[Federal Register Volume 65, Number 17 (Wednesday, January 26, 2000)]
[Proposed Rules]
[Pages 4176-4179]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 00-1438]


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SMALL BUSINESS ADMINISTRATION

13 CFR Part 121


Small Business Size Regulations; Size Standards for Compliance 
With Programs of Other Agencies

AGENCY:  Small Business Administration.

ACTION:  Proposed rule.

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SUMMARY:  The Small Business Administration (SBA) proposes to amend its 
size regulations. The proposed amendment requires an agency to consult 
in writing with SBA before proposing small business size standards for 
use in its programs, if those size standards are other than those 
established by SBA. It removes the requirement that the agency have the 
SBA Administrator's approval for the contemplated size standards prior 
to the proposed rule. Rather, the agency must seek the SBA 
Administrator's approval only before it adopts size standards in a 
final rule. As does the existing regulatory text, the proposed 
amendment sets forth the minimum information agencies must furnish the 
SBA Administrator to support its request for approval of its 
contemplated size standards.

DATES:  SBA must receive comments on or before March 27, 2000. SBA will 
make all public comments available to any person or entity upon 
request.

ADDRESSES:  Address all comments concerning this proposed rule to Gary 
M. Jackson, Assistant Administrator for Size Standards, Office of Size 
Standards, 409 3rd Street, SW, Washington, DC 20416.

[[Page 4177]]


FOR FURTHER INFORMATION CONTACT:  Carl Jordan, Office of Size 
Standards, at (202) 205-6618.

SUPPLEMENTARY INFORMATION: The Small Business Act (section 3(a)&(b), 15 
U.S.C. 632) (Act) provides for the establishment of small business size 
standards. The Act authorizes the Administrator of SBA to ``specify 
detailed definitions or standards by which a business concern may be 
determined to be a small business concern for the purposes of this Act 
or any other Act'' (emphasis added). The Act thereby gives the SBA 
Administrator exclusive authority to establish small business size 
standards for all Federal agencies, in the absence of other specific 
statutory authority. Unless a statute specifically provides size 
standards for an agency's program or gives an agency authority to do 
so, the agency must use the applicable size standards established by 
the Administrator of SBA. However, the Act allows an agency to 
``prescribe a size standard for categorizing a business concern as a 
small business concern'' (section 3[a][2][C]) of the Act) provided the 
contemplated size standard meets certain criteria and the agency first 
obtains approval of the SBA Administrator.
    Currently, Small Business Size Regulations in 13 CFR 121.902 
establish procedures for agencies, other than SBA, to follow before 
they prescribe size standards for their own use. These regulations 
require an agency contemplating the use of size standards different 
from those established by SBA to obtain the SBA Administrator's 
approval to do so before it proposes them for comment as part of its 
rulemaking process. If an agency believes that size standards different 
from those established by SBA are appropriate for its purposes, it must 
propose the specific size standards, explain why it believes they are 
appropriate for their intended purposes and why SBA's are not, and seek 
public comment on them. The proposed size standards must be specific 
and must meet the criteria set forth in the Act and SBA regulations.
    This proposed rule is limited to modifying the procedure that 
agencies must follow when requesting the SBA Administrator's approval 
to use special size standards. If the rule is adopted, it will only 
require the agency to consult in writing with SBA's Office of Size 
Standards before proposing to use an alternative size standard. The 
agency will only be required to request the SBA Administrator's 
approval of the size standard before it publishes its final rule as 
part of its rulemaking process.
    The written consultation must include what size standard the agency 
is proposing, to what program it will apply, how the agency arrived at 
this particular size standard for this program, and why SBA's existing 
size standards do not satisfy their program requirements. Such written 
consultation shall take place at least fourteen (14) calendar days 
before issuing the proposed rule. SBA believes that less than fourteen 
(14) calendar days is not sufficient time for SBA to review the 
proposed size standards and respond to the agency's consultation. The 
consultation will allow SBA to review the proposed size standards and 
advise the agency as soon as practicable of issues, such as those in 
conflict with the Act or SBA's Small Business Size Regulations. Such 
issues could become a bar to the SBA Administrator's approval, unless 
they are addressed. SBA's Office of Size Standards will acknowledge 
receipt of an agency's written consultation.
    SBA intends that ``consultation,'' as it is described above, will 
fulfill the requirements of this proposed rule, and expects that there 
shall be no further required discussions, except at the option of the 
requesting agency. SBA is committed to ensuring that such consultation 
with the Office of Size Standards will not delay or otherwise interfere 
with the agency's rulemaking process.
    This procedure will be a simpler one than now exists, because, if 
adopted, it will only require the SBA Administrator's approval before 
the agency issues its final rule adopting the contemplated size 
standards, rather than before it proposes them. It also will require 
the agency to furnish SBA a copy of the proposed rule at the time the 
agency publishes it for public comment. It is important to note that 
this is a procedural modification, and that SBA is not changing any 
substantive requirements.
    SBA proposes to amend these procedures in its regulations for the 
following reasons:

1. It Will Streamline the Rule Making Process

    Obtaining SBA approval for contemplated size standards prior to a 
proposed rule can encumber the process by which an agency implements 
legislation or otherwise fulfills its statutory mandates. The number of 
agencies seeking the SBA Administrator's approval has not been large. 
However, the number and complexity of requests from a small number of 
agencies, together with the limited time within which they must 
complete their actions, leads SBA to conclude that this modification is 
necessary. SBA has experienced a number of requests for approval of 
alternative small business size standards from agencies that are 
required to comply with Congressional mandates within limited time 
frames. Under SBA's existing regulations, which this rule amends, 
agencies frequently cannot seek and obtain the SBA Administrator's 
approval within time frames statutorily allowed.

2. The Prescribed Size Standards Adopted in an Agency's Final Rule 
May Not Be the Same as Those the SBA Administrator Had Approved for 
the Proposed Rule, Unless SBA Amends This Regulation

    An agency may receive a large number of comments on its proposed 
size standards, and the comments may or may not support the proposal, 
to varying degrees. Comments to proposed rules weigh heavily on agency 
decisions concerning final rules. Therefore, it sometimes happens that 
an agency, after evaluating the comments it received, could issue a 
final rule with small business size standards that differ from those in 
the proposed rule. The agency's final rule will reflect public comments 
to the proposed rule. Because the authority to approve small business 
size standards resides solely with the SBA Administrator, SBA believes 
that the current procedures can have results inconsistent with the Act 
and congressional intent. It can also happen, though infrequently, that 
after an agency has reviewed and considered the comments, it will not 
issue any final rule. Rather, it may then issue another proposed rule, 
taking into consideration the comments it received. If the newly 
contemplated size standards are not the same as the agency originally 
proposed, the agency must request the SBA Administrator's approval a 
second time for this new proposal. This procedural change, if adopted, 
will let an agency determine, after considering public comments, what 
size standards it believes it should include in its final rule, or 
whether it will elect to use the SBA size standards. SBA, for its part, 
will review no more than one request, based on the agency's decision 
relative to its final rule.

[[Page 4178]]

3. An Agency That Contemplates Using Small Business Size Standards, 
Other Than Those Established by SBA, Will Have SBA's Input Before 
It Issues Its Proposed Rule

    SBA intends the written consultation to be considerably simpler 
than a request for the SBA's approval before a proposed rule, and will 
not delay the rulemaking proceedings of the agency. It will give SBA 
the background and supporting information for the agency's contemplated 
size standards. SBA can then, if necessary, comment on the contemplated 
size standards, and provide the agency with further advice and 
direction on formulating the size standards and its reasons for 
proposing them. This can reduce future delays and possible barriers in 
the administrative process, when the agency requests the SBA 
Administrator's approval to prescribe the size standards in its final 
rule.

4. SBA Will Have, as Part of Its Decision Making Process, the 
Requesting Agency's Proposed Rule, Its Explanation and 
Justification for the Standards, Copies of the Public Comments to 
the Size Standards in the Proposed Rule, as Well as a Draft Copy of 
the Agency's Intended Final Rule

    In its final rule the agency will address the comments and justify 
adopting the size standards. Under existing regulations, which this 
rule proposes to change, after reviewing the comments received and 
reaching its final decision based on them, an agency only notifies SBA 
of its intent to publish a final rule, and furnishes this information 
to SBA. SBA believes comments can and do provide a requesting agency 
with more information to justify the size standards it elects to 
implement, whether they are the same as it proposed or not. Without 
this procedural change, SBA will continue to be asked to approve size 
standards on which interested parties have not commented. Commenters 
may raise important issues regarding the size standards that an agency 
needs to consider before making its decision on the size standards. 
Based on the comments, the requesting agency may opt for size standards 
that differ from what it had proposed. Since the Act precludes an 
agency from prescribing size standards that SBA has not approved, the 
agency would have to resubmit it for SBA approval. By simplifying these 
procedures, SBA will have at hand and be able to evaluate the same 
information the requesting agency uses.
    This proposal will only change the procedures an agency must follow 
when it requests the SBA Administrator's approval to prescribe size 
standards, other than those promulgated by SBA, for its programs. It 
changes no substantive requirement or small business criteria in 
connection with requesting the Administrator's approval. The proposed 
change will, SBA believes, simplify the rulemaking process for other 
agencies and for itself, without compromising the statutory requirement 
that other agencies obtain the SBA Administrator's approval for size 
standards they contemplate prescribing for their use. Similarly, when 
an agency contemplates using alternative size standards for its 
Regulatory Flexibility Analysis, this proposed rule does not change the 
Regulatory Flexibility Act requirement that it consult with SBA's 
Office of Advocacy before it does so.

Compliance With Executive Orders 12866, 12988, and 13132, the 
Regulatory Flexibility Act (5 U.S.C. 601 et seq.), and the Paperwork 
Reduction Act (44 U.S.C. Ch. 35)

    SBA has determined that this rule, if adopted, would not be a 
significant rule within the meaning of Executive Order 12866. It will 
not have an annual economic effect in excess of $100 million, result in 
a major increase in costs for individuals or governments, or have a 
significant adverse effect on competition. SBA has made this 
determination for the following reasons: 1) The proposed change is 
procedural, not substantive, in nature; (2) the proposed change applies 
to Federal agencies only; and (3) the proposed change applies only when 
a Federal agency contemplates categorizing an entity as a small 
business concern for its programs using standards other than those 
established by SBA. SBA has also made this determination based on the 
nature, number and complexity of requests from Federal agencies that 
have made such requests. SBA does not believe that this amendment will 
increase the nature, number or frequency of these requests.
    For purposes of Executive Order 13132, SBA has determined that this 
proposed rule has no federalism implications.
    For purposes of Executive Order 12988, SBA has determined that this 
proposed rule is drafted, to the extent practicable, in accordance with 
the standards set forth in Section 3 of that Order.
    For purposes of the Regulatory Flexibility Act, SBA certifies that 
this proposed rule, if promulgated as a final rule, would not have a 
significant economic effect on a substantial number of small entities 
since the procedure applies to the work of federal agencies and imposes 
no burden on small businesses. For purposes of the Paperwork Reduction 
Act, SBA certifies that this proposed rule, if promulgated in final 
form, would not impose any new reporting or recordkeeping requirements.

List of Subjects in 13 CFR Part 121

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


    Accordingly, SBA proposes to amend part 121 of 13 CFR as follows:

PART 121--SMALL BUSINESS SIZE REGULATIONS

    1. The authority citation of part 121 continues to read as follows:

    Authority:  Pub. L. 105-135 sec. 601 et seq., 111 Stat. 2592; 15 
U.S.C. 632(a), 634(b)(6), 637(a) and 644(c); and Pub. L. 102-486, 
106 Stat. 2776, 3133.
    2. Section 121.902 is revised to read as follows:


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

    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 the agency and SBA agree otherwise.
    3. Section 121.903 is revised to read as follows:


Sec. 121.903  May an agency use size standards for its programs that 
are different than those established by SBA?

    (a) Federal agencies or departments promulgating regulations 
relating to small businesses usually use SBA size criteria. In limited 
circumstances, if they decide SBA size standards are not suitable for 
their programs, then agency heads may establish more appropriate small 
business definitions for the exclusive use in such programs, but only 
when:
    (1) The size standards will determine the size of a small 
manufacturing concern by its average number of employees based on the 
preceding twelve calendar months, determined according to Sec. 121.106; 
the size of a small services concern by its average annual gross 
receipts over a period of at least three years, determined according to 
Sec. 121.104; the size of other small concerns on data over a period of 
at least three years; or, other factors approved by SBA;

[[Page 4179]]

    (2) The agency has consulted in writing with SBA's Assistant 
Administrator for Size Standards at least fourteen (14) calendar days 
before publishing the proposed rule which is part of the rulemaking 
process. The written consultation will include: what size standard the 
agency contemplates using; to what agency program it will apply; how 
the agency arrived at this particular size standard for this program; 
and, why SBA's existing size standards do not satisfy the program 
requirements.
    (3) The agency proposes the size standards for public comment 
pursuant to the Administrative Procedure Act, 5 U.S.C. 553;
    (4) The agency provides a copy of the proposed rule, when it 
publishes it for public comment as part of the rulemaking process, to 
SBA's Assistant Administrator for Size Standards;
    (5) SBA's Administrator approves the size standards before the 
agency adopts a final rule or otherwise prescribes them for its use;
    (6) The agency's request to SBA for the Administrator's approval be 
accompanied by at least the following: copies of all comments on the 
proposed size standards received in response to the proposed rule; 
reasons for adopting size standards other than SBA's; a copy of the 
intended final rule, including the preamble, or a separate written 
justification for the intended size standards followed by a copy of the 
intended final rule and preamble prior to its publication; other 
information SBA may request in connection with the request; and 
certification that it complies with the Small Business Act (Sec. 3[a] & 
[b]) and with 13 CFR part 121; and
    (b) When approving any size standards established pursuant to this 
section, SBA's Administrator will ensure that the size standards vary 
from industry to industry to the extent necessary to reflect the 
differing characteristics of the various industries, and consider other 
relevant factors.
    (c) Where the agency head is developing size standards 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 size standards 
different from SBA's which are more appropriate for such analysis.
    4. Section 121.904 is added to read as follows:


Sec. 121.904  When does SBA determine the size status of a business 
concern?

    For 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.

    Dated: January 14, 2000.
Aida Alvarez,
Administrator.
[FR Doc. 00-1438 Filed 1-25-00; 8:45 am]
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