[Federal Register Volume 64, Number 106 (Thursday, June 3, 1999)]
[Proposed Rules]
[Pages 29813-29814]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 99-14012]
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SMALL BUSINESS ADMINISTRATION
13 CFR Part 121
Small Business Size Standards; Accounting, Auditing, and
Bookkeeping Services
AGENCY: Small Business Administration.
ACTION: Advance notice of proposed rulemaking.
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SUMMARY: With the recent consolidations of the largest firms in the
accounting, auditing, and bookkeeping services industry and their
expansion into providing services of other industries, the Small
Business Administration (SBA) has undertaken a review of its small
business size standard for this industry. To supplement its review of
this industry's size standard, SBA is requesting public comment as to
what factors should be considered in establishing a definition of a
small accounting, auditing, and bookkeeping services firm, what the
public's views on several developments within the accounting industry
are, whether the current size standard should be changed, and what the
actual definition should be. Should SBA decide that a change is
warranted, it would publish a proposed size standard in the Federal
Register and seek public comment on a specific size standard before any
change in the size standard is put into effect.
DATES: Submit comments on or before July 6, 1999.
ADDRESSES: Send comments to: Gary M. Jackson, Assistant Administrator
for Size Standards, Small Business Administration, 409 Third St., SW,
Mail Code: 6880, Washington, DC 20416.
FOR FURTHER INFORMATION CONTACT: Harvey Bronstein, Office of Size
Standards, (202) 205-6618.
SUPPLEMENTARY INFORMATION: Size standards are numerical indicators to
define what is a small business. They have been established to
determine eligibility for firms for SBA and other Federal small
business programs, such as loan guarantees, Government contracting
assistance, minority enterprise development, and small disadvantaged
business preferences. Currently, SBA defines a firm in the accounting
industry (Standard Industrial Classification (SIC) 8721) as small if it
has $6 million or less in average annual receipts, including any
affiliates. By comparison, SBA uses $5 million as a size standard for
most service industries. Other illustrative size standards in business
and professional services include $18 million for computer services, $9
million for security guard services, and $2.5 million for architectural
and engineering services. A list of the SBA size standards by industry
category is available in 13 CFR 121.201, or on SBA's Internet web site
(http://www.sba.gov/regulations/siccodes).
SBA bases its size standards on an analysis of an industry's
economic structure and other information describing the relative
standing of smaller businesses within an industry. SBA generally looks
at factors such as average firm size, start-up costs, degree of
competition, distribution of sales by firm size, and the objectives of
SBA's programs. Other factors that may have an impact on the position
of small businesses in an industry may also be considered, such as
technological change, growth trends, and comparison with size standards
in similar industries. By examining quantitative indicators for these
factors from generally available sources of industry data, SBA is able
to identify a small business segment within an industry and maintain a
degree of comparability among size standards in different industries.
A review of data on the accounting industry and discussions with
industry associations and accounting firms indicates a need for
additional information on several issues before SBA can decide whether
to propose a change to the current accounting size standard. Several
issues are discussed below that have come to our attention that we
believe merit a request for comments from the public. Other information
the public believes is relevant to the question of an appropriate
accounting size standard is also welcomed for our consideration.
One issue we specifically seek comments on concerns the available
industry data on the accounting industry. According to data from the
U.S. Bureau of the Census' 1992 Economic Census, of the 76,000
businesses in that industry, more than 99 percent are considered small
businesses under the present size standard and they cumulatively
obtained 60 percent of total industry revenues. Approximately 450 firms
exceed the present size standard, and the top four firms with the
largest operations in accounting obtain 19 percent of industry
revenues. We are concerned that the recent changes in the industry are
not fully reflected in the Census Bureau's data and other data sources.
Thus, we are interested in the public's view on the changing nature of
the industry since the early 1990s, and whether data from 1992
adequately characterizes the industry today. If not, the public should
address what changes have occurred to alter the makeup of the industry,
what data exists to verify and gauge the extent of these changes, and
how these changes should affect the size standard.
Another issue concerns a prominent trend that is affecting the
accounting industry--the expansion of services being offered by many of
the larger firms. Some firms, especially the largest ones (often
referred to as the ``Big 5''), which at one time primarily provided
accounting services, have been diversifying into other areas of
business and professional services such as management and economic
consulting, information technology, computer systems integration,
public relations, and legal services. Thus, while some of these firms
originally offered only accounting services, they now offer a range of
other business and professional services while still maintaining a
considerable accounting and auditing capability. We are interested to
know whether this trend is also occurring for small firms, and how it
may affect the current size standard.
The SBA programs and other Federal programs which seem to be most
affected by the accounting size standard are those that accord
preference for Federal contracts, that is, the small business set-
aside, 8(a), and small disadvantaged business programs. Federal
contract award data supplied by the General Services Administration's
Federal Procurement Data System indicate that small businesses have a
substantial share of Federal accounting
[[Page 29814]]
contracts, capturing close to one-half of about $115 million worth of
contracts in both fiscal years 1996 and 1997. We have received
information from accounting industry groups concerned about the
procurement preference programs and the relationship of these programs
to the accounting size standard. Some believe that the $6 million size
standard is too limiting in terms of allowing firms they believe to be
small accounting firms to access larger Federal contracts. The issue,
then, is whether firms above the present size standard should become
designated as small businesses because they have difficulty competing
against the largest firms in the industry for Federal contracts. Thus,
we also seek comments on whether some or all ``mid-sized'' firms (those
larger than SBA's $6 million size standard but smaller than the ``Big
5'') are at a competitive disadvantage with the largest firms in the
industry for Federal contracts. If so, please comment on whether an
increase to the size standard to include some mid-sized firms as small
businesses would be helpful.
There also has been concern expressed that the largest accounting
firms are receiving large-sized Federal contracts to the detriment of
small- and mid-sized firms. In particular, we are told, accounting and
auditing services are combined or bundled with other types of business,
management, or financial services into larger contracts. When contract
requirements in more than one industry are grouped together, this is
known as contract bundling. These bundled contracts tend to limit
opportunities for small businesses since the combined requirements
become too large of a contract for a small business to handle. Yet, a
small business could capably perform on one or a few requirements if
they were separate and smaller contracts. We are interested in finding
out the extent that accounting services are being bundled with other
business and professional services to form large-sized contracts which
are out of the reach of small- and mid-sized businesses. Also, if such
practice is extensive, the public should comment on whether it should
influence the level of the size standard for accounting.
Note: SBA has issued a proposed rule to define contract bundling
(64 FR 2153) and its intent to determine the impact on small
business of bundled contracts with expected value of $5 million or
more.
In addition to these issues, comments on other issues concerning
the accounting industry and the size standard that would be helpful to
SBA include:
Recent changes in the structure of the accounting
industry;
Competitiveness of small accounting businesses versus the
largest or ``Big 5'' accounting firms;
Growth of accounting firms;
The role of and problems affecting ``mid-sized'' firms in
the industry and how they may differ from small businesses; and
Whether firms approaching the $6 million size standard are
disadvantaged because of their size and if so, how?
The purpose of this advance notice is to obtain additional
information on the accounting, auditing, and bookkeeping services
industry to assist us in deciding whether a sufficient basis exists to
propose a different size standard or to retain the current size
standard. If we decide to propose a change to the size standard, this
notice would be followed by a proposed rule published in the Federal
Register indicating a specific new size standard. After evaluating
public comment on a proposed size standard, a final rule would put into
effect any new size standard.
Dated: May 17, 1999.
Aida Alvarez,
Administrator.
[FR Doc. 99-14012 Filed 6-2-99; 8:45 am]
BILLING CODE 8025-01-P