[Federal Register Volume 64, Number 93 (Friday, May 14, 1999)]
[Rules and Regulations]
[Pages 26275-26281]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 99-12267]


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

SMALL BUSINESS ADMINISTRATION

13 CFR Part 121


Small Business Size Standards; Engineering Services, 
Architectural Services, Surveying, and Mapping Services

AGENCY: Small Business Administration.

ACTION: Final rule.

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

SUMMARY: The Small Business Administration (SBA) is establishing a size 
standard of $4.0 million in average annual receipts for general 
Engineering Services (part of Standard Industrial Classification (SIC) 
code 8711), Architectural Services (SIC code 8712), Surveying (SIC code 
8713) and Mapping Services (part of SIC code 7389). The current size 
standard for the general Engineering component of SIC code 8711 and all 
of SIC codes 8712 and 8713 is $2.5 million. For Mapping Services under 
SIC code 7389, the current size standard is $3.5 million. These 
revisions are made to more appropriately define the size of business in 
these industries that SBA believes should be eligible for Federal small 
business assistance programs.

DATES: This rule is effective on June 14, 1999.

FOR FURTHER INFORMATION CONTACT: Robert N. Ray, Office of Size 
Standards, (202) 205-6618.

SUPPLEMENTARY INFORMATION: On February 3, 1998, SBA proposed a revision 
to the size standard for general Engineering Services (part of SIC code 
8711) from $2.5 million to $7.5 million (63 FR 5480). (The other size 
standards applicable to Engineering Services under SIC code 8711--
Military and Aerospace Equipment, Military Weapons, Marine Engineering, 
and Naval Architecture--were not reviewed as part of the proposed rule 
and are not changed by this final rule.)
    The proposed rule also revised the size standard for the 
Architectural Services industry (SIC code 8712), from $2.5 million to 
$5.0 million, and for the Surveying Services industry (SIC code 8713) 
from $2.5 million to $3.5 million. SBA proposed no change to the $3.5 
million size standard for Mapping Services categorized within Business 
Services, Not Elsewhere Classified (SIC code 7389). SBA proposed that 
Mapping Services should have the same size standard as Surveying 
Services since they are closely related industries. Surveying Services 
was proposed for adjustment to $3.5 million, the standard already 
applicable to Mapping Services.
    SBA proposed these size standards based on its analysis of the 
latest

[[Page 26276]]

available industry data from the U.S. Bureau of the Census (the Census 
Bureau) and Federal contract award data from the Federal Procurement 
Data Center. SBA evaluated certain factors describing the economic 
characteristics of firms in the Engineering, Architectural, and 
Surveying Services industries (industry data from the Census Bureau are 
not available for Mapping Services under SIC code 7389). These factors 
were average firm size, the distribution of industry revenues by size 
of firm, start-up costs, and industry competition. SBA compared the 
characteristics of the Engineering, Architectural, and Surveying 
Services industries to the average characteristics of all industries 
with a $5.0 million size standard (the most common size standard 
established for nonmanufacturing industries and referred to as the 
``anchor'' size standard for the nonmanufacturing industries).
    Doing so enabled SBA to determine if the size standards for 
Architectural, General Engineering, and Surveying Services should be 
the same, higher, or lower than the $5 million anchor size standard. In 
addition, SBA reviewed the percent of total Federal contract dollars 
awarded to small businesses to determine if small businesses were 
obtaining a reasonable share of Federal contracts. For a further 
discussion of SBA's size standard methodology and the analyses leading 
to the proposed size standards see the proposed rule of February 3, 
1998 (63 FR 5480).

Reason for Adopting a $4.0 Million Size Standard for These 
Industries

    This final rule establishes a $4.0 million size standard for the 
each of the general Engineering, Architectural, Surveying, and Mapping 
Services industries. The decision to adopt this size standard rather 
than those proposed primarily reflects our assessment of public 
comments received on the proposed size standards. While industry and 
Federal procurement data support the size standards originally 
proposed, these data also indicate that $4.0 million is within a range 
of size standards supportable by the data.
    The size standards analysis is not a mechanical process that 
produces a finite result. Rather, the analysis of industry and Federal 
procurement data provides SBA with a reasonable range of size standards 
to consider. Based on a review of specific industry characteristics and 
other information, such as public comments on a proposed size standard, 
SBA makes a decision on what final size standard to adopt within the 
range of size standards supported by the data.
    As discussed in greater detail below, a significant number of 
comments disagree with the $7.5 million proposed size standard for 
General Engineering Services and the $5.0 million proposed size 
standard for Architectural Services. These comments express a 
consistent and serious concern that smaller businesses, especially 
those below the $2.5 million size standard, would not be competitive 
with businesses whose sizes are at or near the size standards which 
were proposed for general Engineering ($7.5 million) or Architectural 
Services ($5.0 million).
    SBA has accepted the significance of these concerns, and adopts the 
lower size standard of $4.0 million to help address them, while at the 
same time providing an appropriate recognition of the results of 
inflation. Most comments separately addressing Surveying and Mapping 
Services support a higher standard than the proposed $3.5 million. A 
$4.0 million size standard helps address those views as well.
    As explained below, numerous commenters strongly argue that a 
common size standard should be established for the four industry 
categories of general Engineering, Architecture, Surveying, and Mapping 
Services to reflect the many related activities encompassing the 
professional design industry. SBA agrees. The desirability of 
establishing the same size standard for each of these industries, 
provided industry-specific factors are reasonably consistent with that 
standard, was a strong consideration in developing this final rule.
    SBA's review of industry and Federal procurement data support $4.0 
million as a reasonable size standard for these industries. As 
discussed in the proposed rule, most of the industry factors for 
Architectural Services and Surveying Services support a size standard 
at or below SBA's anchor size standard of $5.0 million for 
nonmanufacturing industries.
    Also, as discussed in the proposed rule, the large discrepancy 
between the share of Federal contract awards to small businesses in 
these two industries and their share of total industry revenues support 
an increase from the $2.5 million size standard. A size standard of 
$4.0 million recognizes the impact of general inflationary trends that 
have occurred since the current size standard was established in 1986, 
as well as additional cost pressures related to the expanded use of 
computerized applications experienced by engineering, architectural and 
surveying and mapping firms. Thus, we believe a size standard at $4.0 
million is a reasonable alternative to the proposed size standards for 
Architectural Services and Surveying Services.
    Although the industry data for general Engineering Services support 
a size standard higher than the anchor size standard, the SBA is now 
persuaded, in light of comments received, that Census Bureau data do 
not adequately consider the integrated nature and relationships among 
the four industry categories. For this reason, we believe the size 
standard appropriate for Architectural Services and Surveying Services 
is also appropriate for general Engineering Services.
    Finally, we continue to believe the size standard for Surveying 
Services should also be established for Mapping Services. As discussed 
in the proposed rule, Surveying Services and Mapping Services are 
considered closely related activities. The newly developed North 
American Industry Classification System (NAICS) organizes firms engaged 
in these two activities into a single industry. SBA will be 
establishing size standards by NAICS industries in the near future, and 
believes it should treat Surveying Services and Mapping Services as one 
industry for size standards purposes.

Discussion of Comments

    SBA received 177 timely comments on the proposed size standards. 
Eight comments are from associations, two from officials of Government 
agencies, and 167 from businesses and individuals. Several 
organizations submitted multiple comments. By counting multiple 
comments from the same organization as one, there are 130 comments from 
individuals and organizations that express a clear preference for a 
particular size standard. Just over half of the comments favor size 
standards similar to or higher than those proposed, and just under half 
favor no change to the current size standard or favor increases smaller 
than those proposed.
    The comments raise ten major issues concerning the proposed size 
standards. Two of these issues strongly influenced our decision to 
adopt a $4.0 million size standard for each of general Engineering, 
Architectural, Surveying, and Mapping Services rather than the proposed 
size standards ($7.5 million, $5.0 million, and $3.5 million, 
respectively). These two issues involve the amount of increase 
appropriate from the existing size standards, and whether there should 
be a common size standard for all four industries. These two issues are 
dealt with first in the following discussion of the major issues raised 
by the commenters. Eight other issues raised by the commenters dealt 
with

[[Page 26277]]

other concerns. Below we explain our position on each.

Common Size Standard

    A majority of the commenting associations, several individual 
businesses, and one Government agency argue for a common size standard 
for the general Engineering, Architectural, Surveying, and Mapping 
Services industries. Many of these comments consider the Architecture, 
Landscape Architecture, Engineering, Surveying, and Mapping Services as 
fully integrated and comprising the ``Professional Design Services'' 
industry.
    This multi-disciplined nature of the industry indicates the need 
for a common size standard among these services. In the public sector, 
these commenters argued that architects, landscape architects, 
engineers, and surveyors often serve in similar positions of 
responsibility, moving between jobs requiring a design professional's 
expertise. In the private sector, many design professionals practice in 
multidisciplinary design firms. These firms integrate the skills of 
each profession to offer quality services to their clients.
    Because of the integrated nature of multidisciplined firms, many of 
the comments express concern that firms could be held to three 
different size standards if the proposed size standards were adopted 
depending on the nature of a particular project. This is seen as 
confusing and unnecessary. Moreover, it is argued that with different 
size standards, contracting officers will at times inappropriately 
select the SIC code with the highest size standard when a procurement 
calls for activities from different industries.
    Based on these comments, we agree that a common size standard 
should be established for general Engineering, Architectural, 
Surveying, and Mapping Services. The industries of general Engineering 
and Architectural Services are closely integrated and it is often 
difficult to distinguish whether a Federal contract should be 
classified under Architectural or Engineering Services. Also 
competition on surveying contracts frequently involves firms from both 
the Surveying Services and Engineering Services industries. In 
addition, there could be a tendency for contracting officers to select 
industries with higher size standards in cases where it's a ``close 
call'' as to which industry best describes the primary purpose of the 
contract. A common size standard will ensure that firms that compete in 
closely related industries are subject to the same size standard, and 
that contracting officers are not influenced by the size standard when 
determining the proper SIC code for a Federal procurement.
    We recognize that this position departs from the approach taken in 
the proposed rule. Architectural, Engineering, and Surveying Services 
are separate industries under the SIC system for which the Census 
Bureau publishes data on firms primarily engaged in each industry. 
(Mapping Services is a very small component of SIC 7389, which includes 
a broad range of business services. No separate Census Bureau industry 
data are available for Mapping Services.) The proposed rule was the 
first time the SBA had both specific industry data to analyze a size 
standard for Architectural, Engineering, and Surveying industries and 
legal authority to make size standard changes.
    When the $2.5 million size standard was adopted in 1986, 
Engineering, Architectural, and Surveying Services made up only one SIC 
industry. The revisions to the SIC System in 1987 created separate 
industries for Engineering, Architectural, and Surveying Services from 
that one industry. Census Bureau data for the 1987 SIC industries were 
not available until 1990. By that time, the Congress had imposed a 
prohibition against changing the size standards for these industries 
(see the Small Business Competitiveness Demonstration Program Act, 
Title VII, Public Law 100-656, 102 Stat. 3853, 3889). As explained in 
the proposed rule, when SBA examined these industries they exhibited 
significant differences. While these differences could support a 
separate size standard for each industry, the comments received present 
persuasive reasons why the SBA should continue to retain a common size 
standard for those three industries even though the statutory 
restriction has now been removed.
    Furthermore, Census Bureau data corroborate the interaction that 
exists among firms in these three industries. For example, a review of 
the Census Bureau's publication ``Sources of Firm Revenues'' shows that 
engineering firms earned revenues for surveying work equal to about 
half the total revenues earned by surveying firms. Engineering firms 
also earned revenues for architectural services equal to about nine 
percent of the revenues earned by architectural firms. These data, 
along with the comments, indicate that a common size standard for the 
three industries is appropriate. As indicated above, SBA believes the 
Mapping Services size standard should be the same as the Surveying size 
standard. The end result is a common size standard for all four 
industries.
    The size standard for Landscape Architectural Services, also 
considered part of the Professional Design Services industry, is $5.0 
million, and was not part of the February 3, 1998, proposed rule. This 
industry's size standard was revised from $3.5 million in 1994, as part 
of SBA's inflation adjustment to receipts-based size standards. Since 
the public was not given a fair opportunity to comment on any 
adjustments to that size standard, we make no change to that size 
standard in this final rule.

What the Appropriate Size Standard Should Be

    Most of the comments addressed the question of what size standard 
should be adopted for the general Engineering, Architectural, 
Surveying, and Mapping Services industries. The comments supporting a 
higher size standard generally argue that an increase is long overdue 
since the $2.5 million size standard, established in 1986, was not 
adjusted for inflation in 1994, when most other revenue-based size 
standards were adjusted (see 59 FR 16513).
    In addition, Federal contracts have in recent years grown 
progressively larger and commenters argued that a higher size standard 
is needed to recognize the size of small firms that can perform on 
these newer contracts. The costs of entry into these industries have 
also increased over time, especially technology costs. These technology 
costs include computer-aided design and drafting, state-of-the-art 
computer hardware, new engineering and architectural software, and 
modern surveying equipment such as Global Positioning Software.
    Several architectural firms also argued that the actual operations 
of an architectural firm is significantly smaller than indicated by its 
revenue size since the value of subcontracts, which may account for 30 
percent to 40 percent of revenues, is included in calculating the gross 
revenues of a firm. The supporters of a higher size standard also 
stated that firms even exceeding the current $2.5 million are usually 
not strong enough to compete successfully against mid-sized and large 
firms. Thus, a size standard higher than $2.5 million is needed to help 
small firms become more competitive.
    Among comments opposing the proposed size standards, the most 
common argument was that firms below $2.5 million in size could not 
compete with firms in the $5.0 million to $7.5 million size range. 
Firms below $2.5 million contend that they do not have the resources to 
compete with these businesses in terms of preparing

[[Page 26278]]

proposals for Federal contracts. These comments claim that contracting 
officers will naturally favor the larger-sized firms that are within 
the size standard. Larger firms have more personnel to draw on. Often 
these larger firms can offer higher salaries, thus drawing in 
professionals with strong reputations attractive to contracting 
officers.
    Since Federal contracts for general Engineering, Architectural, 
Surveying, and Mapping Services are awarded using qualifications-based 
selection criteria, larger and more experienced firms tend to have an 
advantage over smaller and younger firms. Some comments also argue that 
in some markets (e.g., New Mexico, Wyoming, and the District of 
Columbia), all firms would be considered small under the proposed size 
standards and, therefore, there would be no meaningful small business 
definition.
    While many of the comments made general statements on the proposed 
new size standards, some commenters' comments specifically discussed 
the proposed Surveying and Mapping Services size standard. A few wanted 
no change to the current $2.5 million for reasons similar to those 
given in opposition to the general Engineering and Architectural 
Services size standards. A few others support the proposed $3.5 million 
size standard, while most recommended size standards of between $4.0 
million and $10.0 million. Those comments supporting an increase to the 
current size standard cite high start-up costs for surveying and 
mapping equipment and a concern that the Surveying and Mapping Services 
size standard should be similar to the general Engineering Services 
size standard. A mapping association, representing over 120 members, 
recommends we establish a separate size standard for Mapping Services 
of $7.5 million.
    Although a majority of the comments favor the proposed size 
standards or higher size standards than those proposed, almost an equal 
number of comments recommend size standards lower than those proposed. 
This large difference of opinion strongly suggests that the proposed 
size standard increases were too high, particularly the proposed size 
standard of $7.5 million for General Engineering Services. We agree 
with many of the comments that firms below $2.5 million in size will 
likely have difficulty competing with firms that are $5.0 million or 
larger in size. A $4.0 million size standard addresses both the need 
for a higher size standard than the current $2.5 million while ensuring 
that smaller businesses in the industries are not significantly harmed 
by a higher size standard. We also believe the adopted size standard 
helps address the concern that all firms in a regional market could be 
considered small under the proposed size standards.

Surveying and Mapping Services Size Standard

    Several comments on the Surveying and Mapping Services size 
standards argue that the cost of entry into photogrammetric mapping 
activities is higher than the cost of entry into the Architectural 
Services and Engineering Services industries and recommend a higher 
size standard than proposed. Also, a mapping association argues that a 
separate size standard should be established for Mapping Services given 
the different characteristics of mapping firms as compared to surveying 
firms.
    Although the Census Bureau data used to evaluate the Surveying 
Services industry clearly supports a size standard lower than that for 
general Engineering Services, the data do not capture the significant 
number of engineering firms that are engaged in Surveying Services. 
Consequently, the size standard adopted for general Engineering and 
Architectural Services is also adopted for Surveying and Mapping 
Services. This does result in a higher size standard being adopted than 
proposed.
    With respect to establishing a separate size standard for Mapping 
Services, SBA establishes size standards at the industry level, except 
for a few special categories. The size standard established for an 
industry reflects the characteristics of all firms engaged in all 
activities within that industry. In every industry, some firms engage 
in specialized activities that are too few in number to influence the 
level of the size standard. To address the concerns of these comments, 
we would have to establish a size standard for a sub-category under 
Business Services, Not Elsewhere Classified. Only when a category 
represents a major activity within an industry and is significantly 
distinct from all other industry activities do we consider a size 
standard below the industry level. If we were to routinely establish 
size standards below the industry level, it could potentially 
complicate size standards by creating hundreds if not thousands of 
additional size standards. Information provided by a mapping 
association does indicate that Mapping Services may be a sufficiently 
large activity within the industry and Federal procurement for us to 
examine whether a separate size standard should be established. 
However, that decision will be made after additional study of the 
industry and a change will be pursued as a separate proposed rule if it 
is deemed necessary.

Historic and Cultural Preservation

    A few commenters focused on a special subset of activities within 
Engineering and Architectural Services involving historic or cultural 
preservation. These submitters argue that raising the size standards as 
proposed would devastate small businesses in this category, because, in 
their view, most Federal contracts would be awarded to firms they 
consider large businesses. These comments recommend either no change or 
a much smaller increase to the current size standard.
    These commenters expressed concerns similar to many of the 
commenters arguing for no change in the size standards or lower 
increases than proposed. As discussed above, SBA establishes size 
standards at the industry level, except in a few instances where a 
category represents a major activity within an industry that is 
significantly distinct from all other activities. Based on the 
information provided in the comments, we do not believe historic and 
cultural preservation activities are a sufficiently large activity 
within the Engineering and Architectural industries to warrant a 
separate size standard. However, for reasons discussed above, a lower 
size standard of $4.0 million is being adopted to apply to general 
Engineering Services and to all Architectural Services that should 
adequately address the concerns raised by these commenters.

Inflation Adjustment

    A few comments recommend an inflationary adjustment to the size 
standards on a regular basis.
    The evaluation of economic characteristics of an industry is the 
primary basis for establishing size standards. Historically, we review 
size standards for inflation when a lengthy period of time has passed 
since the last size standard revision or when a large number of 
industries are under review. Because inflation affects industries 
differently, it's not appropriate to specify in advance under what 
situations an inflation adjustment will be made. Nonetheless, we do 
monitor the rate of inflation on a continuing basis and will pursue an 
inflation adjustment when it is considered necessary.

[[Page 26279]]

Consideration of the North American Industry Classification System

    Several comments recommend that we establish size standards based 
on the North American Industry Classification System (NAICS) rather 
than the Standard Industrial Classification (SIC) System.
    We will convert size standards to the NAICS system in the near 
future. At present, size standards are established following the SIC 
system. Until the NAICS system is put in place, the SIC system will be 
used by all Federal agencies for assigning an appropriate SIC code and 
size standard to Federal procurements and for classifying the primary 
industry of a firm. Moreover, the Engineering Services and 
Architectural Services industries are the same under the NAICS and SIC 
systems. For Surveying Services and Mapping Services, the NAICS combine 
these two activities into either Geophysical Surveying and Mapping 
Services or Surveying and Mapping (except Geophysical) Services 
primarily from SIC code 8713. Thus, even if we establish size standards 
based on the NAICS, the information currently available to evaluate 
these industries would lead to the same size standard.

Industry Data

    Several associations argue that the data used to evaluate the 
industries is too old to be useful, and recommend that we withdraw the 
proposed rule and publish a new proposal based on better data.
    Although the data we used were derived from the 1992 Economic 
Census, they represent the latest and best data available from the 
Census Bureau on the distribution of firms by size. Moreover, the data 
continue to be useful in assessing the structural characteristics of an 
industry unless there have been significant changes in an industry 
which fundamentally affect the operations of firms in the industry 
(e.g., new production methods such as the use of electric furnaces to 
make steel from ferrous scrap by mini-mills or the deregulation of an 
industry).
    Absent these types of major changes, the 1992 Census Bureau data 
provide the SBA with reliable and objective data on the relative 
position of small businesses within an industry and there is no 
apparent reason to wait for newer data. (The Census Bureau gathers data 
in an Economic Census every five years. Data for the 1997 Economic 
Census was gathered in early 1998 and will not be available for about 
two years.) Our review of Federal contract awards data, however, is 
based on more recent data from Fiscal Years 1995 and 1996. More recent 
contract data for Fiscal Year 1997 reveal small business awards in the 
Engineering and Architectural Services industries similar to the 
previous two fiscal years. Small business awards to surveying firms did 
increase significantly in Fiscal Year 1997. However, the small business 
share of Federal awards is significantly below the small business share 
of total industry revenues, as was the case for Fiscal Years 1995 and 
1996.

Size Standards Methodology

    Several comments oppose our industry comparisons (using four 
measures of industry characteristics), especially the use of payroll/
receipts ratios as a proxy for high initial capital requirements.
    The evaluation of industry structure has been the primary basis for 
establishing size standards by SBA for many years. The use of these 
four measures to describe industry structure is well established within 
SBA. In addition, we obtained new data for 1997 on average assets per 
firm to improve the evaluation of startup costs. Because these data are 
more useful and accurate than payroll/receipts data we reworked our 
calculations. Our analysis using these data continues to support the 
size standard conclusion contained in the February 3, 1998, proposed 
rule and our decision in this final rule.

Small Business Contracting Opportunities

    Several comments suggest that SBA should focus on other issues 
harming small business opportunities in Federal procurement rather than 
increasing size standards. These comments point out that contract 
bundling, the use of design-build contracting, and indefinite delivery/
indefinite quantity task order contracts have adversely affected small 
business participation. Also, many small businesses work as 
subcontractors. The subcontracting program, however, is not monitored 
rigorously by many agencies and the comments suggest that SBA should 
gather better data on subcontracting efforts.
    We are vigorously working on these other issues. Although these are 
important issues affecting the opportunities of small businesses, they 
generally do not affect the size standards analysis.

Calculation of Receipts

    A few comments recommend that SBA count revenues in these 
industries on a net basis in which costs for ``pass-through'' materials 
and subcontracting would be excluded from the calculation of a firm's 
size.
    We believe the gross revenues of a firm is the most equitable way 
to measure the size of a firm. In a few industries, the revenues earned 
by a firm may not accurately reflect the magnitude of its operation, as 
would be the case for a travel agency. We do calculate revenues 
differently in those cases or use number of employees as the size 
standard measure. Furthermore, the economic data from the Census Bureau 
we use to evaluate size standards is based on gross revenues for most 
industries. More specifically, the Census Bureau's data collected for 
the Architectural Services and Engineering Services industries include 
all revenues received by the company (including the value of 
subcontracts). If we were to exclude the value of subcontracts and 
other ``pass-through'' revenues, we would also have to establish a 
lower size standard to properly reflect the size of small businesses in 
the industry.

Dominant Field of Operation

    In the proposed rule, SBA stated that no firm at or below the 
proposed size standards business would be dominant in its field of 
operations. Only a few comments addressed this issue. Of those 
comments, most indicated that only firms of 500 to 5,000 employees 
could have a controlling influence on the Engineering, Architectural 
Surveying, or Mapping Services industries--a size well above the 
proposed size standards. A few commenters did express a concern that in 
a local area all Architectural firms could qualify as small business 
under the proposed size standards. In considering whether a firm is 
dominant in an industry, SBA assesses whether a firm may have a 
controlling influence on an industry on a national basis. In 
consideration of the comments, and the analysis in the proposed rule, 
SBA believes no firms at or below the adopted size standard would be 
dominant in the Engineering, Architectural, Surveying or Mapping 
Services industries.

Compliance With Executive Orders 12612, 12988, and 12866, the 
Regulatory Flexibility Act (5 U.S.C. Sec. 601-612), and the 
Paperwork Reduction Act (44 U.S.C. Sec. 3501 et seq.)

    The Office of Management and Budget (OMB) reviewed this rule under 
Executive Order 12866. OMB determined that this is not a major rule 
under the Congressional Review Act, 5 U.S.C. 800, et. seq. This rule, 
however, will have a significant impact on a substantial number of 
small entities. Immediately below, SBA sets forth a

[[Page 26280]]

final regulatory impact analysis of this final rule.

1. Description of Entities to Which the Rule Applies

    SBA estimates that 1,460 additional firms will be considered small 
as a result of this rule. These firms will be eligible to seek 
available SBA assistance provided they meet other program requirements. 
Many of these firms probably had small business status in 1986 when 
these size standards were established at $2.5 million, but have since 
lost eligibility because of general price increases. Of the 1,460 
additional firms gaining eligibility, 1,015 operate in Engineering 
Services, 340 operate in Architectural Services, 60 operate in 
Surveying Services, and 45 operate in Mapping Services. Firms becoming 
eligible for SBA assistance as a result of this rule cumulatively 
generate $2.3 billion in annual sales, and total sales in these 
industries are $77.5 billion. Of the $2.3 billion for newly eligible 
firms, $1.7 billion are in Engineering Services, $0.6 billion are in 
Architectural Services, $56.0 million are in Surveying Services, and 
$45.0 million in Mapping Services.

2. Potential Benefits of the Rule

    We have identified two areas of benefit to businesses obtaining 
small business status as a result of adoption of this rule. One is 
eligibility for the Federal Government's small business procurement 
preference programs and SBA's Business Loan Program. SBA estimates that 
firms gaining small business status could potentially obtain Federal 
contracts worth $45.0 million per year under the Small Business Set-
aside Program, the 8(a) Program, or unrestricted contracts. Second, we 
estimate $2.5 million in new loans could be made to these newly defined 
small businesses under SBA's 7(a) Guaranteed Loan Program, and an 
additional $0.7 million in loans under the Certified Development 
Company (504) Program. These small increases occur since most firms 
that obtain SBA guaranteed loans tend to have less than $2.0 million in 
revenues. Another benefit identified is that increased competition for 
many of these procurements would likely result in a lower price to the 
government for procurements which have been set aside, but we are 
unable to quantify this benefit.

3. Potential Costs of the Rule

    The changes in size standards as they affect Federal procurement 
are not expected to add any significant costs to the Government. As a 
matter of policy, Federal procurements may be set aside for small 
business or under the 8(a) Program only if awards are expected to be 
made at reasonable prices. Changing a size standard would not result in 
any added costs associated with the 7(a) and 504 loan programs. The 
amount of lending authority SBA can make or guarantee is established by 
appropriation. The competitive effects of size standard revisions 
differ from those normally associated with changes in regulations. The 
new size standards will not impose a regulatory burden because they do 
not regulate or control business behavior.
    Other regulations in areas such as prices, costs, profits, growth, 
innovation and mergers typically burden smaller firms to a greater 
degree than larger firms. The change to a size standard is not 
anticipated to have any appreciable affect on any of these factors, 
although small businesses or 8(a) firms much smaller than the size 
standard for their industries may be less successful in competing for 
some Federal procurement opportunities due to the presence of larger, 
newly defined small businesses. On the other hand, with more and larger 
small businesses competing for small business set-aside and 8(a) 
procurements, contracting agencies are likely to increase the overall 
number of contacting opportunities available under these programs.

4. Potential Net Benefits From the Rule

    Two benefits were identified for small businesses and one for 
Government. Because the potential costs of this rule are minimal, the 
potential net benefits will be approximately equal to the total 
potential benefits. Most of the impact of this rule will appear in the 
Federal procurement area.

5. Reasons Why This Action Is Being Taken and Objectives of Rule

    SBA has provided in the supplementary information a statement of 
the reasons why these new size standards should be established and a 
statement of the reasons for and objectives of this rule.
    For the purpose of the Paperwork Reduction Act, 44 U.S.C. 3501, et 
seq., SBA certifies that this rule will not impose new reporting or 
record keeping requirements, other than those required of SBA. For 
purposes of Executive Order 12612, SBA certifies that this rule does 
not have any federalism implications warranting the preparation of a 
Federalism Assessment. For purposes of Executive Order 12988, SBA 
certifies that this rule is drafted, to the extent practicable, in 
accordance with the standards set forth in section 3 of the Order.

List of Subjects in 13 CFR part 121

    Government procurement, Government property, Grant programs--
business. Loan programs--business. Small business.

    For the reasons stated in the preamble, SBA amends 13 CFR part 121 
as follows:

Part 121--SMALL BUSINESS SIZE REGULATIONS

    1. The authority citation for part 121 is revised to read as 
follows:

    Authority: 15 U.S.C. 632(a), 634(b)(6), 637(a), 644(c) and 
662(5);

    2. In Sec. 121.201 in the table ``Size Standards by SIC Industry,'' 
under the heading DIVISION I--SERVICES, revise the entries 
corresponding to 7389, 8711, 8712, and 8713 to read as follows:


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

* * * * *

[[Page 26281]]



                                         Size Standards by SIC Industry
----------------------------------------------------------------------------------------------------------------
                                                              Size standards in number of employees or millions
                  SIC code and description                                        of dollars
----------------------------------------------------------------------------------------------------------------
 
*                  *                  *                  *                  *                  *
                                                        *
----------------------------------------------------------------------------------------------------------------
                                              DIVISION I--SERVICES
----------------------------------------------------------------------------------------------------------------
 
*                  *                  *                  *                  *                  *
                                                        *
    7389  Business Services, N.E.C.........................  $5.0
              Except, Map Drafting Services, Mapmaking       $4.0
         (Including Aerial) and Photogrammetric Mapping
         Services.
 
*                  *                  *                  *                  *                  *
                                                        *
    8711  Engineering Services.............................  $4.0
          Military and Aerospace Equipment and Military      $20.0
     Weapons.
              Contracts and Subcontracts for Engineering     $20.0
         Services Awarded Under the National Energy Policy
         Act of 1992.
              Marine Engineering and Naval Architecture....  $13.5
    8712  Architectural Services (Other than Naval)........  $4.0
    8713  Surveying Services...............................  $4.0
 
*                  *                  *                  *                  *                  *
                                                        *
----------------------------------------------------------------------------------------------------------------

Aida Alvarez,
Administrator.
[FR Doc. 99-12267 Filed 5-13-99; 8:45 am]
BILLING CODE 8025-01-P