paid using the sponsoring organization's funds or by the conference 
management services provider and later reimbursed by the sponsoring 
organization. The pass-through monies paid to third-party providers 
generally account for a majority of the total expenses incurred by the 
conference management services provider. The conference management 
services provider's earnings are based on fees or commissions from 
these activities.
    The scope of activities and business operations of conference 
management services providers appear to conform with the 
characteristics outlined above to support the exclusion of funds 
received in trust for an unaffiliated third party. The SBA believes 
that the revenues a conference management services provider received 
for a third party provider represents revenues intended for the third 
party. Accordingly, an exclusion of these types of revenues is 
warranted. The fees and commissions earned by the conference management 
services provider from its activities is also a more representative 
measure of the magnitude of operations of the firm and of the services 
provided.
    Before a final decision is made on the exclusion of pass-through 
revenues for conference management services firms, the SBA would find 
additional information helpful on the practices of firms in the 
conference management services industry. In particular, the SBA seeks 
comments from the public concerning the typical relationship between 
clients of conference managers and conference management services 
providers themselves. Pertinent information would include:

    (1) To what extent are funds passed through to other vendors in 
this industry, particularly the extent of booking costs for 
transportation, lodging and meeting room space?
    (2) To what extent are funds ``escrowed'' in which the client 
firm provides an account to be used by the conference facilitator to 
``perform a condition'' and meet ongoing expenses? What is the 
typical nature of these accounts in ownership and liability terms?
    (3) Are conferences typically planned by the client firm or the 
independent conference planner? Who prepares the program and selects 
the speaker? Does the conference management services provider 
usually act as a mere facilitator or as a planner in which the 
entire production would be planned by the conference management 
services provider?
    (4) How does the conference management services provider recover 
costs and make profits? Are arrangements normally on a cost-plus 
fixed-fee basis, a standard commission basis or fixed price?

    This proposed rule does not change the current size standard of 
$5.0 million applicable to firms in SIC 8741, Management Services. 
However, if pass-through funds are excluded from the calculation of 
revenues for conference management services firms as proposed, it would 
effectively increase the size standard applicable to these type of 
firms. At this time, the SBA does not have available data to determine 
if the $5.0 million size standard continues to be appropriate for the 
conference management services industry. Accordingly, the SBA is also 
seeking information on the economic characteristics of conference 
management services firms, such as average firm size, the degree of 
concentration, the size distribution of firms, start-up costs and the 
difficulty of entry. Other information which may influence the size 
standard, and the need for a new size standard, may also be submitted. 
The SBA will consider this information to assess the appropriateness of 
the current size standard, which may lead to a future rulemaking 
proposing a different size standard than $5.0 million.
    This proposed rule would also clarify that SBA may use all 
available information to determine annual receipts when making a size 
determination, especially if other information is available which 
disputes a firm's Income Tax returns.
    Section 121.402(e)(i) would be redesignated as Sec. 121.104(d) and 
amended to add language indicating that the annual receipts for a 
concern and its affiliates are calculated in accordance with proposed 
Sec. 121.104(b) even though this may result in different time frames 
being used to calculate the concern's and affiliate's revenues.
    Sections 121.403(a) and (b) would be redesignated as 
Secs. 121.105(a) and (b), respectively, and revised for clarity. A new 
subsection (c) would be added to make it clear that if one entity is 
replaced by another having the same assets and liabilities, the 
successor firm is not a new entity for purposes of calculating annual 
receipts/employees.
    The current definition of employees in Sec. 121.404 would be 
combined with the definition of number of employees in Sec. 121.407 
into proposed Sec. 121.106, and rewritten for clarity. The proposed 
rule would eliminate the list of numerous factors bearing on the issue 
of whether individuals are employees of a concern or employees of an 
independent employment contractor, and simply authorize SBA to look at 
all relevant factors concerning the issue.
    The provisions of Sec. 121.406 would be eliminated as unnecessary. 
Language indicating that dominance is taken into account in the setting 
of industry size standards would be added to proposed Sec. 121.102.
    The proposed rule would add a new Sec. 121.107 which states the 
existence of statutory penalties for misrepresentations of size status.
    The substance of Sec. 121.601 would be redesignated as 
Sec. 121.201, which would be amended to eliminate unnecessary language.
    The size standards table identified by SIC industry would be 
greatly streamlined. The redesigned size standard table would list the 
size standard applying to each Division within the SIC System and each 
Major Group within that Division if different from the general Division 
size standard. Only those industries having a size standard different 
from the applicable Division or Major Group size standard, or those to 
which a footnote applies, would be specifically listed in the table by 
four-digit SIC code. This change would eliminate the duplication of 
listing four-digit SIC code after four-digit SIC code within a Division 
or Major Group with identical size standards.
    The asterisks identifying new SIC codes for 1987 would also be 
eliminated from the table as no longer relevant or useful.
    Many of the footnotes to the size standards in proposed 
Sec. 121.201 would be clarified and simplified. Some footnotes have 
been deleted resulting in the need to renumber remaining ones as 
identified below. Size standards themselves would not be amended by 
this proposed rule.
    Footnote 1 would be deleted as unnecessary. The Table of Size 
Standards itself, as well as the introductory language to the Table, 
indicates that size standards are in number of employees or average 
annual receipts unless otherwise specified.
    Footnote 2, redesignated as footnote 1, would be clarified to 
indicate that the 40 percent requirement in the footnote 

[[Page 57987]]
applies to government procurement only.
    Footnotes 3, 4, and 5, redesignated as footnotes 2, 3, and 4, 
respectively, would be reworded for clarity.
    Footnote 6, redesignated as footnote 5, would be amended by 
replacing the words ``which it manufactured worldwide'' with the words 
``comprising its total worldwide manufacture'' to clarify that SBA 
intended no difference in the application of those words.
    The substance of footnote 7 would be transferred into the size 
standard table for SIC code 4212, and the footnote eliminated.
    Footnote 8 would be incorporated into the Table, and eliminated as 
a separate footnote.
    Footnote 9 would be eliminated as unnecessary.
    Footnote 10, redesignated as footnote 6, would clarify that gross 
commissions of a travel, real estate or advertising agency are to be 
counted when determining such a concern's size, whether paid directly 
(e.g., through some sort of escrow account) or indirectly (i.e., 
received first by the agency and then paid to the individual) to 
individual agents of the concern. SIC codes relating to advertising 
agents (SIC codes 7311, 7312, 7313, and 7319) and that part of SIC code 
8741 dealing with conference management service providers would be 
added to this footnote.
    The substance of footnotes 11 and 12 would be incorporated into the 
size standard table for SIC codes 4212 and 5599 respectively, and the 
footnotes eliminated.
    Footnote 13 would be deleted as duplicative of restrictions on 
financial assistance covered in Part 120.
    Footnote 14, redesignated as footnote 6, would be revised to 
incorporate the substance of existing Secs. 121.1402(a) and (b).
    Footnote 15, redesignated as footnote 7, would be rewritten for 
clarity.
    Footnote 16 would be eliminated and its substance combined with the 
statement at the beginning of the size standards chart dealing with the 
$5 million alternate size standard.
    Footnotes 17, 18 and 20 would be clarified for ease of use and 
renumbered as footnotes 9, 10, and 12, respectively.
    Footnotes 21 and 22 would be incorporated into the size Table, and 
eliminated as separate footnotes.
    Footnote 23 would be redesignated as footnote 13.
    Sections 121.801 and 121.802 (proposed Secs. 121.301 and 121.302) 
would be amended for clarity and ease of use. The proposed rule would 
eliminate differentials in size standards for Redevelopment Areas. 
Differentials for Redevelopment Areas would be eliminated because 
almost all counties are so designated, and such designations tend to be 
permanent or long lasting designations once designated.
    Section 121.803(a) (proposed Sec. 121.303(a)) would be amended to 
clarify that the size of an applicant for financial assistance is 
determined as of the date the application for such assistance is 
received by SBA (or, in the case of the preferred lenders program, the 
date of approval of the loan by the Preferred Lender).
    The current Sec. 121.803(b) would be eliminated since it is covered 
in revised Sec. 121.103(d).
    Section 121.803(c), redesignated as Sec. 121.303(b), would be 
rewritten for clarity.
    Sections 121.804 through 121.806 (proposed Secs. 121.304 through 
121.306) would be rewritten for clarity and ease of use. SBA's 
Government Contracting Area Directors also would be substituted for 
staff in regional offices. They are familiar with size issues and 
principles because of their work in the government procurement area and 
have sufficient knowledge and expertise to make size determinations 
pertaining to financial assistance.
    Proposed Sec. 121.307 would clarify that a MED concern which 
qualifies for award of a specific 8(a) subcontract would be eligible 
for SBA financial assistance to finance the subcontract.
    Section 121.901, redesignated as Sec. 121.401, would clarify that 
it covers MED issues, but that additional size issues pertaining to the 
MED program are discussed in Secs. 121.601 through 121.604.
    Sections 121.902 and 121.903 would be redesignated as Secs. 121.402 
and 121.403, respectively, and revised for clarity.
    Section 121.904, redesignated as Sec. 121.404, would be rewritten 
for clarity and ease of use. The substance of subsection 121.904(b) has 
been transferred to proposed Sec. 121.103(a)(4). Subsection (c) has 
been eliminated, and subsection (d) redesignated as subsection (b). 
This section would also call for determining size as of the date of 
best and final offers in negotiated procurements (rather than the date 
of self-certification) when a size protest alleges that a small 
business dealer is not supplying the product of a small business 
manufacturer or that a small business' subcontracting plan creates a 
joint venture that should be considered large. A concern's proposed 
supplier or subcontractors often will change during the process of 
negotiation, and it is unreasonable to expect subcontracting plans to 
be finalized at the time a concern self-certifies and submits its 
initial offer on the solicitation.
    Sections 121.905 and 121.906, redesignated as Secs. 121.405 and 
121.406, respectively, would be amended for clarity and ease of use.
    Section 121.907 would be redesignated as Sec. 121.407, with the 
example deleted as unnecessary.
    Section 121.908 would be redesignated as Sec. 121.408. Subsections 
(a) and (b) would be consolidated and would clarify that a formal size 
determination is required if the size status of an applicant for a COC 
is at issue. Subsection (c) would be eliminated as duplicative (see 
Sec. 121.404), and subsection (d) redesignated as subsection (b).
    Section 121.909 would be redesignated as Sec. 121.409.
    Section 121.910 would be redesignated as Sec. 121.410. Minor 
editorial changes and a corrected cross-reference would be made in 
subsections (a) and (b). Language referring to subcontracting for 
financial services under section 8(d) of the Small Business Act would 
be transferred to a new subsection (c).
    Section 121.911 would be redesignated as Sec. 121.411, and 
rewritten for clarity. Cross-references to sections would be corrected 
and a clarification made that prime contractors must notify 
unsuccessful offerors for Section 8(d) subcontracts of the apparent 
successful offeror to enable unsuccessful offerors to timely protest 
the size of the apparent successful offeror where appropriate.
    A new Sec. 121.412 would be added to the regulations to clarify 
that a concern must meet the applicable size standard only for that 
portion of a partial small business set-aside that is set-aside for 
small business. The concern is not required to qualify as a small 
business for that portion of a requirement that is open to both small 
and large business concerns. For instance, to be eligible as a small 
business concern for petroleum refining in SIC Code 2911, a concern is 
required to refine 90 percent of the petroleum from either crude oil or 
bona fide feedstocks. On a partial small business set-aside, a concern 
would have to meet this requirement on the portion of the offer that is 
set-aside, but would not have to meet this requirement on the 
unrestricted portion.
    Sections 121.1001 through 121.1003 would be redesignated as 
Secs. 121.501 through 121.503, and reworded for clarity.
    Section 121.1004(a) would be redesignated as Sec. 121.504, and 
reworded for clarity. The substance of subsection 

[[Page 57988]]
(b) would be transferred to proposed Sec. 121.103(a)(4).
    Section 121.1005 would be redesignated as Sec. 121.505, and 
reworded for brevity.
    Proposed Sec. 121.506 consolidates definitions (important for sales 
and leases of Government-owned timber) that are presently contained in 
different sections.
    Section 121.1006, redesignated as Sec. 121.507, clarifies that the 
Alaskan resale limitation applies when the original purchaser, and not 
necessarily the repurchaser, is an Alaskan business.
    Sections 121.1006 through 121.1010 would be renumbered as 
Secs. 121.507 through 121.511, and reworded for clarity and brevity.
    Section 121.1011, redesignated as Sec. 121.512, would clarify that 
SBA considers a concern's affiliates in determining the size of a 
stockpile purchaser.
    Sections 121.1012 and 121.1013 would be redesignated as 
Secs. 121.513 and 121.514, respectively, and amended for clarity and 
brevity.
    Section 121.1101 would be eliminated as unnecessary.
    Section 121.1102 would be reorganized for clarity. The substance of 
subsections (a)(1), (a)(2), and (b)(1) would be redesignated as 
Secs. 121.601, 121.604(a), and 121.603, respectively. The substance of 
subsections (b)(2), (c) and (d) would be consolidated into 
Sec. 121.402.
    Section 121.1103 would be reorganized for clarity. The substance of 
subsections (a), (b), and (c) would be redesignated as Secs. 121.602, 
121.604(a), and 121.605, respectively. The substance of subsection (d) 
would be consolidated into Sec. 121.404(b).
    Section 121.1104 would be redesignated as Sec. 121.604, and amended 
for clarity.
    Sections 121.1105 and 121.1106 would be consolidated into 
Secs. 121.405 and 121.406, respectively.
    The substance of 121.1108 would be redesignated as Sec. 121.605.
    Section 121.1201 would be redesignated as Sec. 121.701 and the 
definition of funding agreement in Sec. 121.1202(b) would be moved to 
this section in order to keep definitions in one place.
    Section 121.1202 would be redesignated as Sec. 121.702 and the 
language would be simplified.
    Section 121.1203 would be redesignated as Sec. 121.703 and 
rewritten for clarity.
    Section 121.1204 would be redesignated as Sec. 121.704. The 
reference to a firm of more than 500 employees being ineligible for 
award would be deleted as duplicative of revised Sec. 121.702. Section 
121.1205 would be redesignated as Sec. 121.705 and amended for clarity.
    Sections 121.1301 through 121.1305 would be redesignated as 
Secs. 121.801 through 805, respectively, with slight changes for 
clarity.
    Sections 121.1401 through 121.1405 would be deleted as unnecessary 
since size eligibility of financial institutions for subcontracting 
purposes would be addressed in proposed Sec. 121.410(c) and footnote 9 
of proposed Sec. 121.201.
    Section 121.1501, redesignated as Sec. 121.901 and rewritten for 
clarity, would address the procedures for size determinations and 
discretionary appeals currently set forth in Sec. 121.1505.
    Sections 121.1502 and 121.1503 would be consolidated into a new 
Sec. 121.902.
    A proposed amendment of Sec. 121.1502 was published in the Federal 
Register (58 Fed. Reg. 44620) for public comment on August 23, 1993. It 
would have implemented Section 222 of Public Law 102-366, amending the 
Small Business Act, to delineate the limited circumstances under which 
a Federal department or agency may prescribe its own standard for 
determining whether an entity is a small business concern. After 
reviewing public comments, SBA has decided to publish for further 
comment a new proposal for the rule as part of this proposed rule.
    After publication of the initial proposal, Congress modified 
Section 3(a)(2) of the Small Business Act further, thereby affecting 
two aspects of the proposed rule (See  Sec. 301, Public Law 103-403). 
Public Law 103-403 modified the time period for determining the size of 
a manufacturing concern from ``over a period of not less than three 
years'' to ``a manufacturing concern's pay periods for the preceding 12 
months.'' This modification makes the time period of measurement of a 
manufacturing concern's size consistent with the time period used by 
SBA in calculating the size of other business concerns subject to an 
employee-based size standard. Public Law 103-403 then expanded upon the 
types of size standard measures that could be used for certain 
industries. While Sec. 301 requires that the number of employees be 
used to determine the size of a manufacturing concern, and gross 
receipts used to determine the size of concerns providing services, 
Sec. 301 permits these or some other measure of size to be used for 
size standards for all other industry categories (e.g., retail trade, 
wholesale trade, and construction). Other measures of size standards 
could include net worth, net income, or some other quantitative measure 
that appropriately delineates business concerns by size. These 
statutory modifications have been incorporated into this final rule.
    The current statutory provisions under Section 3(a)(2) of the Small 
Business Act establish certain requirements for the development of size 
standards by a Federal department or agency. Those requirements would 
be repeated in the regulations under this proposal. The head of a 
Federal department or agency may only prescribe a size standard 
different from that prescribed by SBA when it is for use in connection 
with a program of the department or agency, and other statutory 
criteria are met.
    SBA proposes to adopt appropriate measures to implement this 
statutory authority. As stated in revised Sec. 121.901, SBA applies the 
rules and procedures contained in this regulation when making size 
determinations for other agencies. This includes the definition of the 
size standard measure as well as all other criteria related to the size 
standard. SBA will consider the use of alternative definitions and 
other size related criteria by other agencies where appropriate. As 
required by statute, SBA also is publishing a list of non-SBA size 
standards currently in effect. The list contained in this proposed rule 
will be updated periodically by notices published in the Federal 
Register as non-SBA size standards become established or when 
additional existing non-SBA size standards are identified. The current 
list is as follows:

                 Table of Statutory and Regulatory Size Standards Set by Agencies Other Than SBA                
----------------------------------------------------------------------------------------------------------------
            Agency/Program                     Size standard                             Cite                   
----------------------------------------------------------------------------------------------------------------
Bureau of Land Management, Timber      SBA size standards...........  43 CFR 5400.0-5                           
 Sales.                                                                                                         
Department of Agriculture, SBIR        Fewer than 500 employees; all  7 CFR 3403.2(o)                           
 program.                               requirements of 13 CFR 121.                                             

[[Page 57989]]
                                                                                                                
Department of the Air Force,           SBA size standards...........  32 CFR 841.4                              
 Licensing Government-Owned                                                                                     
 Inventions.                                                                                                    
Department of the Army, Timber Sales.  SBA size standards...........  32 CFR 644.509                            
Department of Commerce, International  ``Small business'' means any   19 CFR 353.12                             
 Trade Administration, Antidumping      business concern which, in                                              
 Duty Procedures.                       the agency's judgment, due                                              
                                        to its small size, has                                                  
                                        neither adequate internal                                               
                                        resources nor financial                                                 
                                        ability to obtain qualified                                             
                                        outside assistance in                                                   
                                        preparing and filing                                                    
                                        petitions and applications                                              
                                        for remedies and benefits                                               
                                        under trade laws. (19 USC                                               
                                        1339).                                                                  
Department of Commerce, International  ``Small business'' means any   19 CFR 355.12                             
 Trade Administration, Countervailing   business concern which, in                                              
 Duty Procedures.                       the agency's judgment, due                                              
                                        to its small size, has                                                  
                                        neither adequate internal                                               
                                        resources nor financial                                                 
                                        ability to obtain qualified                                             
                                        outside assistance in                                                   
                                        preparing and filing                                                    
                                        petitions and applications                                              
                                        for remedies and benefits                                               
                                        under trade laws. (19 USC                                               
                                        1339).                                                                  
Department of Commerce, Licensing      SBA size standards...........  37 CFR 404.3                              
 Government-Owned Inventions.                                                                                   
Department of Commerce, Patent Rights  SBA size standards...........  37 CFR 401.14                             
 Clause.                                                                                                        
Department of Commerce, Rights to      SBA size standards...........  37 CFR 401.2                              
 Inventions.                                                                                                    
Department of Defense, Business Type   13 CFR part 121..............  48 CFR 252.211-7020                       
 Certification--Commercial Items.                                                                               
Department of Defense, Contract Goals  Section 8(d) of the Small      10 USC 2323                               
 for Small Disadvantaged Businesses.    Business Act.                                                           
Department of Defense, Notice of       13 CFR part 121..............  48 CFR 252.219-7001                       
 Partial Small Business Set-aside.                                                                              
Department of Energy, Domestic         ``[A]s defined by SBA''......  10 CFR 760.1                              
 Uranium Project.                                                                                               
Department of Energy, Electric and     13 CFR 121.310...............  10 CFR 791.3                              
 Hybrid Vehicle Research,                                                                                       
 Development, Demonstration and                                                                                 
 Production Loan Guaranties.                                                                                    
Department of Energy, Financial        Not dominant in its field;     10 CFR 600.3                              
 Assistance Rules.                      independently owned and                                                 
                                        operated; meets criteria of                                             
                                        SBA.                                                                    
Department of Energy, Financial        Not dominant in its field;     10 CFR 600.3                              
 Assistance Rules--Grants.              independently owned and                                                 
                                        operated; meets criteria of                                             
                                        SBA.                                                                    
Department of Energy, Geothermal Loan  Not dominant in field; does    10 CFR 790.5                              
 Guaranty Program.                      not have assets in excess of                                            
                                        $9 million or net worth in                                              
                                        excess of $4 million; does                                              
                                        not have average net income,                                            
                                        after Federal income tax,                                               
                                        for the preceding 2 years in                                            
                                        excess of $400,000.                                                     
Department of Energy, Patent Rights    13 CFR 121.3-8, 121.3-12.....  10 CFR 600.33                             
 of Grantees.                                                                                                   
Department of Energy, State Energy     SBA regulations..............  10 CFR 420.2                              
 Conservation Program.                                                                                          
Department of Housing and Urban        SBA size standards...........  24 CFR 135.5                              
 Development, Employment                                                                                        
 Opportunities for Businesses and                                                                               
 Lower Income Persons in Connection                                                                             
 with Assisted Projects.                                                                                        
Department of Labor, OSHA,             19 or fewer employees........  29 CFR 1910.1027(p)(2)                    
 Occupational Safety and Health                                                                                 
 Standards, Cadmium.                                                                                            
Department of Transportation,          Section 3 of the Small         49 CFR 23.62                              
 Implementation of Sec.  105(f) of      Business Act and SBA                                                    
 the Surface Transportation             regulations, except that a                                              
 Assistance Act of 1982.                small business concern will                                             
                                        not include any concern or                                              
                                        group of concerns controlled                                            
                                        by the same socially and                                                
                                        economically disadvantaged                                              
                                        individual(s) which has                                                 
                                        average annual gross                                                    
                                        receipts in excess of $15                                               
                                        million over the previous 3                                             
                                        fiscal years (amount is                                                 
                                        increased annually for                                                  
                                        inflation).                                                             
Department of Transportation, Size     See note below for size        49 CFR 23.89                              
 Standards for Airport                  standards for specific                                                  
 Concessionaires.                       airport concessionaires.                                                
Department of Transportation, Uniform  Small business is a business   49 CFR 24.2(t)                            
 Relocation Assistance and Real         having not more than 500                                                
 Property Acquisition for Federal and   employees working at the                                                
 Federally Assisted Programs.           site being acquired or                                                  
                                        displaced by a project or                                               
                                        program, which site is the                                              
                                        location of economic                                                    
                                        activity. Sites occupied                                                
                                        solely by outdoor                                                       
                                        advertising signs, displays,                                            
                                        or devices do not qualify as                                            
                                        a business.                                                             
Environmental Protection Agency,       Section 3 of the Small         40 CFR 30.6015                            
 Cooperative Agreements and Superfund   Business Act.                                                           
 State Contracts for Superfund                                                                                  
 Response Actions.                                                                                              
Environmental Protection Agency,       SBA size standards...........  40 CFR 21.2                               
 Issuance of Statements Required by                                                                             
 Sec.  7(g) of the Small Business Act.                                                                          
Environmental Protection Agency,       Small Business Act...........  40 CFR 33.005                             
 Procurement Under Assistance                                                                                   
 Agreements.                                                                                                    
Environmental Protection Agency,       100 employees................  42 USC 7661(f)                            
 Stationary Source Technical and                                                                                
 Environmental Compliance Assistance                                                                            
 Program.                                                                                                       
Family and Medical Leave Act.........  Fewer than 50 employees......  Public Law 103-1, Sec.  101               

[[Page 57990]]
                                                                                                                
FAR, Patent Rights, Retention by       Section 2 of the Small         48 CFR 52.227-11                          
 Contractor (Short Form).               Business Act and SBA                                                    
                                        regulations.                                                            
FAR, Patent Rights, Retention by       Section 2 of the Small         48 CFR 52.227-12                          
 Contractor (Long Form).                Business Act and SBA                                                    
                                        regulations.                                                            
FAR, Patent Rights Under Government    16 USC 632 and SBA             48 CFR 27.301                             
 Contracts.                             regulations.                                                            
FAR, Size Standards..................  SBA size standards...........  48 CFR 19.102                             
FAR, Small Business Competitiveness    Emerging small business: size  48 CFR 19.1002                            
 Demonstration Program.                 is no greater than 50% of                                               
                                        numerical SIC size standard.                                            
FAR, Socioeconomic Programs..........  13 CFR 121 and not dominant    48 CFR 19.001                             
                                        in field.                                                               
FAR, Utilization of Small Business     Section 3 of the Small         48 CFR 52.219-8                           
 Concerns and Small Disadvantaged       Business Act and SBA                                                    
 Business Concerns.                     regulations.                                                            
General Services Administration,       13 CFR part 121..............  48 CFR 552.219-1                          
 Small Business Concern                                                                                         
 Representation.                                                                                                
Internal Revenue Service, Dollar-      Average annual gross receipts  26 CFR 1.472-8                            
 value Method of Pricing LIFO           of the taxpayer for the 3                                               
 Inventories.                           preceding taxable years do                                              
                                        not exceed $5 million.                                                  
Internal Revenue Service, Loss on      (1) Post-1978 stock: capital   26 CFR 1.1244(c)-2                        
 Small Business Stock.                  receipts of small business                                              
                                        corporation may not exceed                                              
                                        $1 million (capital receipts                                            
                                        means aggregate dollar                                                  
                                        amount received by the                                                  
                                        corporation for its stock).                                             
                                       (2) Pre-1978 stock: sum of                                               
                                        aggregate amount to be paid                                             
                                        for pre-1978 stock may not                                              
                                        exceed $500,000.                                                        
Internal Revenue Service, S            Fewer than 35 shareholders;    26 CFR 1.1361-1                           
 Corporation Defined.                   no shareholder (other than                                              
                                        an estate or trust) who is                                              
                                        not an individual; no                                                   
                                        nonresident alien as                                                    
                                        shareholder; only one class                                             
                                        of stock.                                                               
Internal Revenue Service, Simplified   Average annual gross receipts  26 USC 474                                
 Dollar-value LIFO Method for Certain   of the taxpayer for the 3                                               
 Small Businesses.                      preceding taxable years do                                              
                                        not exceed $5 million.                                                  
Internal Revenue Service, Subchapter   Fewer than 35 shareholders;    26 USC 1361(b)(1)(A)                      
 S Corporation.                         no shareholder (other than                                              
                                        an estate or trust) who is                                              
                                        not an individual; no                                                   
                                        nonresident alien as                                                    
                                        shareholder; only one class                                             
                                        of stock.                                                               
International Trade Commission, Trade  SBA size standards...........  19 CFR 213.2                              
 Remedy Assistance.                                                                                             
Interstate Commerce Commission,        Small Business Act...........  49 USC 10701                              
 Negotiated Rates Act.                                                                                          
NASA, Licensing of Inventions........  13 CFR 121.3-8 and 121.3-12..  14 CFR 1245.202                           
NASA, Patent Rights--Retention by      13 CFR 121.3-8 and 121.3-12..  14 CFR 1260 App.                          
 Grantee.                                                                                                       
National Science Foundation, Patent    13 CFR 121.3-8 and 121.3-12..  45 CFR 650.4                              
 Rights of Grantee.                                                                                             
Patent and Trademark Office..........  13 CFR 121.12................  37 CFR 1.9                                
Regulatory Flexibility Act...........  Section 3 of the Small         5 USC 601                                 
                                        Business Act, unless an                                                 
                                        agency, after consultation                                              
                                        with the Office of Advocacy                                             
                                        of SBA and after opportunity                                            
                                        for public comment,                                                     
                                        establishes one or more                                                 
                                        definitions of such term                                                
                                        which are appropriate to the                                            
                                        activities of the agency and                                            
                                        publishes such definition(s)                                            
                                        in the Federal Register.                                                
Securities & Exchange Commission,      Small business issuer-         17 CFR 228.10                             
 Integrated Disclosure System for       revenues less than $25                                                  
 Small Business Issuers.                million; US or Canadian                                                 
                                        issuer; not an investment                                               
                                        company; if a majority owned                                            
                                        subsidiary, parent                                                      
                                        corporation must also be a                                              
                                        small business issuer.                                                  
Securities & Exchange Commission       Small business issuer-         17 CFR 240.12b-2                          
 Registration and Reporting.            revenues less than $25                                                  
                                        million; US or Canadian                                                 
                                        issuer; not an investment                                               
                                        company; if a majority owned                                            
                                        subsidiary, parent                                                      
                                        corporation must also be a                                              
                                        small business issuer.                                                  
Selective Service, Placement of        500 employees................  50 App. USC 468(a)                        
 Orders.                                                                                                        
Federal Communications Commission,     $40 million in average annual  47 CFR 24.720(b)(1)                       
 Licensing of Broadband Personal        gross revenues.                                                         
 Communications Services.                                                                                       
Federal Communications Commission,     $40 million in average annual  47 CFR 24.320(b)                          
 Licensing of Narrowband Personal       gross revenues and $40                                                  
 Communications Services.               million in personal net                                                 
                                        worth.                                                                  
Federal Communications Commission,     $40 million in average annual  47 CFR 21.961(b)                          
 Licensing of Multipoint Distribution   gross revenues.                                                         
 Services (Wireless Cable).                                                                                     
Federal Communications Commission,     Small cable systems of 15,000  47 CFR 76.901(c)                          
 Regulatory Relief for Small Cable      or fewer subscribers owned                                              
 Entities.                              by cable companies with                                                 
                                        400,000 or fewer subscribers.                                           
Nuclear Regulatory Commission,         $5 million in average annual   10 CFR 2.810                              
 Regulatory Flexibility Analyses.       gross revenues for concerns                                             
                                        providing services and 500                                              
                                        employees for manufacturing                                             
                                        concerns.                                                               
Department of the Treasury, Office of  $1 million in average annual   12 CFR 25.22(b)(3)                        
 the Comptroller of the Currency,       gross revenues.                                                         
 Community Reinvestment Act.                                                                                    
Department of the Treasury, Office of  $1 million in average annual   12 CFR 563e.22(b)(3)(iii)                 
 Thrift Supervision, Community          gross revenues.                                                         
 Reinvestment Act.                                                                                              
Board of Governors of the Federal      $1 million in average annual   12 CFR 228.22(b)(3)(ii)                   
 Reserve System, Community              gross revenues.                                                         
 Reinvestment Act.                                                                                              

[[Page 57991]]
                                                                                                                
Federal Deposit Insurance              $1 million in average annual   12 CFR 345.22(b)(3)(ii)                   
 Corporation, Community Reinvestment    gross revenues.                                                         
 Act.                                                                                                           
Department of Agriculture, Commodity   SBA size standards...........  7 CFR 1485.11(oo)                         
 Credit Corporation, Market Promotion                                                                           
 Program.                                                                                                       
----------------------------------------------------------------------------------------------------------------


Note for Airport Concessionaire Size Standards
    Following is a list of the maximum average annual gross receipts in 
the preceding 3 years (in millions of dollars):

------------------------------------------------------------------------
                          Concession                             Amount 
------------------------------------------------------------------------
Food and beverage.............................................     30.00
Book stores...................................................     30.00
Auto rental...................................................     40.00
Banks.........................................................  \1\100.0
                                                                       0
Hotels and motels.............................................     30.00
Insurance machines and counters...............................     30.00
Gift, novelty, and souvenir shop..............................     30.00
Newsstands....................................................     30.00
Shoe shine stands.............................................     30.00
Barber shops..................................................     30.00
Automobile parking............................................     30.00
Jewelry stores................................................     30.00
Liquor stores.................................................     30.00
Travel agencies...............................................     30.00
Drug stores...................................................     30.00
Pastries and baked goods......................................     30.00
Luggage cart rental...........................................     30.00
Coin-operated T.V.'s..........................................     30.00
Game rooms....................................................     30.00
Luggage and leather goods stores..............................     30.00
Candy, nut, and confectionery stores..........................     30.00
Toy stores....................................................     30.00
Beauty shops..................................................     30.00
Vending machines..............................................     30.00
Coin-operated lockers.........................................     30.00
Florists......................................................     30.00
Advertising...................................................     30.00
Taxicab.......................................................     30.00
Limousines....................................................     30.00
Duty free shops...............................................     30.00
Pay telephones................................................  \2\ 1,50
                                                                       0
Gambling machines.............................................     30.00
Other concessions not shown above.............................     30.00
------------------------------------------------------------------------
\1\ As measured by total assets.                                        
\2\ Number of employees.                                                

    SBA will briefly describe and respond to the comments received in 
response to its initial proposed rule regarding alternate size 
standards of other agencies. Several of the commenters, although 
supportive of the proposed rule, identified the following issues that 
they felt warranted further clarification or modification to the 
proposed procedures. These issues are identified below along with the 
SBA's response.
    Definition and Calculation of Average Annual Receipts and Number of 
Employees: The commenters raised two questions concerning annual 
average receipts and number of employees--how are these terms defined 
and how are they calculated? As specified in revised Sec. 121.901, the 
SBA utilizes its rules, standards and procedures when making size 
determinations for other agencies. For clarification on the definition 
and calculation of size standard measures, Sec. 121.902(b)(1)(ii)(D) of 
this part has been added to incorporate, by reference, the SBA's 
criteria for defining and calculating gross receipts and number of 
employees. The SBA's policy of applying the criteria specified in this 
regulation to another agency's size standard does not preclude a 
department or agency from requesting a change to the definition of 
procedures regarding its size standard. Such request would be part of 
the SBA's review of the proposed size standard.
    Size Standard Measures: Two commenters suggested that these 
regulations should permit the use of size standard measures other than 
gross receipts and number of employees, such as net worth, and permit 
the use of number of employees for non-manufacturing industries. For 
non-SBA size standards, the law clearly requires that the size standard 
for manufacturing concerns be established based on number of employees, 
and for concerns providing services that the size standards be 
established based on gross receipts. SBA believes that the statutory 
changes pursuant to Sec. 301 of Public Law 103-403 permit an agency to 
request establishment of a size standard for all other types of 
concerns (e.g., agriculture, construction, retail trade) based on gross 
receipts, number of employees or another quantitative measure of size 
suitable for the purpose and industry under consideration, and this 
final rule allows a department or agency to make such a request.
    Application of Size Standards to Programs: The comments reviewed 
reflected confusion about the application of non-SBA size standards to 
Federal government programs. Several commenters indicated that they 
were unsure if non-SBA size standards were only to be used within a 
specific department or agency, even though a program may be implemented 
across several agencies or departments. Second, some commenters 
appeared to be under the misunderstanding that individual agencies 
would be able to establish their own size standards for use in SBA 
programs within their agency.
    These regulations allow departments and agencies to prescribe 
unique size standards only for programs under their responsibility. For 
example, this means that size standards established by the Department 
of Transportation for a program under its control are applicable to all 
departments or agencies that must also implement such a program. 
Similarly, the SBA size standards are applicable to all programs under 
the SBA area of cognizance, regardless of where implemented. This means 
that the SBA size standards must be used by all departments and 
agencies for the Small Business Set-Aside and MED Programs.
    In another case, a statute may require the use of SBA's size 
standards or refer to small business as defined under the Small 
Business Act. An example is the Department of Defense's Small 
Disadvantaged Business Program. In those cases, the SBA size standards 
clearly must be used. However, if use of SBA's size standards has not 
been statutorily required, a Federal department or agency is free to 
either use the SBA's size standards or endeavor to obtain the approval 
of SBA to establish a different size standard.
    Size Determinations and Appeals to Non-SBA Size Standards: A 
commenter raised the question of how size determinations and appeals 
would be made for non-SBA size standards in cases involving a dispute 
over the size status of a business concern. When requested, the SBA 
will provide size determinations for other Federal government agencies, 
even in cases where size standards are established by statute or the 
SBA has approved size standards different from its own size standards 
(See proposed Sec. 121.1001(b)(6)). The SBA also provides a 
discretionary appeal process from such size determinations that would 
be available to other Federal agencies. The procedures regarding size 
appeals are contained in part 134 (See proposed Sec. 121.1102).
    Documentation for SBA Review of Non-SBA Size Standards: A commenter 
requested clarification on what 

[[Page 57992]]
documentation must accompany its requests for approval of non-SBA size 
standards, particularly regarding submission of copies of comments 
received on the proposed rule. In order for the SBA to properly 
evaluate requests to issue proposed rules, an agency proposing a size 
standard shall provide the SBA with (1) the reasons for proposing a 
size standard different from the SBA's size standard, and (2) industry 
related data or other data supporting its proposed size standard. In 
order to properly evaluate each request for non-SBA size standards and 
approve the issuance of a final rule, the SBA shall also be provided 
with copies of all comments that relate to the establishment of the 
size standard, not just copies of all comments received on the proposed 
rule. The SBA has modified a provision of the proposed rule to specify 
that only comments related to the size standard need to be provided to 
the SBA as part of its review of an agency final rule.
    Another commenter recommended modifying the requirement to provide 
the SBA with a copy of the final rule prior to approval by the SBA's 
Administrator. To expedite the SBA's review of the size standard at 
this stage of the rulemaking process, the commenter recommended that 
agencies be allowed to submit the intended size standard with an 
accompanying justification. The SBA agrees, and has modified this 
provision of the proposed rule. When possible, the requesting agency 
should submit a draft final rule and preamble. However, correspondence 
containing a justification for the intended size standard is 
acceptable, provided the agency furnishes the SBA a copy of the final 
rule and its preamble before submitting it for publication in the 
Federal Register.
    Clarify ``Other Factors'' Considered by the SBA Administrator: 
Several commenters requested clarification on the information the SBA 
believes it should review when complying with the requirement to 
``consider other factors the Administrator deems to be relevant.'' When 
establishing or approving size standards, the SBA Administrator is 
required to ensure that size standards vary by industry to the extent 
necessary to reflect industry differences and to consider other 
relevant factors. The SBA generally evaluates the structural 
characteristics of an industry to determine the appropriate differences 
between industry size standards. These characteristics include, but are 
not limited to: average firm size, industry competition, the extent of 
industry dominance by large firms, the distribution of sales and 
employees by firm size, and start-up costs. Other relevant factors 
generally pertain to all other types of information that could 
influence the decision on the size standard. Although this may vary for 
each request, several important factors would include the goals and 
objectives of the program, the impact of the size standard on small 
businesses, conventional industry business practices, and the 
administration and application of size standard requirements.
    Timeliness of SBA Decisions on Approval Process: Several commenters 
were concerned about the timeliness of the SBA approval process and 
what impact it might have on rulemaking. The SBA shares this concern 
and will make every effort to ensure that the regulatory process is not 
delayed. However, the SBA believes specifying a time frame for these 
reviews is impractical. Each request will likely have different 
implications. That makes estimating within this rule a definite 
completion date for a review inappropriate. The SBA will, as a matter 
of policy, respond to requests for non-SBA size standards within 30 
days. Where the SBA cannot respond within 30 days, the agency will 
advise the requester as soon as possible.
    SBA Reviews and Legislation Providing Authority to Establish Size 
Standard: One comment questioned the need for an agency to request the 
SBA's approval for a non-SBA size standard if the enabling legislation 
for a particular program specifically authorized the agency to 
establish a size standard without specifying a size standard.
    The SBA believes that if the enabling legislation does not 
designate the size standard, the department or agency would be required 
to follow the approval procedures specified in the Small Business Act 
and these regulations. Only in instances in which legislation 
specifically establishes a size standard would an agency or department 
be exempted from these procedures.
    Section 121.1504 would be redesignated as Sec. 121.903, and 
reworded in plain English.
    Section 121.1601 would be redesignated as Sec. 121.1001 and 
reworded for clarity. The section would be revised to reflect the new 
names of offices under SBA's reorganization. References to the Agency's 
regional offices would be changed to the offices of SBA Government 
Contracting Area Director or SBA District Director, as appropriate. 
Reference to any inactive assistance program would be deleted. In 
addition, proposed Sec. 121.1001(b)(1)(iv) would be amended by 
expanding the first sentence to clarify existing policy. The 
regulations currently state that a large business may initiate a size 
protest as an interested party if only one offer was received. This 
change would clarify that this does not include a concern that is found 
to be other than small for a particular procurement protesting the size 
of the only remaining offeror.
    Proposed Sec. 121.1001(b)(5) (present Sec. 121.1601(a)(5)) would be 
amended to clarify that SBA will make size determinations when a 
procurement is unrestricted, and that the Office of Hearings and 
Appeals (OHA) will issue decisions on size appeals and Standard 
Industrial Classification (SIC) code appeals on unrestricted 
procurements. This change is necessary because OHA has issued decisions 
in the past that the SBA regional offices have no jurisdiction to make 
size determinations when a procurement is unrestricted, and that OHA 
has no jurisdiction over size appeals or SIC Code appeals when a 
procurement is unrestricted. SBA disagrees with OHA's interpretation of 
the existing regulations, and therefore proposes to clarify the 
regulations. OHA has said that small business status is beneficial only 
for small business set-aside contracts. This is not true. Small 
business status is beneficial in unrestricted procurements as well for 
the following reasons, among others:
    1. Small Businesses receive the contract award in the case of a tie 
bid with a large business.
    2. Small businesses are eligible to apply for a Certificate of 
Competency when a contracting officer makes a determination of non-
responsibility.
    3. Small businesses are exempt from the Cost Accounting Standards.
    4. Small businesses may receive accelerated progress payments.
    5. Small businesses are exempt from submitting subcontracting 
plans.

In the January 1, 1990, revision to 13 CFR Part 121, SBA attempted to 
clarify this issue by providing the example of the tie bids and the 
Certificate of Competency eligibility. It was not SBA's intention to 
limit size determinations and size appeals to just those two examples 
when a procurement is unrestricted. However, after publication of the 
revised regulations, OHA ruled that it would not make a decision on a 
size determination appeal unless there were tie bids or the contracting 
officer made a determination of non-responsibility. There are many 
benefits to being a small business in unrestricted procurements. It is 
SBA's policy to make size determinations when a 

[[Page 57993]]
protest is received on any unrestricted procurement, regardless of 
whether there is an apparent benefit at the time the protest is 
received. Additionally, SBA is attempting to clarify that OHA has 
jurisdiction to issue decisions concerning SIC appeals on unrestricted 
procurements. Currently, a concern has no recourse when a contracting 
officer issues an unrestricted solicitation with an incorrect SIC Code.
    The revised Sec. 121.1001 would be further amended to use the term 
``headquarters'' in lieu of the term ``principal office'' in referring 
to a concern's primary headquarters. SBA believes the term 
``headquarters'' more accurately describes the location where a firm's 
business or corporate records are maintained and business decisions are 
made.
    Section 121.1602 would be redesignated as Sec. 121.1002, rewritten 
for clarity, and amended to provide for changes in offices responsible 
for making formal size determinations as a result of the Agency's 
reorganization. The Government Contracting Area Director would assume 
the responsibilities formerly held by SBA regional administrators for 
making size determinations. The term ``headquarters'' would be used 
instead of ``principal offices'' when describing the primary location 
of a concern's executive office.
    Section 121.1603 would be broken out into proposed Secs. 121.1003 
through 121.1006 for ease of use and clarity. Individual sections would 
be created relating to where a protest should be filed, what time 
limits apply to size protests, how a protest must be filed with the 
contracting officer, and referral of a size protest to the appropriate 
SBA Government Contracting Area Office.
    Proposed Sec. 121.1004 would clarify that although a protest filed 
by a contracting officer is timely whether filed before or after award, 
such a protest will be dismissed by SBA as premature if filed before 
the selection of the apparent successful offeror. This change would 
prohibit a contracting officer from protesting the size of several 
concerns at once (e.g., all firms found to be in the competitive range) 
and would authorize a protest only after the apparent successful 
offeror has been selected.
    Section 121.1604(a) and (b) would be redesignated as 
Sec. 121.1007(b) and (c), reworded for clarity, and the examples 
deleted. A portion of present Sec. 121.1601(a)(1)(iv) would be added to 
proposed Sec. 121.1007 as subsection (a) for the purpose of clarifying 
that a protest not pertaining to a particular procurement or sale would 
not be acted upon by SBA. Subsection (c) which pertains to appeals of 
dismissals would be eliminated as unnecessary in this section 
addressing size determinations.
    Section 121.1605 would be redesignated as Sec. 121.1008 and would 
be reworded for clarity and user ease. In addition, the revised 
Sec. 121.1008(a) would be amended to allow any overnight mail delivery 
service that provides proof of receipt to be used in the size 
determination process. This change is necessary in order that size 
determinations may be made in a timely manner.
    Section 121.1606 would be redesignated as Sec. 121.1009. Its 
provisions would be reworded for clarity. The revision would permit use 
of any overnight mail delivery service that provides proof of receipt 
to be used in the size determination process. The change would assist 
SBA in making size determinations in a timely manner. Paragraph (g)(3) 
would be further amended to provide that a concern which had self 
certified as small on a pending procurement or assistance application 
would have to provide notice of any adverse size determination to 
officials responsible for the pending procurement or assistance 
request. Subsection (h) would be added to permit the SBA office that 
performed a formal size determination to reopen that determination in 
the limited instance where the size determination contains clear 
administrative error or a clear mistake of fact, provided that no 
appeal has been taken to OHA and that no contract has been awarded. 
This provision would permit SBA to correct the error or mistake without 
requiring the filing of an appeal at OHA.
    Section 121.1607 would be redesignated as Sec. 121.1010. The 
proposed provision would be reworded for ease of use and clarity.
    Section 121.1701 would be amended and the substance of subsections 
(a) and (b) redesignated as Sec. 121.1101 and Sec. 121.1103, 
respectively. Proposed Sec. 121.1101 would materially alter the right 
of a party adversely affected by a size determination to appeal the 
adverse determination to OHA and further provide that OHA has the 
unfettered discretion to select and review formal size determinations. 
There would no longer be a right to appeal a size determination. SBA 
believes that this amended procedure will simplify and speed the final 
consideration of size status issues. Unless a petition for review is 
accepted by OHA, the size determinations made by Government Contracting 
offices and disaster area offices would be final Agency decisions and 
would end the size determination process. Under the revised procedures, 
the procurement process generally would not be delayed because of size 
determination appeals to OHA. OHA could elect to consider any size 
determination appeal request.
    Section 121.1702 has been eliminated. Part of proposed 
Sec. 121.1101 simply references procedures for discretionary OHA 
reviews as contained in part 134.
    Section 121.1703(a) would be incorporated into Sec. 121.1101. 
Sections 121.1703 (b) and (c) would be incorporated into 
Secs. 121.1103, and 121.1703(d) would be eliminated.
    Section 121.1704 would be incorporated into Sec. 121.1103. The 
revised section would address procedures for appealing SIC code 
designations. The revision would provide that appeal procedures would 
be those outlined in FAR 19-303.
    Sections 121.1705 through 121.1722 would be eliminated and their 
substance transferred to part 134.
    Sections 121.2001 through 121.2005 would be redesignated as 
Secs. 121.1201 through 121.1206. The sections would be revised to 
reflect better clarity and organizational content. The substance of 
these provisions would remain substantially unaffected. Minor editorial 
changes would be made, for example, to eliminate outdated information 
such as procurement funding levels for prior years. The content of the 
current Sec. 121.2004 would be rearranged in a more logical sequence. 
Where organizational titles have changed, the revisions would adopt the 
new titles.
    Sections 121.2101 through 121.2104 would be redesignated as 
Secs. 121.1301-121.1304, respectively, Sec. 121.2105 would be 
incorporated into proposed Sec. 121.1304, and Sec. 121.2106 would be 
redesignated as Sec. 121.1305. Minor editorial changes pertaining to 
class waivers would be made for ease of reading and use.
    In addition, SBA is proposing to incorporate in these sections 
procedural rules pertaining to individual waivers of the 
Nonmanufacturer Rule for specific solicitations. On November 15, 1988, 
the enactment of Public Law 100-656 incorporated into the Small 
Business Act the previously existing SBA requirement that recipients of 
small business set-asides or SBA 8(a) subcontracts for manufactured 
products that are not the actual manufacturers (nonmanufacturers) be 
themselves small business regular dealers. This legislation specifies 
that regular dealers may provide only the product of domestic small 
business manufacturers or processors on small business set-asides and 
8(a) procurements. This requirement is commonly known as the 

[[Page 57994]]
Nonmanufacturer Rule. Section 303(h) of Public Law 100-656 authorized 
the Administrator of the SBA to grant a waiver of the Nonmanufacturer 
Rule for a product or class of products for which there are no small 
business manufacturers or processors in the Federal market. The 
requirement that a small business supplier provide a product 
manufactured or processed by a small business concern in the U.S. under 
a contract set-aside for small business or under an SBA 8(a) 
subcontract is found in SBA regulations at Secs. 121.406(b). On June 
15, 1989, Public Law 101-37 renumbered the elements in the 
Nonmanufacturer Rule and added the requirement that a small business 
concern must meet the numerical size standard for the Standard 
Industrial Classification code assigned to the contract solicitation on 
which the offer is being made. Further, on November 15, 1990, Public 
Law 101-574 modified the wording of the waiver provision. The new 
wording allowed the Administrator of the SBA to waive the requirement 
for any product or class of products for which there is no small 
business manufacturer or processor ``available to participate in the 
Federal procurement market.'' The law also added a provision which 
allows the Administrator to waive the requirements of the 
Nonmanufacturer Rule after receiving a determination by the contracting 
officer stating that no small business manufacturer or processor can 
reasonably be expected to offer a product meeting the specification, 
including period of performance, required of an offeror on a 
solicitation.
    On September 21, 1993, SBA published in the Federal Register 
proposed procedural rules for individual waivers of the Nonmanufacturer 
Rule. SBA received two sets of comments in response to the proposed 
rule. Due to the passage of time since the proposed rule was originally 
published, SBA is not issuing final regulations pertaining to 
individual waivers but is again proposing revised regulations taking 
into account the comments received. The first commenter was the United 
States Department of the Interior, Geological Survey (DOI). Its first 
comment was a request to include in the regulations a definition of 
``nonmanufacturing.'' Since this term is not used in the proposed 
regulations, a definition is unnecessary.
    DOI's second comment was a request to clarify the language of the 
regulation by shortening word and sentence lengths. SBA reviewed the 
regulation and, where possible, reduced the length of the sentences and 
the size of the words.
    The second commenter was a small business wholesaler who submitted 
four comments. The first comment was that SBA should review and grant 
class waivers for individual items. The statute authorizing waivers 
does permit class waivers for products for which there are no small 
business manufacturers available to participate in the Federal 
procurement market and current SBA regulations already address this. 
Consequently, no action on the comment is necessary.
    The small business wholesaler's second comment was that a SBA 
Business Opportunity Specialist should be allowed to request waivers 
for individual procurements. Waivers for individual procurements are 
routinely granted for both small business set-asides and SBA 8(a) 
subcontracts. SBA believes that the best procedure to maintain 
administrative consistency is to allow only the procuring agencies' 
contracting officers to request individual waivers for both set-asides 
and 8(a) awards. We believe that the procuring agency contracting 
officer ultimately responsible for contract award is the most qualified 
individual to determine whether small business products are available 
and/or meet the specifications of a particular solicitation.
    The small business wholesaler's third comment was that SBA state 
procurement center representatives should be allowed to request 
individual waivers of the Nonmanufacturer Rule. Public Law 101-574, 
Section 210, is explicit in its language allowing only contracting 
officers to request individual waivers. Therefore, SBA has no authority 
to allow anyone other than contracting officers to request individual 
waivers of the Nonmanufacturer Rule.
    The fourth comment by the small business wholesaler was that SBA 
8(a) subcontractors should be allowed to request individual waivers of 
the Nonmanufacturer Rule. As with the commenter's third comment, Public 
Law 101-574, Section 210, is explicit in its language allowing only 
contracting officers to request individual waivers.

Compliance With Executive Orders 12612, 12778, and 12866, the 
Regulatory Flexibility Act (5 U.S.C. 601, et seq.), and the Paperwork 
Reduction Act (44 U.S.C. Ch. 35)

    SBA certifies that this proposed rule would not be considered a 
significant rule within the meaning of Executive Order 12866 and would 
not have a significant economic impact on a substantial number of small 
entities within the meaning of the Regulatory Flexibility Act, 5 U.S.C. 
601, et seq. This rule is would clarify SBA's procedural and 
definitional size rules, but would not change the size standard for any 
particular industry. As such, size eligibility for the various SBA 
programs should not be affected by this proposal. The rule would have 
no effect on the amount or dollar value of any Federal contract 
requirements or of any financial assistance provided through SBA. 
Therefore, it is not likely to have an annual economic effect of $100 
million or more, result in a major increase in costs or prices, or have 
a significant adverse effect on competition or the United States 
economy.
    For purposes of the Paperwork Reduction Act, 44 U.S.C. Ch. 35, SBA 
certifies that this proposed rule, if adopted in final form, would 
contain no new reporting or recordkeeping requirements.
    For purposes of Executive Order 12612, SBA certifies that this rule 
would not have any federalism implications warranting the preparation 
of a Federalism Assessment.
    For purposes of Executive Order 12778, SBA certifies that this rule 
is drafted, to the extent practicable, in accordance with the standards 
set forth in Section 2 of that Order.

List of Subjects in 13 CFR Part 121

    Government procurement, Government property, Grant programs--
business, Individuals with disabilities, Loan programs--business, 
Reporting and recordkeeping requirements, Small businesses.

    Accordingly, pursuant to the authority set forth in sections 3(a) 
and 5(b)(6) of the Small Business Act, 15 U.S.C. 632(a) and 634(b)(6), 
SBA hereby proposes to revise part 121 of Title 13, Code of Federal 
Regulations (CFR), to read as follows:

PART 121--SMALL BUSINESS SIZE REGULATIONS

Subpart A--Size Eligibility Provisions and Standards

Provisions of General Applicability

Sec.
121.101  What are SBA size standards?
121.102  How does SBA establish size standards?
121.103  What is affiliation?
121.104  How does SBA calculate annual receipts?
121.105  How does SBA define ``business concern or concern''?
121.106  How does SBA calculate number of employees?
121.107  How does SBA determine a concern's ``primary industry''? 

[[Page 57995]]

121.108  What are the penalties for misrepresentation of size 
status?

Size Standards Used To Define Small Business Concerns

6121.201  What size standards has SBA identified by Standard Industrial 
Classification codes?

Size Eligibility Requirements for SBA Financial Assistance

6121.301  What size standards are applicable to financial assistance 
programs?
6121.302  When does SBA determine the size status of an applicant?
6121.303  What size procedures are used by SBA before it makes a formal 
size determination?
6121.304  What are the size requirements for refinancing an existing 
SBA loan?
6121.305  What size eligibility requirements exist for obtaining 
business loans relating to particular procurements?

Size Eligibility Requirements for Government Procurement

6121.401  What procurement programs are subject to size determinations?
6121.402  What size standards are applicable to procurement assistance 
programs?
6121.403  Are SBA size determinations and SIC code designations binding 
on parties?
6121.404  When does SBA determine the size status of a business 
concern?
6121.405  May a business concern self-certify its small business size 
status?
6121.406  How does a small business concern qualify to provide 
manufactured products under small business set-aside or MED 
procurements?
6121.407  What are the size procedures for multiple item procurements?
6121.408  What are the size procedures for SBA's Certificate of 
Competency Program?
6121.409  What size standard applies in an unrestricted procurement for 
Certificate of Competency purposes?
6121.410  What are the size standards for SBA's Section 8(d) 
Subcontracting Program?
6121.411  What are the size procedures for SBA's Section 8(d) 
Subcontracting Program?
6121.412  What are the size procedures for partial small business set-
asides?

Size Eligibility Requirements for Sales or Lease Of Government Property

6121.501  What programs for sales or leases of Government property are 
subject to size determinations?
6121.502  What size standards are applicable to programs for sales or 
leases of Government property?
6121.503  Are SBA size determinations binding on parties?
6121.504  When does SBA determine the size status of a business 
concern?
6121.505  What is the effect of a self-certification?
6121.506  What definitions are important for sales or leases of 
Government-owned timber?
6121.507  What are the size standards and other requirements for the 
purchase of Government-owned timber (other than Special Salvage 
timber)?
6121.508  What are the size standards and other requirements for the 
purchase of Government-owned Special Salvage Timber?
6121.509  What is the size standard for leasing of Government land for 
coal mining?
6121.510  What is the size standard for leasing of Government land for 
uranium mining?
6121.511  What is the size standard for buying Government-owned 
petroleum?
6121.512  What is the size standard for stockpile purchases?

Size Eligibility Requirements for the Minority Enterprise Development 
(MED) Program

6121.601  What is a small business for purposes of admission to SBA's 
Minority Enterprise Development (MED) Program?
6121.602  At what point in time must a MED applicant be small?
6121.603  How does SBA determine whether a Participant is small for a 
particular MED subcontract?
6121.604  Are MED Participants considered small for purposes of other 
SBA assistance?

Size Eligibility Requirements for the Small Business Innovation 
Research (SBIR) Program

6121.701  What SBIR programs are subject to size determinations?
6121.702  What size standards are applicable to SBIR programs?
6121.703  Are formal size determinations binding on parties?
6121.704  When does SBA determine the size status of a business 
concern?
6121.705  Must a business concern self-certify its size status?

Size Eligibility Requirements for Paying Reduced Patent Fees

6121.801  May patent fees be reduced if a concern is small?
6121.802  What size standards are applicable to reduced patent fees 
program?
121.803  Are formal size determinations binding on parties?
121.804  When does SBA determine the size status of a business 
concern?
121.805  May a business concern self-certify its size status?

Size Eligibility Requirements for Compliance With Programs of Other 
Agencies

121.901  Can other Government agencies obtain SBA size 
determinations?
121.902  What size standards are applicable to programs of other 
agencies?
121.903  When does SBA determine the size status of a business 
concern?

Procedures for Size Protests and Requests for Formal Size 
Determinations

121.1001  Who may initiate a size protest or a request for formal 
size determination?
121.1002  Who makes a formal size determination?
121.1003  Where should a size protest be filed?
121.1004  What time limits apply to size protests?
121.1005  How must a protest be filed with the contracting officer?
121.1006  When will a size protest be referred to an SBA Government 
Contracting Area Office?
121.1007  Must a protest of size status relate to a particular 
procurement and be specific?
121.1008  What happens after SBA receives a protest or a request for 
a formal size determination?
121.1009  What are the procedures for making the size determination?
121.1010  How does a concern become recertified as a small business?

Appeals of Size Determinations and SIC Code Designations

121.1101  Are formal size determinations subject to appeal?
121.1102  Are SIC code designations subject to appeal?
121.1103  What are the procedures for appealing a SIC code 
designation?
121.1104  What are the time limits for appeals?

Subpart B--Other Eligibility Provisions

Eligibility of Organizations for the Handicapped for Small Business 
Set-asides

121.1201  May handicapped organizations be awarded Federal 
procurements set aside for small business?
121.1202  What is an organization for the handicapped?
121.1203  Who are handicapped individuals?
121.1204  What are the eligibility requirements for organizations 
for the handicapped to receive awards of contracts set aside for 
small business?
121.1205  What are the procedures for filing protests of the status 
of handicapped organizations?
121.1206  How does SBA handle appeals of economic impact?

Waivers of the Nonmanufacturer Rule for Classes of Products

121.1301  What is the Nonmanufacturer Rule?
121.1302  When will a waiver of the Nonmanufacturer Rule be granted 
for a class of products?
121.1303  When will a waiver of the Nonmanufacturer Rule be granted 
for an individual contract? 

[[Page 57996]]

121.1304  What are the procedures for requesting and granting 
waivers?
121.1305  How is a list of previously granted class waivers 
obtained?

    Authority: 15 U.S.C. 632(a), 634(b)(6), 637(a) and 644(c); and 
Pub. L. 102-486, 106 Stat. 2776, 3133.

Provisions of General Applicability


Sec. 121.101  What are SBA size standards?

    SBA's size standards define whether a business entity is small and, 
thus, eligible for Government programs and preferences reserved for 
``small business'' concerns. Size standards have been established for 
types of economic activity, or industry, generally under the Standard 
Industrial Classification (SIC) System. The SIC System is described in 
the ``Standard Industrial Classification Manual'' published by the 
Office of Management and Budget, Executive Office of the President, and 
sold by the U.S. Government Printing Office, Superintendent of 
Documents, P.O. Box 371954, Pittsburgh, PA 15250-7954. The SIC System 
assigns four-digit SIC codes to all economic activity within ten major 
divisions. Section 121.201 describes the size standards now 
established. A full table matching a size standard with each four-digit 
SIC code is also published annually by SBA in the Federal Register.


Sec. 121.102  How does SBA establish size standards?

    (a) SBA considers economic characteristics comprising the structure 
of an industry, including degree of competition, average firm size, 
start-up costs and entry barriers, and distribution of firms by size. 
It also considers technological changes, competition from other 
industries, growth trends, historical activity within an industry, 
unique factors occurring in the industry which may distinguish small 
firms from other firms, and the objectives of its programs and the 
impact on those programs of different size standard levels.
    (b) As part of its review of a size standard, SBA will investigate 
if any concern at or below a particular standard would be dominant in 
the industry. SBA will take into consideration market share of a 
concern and other appropriate factors which may allow a concern to 
exercise a major controlling influence on a national basis in which a 
number of business concerns are engaged. Size standards seek to ensure 
that a concern that meets a specific size standard is not dominant in 
its field of operation.
    (c) Please address any requests to change existing size standards 
or establish new ones for emerging industries to the Assistant 
Administrator for Size Standards, Small Business Administration, 409 
3rd Street, S.W., Washington, D.C. 20416.


Sec. 121.103  What is affiliation?

    (a) General Principles of Affiliation. (1) Concerns are affiliates 
of each other when one concern controls or has the power to control the 
other, or a third party or parties controls or has the power to control 
both.
    (2) SBA considers factors such as ownership, management, and 
contractual relationships, in determining whether affiliation exists.
    (3) Individuals or firms that have identical or substantially 
identical business or economic interests, such as family members, 
persons with common investments, or firms that are economically 
dependent through contractual or other relationships, may be treated as 
one party with such interests aggregated.
    (4) SBA counts the receipts or employees of the concern whose size 
is at issue and those of all its domestic and foreign affiliates, 
regardless of whether the affiliates are organized for profit, in 
determining the concern's size.
    (b) Exclusion from affiliation coverage. (1) Business concerns 
owned in whole or substantial part by investment companies licensed, or 
development companies qualifying, under the Small Business Investment 
Act of 1958, as amended, or by Investment Companies registered under 
the Investment Company Act of 1940, as amended, are not considered 
affiliates of such investment companies or development companies.
    (2) Business concerns owned and controlled by Indian Tribes, Alaska 
Regional or Village Corporations organized pursuant to the Alaska 
Native Claims Settlement Act (43 U.S.C. 1601), Native Hawaiian 
Organizations, or Community Development Corporations authorized by 42 
U.S.C. 9805 are not considered affiliates of such entities, or with 
other concerns owned by these entities solely because of their common 
ownership.
    (3) Business concerns which are part of a SBA approved pool of 
concerns for a joint program of research and development as authorized 
by the Small Business Act are not affiliates of one another because of 
the pool.
    (4) Business concerns which lease employees from concerns primarily 
engaged in leasing employees to other businesses are not affiliated 
with the leasing company solely on the basis of a leasing agreement.
    (5) For financial, management, or technical assistance under the 
Small Business Investment Company program, an applicant concern will 
not be affiliated with the following investors, provided the investors 
do not control the concern other than to the extent that would be 
permitted under Sec. 107.865 of this chapter:
    (i) Venture capital operating companies as defined in the U.S. 
Department of Labor Regulations found at 29 CFR 2510.3-101(d);
    (ii) Employee benefit or pension plans established and maintained 
by the Federal government or by any state, their political 
subdivisions, or any agency or instrumentality thereof for the benefit 
of employees;
    (iii) Employee benefit or pension plans within the meaning of the 
Employee Retirement Income Security Act of 1974; or
    (iv) Charitable trusts, foundations, endowments, or similar 
organizations exempt from Federal income taxation under Section 501(c) 
of the Internal Revenue Code of 1986.
    (6) A protege firm is not an affiliate of a mentor firm solely 
because the protege firm receives assistance from the mentor firm under 
Federal Mentor-Protege programs.
    (c) Affiliation based on stock ownership. (1) A person is an 
affiliate of a concern if the person owns or controls, or has the power 
to control 50 percent or more of its voting stock, or a block of stock 
which affords control because it is large compared to other outstanding 
blocks of stock.
    (2) If two or more persons each owns, controls or has the power to 
control less than 50 percent of the voting stock of a concern, with 
minority holdings that are equal or approximately equal in size, but 
the aggregate of these minority holdings is large as compared with any 
other stock holding, each such person is presumed to be an affiliate of 
the concern.
    (d) Affiliation arising under stock options, convertible 
debentures, and agreements to merge. Since stock options, convertible 
debentures, and agreements to merge (including agreements in principle) 
affect the power to control a concern, SBA treats them as though the 
rights granted have been exercised (except that an affiliate cannot use 
them to appear to terminate control over another concern before it 
actually does so). SBA gives present effect to an agreement to merge or 
sell stock whether such agreement is unconditional, conditional, or 
finalized but unexecuted. Agreements to open or continue negotiations 
towards the possibility of a merger or a sale of stock at some later 
date are not considered 

[[Page 57997]]
``agreements in principle'' and, thus, are not given present effect.
    (e) Affiliation based on common management. Affiliation arises 
where one or more officers, directors or general partners controls the 
board of directors and/or the management of another concern.
    (f) Affiliation based on joint venture arrangements. (1) Parties to 
a joint venture are affiliates if any one of them seeks SBA financial 
assistance for use in connection with the joint venture.
    (2) Concerns bidding on a particular procurement or property sale 
as joint venturers are affiliated with each other with regard to 
performance of that contract.
    (3) A contractor and subcontractor are treated as joint venturers 
if the ostensible subcontractor will perform primary and vital 
requirements of a contract or if the prime contractor is unusually 
reliant upon the ostensible subcontractor. All requirements of the 
contract are considered in reviewing such relationship, including 
contract management, technical responsibilities, and the percentage of 
subcontracted work.
    (4) For size purposes, a concern must include in its revenues its 
proportionate share of joint venture receipts.
    (g) Affiliation based on franchise and license agreements. The 
restraints imposed on a franchisee or licensee by its franchise or 
license agreement relating to standardized quality, advertising, 
accounting format and other similar provisions, generally will not be 
considered in determining whether the franchisor or licensor is 
affiliated with the franchisee or licensee provided the latter has the 
right to profit from its efforts and bears the risk of loss 
commensurate with ownership. Affiliation may arise, however, through 
other means, such as common ownership, common management or excessive 
restrictions upon the sale of the franchise interest.


Sec. 121.104  How does SBA calculate annual receipts?

    (a) Definitions. In determining annual receipts of a concern:
    (1) Receipts is defined as gross or total income, plus cost of 
goods sold, as reported on a concern's Federal Income Tax return. 
However, the term receipts excludes net capital gains or losses, taxes 
collected for and remitted to a taxing authority if included in gross 
or total income, proceeds from the transactions between a concern and 
its domestic or foreign affiliates (if also excluded from gross or 
total income on a consolidated return filed with the IRS), and amounts 
collected for another by a travel agent, real estate agent, advertising 
agent, or conference management service provider.
    (2) Completed fiscal year means a taxable year including any short 
period. Taxable year and short period have the meaning attributed to 
them by the IRS.
    (3) Unless otherwise defined in this section, all terms shall have 
the meaning attributed to them by the IRS.
    (b) Period of measurement. (1) Annual receipts of a concern which 
has been in business for 3 or more completed fiscal years means the 
receipts of the concern over its last 3 completed fiscal years divided 
by three.
    (2) Annual receipts of a concern which has been in business for 
less than 3 complete fiscal years means the receipts for the period the 
concern has been in business divided by the number of weeks in 
business, multiplied by 52.
    (3) Annual receipts of a concern which has been in business 3 or 
more complete fiscal years but has a short year as one of those years 
means the receipts for the short year and the two full fiscal years 
divided by the number of weeks in the short year and the two full 
fiscal years, multiplied by 52.
    (c) Use of information other than the Federal tax return. Where 
other information gives SBA reason to regard Federal Income Tax returns 
as false, SBA may base its size determination on such other 
information.
    (d) Annual receipts of affiliates. (1) If a concern has acquired an 
affiliate or been acquired as an affiliate during the applicable 
averaging period or before small business self-certification, the 
annual receipts in determining size status include the receipts of both 
firms. Furthermore, this aggregation applies for the entire applicable 
period used in computing size rather than only for the period after the 
affiliation arose. Receipts are determined for the concern and its 
affiliates in accordance with paragraph (b) of this section even though 
this may result in different periods being used to calculate annual 
receipts.
    (2) The annual receipts of a former affiliate are not included as 
annual receipts if affiliation ceased before the date used for 
determining size. This exclusion of annual receipts of a former 
affiliate applies during the entire period used in computing size, 
rather than only for the period after which the affiliation ceased.


Sec. 121.105  How does SBA define ``business concern or concern''?

    (a) A business concern eligible for assistance from SBA as a small 
business is a business entity organized for profit, with a place of 
business located in the United States, and which operates primarily 
within the United States or which makes a significant contribution to 
the U.S. economy through payment of taxes or use of American products, 
materials or labor.
    (b) A business concern may be in the legal form of an individual 
proprietorship, partnership, limited liability company, corporation, 
joint venture, association, trust or cooperative, except that where the 
form is a joint venture there can be no more than 49 percent 
participation by foreign business entities in the joint venture.
    (c) A firm will not be treated as a separate business concern if a 
substantial portion of its assets and/or liabilities are the same as 
those of a predecessor entity. In such a case, the annual receipts and 
employees of the predecessor will be taken into account in determining 
size.


Sec. 121.106  How does SBA calculate number of employees?

    (a) Employees counted in determining size include all individuals 
employed on a full-time, part-time, temporary, or other basis. SBA will 
consider the totality of the circumstances, including factors relevant 
for tax purposes, in determining whether individuals are employees of 
the concern in question.
    (b) Where the size standard is number of employees, the method for 
determining a concern's size includes the following principles:
    (1) The average number of employees of the concern is used 
(including the employees of its domestic and foreign affiliates) based 
upon numbers of employees for each of the pay periods for the preceding 
completed 12 calendar months.
    (2) Part-time and temporary employees are counted the same as full-
time employees.
    (3) If a concern has not been in business for 12 months, the 
average number of employees is used for each of the pay periods during 
which it has been in business.
    (4) The treatment of employees of former affiliates or recently 
acquired affiliates is the same as for size determinations using annual 
receipts in Sec. 121.104(d).


Sec. 121.107  How does SBA determine a concern's ``primary industry''?

    In determining the primary industry in which a concern or a concern 
combined with its affiliates is engaged, SBA considers the distribution 
of receipts, employees and costs of doing business among the different 
industries in which business operations occurred for the most recently 
completed fiscal 

[[Page 57998]]
year. SBA may also consider other factors, such as the distribution of 
patents, contract awards, and assets.


Sec. 121.108  What are the penalties for misrepresentation of size 
status?

    In addition to other laws which may be applicable, section 16(d) of 
the Small Business Act, 15 U.S.C. 645(d), provides severe criminal 
penalties for knowingly misrepresenting the small business size status 
of a concern in connection with procurement programs. Section 16(a) of 
the Act also provides, in part, for criminal penalties for knowingly 
making false statements or misrepresentations to SBA for the purpose of 
influencing in any way the actions of the Agency.

Size Standards Used to Define Small Business Concerns


Sec. 121.201  What size standards has SBA identified by Standard 
Industrial Classification codes?

    The size standards described in this section apply to all SBA 
programs unless otherwise specified. The number of employees or annual 
receipts indicates the maximum allowed for a concern and its affiliates 
to be considered small. The following is a listing of size standards 
for industries under the SIC System. Size standards are listed by 
Division and apply to all industries in that Division except those 
specifically listed with separate size standards.

                     Size Standards by SIC Industry                     
------------------------------------------------------------------------
                                                    Size standards in   
            SIC code and description              number of employees or
                                                   millions of dollars  
------------------------------------------------------------------------
                        DIVISION A--AGRICULTURE                         
                                                                        
------------------------------------------------------------------------
MAJOR GROUP 01--AGRICULTURAL PRODUCTION-CROPS..  0.5                    
MAJOR GROUPS 02--LIVESTOCK AND ANIMAL            0.5                    
 SPECIALTIES.                                                           
EXCEPT:                                                                 
    0211  Beef Cattle Feedlots (Custom)........  1.5                    
    0252  Chicken Eggs.........................  9.0                    
MAJOR GROUP 07--AGRICULTURAL SERVICES..........  5.0                    
MAJOR GROUP 08--FORESTRY.......................  5.0                    
MAJOR GROUP 09--FISHING, HUNTING, AND TRAPPING.  3.0                    
                                                                        
                           DIVISION B--MINING                           
                                                                        
------------------------------------------------------------------------
MAJOR GROUP 10--METAL MINING...................  500                    
MAJOR GROUP 12--COAL MINING....................  500                    
MAJOR GROUP 13--OIL AND GAS EXTRACTION AND       500                    
 MAJOR GROUP 14--MINING AND QUARRYING OF                                
 NONMETALLIC MINERALS, EXCEPT FUELS.                                    
EXCEPT:                                                                 
    1081  Metal Mining Services................  5.0                    
    1241  Coal Mining Services.................  5.0                    
    1382  Oil and Gas Field Exploration          5.0                    
     Services.                                                          
    1389  Oil and Gas Field Services, N.E.C....  5.0                    
                        DIVISION C--CONSTRUCTION                        
                                                                        
------------------------------------------------------------------------
MAJOR GROUP 15--GENERAL BUILDING CONTRACTORS...  17.0                   
MAJOR GROUP 16--HEAVY CONSTRUCTION, NON          17.0                   
 BUILDING.                                                              
EXCEPT:                                                                 
    1629 (Part)  Dredging and Surface Cleanup    13.5 \1\               
     Activities.                                                        
MAJOR GROUP 17--CONSTRUCTION--SPECIAL TRADE      7.0                    
 CONTRACTORS.                                                           
DIVISION D--MANUFACTURING \2\..................  500                    
EXCEPT:                                                                 
    2032  Canned Specialties...................  1,000                  
    2033  Canned Fruits, Vegetables, Preserves,  500 \3\                
     Jams and Jellies.                                                  
    2043  Cereal Breakfast Foods...............  1,000                  
    2046  Wet Corn Milling.....................  750                    
    2052  Cookies and Crackers.................  750                    
    2062  Cane Sugar Refining..................  750                    
    2063  Beet Sugar...........................  750                    
    2076  Vegetable Oil Mills, Except Corn,      1,000                  
     Cottonseed, and Soybean.                                           
    2079  Shortening, Table Oils, Margarine,     750                    
     and Other Edible Fats and Oils, N.E.C.                             
    2085  Distilled and Blended Liquors........  750                    
    2111  Cigarettes...........................  1,000                  
    2211  Broadwoven Fabric Mills, Cotton......  1,000                  
    2261  Finishers of Broadwoven Fabrics of     1,000                  
     Cotton.                                                            
    2295  Coated Fabrics, Not Rubberized.......  1,000                  
    2296  Tire Cord and Fabrics................  1,000                  
    2611  Pulp Mills...........................  750                    
    2621  Paper Mills..........................  750                    
    2631  Paperboard Mills.....................  750                    
    2656  Sanitary Food Containers, Except       750                    
     Folding.                                                           
    2657  Folding Paperboard Boxes, Including    750                    
     Sanitary.                                                          

[[Page 57999]]
                                                                        
    2812  Alkalies and Chlorine................  1,000                  
    2813  Industrial Gases.....................  1,000                  
    2816  Inorganic Pigments...................  1,000                  
    2819  Industrial Inorganic Chemicals, N.E.C  1,000                  
    2821  Plastics Materials, Synthetic Resins,  750                    
     and Nonvulcanizable Elastomers.                                    
    2822  Synthetic Rubber (Vulcanizable         1,000                  
     Elastomers).                                                       
    2823  Cellulosic Manmade Fibers............  1,000                  
    2824  Manmade Organic Fibers, Except         1,000                  
     Cellulosic.                                                        
    2833  Medicinal Chemicals and Botanical      750                    
     Products.                                                          
    2834  Pharmaceutical Preparations..........  750                    
    2841  Soap and Other Detergents, Except      750                    
     Specialty Cleaners.                                                
    2865  Cyclic Organic Crudes and              750                    
     Intermediates, and Organic Dyes and                                
     Pigments.                                                          
    2869  Industrial Organic Chemicals, N.E.C..  1,000                  
    2873  Nitrogenous Fertilizers..............  1,000                  
    2892  Explosives...........................  750                    
    2911  Petroleum Refining...................  1,500 \4\              
    2952  Asphalt Felts and Coatings...........  750                    
    3011  Tires and Inner Tubes................  1,000 \5\              
    3021  Rubber and Plastics Footwear.........  1,000                  
    3211  Flat Glass...........................  1,000                  
    3221  Glass Containers.....................  750                    
    3229  Pressed and Blown Glass and            750                    
     Glassware, N.E.C.                                                  
    3241  Cement, Hydraulic....................  750                    
    3261  Vitreous China Plumbing Fixtures and   750                    
     China and Earthenware Fittings and                                 
     Bathroom Accessories.                                              
    3275  Gypsum Products......................  1,000                  
    3292  Asbestos Products....................  750                    
    3296  Mineral Wool.........................  750                    
    3297  Nonclay Refractories.................  750                    
    3312  Steel Works, Blast Furnaces            1,000                  
     (Including Coke Ovens), and Rolling Mills.                         
    3313  Electrometallurgical Products, Except  750                    
     Steel.                                                             
    3315  Steel Wiredrawing and Steel Nails and  1,000                  
     Spikes.                                                            
    3316  Cold-Rolled Steel Sheet, Strip, and    1,000                  
     Bars.                                                              
    3317  Steel Pipe and Tubes.................  1,000                  
    3331  Primary Smelting and Refining of       1,000                  
     Copper.                                                            
    3334  Primary Production of Aluminum.......  1,000                  
    3339  Primary Smelting and Refining of       750                    
     Nonferrous Metals, Except Copper and                               
     Aluminum.                                                          
    3351  Rolling, Drawing, and Extruding of     750                    
     Copper.                                                            
    3353  Aluminum Sheet, Plate, and Foil......  750                    
    3354  Aluminum Extruded Products...........  750                    
    3355  Aluminum Rolling and Drawing, N.E.C..  750                    
    3356  Rolling, Drawing, and Extruding of     750                    
     Nonferrous Metals, Except Copper and                               
     Aluminum.                                                          
    3357  Drawing and Insulating of Nonferrous   1,000                  
     Wire.                                                              
    3398  Metal Heat Treating..................  750                    
    3399  Primary Metal Products, N.E.C........  750                    
    3411  Metal Cans...........................  1,000                  
    3431  Enameled Iron and Metal Sanitary Ware  750                    
    3482  Small Arms Ammunition................  1,000                  
    3483  Ammunition, Except for Small Arms....  1,500                  
    3484  Small Arms...........................  1,000                  
    3511  Steam, Gas, and Hydraulic Turbines,    1,000                  
     and Turbine Generator Set Units.                                   
    3519  Internal Combustion Engines, N.E.C...  1,000                  
    3531  Construction Machinery and Equipment.  750                    
    3537  Industrial Trucks, Tractors,           750                    
     Trailers, and Stackers.                                            
    3562  Ball and Roller Bearings.............  750                    
    3571  Electronic Computers.................  1,000                  
    3572  Computer Storage Devices.............  1,000                  
    3575  Computer Terminals...................  1,000                  
    3577  Computer Peripheral Equipment, N.E.C.  1,000                  
    3578  Calculating and Accounting Machines,   1,000                  
     Except Electronic Computers.                                       
    3585  Air-Conditioning and Warm Air Heating  750                    
     Equipment and Commercial and Industrial                            
     Refrigeration Equipment.                                           
    3612  Power, Distribution, and Speciality    750                    
     Transformers.                                                      
    3613  Switchgear and Switchboard Apparatus.  750                    
    3621  Motors and Generators................  1,000                  
    3624  Carbon and Graphite Products.........  750                    
    3625  Relays and Industrial Controls.......  750                    
    3631  Household Cooking Equipment..........  750                    
    3632  Household Refrigerators and Home and   1,000                  
     Farm Freezers.                                                     
    3633  Household Laundry Equipment..........  1,000                  

[[Page 58000]]
                                                                        
    3634  Electric Housewares and Fans.........  750                    
    3635  Household Vacuum Cleaners............  750                    
    3641  Electric Lamp Bulbs and Tubes........  1,000                  
    3651  Household Audio and Video Equipment..  750                    
    3652  Phonograph Records and Prerecorded     750                    
     Audio Tapes and Disks.                                             
    3661  Telephone and Telegraph Apparatus....  1,000                  
    3663  Radio and Television Broadcasting and  750                    
     Communications Equipment.                                          
    3669  Communications Equipment, N.E.C......  750                    
    3671  Electron Tubes.......................  750                    
    3692  Primary Batteries, Dry and Wet.......  1,000                  
    3694  Electrical Equipment for Internal      750                    
     Combustion Engines.                                                
    3695  Magnetic and Optical Recording Media.  1,000                  
    3699  Electrical Machinery, Equipment, and   750                    
     Supplies, N.E.C.                                                   
    3711  Motor Vehicles and Passenger Car       1,000                  
     Bodies.                                                            
    3714  Motor Vehicle Parts and Accessories..  750                    
    3716  Motor Homes..........................  1,000                  
    3721  Aircraft.............................  1,500                  
    3724  Aircraft Engines and Engine Parts....  1,000                  
    3728  Aircraft Parts and Auxiliary           1,000 \9\              
     Equipment, N.E.C.                                                  
    3731  Shipbuilding and Repair of Nuclear     1,000                  
     Propelled Ships.                                                   
        Shipbuilding of Nonnuclear Propelled     1,000                  
         Ships and Nonpropelled Ships.                                  
        Ship Repair (Including Overhauls and     1,000                  
         Conversions) Performed on Nonnuclear                           
         Propelled and Nonpropelled Ships East                          
         of the 108 Meridian.                                           
        Ships Repair (Including Overhauls and    1,000                  
         Conversion) Performed on Nonnuclear                            
         Propelled and Nonpropelled Ships West                          
         of the 108 Meridian.                                           
    3743  Railroad Equipment...................  1,000                  
    3761  Guided Missiles and Space Vehicles...  1,000                  
    3764  Guided Missile and Space Vehicle       1,000                  
     Propulsion Units and Propulsion Units                              
     Parts.                                                             
    3769  Guided Missiles and Space Vehicle      1,000                  
     Parts and Auxiliary Equipment, N.E.C.                              
    3795  Tanks and Tank Components............  1,000                  
    3812  Search, Detection, Navigation,         750                    
     Guidance, Aeronautical, and Nautical                               
     Systems and Instruments.                                           
    3996  Linoleum, Asphalted-Felt-Base, and     750                    
     Other Hard Surface Floor Coverings, N.E.C.                         
                                                                        
================================================                        
 DIVISION E--TRANSPORTATION, COMMUNICATIONS ELECTRIC, GAS, AND SANITARY 
                                SERVICES                                
                                                                        
------------------------------------------------------------------------
MAJOR GROUP 40--RAILROAD TRANSPORTATION........  1500                   
EXCEPT:                                                                 
    4013  Railroad Switching and Terminal        500                    
     Establishments.                                                    
MAJOR GROUP 41--LOCAL AND SUBURBAN TRANSIT AND   5.0                    
 INTERURBAN HIGHWAY AND PASSENGER                                       
 TRANSPORTATION.                                                        
MAJOR GROUP 42--MOTOR FREIGHT TRANSPORTATION     18.5                   
 AND WAREHOUSING.                                                       
EXCEPT:                                                                 
    4212 (Part)  Garbage and Refuse Collection,  6.0                    
     Without Disposal.                                                  
    4231  Terminal and Joint Terminal            5.0                    
     Maintenance Facilities for Motor Freight                           
     Transportation.                                                    
MAJOR GROUP 44--WATER TRANSPORTATION...........  500                    
EXCEPT:                                                                 
    4491  Marine Cargo Handling................  18.5                   
    4492  Towing and Tugboat Services..........  5.0                    
    4493  Marinas..............................  5.0                    
    4499  Water Transportation Services, N.E.C.  5.0                    
        Offshore Marine Water Transportation     20.5                   
         Services.                                                      
MAJOR GROUP 45--TRANSPORTATION BY AIR..........  1500                   
EXCEPT:                                                                 
    4522  Air Transportation, Nonscheduled.....  1500                   
        Offshore Marine Air Transportation       20.5                   
         Services.                                                      
    4581  Airports, Flying Fields, and Airport   5.0                    
     Terminal Services.                                                 
MAJOR GROUP 46--PIPELINES, EXCEPT NATURAL GAS..  1500                   
EXCEPT:                                                                 
    4619  Pipelines, N.E.C.....................  25.0                   
MAJOR GROUP 47--TRANSPORTATION SERVICES........  5.0                    
EXCEPT:                                                                 
    4724  Travel Agencies......................  1.0 \6\                
    4731  Arrangement of Transportation of       18.5                   
     Freight and Cargo.                                                 
    4783  Packing and Crating..................  18.5                   
MAJOR GROUP 48--COMMUNICATIONS:                                         
    4812  Radiotelephone Communications........  1,500                  
    4813  Telephone Communications, Except       1,500                  
     Radiotelephone.                                                    

[[Page 58001]]
                                                                        
    4822  Telegraph and Other Message            5.0                    
     Communications.                                                    
    4832  Radio Broadcasting Stations..........  5.0                    
    4833  Television Broadcasting Stations.....  10.5                   
    4841  Cable and Other Pay Television         11.0                   
     Services.                                                          
    4899  Communications Services, N.E.C.......  11.0                   
MAJOR GROUP 49--ELECTRIC, GAS, AND SANITARY      5.0                    
 SERVICES.                                                              
EXCEPT:                                                                 
    4911  Electric Services....................  4 million megawatt hrs.
    4924  Natural Gas Distribution.............  500                    
    4953  Refuse Systems.......................  6.0                    
    4961  Steam and Air-Conditioning Supply....  9.0                    
DIVISION F--WHOLESALE TRADE....................  100                    
  (Not Applicable to Government procurement of                          
   supplies. The nonmanufacturer size standard                          
   of 500 employees shall be used for purposes                          
   of Government procurement of supplies.)                              
DIVISION G--RETAIL TRADE.......................  5.0                    
  (Not Applicable to Government procurement of                          
   supplies. The nonmanufacturer size standard                          
   of 500 employees shall be used for purposes                          
   of Government procurement of supplies.)                              
    5271  Mobile Home Dealers..................  9.5                    
    5311  Department Stores....................  20.0                   
    5331  Variety Stores.......................  8.0                    
    5411  Grocery Stores.......................  20.0                   
    5511  Motor Vehicle Dealers (New and Used).  21.0                   
    5521  Motor Vehicle Dealers (Used Only)....  17.0                   
    5541  Gasoline Service Stations............  6.5                    
    5599  Automobile Dealers, N.E.C............  5.0                    
          Aircraft Dealers, Retail.............  7.5                    
    5611  Men's and Boy's Clothing and           6.5                    
     Accessory Stores.                                                  
    5621  Women's Clothing Stores..............  6.5                    
    5651  Family Clothing Stores...............  6.5                    
    5661  Shoe Stores..........................  6.5                    
    5722  Household Appliance Stores...........  6.5                    
    5731  Radio, Television, and Consumer        6.5                    
     Electronics Stores.                                                
    5734  Computer and Computer Software Stores  6.5                    
    5812  Food Service, Institutional..........  15.0                   
    5961  Catalog and Mail-Order Houses........  18.5                   
    5983  Fuel Oil Dealers.....................  9.0                    
DIVISION H--FINANCE, INSURANCE, AND REAL ESTATE  5.0                    
EXCEPT:                                                                 
    6021-6082  National and Commercial Banks,    100 Million in         
     Savings, Institutions and Credit Unions.     assets\7\             
    6331  Fire, Marine, and Casualty Insurance.  1,500                  
    6515  (Part) Leasing of Building Space to    15.0\8\                
     Federal Government by Owners.                                      
    6531  Real Estate Agents and Managers......  1.5 \6\                
DIVISION I--SERVICES...........................  5.0                    
EXCEPT:                                                                 
    7211  Power Laundries, Family and            10.5                   
     Commercial.                                                        
    7213  Linen Supply.........................  10.5                   
    7216  Drycleaning Plants, Except Rug         3.5                    
     Cleaning.                                                          
    7217  Carpet and Upholstery Cleaning.......  3.5                    
    7218  Industrial Launderers................  10.5                   
    7311  Advertising Agencies.................  5.0\6\                 
    7312  Outdoor Advertising Services.........  5.0\6\                 
    7313  Radio, Television, and Publishers'     5.0\6\                 
     Advertising Representatives.                                       
    7319  Advertising, N.E.C...................  5.0\6\                 
    7349  Building Cleaning and Maintenance      12.0                   
     Services, N.E.C..                                                  
    7371  Computer Programming Services........  18.0                   
    7372  Prepackaged Software.................  18.0                   
    7373  Computer Integrated Systems Design...  18.0                   
    7374  Computer Processing and Data           18.0                   
     Preparation and Processing Services.                               
    7375  Information Retrieval Services.......  18.0                   
    7376  Computer Facilities Management         18.0                   
     Services.                                                          
    7377  Computer Rental and Leasing..........  18.0                   
    7378  Computer Maintenance and Repair......  18.0                   
    7379  Computer Related Services, N.E.C.....  18.0                   
    7381  Detective, Guard, and Armored Car      9.0                    
     Services.                                                          
    7382  Security Systems Services............  9.0                    

[[Page 58002]]
                                                                        
    7389  Business Services, N.E.C.............  5.0                    
        Map Drafting Services, Mapmaking         3.5                    
         (Including Aerial) and Photogrammetric                         
         Mapping Services.                                              
    7513  Truck Rental and Leasing, Without      18.5                   
     Drivers.                                                           
    7514  Passenger Car Rental.................  18.5                   
    7515  Passenger Car Leasing................  18.5                   
    7534  Tire Retreading and Repair Shops.....  10.5                   
    7699  Repair Shops and Related Services,     5.0\9\                 
     N.E.C..                                                            
    7812  Motion Picture and Video Tape          21.5                   
     Production.                                                        
    7819  Services Allied to Motion Picture      21.5                   
     Production.                                                        
    7822  Motion Picture and Video Tape          21.5                   
     Distribution.                                                      
    8299  Flight Training Services.............  18.5                   
    8711  Engineering Services.................  2.5                    
        Military and Aerospace Equipment and     20.0                   
         Military Weapons.                                              
        Contracts and Subcontracts for           20.0                   
         Engineering Services Awarded Under the                         
         National Energy Policy Act of 1992.                            
        Marine Engineering and Naval             13.5                   
         Architecture.                                                  
    8712  Architectural Services (Other Than     2.5                    
     Naval).                                                            
    8713  Surveying Services...................  2.5                    
    8721  Accounting, Auditing, and Bookkeeping  6.0                    
     Services.                                                          
    8731  Commercial Physical and Biological     500 \10\               
     Research.                                                          
        Aircraft...............................  1,500                  
        Aircraft Parts, and Auxiliary            1,000                  
         Equipment, and Aircraft Engines and                            
         Engine Parts.                                                  
        Space Vehicles and Guided Missiles,      1,000                  
         their Propulsion Units, their                                  
         Propulsion Units Parts, and their                              
         Auxiliary Equipment and Parts.                                 
    8741 (Part)  Conference Management Services  5.0 \6\                
    8744  Facilities Support Management          5.0 \11\               
     Services.                                                          
        Base Maintenance.......................  20.0 \12\              
        Environmental Remediation Services.....  500 \13\               
------------------------------------------------------------------------
Footnotes:                                                              
\1\ SIC code1629--Dredging: To be considered small for purpose 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.                                               
\2\ SIC Division D--Manufacturing: For rebuilding machinery or equipment
  on a factory basis, or equivalent, use the SIC code for a newly       
  manufactured product. Concerns performing major rebuilding or overhaul
  activities do not necessarily have to meet the criteria for being a   
  ``manufacturer'' although the activities may be classified under a    
  manufacturing SIC code. Ordinary repair services or preservation are  
  not considered rebuilding.                                            
\3\ SIC code 2033: For purposes of Government procurement for food      
  canning and preserving, the standard of 500 employees excludes        
  agricultural labor as defined in Sec.  3306(k) of the Internal Revenue
  Code, 26 U.S.C. 3306(k).                                              
\4\ SIC code 2911: For purposes of Government procurement, the firm may 
  not have more than 1,500 employees nor more than 75,000 barrels per   
  day capacity of petroleum-based inputs, including crude oil or bona   
  fide feedstocks. Capacity includes owned or leased facilities as well 
  as facilities under a processing agreement or an arrangement such as  
  an exchange agreement or a throughput. The total product to be        
  delivered under the contract must be at least 90 percent refined by   
  the successful bidder from either crude oil or bona fide feedstocks.  
\5\ SIC code 3011: For purposes of Government procurement, a firm is    
  small for bidding on a contract for pneumatic tires within Census     
  Classification codes 30111 and 30112, provided that: (1) The value of 
  tires within Census Classification codes 30111 and 30112 which it     
  manufactured in the United States during the previous calendar year is
  more than 50 percent of the value of its total worldwide manufacture, 
  (2) the value of pneumatic tires within Census Classification codes   
  30111 and 30112 comprising its total worldwide manufacture during the 
  preceding calendar year was less than 5 percent of the value of all   
  such tires manufactured in the United States during that period, and  
  (3) the value of the principal product which it manufactured or       
  otherwise produced, or sold worldwide during the preceding calendar   
  year is less than 10 percent of the total value of such products      
  manufactured or otherwise produced or sold in the United States during
  that period.                                                          
\6\ SIC codes 4724, 6531, 7311, 7312, 7313, 7319, and 8741: 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.        
\7\ 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 Institution     
  Examinations Council 034 call report form.                            
\8\ SIC code 6515: Leasing of building space to the Federal Government  
  by Owners: For Government procurement, a size standard of $15.0       
  million in gross receipts applies to the owners of building space     
  leased to the Federal Government. The standard does not apply to an   
  agent.                                                                
\9\ SIC codes 7699 and 3728: Contracts for the rebuilding or overhaul of
  aircraft ground support equipment on a contract basis are classified  
  under SIC 3728.                                                       
\10\ SIC code 8731: For research and development contracts requiring the
  delivery of a manufactured product, the appropriate size standard is  
  that of the manufacturing industry.                                   
  (1) Research and Development means laboratory or other physical       
  research and development. It does not include economic, educational,  
  engineering, operations, systems, or other nonphysical research; or   
  computer programming, data processing, commercial and/or medical      
  laboratory testing.                                                   
  (2) For purposes of the Small Business Innovation Research (SBIR)     
  program only, a different definition has been established by law. See 
  Sec.  121.701 of these regulations.                                   
  (3) Research and development for guided missiles and space vehicles   
  includes evaluation and simulation, and other services requiring      
  thorough knowledge of complete missiles and spacecraft.               
\11\ Facilities Management, a component of SIC code 8744, includes      
  establishments, not elsewhere classified, which provide overall       
  management and the personnel to perform a variety of related support  
  services in operating a complete facility in or around a specific     
  building, or within another business or Government establishment.     
  Facilities management means furnishing three or more personnel supply 
  services which may include, but are not limited to, secretarial       
  services, typists, telephone answering, reproduction or mimeograph    
  service, mailing service, financial or business management, public    
  relations, conference planning, travel arrangements, word processing, 
  maintaining files and/or libraries, switchboard operation, writers,   
  bookkeeping, minor office equipment maintenance and repair, or use of 
  information systems (not programming).                                

[[Page 58003]]
                                                                        
\12\ SIC code 8744: (1) If one of the activities of base maintenance, as
  defined below, can be identified with a separate industry and that    
  activity (or industry) accounts for 50 percent or more of the value of
  an entire contract, then the proper size standard is that of the      
  particular industry, and not the base maintenance size standard.      
  (2) ``Base Maintenance'' requires the performance of three or more    
  separate activities in the areas of service or special trade          
  construction industries. If services are performed, these activities  
  must each be in a separate SIC code including, but not limited to,    
  Janitorial and Custodial Service, Fire Prevention Service, Messenger  
  Service, Commissary Service, Protective Guard Service, and Grounds    
  Maintenance and Landscaping Service. If the contract requires the use 
  of special trade contractors (plumbing, painting, plastering,         
  carpentry, etc.), all such special trade construction activities are  
  considered a single activity and classified as Base Housing           
  Maintenance. Since Base Housing Maintenance is only one activity, two 
  additional activities are required for a contract to be classified as 
  ``Base Maintenance.''                                                 
\13\ SIC code 8744: (1) 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.                                        
  (2) For purposes of classifying a Government procurement as           
  Environmental Remediation Services, the general purpose of the        
  procurement must be to restore a contaminated environment and also the
  procurement must be composed of activities in three or more separate  
  industries with separate SIC codes or, in some instances (e.g.,       
  engineering), smaller sub-components of SIC codes with separate,      
  distinct size standards. These activities may include, but are not    
  limited to, separate activities in industries such as: Heavy          
  Construction; Special Trade Construction; Engineering Services;       
  Architectural Services; Management Services; Refuse Systems; Sanitary 
  Services, Not Elsewhere Classified; Local Trucking Without Storage;   
  Testing Laboratories; and Commercial, Physical and Biological         
  Research. If any activity in the procurement can be identified with a 
  separate SIC 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.                                    



Size Eligibility For SBA Financial Assistance


Sec. 121.301  What size standards are applicable to financial 
assistance programs?

    (a) For Business Loans and Disaster Loans (other than physical 
disaster loans), an applicant must not exceed the size standard for the 
industry in which:
    (1) The applicant combined with its affiliates is primarily 
engaged; and
    (2) The applicant alone is primarily engaged.
    (b) For Development Company programs, an applicant must meet one of 
the following standards:
    (1) Including its affiliates, net worth not in excess of $6 
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 $2 million; or
    (2) The same standards applicable under paragraph (a) of this 
section.
    (c) For the Small Business Investment Company (SBIC) program, an 
applicant must meet one of the following standards:
    (1) Including its affiliates, net worth not in excess of $18 
million average and net income after Federal income taxes (excluding 
any carry-over losses) for the preceding 2 completed fiscal years not 
in excess of $6 million; or
    (2) The same standards applicable under paragraph (a) of this 
section.
    (d) For Surety Bond Guarantee assistance--
    (1) Any construction (general or special trade) concern or concern 
performing a contract for services is small if its average annual 
receipts do not exceed $5.0 million.
    (2) Any concern not specified in paragraph (d)(1) of this section 
must meet the size standard for the primary industry in which it, 
combined with its affiliates, is engaged.
    (e) The applicable size standards for the purpose of all SBA 
financial assistance programs, excluding the Surety Bond Guarantee 
assistance program, are increased by 25 percent whenever the applicant 
agrees to use the assistance within a labor surplus area. Labor surplus 
areas are listed monthly in the Department of Labor publication called 
``Area Trends.''


Sec. 121.302  When does SBA determine the size status of an applicant?

    (a) The size of an applicant for SBA financial assistance is 
determined as of the date the application for such financial assistance 
is received by SBA, except for the Disaster Loan and Preferred Lenders 
programs.
    (b) For the Preferred Lenders program, size is determined as of the 
date of approval of the loan by the Preferred Lender.
    (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.
    (d) Changes in size subsequent to the applicable date when size is 
determined will not disqualify an applicant for assistance.


Sec. 121.303  What size procedures are used by SBA before it makes a 
formal size determination?

    (a) A concern that submits an application for financial assistance 
is deemed to have certified that it is small under the applicable size 
standard. SBA may question the concern's status based on information 
supplied in the application or from any other source.
    (b) A small business investment company, a development company, a 
surety bond company, or a preferred lender may accept as true the size 
information provided by an applicant, unless credible evidence to the 
contrary is apparent.
    (c) Size is initially considered by the individual with final 
financial assistance authority. This is not a formal size 
determination. A formal determination may be requested prior to a 
denial of eligibility based on size.
    (d) An applicant may request a formal size determination when 
assistance has been denied for size ineligibility. Except for disaster 
loan eligibility, a request for a formal size determination must be 
made to the Government Contracting Area Director serving the area in 
which the headquarters of the applicant is located, regardless of the 
location of the parent company or affiliates. For disaster loan 
assistance, the request for a size determination must be made to the 
Area Director for the Disaster Area Office which denied the assistance.
    (e) There are no time limitations for making a formal size 
determination for purposes of financial assistance. The official making 
the formal size determination must provide a copy of the determination 
to the applicant, to the requesting SBA official, and to other 
interested SBA program officials.


Sec. 121.304  What are the size requirements for refinancing an 
existing SBA loan?

    If natural growth (as distinguished from merger, acquisition or 
similar management action) since the date of original financing causes 
a firm to exceed its applicable size standard, it will still be small 
for the purpose of refinancing an existing SBA loan or guarantee. 
Otherwise, the firm and its affiliates must be small at the time of 
application for refinancing. 

[[Page 58004]]



Sec. 121.305  What size eligibility requirements exist for obtaining 
business loans relating to particular procurements?

    A concern qualified as small for a particular procurement, 
including an 8(a) subcontract, is small for financial assistance 
directly and primarily relating to the performance of the particular 
procurement.

Size Eligibility Requirements for Government Procurement


Sec. 121.401  What procurement programs are subject to size 
determinations?

    The requirements set forth in Secs. 121.401-121.412 cover all 
procurement programs for which status as a small business is required, 
including the small business set-aside program, SBA's Certificate of 
Competency Program, SBA's Minority Enterprise Development program, the 
Small Business Subcontracting program authorized under section 8(d) of 
the Small Business Act, and federal Small Disadvantaged Business 
programs.


Sec. 121.402  What size standards are applicable to procurement 
assistance programs?

    (a) A concern must meet the size standard for the SIC code 
specified in the solicitation.
    (b) The procuring agency contracting officer, or authorized 
representative, designates the proper SIC code and size standard in a 
solicitation, selecting the SIC code which best describes the principal 
purpose of the product or service being acquired. Primary consideration 
is given to the industry descriptions in the SIC Manual, the product or 
service description in the solicitation and any attachments to it, the 
relative value and importance of the components of the procurement 
making up the end item being procured, and the function of the goods or 
services being purchased. Other factors considered include previous 
Government procurement classifications of the same or similar products 
or services, and the classification which would best serve the purposes 
of the Small Business Act. A procurement is usually classified 
according to the component which accounts for the greatest percentage 
of contract value.
    (c) The SIC code assigned to a procurement and its corresponding 
size standard is final unless timely appealed to SBA's Office of 
Hearings and Appeals (OHA), or unless SBA assigns a SIC code or size 
standard as provided in paragraph (d) of this section.
    (d) An unclear, incomplete or missing SIC code designation or size 
standard in the solicitation may be clarified, completed or supplied by 
SBA in connection with a formal size determination or size appeal.
    (e) Any offeror or other interested party adversely affected by a 
SIC code designation or size standard designation may appeal the 
designations to OHA under Part 134 of this chapter.


Sec. 121.403  Are SBA size determinations and SIC code designations 
binding on parties?

    Formal size determinations and SIC code designations made by 
authorized SBA officials are binding upon the parties. Opinions 
otherwise provided by SBA officials to contracting officers or others 
are advisory in nature, and are not binding or appealable.


Sec. 121.404  When does SBA determine the size status of a business 
concern?

    Generally, SBA determines the size status of a concern (including 
its affiliates) as of the date the concern submits a written self-
certification that it is small to the procuring agency as part of its 
initial offer including price. The following are two exceptions to this 
rule:
    (a) The size status of an applicant for a Certificate of Competency 
(COC) relating to an unrestricted procurement is determined as of the 
date of the concern's application for the COC.
    (b) Size status for purposes of compliance with the nonmanufacturer 
rule set forth in Sec. 121.406(b)(1) and the ostensible subcontractor 
rule set forth in Sec. 121.103(f)(3) is determined as of the date of 
the best and final offer.


Sec. 121.405  May a business concern self-certify its small business 
size status?

    (a) A concern must self-certify it is small under the size standard 
specified in the solicitation, or as clarified, completed or supplied 
by SBA pursuant to Sec. 121.402(d).
    (b) A contracting officer may accept a concern's self-certification 
as true for the particular procurement involved in the absence of a 
written protest by other offerors or other credible information which 
causes the contracting officer or SBA to question the size of the 
concern.
    (c) Procedures for protesting the self-certification of an offeror 
are set forth in Secs. 121.1001-121.1009.


Sec. 121.406  How does a small business concern qualify to provide 
manufactured products under small business set-aside or MED 
procurements?

    (a) General. In order to qualify as a small business concern for a 
small business set-aside or 8(a) contract to provide manufactured 
products, an offeror must either:
    (1) Be the manufacturer of the end item being procured (and the end 
item must be manufactured or produced in the United States); or
    (2) Comply with the requirements of paragraphs (b), (c) or (d) of 
this section as a nonmanufacturer, a kit assembler or a supplier under 
Simplified Acquisition Procedures.
    (b) Nonmanufacturers. (1) A concern may qualify for a requirement 
to provide manufactured products as a nonmanufacturer if it:
    (i) Does not exceed 500 employees;
    (ii) Is primarily engaged in the wholesale or retail trade and 
normally sells the items being supplied to the general public; and
    (iii) Will supply the end item of a small business manufacturer or 
processor made in the United States, or obtains a waiver of such 
requirement pursuant to paragraph (b)(3) of this section.
    (2) For size purposes, there can be only one manufacturer of the 
end item being acquired. The manufacturer is the concern which, with 
its own facilities, performs the primary activities in transforming 
inorganic or organic substances, including the assembly of parts and 
components, into the end item being acquired. The end item must possess 
characteristics which, as a result of mechanical, chemical or human 
action, it did not possess before the original substances, parts or 
components were assembled or transformed. The end item may be finished 
and ready for utilization or consumption, or it may be semifinished as 
a raw material to be used in further manufacturing. Firms which perform 
only minimal operations upon the item being procured do not qualify as 
manufacturers of the end item. SBA will evaluate the following factors 
in determining whether a concern is the manufacturer of the end item:
    (i) The proportion of total value in the end item added by the 
efforts of the concern, excluding costs of overhead, testing, quality 
control, and profit; and
    (ii) The importance of the elements added by the concern to the 
function of the end item, regardless of their relative value.
    (3) The Administrator or designee may waive the requirement set 
forth in paragraph (b)(1)(iii) of this section under the following two 
circumstances:
    (i) The contracting officer has determined that no small business 
manufacturer or processor reasonably can be expected to offer a product 
meeting the specifications (including period for performance) required 
by a particular solicitation and SBA reviews and accepts that 
determination; or
    (ii) SBA determines that no small business manufacturer or 
processor of 

[[Page 58005]]
the product or class of products is available to participate in the 
Federal procurement market.
    (4) The two waiver possibilities identified in paragraph (b)(3) of 
this section are called ``individual'' waivers and ``class'' waivers 
respectively, and the procedures for them are contained in 
Sec. 121.1301.
    (5) Any SBA waiver of the nonmanufacturer rule has no effect on 
requirements external to the Small Business Act which involve domestic 
sources of supply, such as the Buy American Act.
    (c) Kit assemblers. (1) Where the manufactured item being acquired 
is a kit of supplies or other goods provided by an offeror for a 
special purpose, the offeror cannot exceed 500 employees, and 50 
percent of the total value of the components of the kit must be 
manufactured by business concerns in the United States which are small 
under the size standards for the SIC codes of the components being 
assembled. The offeror need not itself be the manufacturer of any of 
the items assembled.
    (2) Where the Government has specified an item for the kit which is 
not produced by U.S. small business concerns, such item shall be 
excluded from the calculation of total value in paragraph (c)(1) of 
this section.
    (d) Simplified Acquisition Procedures. Where the procurement of a 
manufactured item is processed under Simplified Acquisition Procedures, 
as defined in Sec. 13.101 of the Federal Acquisition Regulation (FAR) 
(48 CFR 13.101), and where the anticipated cost of the procurement will 
not exceed $25,000, the offeror need not supply the end product of a 
small business concern as long as the product acquired is manufactured 
or produced in the United States, and the offeror does not exceed 500 
employees. The offeror need not itself be the manufacturer of any of 
the items acquired.


Sec. 121.407  What are the size procedures for multiple item 
procurements?

    If a procurement calls for two or more specific end items or types 
of services with different size standards and the offeror may submit an 
offer on any or all end items or types of services, the offeror must 
meet the size standard for each end item or service item for which it 
submits an offer. If the procurement calls for more than one specific 
end item or type of service and an offeror is required to submit an 
offer on all items, the offeror may qualify as a small business for the 
procurement if it meets the size standard of the item which accounts 
for the greatest percentage of the total contract value.


Sec. 121.408  What are the size procedures for SBA's Certificate of 
Competency Program?

    (a) A firm which applies for a COC must file an ``Application for 
Small Business Size Determination'' (SBA Form 355). If the initial 
review of SBA Form 355 indicates the applicant, including its 
affiliates, is small for purposes of the COC program, SBA will process 
the application for COC. If the review indicates the applicant, 
including its affiliates, is other than small, SBA will initiate a 
formal size determination as set forth in Sec. 121.1009. In such a 
case, SBA will not further process the COC application until a formal 
size determination is made.
    (b) A concern is ineligible for a COC if a formal SBA size 
determination finds the concern other than small.


Sec. 121.409  What size standard applies in an unrestricted procurement 
for Certificate of Competency purposes?

    For the purpose of receiving a Certificate of Competency in an 
unrestricted procurement, the applicable size standard is that 
corresponding to the SIC code set forth in the solicitation. For a 
manufactured product, a concern must also furnish a domestically 
produced or manufactured product, regardless of the size status of the 
product manufacturer. The offeror need not be the manufacturer of any 
of the items acquired.


Sec. 121.410  What are the size standards for SBA's Section 8(d) 
Subcontracting Program?

    For subcontracting purposes pursuant to section 8(d) of the Small 
Business Act, a concern is small:
    (a) For subcontracts of $10,000 or less which relate to Government 
procurements, if its number of employees (including its affiliates) 
does not exceed 500 employees. However, subcontracts for engineering 
services awarded under the National Energy Policy Act of 1992 have the 
same size standard as Military and Aerospace Equipment and Military 
Weapons under SIC code 8711;
    (b) For subcontracts exceeding $10,000 which relate to Government 
procurements, if its number of employees or average annual receipts 
(including its affiliates) does not exceed the size standard for the 
product or service it is providing on the subcontract; and
    (c) For subcontracts for financial services, if the concern 
(including its affiliates) is a commercial bank or savings and loan 
association whose assets do not exceed $100 million.


Sec. 121.411  What are the size procedures for SBA's Section 8(d) 
Subcontracting Program?

    (a) Prime contractors may rely on the information contained in 
SBA's Procurement Automated Source System (PASS), or equivalent data 
base maintained or sanctioned by SBA, as an accurate representation of 
a concern's size and ownership characteristics for purposes of 
maintaining a small business source list. Even though a concern is on a 
small business source list, it must still qualify and self-certify as a 
small business at the time it submits its offer as a section 8(d) 
subcontractor.
    (b) Upon determination of the successful subcontract offeror for a 
competitive subcontract, but prior to award, the prime contractor must 
inform each unsuccessful subcontract offeror in writing of the name and 
location of the apparent successful offeror.
    (c) The self-certification of a concern subcontracting or proposing 
to subcontract under section 8(d) of the Small Business Act may be 
protested by the contracting officer, the prime contractor, the 
appropriate SBA official or any other interested party.


Sec. 121.412  What are the size procedures for partial small business 
set-asides?

    A firm is required to meet size standard requirements only for the 
small business set-aside portion of a procurement, and is not required 
to qualify as a small business for the unrestricted portion.

Size Eligibility Requirements for Sale or Lease of Government Property


Sec. 121.501  What programs for sale or lease of Government property 
are subject to size determinations?

    Sections 121.501-121.512 apply to small business size 
determinations for the purpose of the sale or lease of Government 
property, including the Timber Sales Program, the Special Salvage 
Timber Sales Program, and the sale of Government petroleum, coal and 
uranium.


Sec. 121.502  What size standards are applicable to programs for sale 
or lease of Government property?

    (a) Unless otherwise specified in this part--
    (1) A concern primarily engaged in manufacturing is small for sale 
or lease of Government property if it does not exceed 500 employees;
    (2) A concern not primarily engaged in manufacturing is small for 
sale or lease of Government property if it has annual receipts not 
exceeding $2 million. 

[[Page 58006]]

    (b) Size status for such sales and leases is determined by the 
primary industry of the applicant business concern.


Sec. 121.503  Are SBA size determinations binding on parties?

    Formal size determinations based upon a specific Government sale or 
lease, or made in response to a request from another Government agency 
under Sec. 121.901, are binding upon the parties. Other SBA opinions 
provided to contracting officers or others are only advisory, and are 
not binding or appealable.


Sec. 121.504  When does SBA determine the size status of a business 
concern?

    SBA determines the size status of a concern (including its 
affiliates) as of the date the concern submits a written self-
certification that it is small to the Government as part of its initial 
offer including price where there is a specific sale or lease at issue, 
or as set forth in Sec. 121.903 if made in response to a request of 
another Government agency.


Sec. 121.505  What is the effect of a self-certification?

    (a) A contracting officer may accept a concern's self-certification 
as true for the particular sale or lease involved, in the absence of a 
written protest by other offerors or other credible information which 
would cause the contracting officer or SBA to question the size of the 
concern.
    (b) Procedures for protesting the self-certification of an offeror 
are set forth in Secs. 121.1001-121.1009.


Sec. 121.506  What definitions are important for sales or leases of 
Government-owned timber?

    (a) Forest product industry means logging, wood preserving, and the 
manufacture of lumber and wood related products such as veneer, 
plywood, hardboard, particle board, or wood pulp, and of products of 
which lumber or wood related products are the principal raw materials.
    (b) Logging of timber means felling and bucking, yarding, and/or 
loading. It does not mean hauling.
    (c) Manufacture of logs means, at a minimum, breaking down logs 
into rough cuts of the finished product.
    (d) Sell means, in addition to its usual and customary meaning, the 
exchange of sawlogs for sawlogs on a product-for-product basis with or 
without monetary adjustment, and an indirect transfer, such as the sale 
of the assets of a concern after it has been awarded one or more set-
aside sales of timber.
    (e) Significant logging of timber means that a concern uses it own 
employees to perform at least two of the following: felling and 
bucking, yarding, and loading.


Sec. 121.507  What are the size standards and other requirements for 
the purchase of Government-owned timber (other than Special Salvage 
Timber)?

    (a) To be small for purposes of the sale of Government-owned timber 
(other than Special Salvage Timber) a concern must:
    (1) Be primarily engaged in the logging or forest products 
industry;
    (2) Not exceed 500 employees, taking into account its affiliates; 
and
    (3) If it does not intend at the time of the offer to resell the 
timber--
    (i) Agree that it will manufacture the logs with its own facilities 
or those of another business which meets the requirements of paragraphs 
(a)(1) and (a)(2) of this section;
    (ii) Agree that if it eventually resells the timber, it will resell 
no more than 30% of the sawtimber volume to other businesses which do 
not meet the requirements of paragraphs (a)(1) and (a)(2) of this 
section; and
    (iii) Agree that if it becomes acquired or controlled by a business 
which does not meet the requirements of paragraphs (a)(1) and (a)(2) of 
this section, it will require as a condition of the acquisition or 
change of control that the acquiring or controlling business resell at 
least 70% of the sawtimber volume to businesses which do meet the 
requirements of paragraphs (a)(1) and (a)(2) of this section; or
    (4) If it intends at the time of offer to resell the timber--
    (i) Agree that is will not sell more than 30% of such timber (50% 
of such timber if the concern is an Alaskan business) to a business 
which does not meet the requirements of paragraphs (a)(1) and (a)(2) of 
this section; and
    (ii) Agree that if it becomes acquired or controlled by a business 
which does not meet the requirements of paragraphs (a)(1) and (a)(2) of 
this section, it will require as a condition of the acquisition or 
change of control that the acquiring or controlling business resell at 
least 70% of the sawtimber volume (or at least 50% of the sawtimber 
volume, if it is an Alaskan business) to businesses which meet the 
requirements of paragraphs (a)(1) and (a)(2) of this section.
    (b) For a period of three years following the date upon which a 
concern purchases timber under a small business set-aside (other than 
through the Special Salvage Timber Sale program), it must maintain a 
record of:
    (1) The name, address and size status of every concern to which it 
sells the timber or sawlogs; and
    (2) The species, grades and volumes of sawlogs sold.
    (c) For a period of three years following the date upon which a 
concern purchases timber, it must by contract require all small 
business repurchasers of the sawlogs or timber it purchased under the 
small business set-aside to maintain the records described in paragraph 
(b) of this section.


Sec. 121.508  What are the size standards and other requirements for 
the purchase of Government-owned Special Salvage Timber?

    (a) In order to purchase Government-owned Special Salvage Timber 
from the United States Forest Service or the Bureau of Land Management 
as a small business, a concern must:
    (1) Be primarily engaged in the logging or forest product industry;
    (2) Have, together with its affiliates, no more than twenty-five 
employees during any pay period for the last twelve months; and
    (3) If it does not intend at the time of offer to resell the 
timber--
    (i) Agree that it will manufacture a significant portion of the 
logs with its own employees; and
    (ii) Agree that it will log the timber only with its own employees 
or with employees of another business which is eligible for award of a 
Special Salvage Timber sales contract; or
    (4) If it intends at the time of offer to resell the timber, agree 
that it will perform a significant portion of timber logging with its 
own employees and that it will subcontract the remainder of the timber 
logging to a concern which is eligible for award of a Special Salvage 
Timber sales contract.


Sec. 121.509  What is the size standard for leasing of Government land 
for coal mining?

    A concern is small for this purpose if it:
    (a) Together with its affiliates, does not have more than 250 
employees;
    (b) Maintains management and control of the actual mining 
operations of the tract; and
    (c) Agrees that if it sublease the Government land, it will be to 
another small business, and that it will require its sublessors to 
agree to the same.


Sec. 121.510  What is the size standard for leasing of Government land 
for uranium mining?

    A concern is small for this purpose if it, together with its 
affiliates, does not have more than 100 employees.


Sec. 121.511  What is the size standard for buying Government-owned 
petroleum?

    A concern is small for this purpose if it is primarily engaged in 
petroleum 

[[Page 58007]]
refinancing and meets the size standard for a petroleum refining 
business.


Sec. 121.512  What is the size standard for stockpile purchases?

    A concern is small for this purpose if:
    (a) It is primarily engaged in the purchase of materials which are 
not domestic products; and
    (b) Its annual receipts, together with its affiliates, do not 
exceed $42 million.

Size Eligibility Requirements for the Minority Enterprise Development 
(MED) Program


Sec. 121.601  What is a small business for purposes of admission to 
SBA's Minority Enterprise Development (MED) program?

    An applicant must be small under the size standard corresponding to 
its primary industry classification in order to be admitted to SBA's 
Minority Enterprise Development (MED) program.


Sec. 121.602  At what point in time must a MED applicant be small?

    A MED applicant must be small for its primary industry at the time 
SBA certifies it for admission into the program.


Sec. 121.603  How does SBA determine whether a Participant is small for 
a particular MED subcontract?

    (a) Self certification by Participant. A MED Participant must 
certify that it qualifies as a small business under the SIC code 
assigned to a particular MED subcontract as part of its initial offer 
including price to the procuring agency. The Participant also must 
submit a copy of its offer, including its self-certification as to 
size, to the appropriate SBA district office at the same time it 
submits the offer to the procuring agency.
    (b) Verification of size by SBA. Within 30 days of its receipt of a 
Participant's size self-certification for a particular MED subcontract, 
the SBA district office serving the geographic area in which the 
Participant's principal office is located will review the Participant's 
self-certification and determine if it is small for purposes of that 
subcontract. The SBA district office will review the Participant's most 
recent financial statements and other relevant data and then notify the 
Participant of its decision.
    (c) Changes in size between date of self-certification and date of 
award. (1) Where SBA verifies that the selected Participant is small 
for a particular procurement, subsequent changes in size up to the date 
of award, except those due to merger with or acquisition by another 
business concern, will not affect the firm's size status for that 
procurement.
    (2) Where a Participant has merged with or been acquired by another 
business concern between the date of its self-certification and the 
date of award, the concern must recertify its size status, and SBA must 
verify the new certification before award can occur.
    (d) Finding Participant to be other than small. (1) A Participant 
may request a formal size determination (pursuant to Secs. 121.1001-
121.1009) with the SBA Government Contracting Area Office serving the 
geographic area in which the principal office of the Participant is 
located within 5 working days of its receipt of notice from the SBA 
district office that it is not small for a particular MED subcontract.
    (2) Where the Participant does not timely request a formal size 
determination, SBA may accept the procurement in support of another 
Participant, or may rescind its acceptance of the offer for the MED 
program, as appropriate.


Sec. 121.604  Are MED Participants considered small for purposes of 
other SBA assistance?

    A concern which SBA determines to be a small business for the award 
of a MED subcontract will be considered to have met applicable size 
eligibility requirements of other SBA programs where that assistance 
directly and primarily relates to the performance of the MED 
subcontract in question.

Size Eligibility Requirements for the Small Business Innovation 
Research (SBIR) Program


Sec. 121.701  What SBIR programs are subject to size determinations?

    (a) These sections apply to size status for award of a funding 
agreement pursuant to the Small Business Innovation Development Act of 
1982 (Pub. L. 97-219, 15 U.S.C. 638(e) through (k)).
    (b) Funding agreement officer means a contracting officer, a grants 
officer, or a cooperative agreement officer.
    (c) Funding agreement means any contract, grant or cooperative 
agreement entered into between any Federal agency and any small 
business for the performance of experimental, developmental, or 
research work funded in whole or in part by the Federal Government. 
Such work includes:
    (1) A systematic, intensive study directed toward greater knowledge 
or understanding of the subject studied;
    (2) A systematic study directed specifically toward applying new 
knowledge to meet a recognized need; or
    (3) A systematic application of knowledge toward the production of 
useful materials, devices, and systems or methods, including design, 
development, and improvement of prototypes and new processes to meet 
specific requirements.


Sec. 121.702  What size standards are applicable to the SBIR program?

    To be eligible to compete for award of funding agreements in SBA's 
Small Business Innovation Research (SBIR) program, a business concern 
must:
    (a) Be at least 51 percent owned and controlled by one or more 
individuals who are citizens of, or permanent resident aliens in, the 
United States; and
    (b) Not have more than 500 employees, including its affiliates.


Sec. 121.703  Are formal size determinations binding on parties?

    Size determinations by authorized SBA officials are formal actions 
based upon a specific funding agreement, and are binding upon the 
parties. Other SBA opinions provided to funding agreement officers or 
others, are only advisory, and are not binding or appealable.


Sec. 121.704  When does SBA determine the size status of a business 
concern?

    The size status of a concern for the purpose of a funding agreement 
under the SBIR program is determined as of the date of the award for 
both Phase I and Phase II SBIR awards.


Sec. 121.705  Must a business concern self-certify its size status?

    (a) A firm must self-certify it is small in its SBIR funding 
proposal.
    (b) A funding agreement officer may accept a concern's self-
certification as true for the particular funding agreement involved in 
the absence of a written protest by other offerors or other credible 
information which would cause the funding agreement officer or SBA to 
question the size of the concern.
    (c) Procedures for protesting an offeror's self-certification are 
set forth in Secs. 121.1001-121.1009.

Size Eligibility Requirements for Paying Reduced Patent Fees


Sec. 121.801  May patent fees be reduced if a concern is small?

    Sections 121.801-121.805 apply to size status for the purpose of 
paying reduced patent fees authorized by Pub. L. 97-247. The 
eligibility requirements for independent inventors and nonprofit 
organizations for the purpose of paying reduced patent fees are set 
forth in regulations of the Patent and Trademark Office of the 
Department of Commerce, 37 CFR 1.9, 1.27, 1.28. 

[[Page 58008]]



Sec. 121.802  What size standards are applicable to reduced patent fees 
programs?

    A concern eligible for reduced patent fees is one:
    (a) Whose number of employees, including affiliates, does not 
exceed 500 persons; and
    (b) Which has not assigned, granted, conveyed, or licensed (and is 
under no obligation to do so) any rights in the invention to any person 
who made it and could not be classified as an independent inventor, or 
to any concern which would not qualify as a non-profit organization or 
a small business concern under this section.


Sec. 121.803  Are formal size determinations binding on parties?

    Size determinations by authorized SBA officials are formal actions, 
based upon a specific patent application pursuant to the rules of the 
Patent and Trademark Office, Department of Commerce, and are binding 
upon the parties. Other SBA opinions provided to patent applicants or 
others are only advisory, and are not binding or appealable.


Sec. 121.804  When does SBA determine the size status of a business 
concern?

    Size status is determined as of the date of the patent applicant's 
written verification of size.


Sec. 121.805  May a business concern self-certify its size status?

    (a) A concern verifies its size status with its submission of its 
patent application.
    (b) Any attempt to establish small size status improperly 
(fraudulently, through gross negligence, or otherwise) may result in 
remedial action by the Patent and Trademark Office.
    (c) In the absence of credible information indicating otherwise, 
the Patent and Trademark Office may accept the verification by the 
concern as a small business as true.
    (d) Question concerning the size verification are resolved 
initially by the Patent and Trademark Office. If not verified as small, 
the applicant may request a formal SBS size determination.

Size Eligibility Requirements for Compliance With Programs of Other 
Agencies


Sec. 121.901  Can other Government agencies obtain SBA size 
determinations?

    Upon request by another Government agency, SBA will provide a size 
determination, under SBA rules, standards and procedures, for its use 
in determining compliance with small business requirements of its 
statutes, regulations or programs.


Sec. 121.902  What size standards are applicable to programs of other 
agencies?

    (a) SBA size standards. The size standards for compliance with 
programs of other agencies are those for SBA programs which are most 
comparable to the programs of such other agencies, unless otherwise 
agreed by the agency and SBA.
    (b) Special size standards. (1) Federal agencies or departments 
promulgating regulations relating to small businesses usually use SBA 
size criteria. In limited circumstances, if they decide the SBA size 
standard is not appropriate, then agency heads may establish a small 
business definition for the exclusive use of such program which is more 
appropriate, but only when:
    (i) The size standard is first proposed for public comment pursuant 
to the Administrative Procedure Act, 4 U.S.C. 553;
    (ii) The proposed size standard provides for determining size 
measured by average number of employees over 12 months for 
manufacturing concerns, average annual revenues over three years for 
concerns providing services, and data over a period of not less than 
three years for all other concerns (unless approved by SBA, ``annual 
receipts'' and ``number of employees'' must be determined in accordance 
with Secs. 121.104 and 121.106, respectively); and
    (iii) The proposed size standard is approved by SBA's 
Administrator.
    (2) In order to receive the approval of SBA's Administrator, the 
agency head must:
    (i) Request approval prior to publishing the proposed rule 
containing the size standard. The request must include: an explanation 
of the contemplated industry size standard, the reasons the SBA size 
standard is not appropriate, and the reasons the proposed size standard 
would be appropriate; and a certification that there will be compliance 
with the criteria set forth in paragraphs (b)(1)(i) and (b)(1)(ii) of 
this section; and
    (ii) Agree to provide written notice to SBA's Administrator prior 
to publishing the contemplated size standard as a final rule. The 
notice must include: a copy of the intended final rule, including the 
preamble, or a separate written justification for the intended size 
standard followed by a copy of the intended final rule and preamble 
prior to its publication; copies of all public comments relating to the 
size standards received in response to the proposed rule; and any other 
supporting documentation relevant to the size standard and requested by 
SBA's Administrator.
    (3) When approving any size standard established pursuant to 
paragraph (b) of this section, SBA's Administrator will ensure that the 
size standard varies from industry to industry to the extent necessary 
to reflect the differing characteristics of the various industries, and 
consider other relevant factors.
    (4) Where the agency head is developing a size standard for the 
sole purpose of performing a Regulatory Flexibility Analysis pursuant 
to the Regulatory Flexibility Act, the department or agency may, after 
consultation with the SBA Office of Advocacy, establish a size standard 
different from SBA's which is more appropriate for such analysis.


Sec. 121.903  When does SBA determine the size status of a business 
concern?

    For the purpose of compliance with programs of other agencies, SBA 
will base its size determination on the size of the concern as of the 
date set forth in the request of the other agency.

Procedures for Size Protests and Requests for Formal Size 
Determinations


Sec. 121.1001  Who may initiate a size protest or a request for formal 
size determination?

    (a) Size Status Protests. (1) For SBA's Small Business Set-Aside 
Program, including the Property Sales Program, the following entities 
may file a size protest in connection with a particular procurement or 
sale:
    (i) Any offeror;
    (ii) The contracting officer;
    (iii) The SBA Government Contracting Area Director having 
responsibility for the area in which the headquarters of the protested 
offeror is located, regardless of the location of a parent company or 
affiliates, or the Associate Administrator for Government Contracting; 
and
    (iv) Other interested parties. Other interested parties include 
large businesses where only one concern submitted an offer for the 
specific procurement in question. A concern found to be other than 
small in connection with the procurement is not an interested party 
unless there is only one remaining offeror after the concern is found 
to be other than small.
    (2) For SBA's Subcontracting Program, the following entities may 
protest:
    (i) The prime contractor;
    (ii) The contracting officer;
    (iii) Other potential subcontractors;
    (iv) The responsible SBA Government Contracting Area Director or 
the Associate Administrator for Government Contracting; and
    (v) Other interested parties. 

[[Page 58009]]

    (3) For SBA's Small Business Innovation Research (SBIR) Program, 
the following entities may protest:
    (i) A prospective offeror;
    (ii) The funding agreement officer;
    (iii) The responsible SBA Government Contracting Area Director or 
the Assistant Administrator for Technology; and
    (iv) Other interested parties.
    (4) For the Department of Defense's Small Disadvantaged Business 
(SDB) Program, and any other similar program of another Federal agency, 
the following entities may file a protest in connection with a 
particular SDB procurement:
    (i) Any offeror for the specific SDB requirement;
    (ii) The contracting officer; and
    (iii) The responsible SBA Government Contracting Area Director, the 
Associate Administrator for Government Contracting, or the Associate 
Administrator for MED.
    (5) For any unrestricted Government procurement in which status as 
a small business may be beneficial, including, but not limited to, the 
award of a contract to a small business where there are tie bids, the 
opportunity to seek a Certificate of Competency by a small business, 
and SDB price evaluation preferences, the following entities may 
protest in connection with a particular procurement:
    (i) Any offeror;
    (ii) The contracting officer; and
    (iii) The responsible SBA Government Contracting Area Director, the 
Associate Administrator for Government Contracting, or the Associate 
Administrator for MED.
    (b) Request for Size Determinations. (1) For SBA's Financial 
Assistance Programs, the following entities may request a formal size 
determination:
    (i) The applicant for assistance; and
    (ii) The SBA official with authority to take final action on the 
assistance requested.
    (2) For SBA's MED program--
    (i) Concerning initial MED eligibility, the following entities may 
request a formal size determination:
    (A) The MED applicant concern; and
    (B) The Director of the Division of Program Certification and 
Eligibility or the Associate Administrator for MED.
    (ii) Concerning individual 8(a) subcontract awards, whether sole 
source or competitive, the following entities may request a formal size 
determination:
    (A) The MED concern nominated by SBA for the particular sole source 
8(a) award or the apparent successful offeror for the particular 
competitive 8(a) award;
    (B) The SBA program official with authority to execute the 8(a) 
subcontract; and
    (C) The SBA District Director in the district serving the area in 
which the headquarters of the MED concern is located, regardless of the 
location of a parent company and affiliates, or the Associate 
Administrator for MED.
    (3) For SBA's Certificate of Competency Program, the following 
entities may request a formal size determination:
    (i) The offeror who has applied for a COC; and
    (ii) The responsible SBA Government Contracting Area Director or 
the Associate Administrator for Government Contracting.
    (4) For SBA's sale or lease of government property, the following 
entities may request a formal size determination:
    (i) The responsible SBA Government Contracting Area Director or the 
Associate Administrator for Government Contracting; and
    (ii) Authorized officials of other Federal agencies administering a 
property sales program.
    (5) For eligibility to pay reduced patent fees, the following 
entities may request a formal size determination:
    (i) The applicant for the reduced patent fees; and
    (ii) The Patent and Trademark Office.
    (6) For purposes of determining compliance with small business 
requirements of another Government agency program not otherwise 
specified in this section, an official with authority to administer the 
program involved may request a formal size determination.


Sec. 121.1002  Who makes a formal size determination?

    The responsible Government Contracting Area Director or designee 
makes all formal size determinations in response to either a size 
protest or a request for a formal size determination, with the 
exception of size determinations for purposes of the Disaster Loan 
Program, which will be made by the Disaster Area Office Director or 
designee responsible for the area in which the disaster occurred.


Sec. 121.1003  Where should a size protest be filed?

    A protest involving a government procurement or sale must be filed 
with the contracting officer for the procurement or sale, who must 
forward the protest to the SBA Government Contracting Area Office 
serving the area in which the headquarters of the protested concern is 
located, regardless of the location of any parent company or 
affiliates.


Sec. 121.1004  What time limits apply to size protests?

    (a) Protests by entities other than contracting officers or SBA--
(1) Non-negotiated procurement or sale. A protest must be received by 
the contracting officer prior to the close of the 5th day, exclusive of 
Saturdays, Sundays, and legal holidays, after bid or proposal opening.
    (2) Negotiated procurement. A protest must be received by the 
contracting officer prior to the close of business on the 5th day, 
exclusive of Saturdays, Sundays, and legal holidays, after the 
contracting officer has notified the protestor of the identity of the 
prospective awardee.
    (3) Multiple award schedule. On a multiple award schedule 
procurement set aside for small business, protests will be considered 
timely if received by SBA at any time prior to the expiration of the 
contract period (including renewals).
    (b) Protests by contracting officers or SBA. The time limitations 
in paragraph (a) of this section do not apply to contracting officers 
or SBA, and they may file protests before or after awards, except to 
the extent set forth in paragraph (e) of this section.
    (c) Effect of contract award. A timely filed protest applies to the 
procurement in question even though a contracting officer awarded the 
contract prior to receipt of the protest.
    (d) Untimely protests. A protest received after the allotted time 
limits must still be forwarded to SBA. SBA will dismiss untimely 
protests.
    (e) Premature protests. A protest filed by any party, including the 
contracting officer, before bid opening or notification to offerors of 
the selection of the apparent successful offer will be dismissed as 
premature.


Sec. 121.1005  How must a protest be filed with the contracting 
officer?

    A protest must be delivered to the contracting officer by hand, 
telegram, mail, FAX, or telephone. If a protest is made by telephone, 
the contracting officer must later receive a confirming letter either 
within the 5-day period in Sec. 121.1004 (b)(1) or postmarked no later 
than one day after the date of the telephone protest.


Sec. 121.1006  When will a size protest be referred to an SBA 
Government Contracting Area Office?

    (a) A contracting officer who receives a protest (other than from 
SBA) must forward the protest promptly to the SBA Government 
Contracting Area Office serving the area in which the headquarters of 
the offeror is located. 

[[Page 58010]]

    (b) A contracting officer's referral must contain the following 
information:
    (1) The protest and any accompanying materials;
    (2) A copy of the self-certification as to size;
    (3) Identification of the applicable size standard;
    (4) A copy of the solicitation;
    (5) Identification of the date of bid opening or notification 
provided to unsuccessful offerors;
    (6) The date on which the protest was received; and
    (7) A complete address and point of contact for the protested 
concern.


Sec. 121.1007  Must a protest of size status relate to a particular 
procurement and be specific?

    (a) Particular procurement. A protest challenging the size of a 
concern which does not pertain to a particular procurement or sale will 
not be acted on by SBA.
    (b) A protest must include specific facts. A protest must be 
sufficiently specific to provide reasonable notice as to the grounds 
upon which the protested concern's size is questioned. Some basis for 
the belief or allegation stated in the protest must be given. A protest 
merely alleging that the protested concern is not small or is 
affiliated with unnamed other concerns does not specify adequate 
grounds for the protest. No particular form is prescribed for a 
protest. Where materials supporting the protest are available, they 
should be submitted with the protest.
    (c) Non-specific protests will be dismissed. Protests which do not 
contain sufficient specificity will be dismissed by SBA.


Sec. 121.1008  What happens after SBA receives a size protest or a 
request for a formal size determination?

    (a) When a size protest is received, the SBA Government Contracting 
Area Director, or designee, will promptly notify the contracting 
officer, the protested concern, and the protestor that a protest has 
been received. In the event the size protest pertains to a requirement 
involving SBA's SBIR Program, the Government Contracting Area Director 
will advise the Assistant Administrator for Technology of the receipt 
of the protest. SBA will provide a copy of the protest to the protested 
concern along with a blank SBA Application for Small Business Size 
Determination (SBA Form 355) by certified mail, return receipt 
requested, or by any overnight delivery service that provides proof of 
receipt. SBA will ask the protested concern to respond to the 
allegations of the protestor.
    (b) When SBA receives a request for a formal size determination in 
accord with Sec. 121.1001(b), SBA will provide a blank copy of SBA Form 
355 to the concern whose size is at issue.
    (c) The protested concern or concern whose size is at issue must 
return the completed SBA Form 355 and all other requested information 
to SBA within 3 working days from the date of receipt of the blank form 
from SBA. SBA has discretion to grant an extension of time to file the 
form. The firm must attach to the completed SBA Form 355 its answers to 
the allegations contained in the protest, where applicable, together 
with any supporting material.
    (d) If a concern does not submit a completed SBA Form 355, answers 
to the protest allegations, or other requested information within the 
allotted time provided by SBA, or if it submits incomplete information, 
SBA may presume that disclosure of the form, any information missing 
from it, or other missing information would show or tend to show that 
the concern is other than a small business.


Sec. 121.1009  What are the procedures for making the size 
determination?

    (a) Time frame for making size determination. After receipt of a 
protest or a request for a formal size determination, SBA will make a 
formal size determination within 10 working days, if possible.
    (b) Basis for determination. The size determination will be based 
primarily on information supplied by the protestor or the entity 
requesting the size determination and the subject concern. The 
determination, however, may also be based on other grounds not raised 
in the protest or request for size determination. SBA may utilize other 
information in its files and may make inquiries including requests to 
the protestor, the protested concern and any alleged affiliates, or 
other persons for additional specific information.
    (d) Burden of persuasion. The concern whose size is under 
consideration has the burden of establishing its small business size.
    (e) Weight of evidence. SBA will give greater weight to specific, 
signed, factual evidence than to general, unsupported allegations or 
opinions. In the case of refusal or failure to furnish requested 
information within a required time period, SBA may assume that 
disclosure would be contrary to the interests of the party failing to 
make disclosure.
    (f) Formal size determination. The SBA will base its formal size 
determination upon the record, including reasonable inferences from the 
record, and will state in writing the basis for its findings and 
conclusions.
    (g) Notification of determination. SBA will promptly notify the 
contracting officer, the protestor, and the protested offeror, as well 
as each affiliate or alleged affiliate, of the size determination. The 
notification will be by certified mail, return receipt requested, or by 
any overnight delivery service that provides proof of receipt.
    (h) Results of an SBA size determination. (1) A formal size 
determination becomes effective immediately and remains in full force 
and effect unless and until reversed by OHA, or unless the concern is 
formally recertified as a small business by SBA.
    (2) Once SBA has determined that a concern is other than small for 
purposes of a particular procurement, the concern cannot later become 
eligible for the procurement by reducing its size.
    (3) A concern determined to be other than small for a particular 
size standard is ineligible for any procurement or assistance 
authorized by the Small Business Act or the Small Business Investment 
Act of 1958, requiring the same or a lower size standard, unless 
recertified as small pursuant to Sec. 121.1010. Following an adverse 
size determination, a concern cannot again self-certify as small within 
the same or a lower size standard unless it is recertified as small by 
SBA. If it does so, it may be in violation of criminal laws, including 
section 16(d) of the Small Business Act, 15 U.S.C. 645(d). If the 
concern has already certified itself as small on a pending procurement 
or on another assistance application, the concern must immediately 
inform the officials responsible for the pending procurement or other 
requested assistance of the adverse size determination.
    (i) Limited reopening of size determinations. In cases where the 
size determination contains clear administrative error or a clear 
mistake of fact, the SBA office that made the size determination may, 
in its sole discretion, reopen the size determination to correct the 
error or mistake, provided the case has not been accepted for review by 
OHA.


Sec. 121.1010  How does a concern become recertified as a small 
business?

    (a) A concern may request SBA to recertify it as small at any time 
by filing an application for recertification with the Government 
Contracting Area Office responsible for the area in which the 
headquarters of the applicant is located, regardless of the location of 
parent companies or affiliates. No particular form is prescribed for 
the application; 

[[Page 58011]]
however, the request for recertification must be accompanied by a 
current completed SBA Form 355 and any other information sufficient to 
show a significant change in its ownership, management, or other 
factors bearing on its status as a small concern.
    (b) Recertification will not be required nor will the prohibition 
against future self-certification apply if the adverse SBA size 
determination is based solely on a finding of affiliation due to a 
joint venture (e.g., ostensible subcontracting) limited to a particular 
Government procurement or property sale, or is based on an ineligible 
manufacturer where the eligible small business bidder or offeror is a 
nonmanufacturer on a particular Government procurement.
    (c) A denial of an application for recertification is a formal size 
determination and may be reviewed by OHA at the discretion of that 
office.
    (d) The granting of an application for recertification has future 
effect only. While it is a formal size determination, notice of 
recertification is required to be given only to the applicant.

Appeals of Size Determinations and SIC Code Designations


Sec. 121.1101  Are formal size determinations subject to appeal?

    There is no right of appeal of a size determination. OHA, however, 
may, in its sole discretion, review a formal size determination made by 
a SBA Government Contracting Area Office or by a Disaster Area Office. 
Unless OHA accepts a petition for review of a formal size 
determination, the size determination made by a SBA Government 
Contracting Area Office or by a Disaster Area Office is the final 
decision of SBA. The procedures for requesting discretionary reviews by 
OHA of formal size determinations are set forth in part 134 of this 
chapter.


Sec. 121.1102  Are SIC code designations subject to appeal?

    Appeals may be made to OHA, which has exclusive jurisdiction to 
determine appeals of SIC code designations pursuant to part 134 of this 
chapter.


Sec. 121.1103  What are the procedures for appealing a SIC code 
designation?

    (a) Generally, any interested party who has been adversely affected 
by a SIC code designation may appeal the designation to OHA. However, 
with respect to a particular MED contract, only the Associate 
Administrator for MED may appeal.
    (b) Procedures for perfecting SIC code appeals with OHA are 
contained in Sec. 19.303 of the Federal Acquisition Regulations, 48 CFR 
19.303.

Subpart B--Other Eligibility Provisions

Eligibility of Organizations for the Handicapped for Small Business 
Set-asides


Sec. 121.1201  May handicapped organizations be awarded Federal 
procurements set aside for small business?

    Section 15 of the Small Business Act, 15 U.S.C. 644(c), provides 
that public or private organizations for the handicapped are eligible 
to participate in Federal procurements which are set aside for small 
business.


Sec. 121.1202  What is an organization for the handicapped?

    An organization for the handicapped means a public or private 
entity:
    (a) Which is organized under the laws of the United States or any 
state and operated in the interest of handicapped individuals, the net 
income of which does not inure in whole or in part to the benefit of 
any shareholder or other individual; and
    (b) Which complies with any applicable occupational health and 
safety standard prescribed by the Secretary of Labor.


Sec. 121.1203  Who are handicapped individuals?

    A handicapped individual means a person who has a physical, mental, 
or emotional impairment, defect, ailment, disease, or disability of a 
permanent nature which in any way limits the selection of any type of 
employment for which the person would otherwise be qualified or 
qualifiable.


Sec. 121.1204  What are the eligibility requirements for organizations 
for the handicapped to receive awards of contracts set aside for small 
business?

    Organizations for the handicapped are eligible if at least 75 
percent of the direct labor performed on each item being produced under 
the contract, or performed in providing each type of service under the 
contract, is performed by handicapped individuals, and the statutory 
maximum allowable amount of such awards for the applicable fiscal year 
has not been reached.


Sec. 121.1205  What are the procedures for filing protests of the 
status of handicapped organizations?

    (a) Who may protest. A responsive offeror, the affected contracting 
officer, or SBA may file a protest.
    (b) Procedure to protest and time frame. A protest must be 
delivered to the contracting officer by hand, telegram, or be placed in 
the U.S. mail prior to the close of business on the fifth working day 
after bid opening, or, in the case of a negotiated procurement, the 
fifth working day after receipt of notification of the identity of the 
apparent successful offeror.
    (c) Protest must be specific. Protests must allege specific 
information tending to show that the protested organization does not 
meet the eligibility criteria.
    (d) Receipt of protest by SBA from contracting officer. The 
contracting officer who received the protest must promptly forward it 
to the Associate Administrator for Government Contracting, Small 
Business Administration, 409 Third Street, S.W., Washington, D.C. 
20416.
    (e) Notice to the protested organization. SBA will notify the 
protested organization in writing of the protest and request 
documentation addressing the allegations supporting the protest.
    (f) Required response from protested organization. Within three 
business days of receipt of written notification of the protest from 
SBA, the protested organization must provide SBA with required 
documentation, including any other documentation or information it 
wishes SBA to consider. Failure to submit required documentation may be 
grounds for a finding against the protested organization.
    (1) Except as provided in paragraph (f)(2) of this section, the 
following documentation, where applicable, must be provided to SBA in 
order to demonstrate the eligibility of an organization:
    (i) A copy of the articles of incorporation of the protested 
organization showing the date of filing and the signature of an 
appropriate State official.
    (ii) A copy of the bylaws of the protested organization.
    (iii) If the articles of incorporation or bylaws do not include a 
statement to the effect that no part of its net income may inure to the 
benefit of any shareholder or other individual, one of the following 
documents:
    (A) A certified copy of the State statute under which the 
organization was incorporated which includes wording to the effect that 
no part of its net income may inure to the benefit of any shareholder 
or other individual;
    (B) A copy of a resolution approved by the governing body of the 
corporation, certified by an officer of the corporation, to the effect 
that no part of its net income may inure to the benefit of any 
shareholder or other individual; or
    (C) A copy of the Internal Revenue Service certificate, duly 
executed during the prior twelve months, indicating that the 
corporation has been accepted as a non-profit agency for taxation 
purposes. 

[[Page 58012]]

    (2) A State-owned or State-operated workshop for the blind or other 
severely handicapped shall demonstrate its eligibility by submitting 
the following documents:
    (i) A certified copy of the State statute establishing or 
authorizing the establishment of a workshop for the handicapped; and
    (ii) In the case of a wholly-owned State corporation, a certified 
copy of the corporate bylaws; and, in the case of a State agency, a 
certified true copy of implementing regulations, operating procedures, 
notice of establishment of the workshop, or other similar documents.
    (3) If the protested organization is a workshop participating under 
the Javits-Wagner-O'Day Program, the required documentation may be 
delivered by the Committee for Purchase from the Blind and Other 
Severely Handicapped which maintains workshop eligibility documentation 
on file in its offices. Delivery may be made by hand, telegram or 
placement in the U.S. Postal Service.
    (g) Required consultation. The Associate Administrator for 
Government Contracting will consult with the Executive Director of the 
Committee for Purchase from the Blind and other Severely Handicapped 
before rendering a determination.
    (h) Notice of decision. SBA shall, within ten business days of 
receipt of a protest, notify all parties of its decision. Notification 
will be considered complete upon hand delivery, receipt of a telegram, 
or placement in the U.S. Postal Service.
    (i) Final SBA decision. The Associate Administrator for Government 
Contracting makes the final Agency decision.


Sec. 121.1206  How does SBA handle appeals of economic impact?

    A proposed award of a small business set-aside to an organization 
for the handicapped may be appealed to SBA if a small business concern 
has experienced or is likely to experience severe economic injury as 
the result of the proposed award.
    (a) Who may appeal. An appeal may be filed by a small business 
concern making an offer on the solicitation which:
    (1) Is or was the incumbent contractor on a predecessor contract 
for the services or products being solicited; or
    (2) Was the apparent otherwise successful offeror on a prior small 
business set-aside contract that was awarded to an organization for the 
handicapped.
    (b) Grounds for appeal. (1) An incumbent contractor must show that:
    (i) Absent competition by organizations for the handicapped, it is 
likely to receive the instant award; and
    (ii) The dollar amount of the instant award represents at least 25 
percent of the concern's annual receipts in its most recently completed 
fiscal year.
    (2) Offerors appealing on the grounds of prior small business set-
aside contract awards to organizations for the handicapped must show 
that:
    (i) Absent competition by organizations for the handicapped, it is 
likely to receive the instant award;
    (ii) The dollar amount of the instant award represents at least 25 
percent of the concern's annual receipts in its most recently completed 
fiscal year; and
    (iii) The dollar amount of the prior small business set-aside 
contract awarded to an organization for the handicapped for which the 
concern was the apparent otherwise successful offeror represented at 
least 25 percent of its annual receipts for the fiscal year in which 
the contract was awarded. If the fiscal year in which the prior 
contract was awarded to an organization for the handicapped is not yet 
completed, the award must represent at least 25 percent of the 
concern's most recently completed fiscal year.
    (c) Procedure for appeal. (1) Appeals must be submitted to the 
contracting officer who must promptly forward them to the Associate 
Administrator for Government Contracting, Small Business 
Administration, 409 3rd Street, S.W., Washington, D.C. 20416. The 
Associate Administrator makes the final Agency decision.
    (2) Appeals must be delivered by hand, telegraph, or placed in the 
United States mail, by the close of business of the tenth calendar day 
after opening of bids or, in the case of negotiated procurements, after 
receipt of notification of the identity of the apparent successful 
offeror.
    (3) The Associate Administrator will consult with the Executive 
Director of the Committee for Purchase from the Blind and Other 
Severely Handicapped and will decide the appeal within ten working days 
after its receipt.
    (4) The Associate Administrator will notify the appellant and 
contracting officer of SBA's decision and require the contracting 
officer to proceed with award or to make an award without regard to 
offers by organizations for the handicapped.

Waivers of the Nonmanufacturer Rule for Classes of Products


Sec. 121.1301  What is the Nonmanufacturer Rule?

    The Nonmanufacturer Rule is set forth in Sec. 121.406(b).


Sec. 121.1302  When will a waiver of the Nonmanufacturer Rule be 
granted for a class of products?

    (a) A waiver for a class of products (class waiver) will be granted 
when there are no small business manufacturers or processors available 
to participate in the Federal market for that class of products.
    (b) Federal market means acquisitions by the Federal Government 
from offerors located in the United States, or such smaller area as SBA 
designates if it concludes that the class of products is not supplied 
on a national basis.
    (1) When considering the appropriate market area for a product, SBA 
presumes that the entire United States is the relevant Federal market, 
unless it is clearly demonstrated that a class of products cannot be 
procured on a national basis. This presumption may be particularly 
difficult to overcome in the case of manufactured products, since such 
items typically have a market area encompassing the entire United 
States.
    (2) When considering geographic segmentation of a Federal market, 
SBA will not necessarily use market definitions dependent on airline 
radius, political, or SBA regional boundaries. Market areas typically 
follow established transportation routes rather than jurisdictional 
borders. SBA examines the following factors, among others, in cases 
where geographic segmentation for a class of products is urged:
    (i) Whether perishability affects the area in which the product can 
practically be sold;
    (ii) Whether transportation costs are high as a proportion of the 
total value of the product so as to limit the economic distribution of 
the product;
    (iii) Whether there are legal barriers to transportation of the 
item;
    (iv) Whether a fixed, well-delineated boundary exists for the 
purported market area and whether this boundary has been stable over 
time; and
    (v) Whether a small business, not currently selling in the defined 
market area, could potentially enter the market from another area and 
supply the market at a reasonable price.
    (c) Available to participate in the context of the Federal market 
means that contractors exist that have been awarded or have performed a 
contract to supply a specific class of products to the 

[[Page 58013]]
Federal Government within 24 months from the date of the request for 
waiver, either directly or through a dealer, or who have submitted an 
offer on a solicitation for that class of products within that time 
frame.
    (d) Class of products is an individual subdivision within a four-
digit Industry Number as established by the Office of Management and 
Budget in the SIC Manual.


Sec. 121.1303  When will a waiver of the Nonmanufacturer Rule be 
granted for an individual contract?

    An individual waiver for a product in a specific solicitation will 
be approved when the SBA Associate Administrator for Government 
Contracting reviews and accepts a contracting officer's determination 
that no small business manufacturer or processor can reasonably be 
expected to offer a product meeting the specifications of a 
solicitation, including the period of performance.


Sec. 121.1304  What are the procedures for requesting and granting 
waivers?

    (a) Waivers for classes of products. (1) SBA may, at its own 
initiative, examine a class of products for possible waiver of the 
Nonmanufacturer Rule.
    (2) Any interested person, business, association, or Federal agency 
may submit a request for a waiver for a particular class of products. 
Requests should be addressed or hand-carried to the Associate 
Administrator of Government Contracting, Small Business Administration, 
409 3rd Street S.W., Washington, D.C.
    (3) Requests for a waiver of a class of products need not be in any 
particular form, but should include a statement of the class of 
products to be waived, the applicable SIC code, and detailed 
information on the efforts made to identify small business 
manufacturers or processors for the class.
    (4) If SBA decides that there are small business manufacturers or 
processors in the Federal procurement market, it will deny the request 
for waiver, issue notice of the denial, and provide the names, 
addresses, and telephone numbers of the sources found. If SBA does not 
initially confirm the existence of small business manufacturers or 
processors in the Federal market, it will:
    (i) Publish notices in the Commerce Business Daily and the Federal 
Register seeking information on small business manufacturers or 
processors, announcing a notice of intent to waive the Nonmanufacturer 
Rule for that class of products and affording the public a 15-day 
comment period; and
    (ii) If no small business sources are identified, publish a notice 
in the Federal Register stating that no small business sources were 
found and that a waiver of the Nonmanufacturer Rule for that class of 
products has been granted.
    (5) An expedited procedure for issuing a class waiver may be used 
for emergency situations, but only if the contracting officer provides 
a determination to the Associate Administrator for Government 
Contracting that the procurement is proceeding under the authority of 
FAR (48 CFR 6.302-2 for ``unusual and compelling urgency,'' or provides 
a determination materially the same as one of unusual and compelling 
urgency. Under the expedited procedure, if a small business 
manufacturer or processor is not identified by a PASS search, the SBA 
will grant the waiver for the class of products and then publish a 
notice in the Federal Register. The notice will state that a waiver has 
been granted, and solicit public comment for future procurements.
    (6) The decision by the Associate Administrator for Government 
Contracting to grant or deny a waiver is the final decision by the 
Agency.
    (7) A waiver of the Nonmanufacturer Rule for classes of products 
has no specific time limitation. SBA will, however, periodically review 
existing class waivers to the Nonmanufacturer Rule to determine if 
small business manufacturers or processors have become available to 
participate in the Federal market for the waived classes of products 
and the waiver should be terminated.
    (i) Upon SBA's receipt of evidence that a small business 
manufacturer or processor exists in the Federal market for a waived 
class of products, the waiver will be terminated by the Associate 
Administrator for Government Contracting. This evidence may be 
discovered by SBA during a periodic review of existing waivers or may 
be brought to SBA's attention by other sources.
    (ii) SBA will announce its intent to terminate a waiver for a class 
of products through the publication of a notice in the Federal 
Register, asking for comments regarding the proposed termination.
    (iii) Unless public comment reveals that no small business 
manufacturer or process in fact exists for the class of products in 
question, SBA will publish a final Notice of Termination in the Federal 
Register.
    (b) Individual waivers for specific solicitations. (1) A 
contracting officer's request for a waiver of the Nonmanufacturer Rule 
for specific solicitations need not be in any particular form, but 
must, at a minimum, include:
    (i) A definitive statement of the specific item to be waived and 
justification as to why the specific item is required;
    (ii) The solicitation number, SIC code, dollar amount of the 
procurement, and a brief statement of the procurement history;
    (iii) A determination by the contracting officer that there are no 
known small business manufacturers or processors for the requested 
items (the determination must contain a narrative statement of the 
contracting officer's efforts to search for small business 
manufacturers or processors of the item and the results of those 
efforts, and a statement by the contracting officer that there are no 
known small business manufacturers for the items and that no small 
business manufacturer or processor can reasonably be expected to offer 
the required items); and
    (iv) For contracts expected to exceed $500,000, a copy of the 
Statement of Work.
    (2) Requests should be addressed to the Associate Administrator for 
Government Contracting, Small Business Administration, 409 3rd Street, 
S.W., Washington, D.C. 20416.
    (3) SBA will examine the contracting officer's determination and 
any other information it deems necessary to make an informed decision 
on the individual waiver request. If SBA's research verifies that no 
small business manufacturers or processors exist for the item, the 
Associate Administrator for Government Contracting will grant an 
individual, one-time waiver. If a small business manufacturer or 
processor is found for the product in question, the Associate 
Administrator will deny the request. Either decision represents a final 
decision by SBA.


Sec. 121.1305  How is a list of previously granted class waivers 
obtained?

    A list of classes of products for which waivers of the 
Nonmanufacturer Rule have been granted will be maintained in SBA's 
Procurement Automated Source System (PASS). A list of such waivers may 
also be obtained by contacting the Office of Government Contracting at 
the Small Business Administration, Washington, D.C. 20416, or at the 
nearest SBA Government Contracting Area Office.

    Dated: November 11, 1995.
Philip Lader,
Administrator.
[FR Doc. 95-28449 Filed 11-22-95; 8:45 am]
BILLING CODE 8025-01-P