[Federal Register Volume 67, Number 51 (Friday, March 15, 2002)]
[Rules and Regulations]
[Pages 11874-11880]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 02-6194]



[[Page 11873]]

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Part VI





Small Business Administration





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13 CFR Part 121 and 123



Small Business Size Standards; Travel Agencies; Economic Injury 
Disaster Loan Program; Interim Final Rule and Proposed Rule

  Federal Register / Vol. 67 , No. 51 / Friday, March 15, 2002 / Rules 
and Regulations  

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SMALL BUSINESS ADMINISTRATION

13 CFR Parts 121 and 123

RIN 3245-AE93


Small Business Size Standards; Travel Agencies; Economic Injury 
Disaster Loan Program

AGENCY: Small Business Administration (SBA).

ACTION: Interim final rule with request for comments.

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SUMMARY: For purposes of eligibility for economic injury disaster loan 
assistance attributed to the September 11, 2001 terrorist attacks on 
the World Trade Center, New York, New York and the Pentagon, Arlington, 
VA, the SBA is increasing the size standard for Travel Agencies (North 
American Industry Classification System (NAICS) code 561510) to $3 
million from $1 million. This action applies to small business Travel 
Agencies located in and outside of the declared areas for that 
disaster. This interim final rule is published in conjunction with 
SBA's proposed rule elsewhere in this issue of the Federal Register 
that recommends increasing the size standard for Travel Agencies from 
$1 million to $3 million for all Federal small business assistance 
programs. SBA believes that this action will better define the size of 
businesses in this industry that the SBA believes should be eligible 
for Federal small business assistance programs. This rule also changes 
the time at which size status is determined for economic injury 
disaster loan assistance in connection with the September 11, 2001 
attacks.

DATES: Effective Date: This rule becomes effective March 15, 2002.
    Comment Date: Comments must be received on or before April 15, 
2002.

ADDRESSES: Send comments to Gary M. Jackson, Assistant Administrator 
for Size Standards, 409 3rd Street, SW., Mail Code 6530, Washington, DC 
20416; or via e-mail to [email protected]. Upon request, SBA will 
make all public comments available.

FOR FURTHER INFORMATION CONTACT: Diane Heal, Office of Size Standards, 
(202) 205-6618.

SUPPLEMENTARY INFORMATION:

I. Justification for Increasing the Size Standard

    SBA has received requests from firms and trade associations in the 
travel industry to increase the $1 million size standard for Travel 
Agencies. These organizations believe that this action is warranted in 
light of the specialized equipment and systems required on Federal and 
corporate travel services contracts and the consolidated and regional 
approach by Federal agencies and large commercial clients in the 
performance of these contracts. They believe that the Federal 
government and corporate client travel markets have changed. These 
clients require specific equipment and systems, and have requirements 
on a regional or national basis. These requirements have raised the 
costs of doing business in this industry to the point that the pool of 
eligible small businesses performing government and corporate client 
travel services has seriously declined. Federal agencies also express 
concern regarding this trend. Specifically, agencies are concerned that 
the declining pool of eligible small businesses with the ability to 
perform these contracts will result in fewer contracts with small 
travel agencies.
    SBA agrees that recent changes in the Travel Agencies industry 
warrant a review of the size standard. Below is a discussion of the 
SBA's size standards methodology and the analysis leading to the 
proposal to increase the size standard for Travel Agencies under NAICS 
code 561510 to $3 million.
    Size Standards Methodology: Congress grants SBA discretion to 
establish detailed size standards. The Agency's Standard Operating 
Procedure (SOP) 90 01 3, ``Size Determination Program'' (available on 
SBA's Web site at http:/www.sba.gov/library/soproom.html) sets out four 
categories for establishing and evaluating size standards: (1) The 
structure of the industry and its various economic characteristics, (2) 
SBA program objectives and the impact of different size standards on 
these programs, (3) whether a size standard successfully excludes those 
businesses which are dominant in the industry, and (4) other factors if 
applicable. Other factors may come to the attention of SBA during the 
public comment period or from SBA's own research on the industry. No 
formula or weighting has been adopted so that the factors may be 
evaluated in the context of a specific industry. Below is a discussion 
of SBA's analysis of the economic characteristics of an industry, the 
impact of a size standard on SBA programs, and the evaluation of 
whether a firm at or below a size standard could be considered dominant 
in the industry under review.
    Industry Analysis: The Small Business Act requires that size 
standards vary by industry to the extent necessary to reflect differing 
industry characteristics (Section 3(a)(3)). SBA has in place two ``base 
or anchor size standards'' that apply to most industries--500 employees 
for manufacturing industries and $6 million for nonmanufacturing 
industries. SBA established 500 employees as the anchor size standard 
for the manufacturing industries at SBA's inception in 1953 and shortly 
thereafter established a $1 million size standard for the 
nonmanufacturing industries. The receipts-based anchor size standard 
for the nonmanufacturing industries has been periodically adjusted for 
inflation so that, currently, the anchor size standard for the 
nonmanufacturing industries is $6 million. Anchor size standards are 
presumed to be appropriate for an industry unless its characteristics 
indicate that larger firms have a much greater significance within that 
industry than for the ``typical industry.''
    The current size standard for Travel Agencies under NAICS code 
561510 is $1 million, which is lower than the $6 million 
nonmanufacturing anchor. This size standard excludes funds received in 
trust for an unaffiliated third party, such as bookings or sales 
subject to commissions. The commissions received are included as 
revenue. In its review, SBA used the nonmanufacturing anchor for 
comparability purposes.
    When evaluating a size standard, the characteristics of the 
specific industry under review are compared to the characteristics of a 
group of industries, referred to as a comparison group. A comparison 
group is a large number of industries grouped together to represent the 
typical industry. It can be comprised of all industries, all 
manufacturing industries, all industries with receipt-based size 
standards, or some other logical grouping. If the characteristics of a 
specific industry are similar to the average characteristics of the 
comparison group, then the anchor size standard is considered 
appropriate for the industry. If the specific industry's 
characteristics are significantly different from the characteristics of 
the comparison group, a size standard higher or, in rare cases, lower 
than the anchor size standard may be considered appropriate. The larger 
the differences between the specific industry's characteristics and the 
comparison group, the larger the difference between the appropriate 
industry size standard and the anchor size standard. Only when all or 
most of the industry characteristics are significantly smaller than the 
average characteristics of the comparison group, or other industry 
considerations strongly suggest the anchor size standard would be an 
unreasonably high size standard for the industry under review, will SBA 
adopt

[[Page 11875]]

a size standard below the anchor size standard.
    In 13 CFR 121.102 (a) and (b), evaluation factors are listed which 
are the primary factors describing the structural characteristics of an 
industry'average firm size, distribution of firms by size, start-up 
costs, and industry competition. The analysis also examines the 
possible impact of a size standard revision on SBA's programs. The SBA 
generally considers these five factors to be the most important 
evaluation factors in establishing or revising a size standard for an 
industry. However, it will also consider and evaluate other information 
that it believes relevant to the decision on a size standard as the 
situation warrants for a particular industry. Public comments submitted 
on proposed size standards are also an important source of additional 
information that SBA closely reviews before making a final decision on 
a size standard. Below is a brief description of each of the five 
evaluation factors.
    1. Average firm size is simply total industry receipts (or number 
of employees) divided by the number of firms in the industry. If the 
average firm size of an industry were significantly higher than the 
average firm size of a comparison industry group, this fact would be 
viewed as supporting a size standard higher than the anchor size 
standard. Conversely, if the industry's average firm size is similar to 
or significantly lower than that of the comparison industry group, it 
would be a basis to adopt the anchor size standard or, in rare cases a 
lower size standard.
    2. The distribution of firms by size examines the proportion of 
industry receipts, employment, or other economic activity accounted for 
by firms of different sizes in an industry. If the preponderance of an 
industry's economic activity is by smaller firms, this tends to support 
adopting the anchor size standard. The opposite is the case for an 
industry in which the distribution of firms indicates that economic 
activity is concentrated among the largest firms in an industry. In 
this rule, the SBA is comparing the size of firm within an industry to 
the size of firm in the comparison group at which predetermined 
percentages of total industry receipts are cumulatively generated by 
firms at that size and smaller. For example, for Travel Agencies, firms 
of $2.2 million in receipts and less generate 50% of total industry 
receipts. This contrasts with the comparison group (composed of 
industries with the nonmanufacturing anchor size standard of $6 
million) in which firms of $5.8 million or less in receipts generated 
50% of total industry receipts. Viewed in isolation, this significantly 
lower figure for the Travel Agencies suggests a size standard at or 
below the $6 million nonmanufacturing anchor size standard. Other size 
distribution comparisons in the industry analysis include 40%, 60%, and 
70%, as well as the 50% comparison discussed above.
    3. Start-up costs affect a firm's initial size because entrants 
into an industry must have sufficient capital to start and maintain a 
viable business. To the extent that firms entering into an industry 
have greater financial requirements than firms do in other industries, 
SBA is justified in considering a higher size standard. SBA collected 
start-up costs data from trade organizations. In addition, SBA is using 
a proxy measure to assess the financial burden for entry-level firms. 
SBA is using nonpayroll costs per establishment as a proxy measure for 
start-up costs. This is derived by first calculating the percent of 
receipts in an industry that are either retained or expended on costs 
other than payroll costs. (The figure comprising the numerator of this 
percentage is mostly composed of capitalization costs, overhead costs, 
materials costs, and the costs of goods sold or inventoried.) This 
percentage is then applied to average establishment receipts to arrive 
at nonpayroll costs per establishment (an establishment is a business 
entity operating at a single location). An industry with a 
significantly higher level of nonpayroll costs per establishment than 
that of the comparison group is likely to have higher start-up costs 
that would tend to support a size standard higher than the anchor size 
standard. Conversely, if the industry showed significantly lower 
nonpayroll costs per establishment when compared to the comparison 
group, the anchor size standard would be considered the appropriate 
size standard.
    4. Industry competition is assessed by measuring the proportion or 
share of industry receipts obtained by firms that are among the largest 
firms in an industry. In this interim final rule, SBA compared the 
proportion of industry receipts generated by the four largest firms in 
the industry--generally referred to as the ``four-firm concentration 
ratio''--with the average four-firm concentration ratio for industries 
in the comparison groups. If a significant proportion of economic 
activity within the industry is concentrated among a few relatively 
large producers, SBA tends to set a size standard relatively higher 
than the anchor size standard to assist firms in a broader size range 
compete with firms that are larger and more dominant in the industry. 
In general, however, SBA does not consider this to be an important 
factor in assessing a size standard if the four-firm concentration 
ratio falls below 40% for an industry under review.
    5. Competition for Federal procurements and SBA Financial 
Assistance. SBA also evaluates the possible impact of a size standard 
on its programs to determine whether small businesses defined under the 
existing size standard are receiving a reasonable level of assistance. 
This assessment most often focuses on the proportion or share of 
Federal contract dollars awarded to small businesses in the industry. 
In general, the lower the share of Federal contract dollars awarded to 
small businesses in an industry which receives significant Federal 
procurement revenues, the greater the justification for a size standard 
higher than the existing one.
    As another factor to evaluate the impact of a size standard on SBA 
programs, the volume of guaranteed loans within an industry and the 
size of firms obtaining those loans is assessed to determine whether 
the current size standard may restrict the level of financial 
assistance to firms in that industry. If small businesses receive ample 
assistance through these programs, or if the financial assistance is 
provided mainly to small businesses much lower than the size standard, 
a change to the size standard (especially, if it is already above the 
anchor size standard) may not be appropriate.
    Evaluation of Industry Size Standard: The two tables below show the 
characteristics for Travel Agencies activities and of a comparison 
group. The primary comparison group is comprised of all industries with 
a $6 million receipt-based size standard (referred to as the 
nonmanufacturing anchor group). Since SBA's size standards analysis is 
assessing whether the Travel Agencies size standards should be higher 
as compared to the nonmanufacturing anchor size standard, this is the 
most logical set of industries to group together for the industry 
analysis. SBA examined economic data on these industries from the 1997 
Economic Census prepared under contract by the U. S. Bureau of the 
Census. SBA also examined Federal contract award data for fiscal years 
1998-2000 from the U. S. General Services Administration's (GSA) 
Federal Procurement Data Center, and GSA's award data and information 
on its Travel Management Centers.

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    Industry Structure Consideration: Table 1 below examines the size 
distribution of Travel Agencies. For this factor, SBA is evaluating the 
size of firms that account for predetermined percentages of total 
industry receipts (40%, 50%, 60%, and 70%). The table shows firms up to 
a specific size that, along with smaller firms, account for a specific 
percentage of total industry receipts. For example, Travel Agencies 
with $900 thousand or less in receipts obtained 40% of total industry 
receipts. Within the nonmanufacturing anchor group, firms of $3.2 
million or less in receipts obtained 40% of total industry receipts in 
the average industry.

                            Table 1.--Size Distributions of Firms of Travel Agencies
                                          [Data in Millions of Dollars]
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                                                                Size of      Size of      Size of      Size of
                          Category                            firm at 40%  firm at 50%  firm at 60%  firm at 70%
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Travel agencies.............................................         $0.9         $2.2         $5.8        $27.1
Nonmanufacturing anchor group...............................          3.2          5.8         11.9         28.0
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    These data show the prevalence of much smaller businesses in the 
Travel Agencies industry than for businesses in the nonmanufacturer 
anchor comparison group. Travel agencies accounting for between 40% to 
60% of industry revenues are one-fourth to one-half of the size of 
businesses in the nonmanufacturing anchor group that capture a similar 
proportion of industry revenues. However, large firms at the 70% level 
are equivalent in size to those in the nonmanufacturer anchor group, 
which reflects the influence of large corporations offering travel 
services. The distribution of travel agencies revenues by size of 
business in relation to the nonmanufacturer anchor group indicate a 
size standard below the $6 million anchor size standard is appropriate. 
Also, that a size standard between $2 million to $3 million would 
represent a reasonable size standard for the Travel Agencies industry 
since these businesses capture approximately half of industry activity.
    Table 2 lists the other three evaluation factors for Travel 
Agencies and the comparison groups. These include comparisons of 
average firm size, the measurement of start-up costs as measured by 
nonpayroll receipts per establishment, and the four-firm concentration 
ratio.

                              Table 2.--Industry Characteristics of Travel Agencies
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                                                              Average firm size      Non payroll     Four firm
                                                         --------------------------  receipts per  concentration
                        Category                            Receipts                establishment    ratio  (in
                                                           (millions)   Employees     (million $)     percent)
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Travel agencies.........................................        $0.44          8.1        $0.188           16.3
Nonmanufacturing anchor group...........................         0.95         10.6         0.562           14.4
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    For Travel Agencies, the average firm size in receipts is lower 
than the nonmanufacturing anchor group's size. However, the average 
number of employees is about the same as the nonmanufacturer anchor 
group size. Based on this factor, a size standard of $2.5 to $3.5 
million, or approximately half the nonmanufacturer anchor size 
standard, is supportable.
    Nonpayroll receipts per establishment, a measure of capital 
requirements to enter an industry, comparatively, are much lower (a 
three-to-one ratio) for Travel Agencies as those of the nonmanufacturer 
anchor group. These data do not support a basis for a higher size 
standard. However, SBA collected additional information on start-up 
cost from the Society of Government Travel Professionals (SGTP). SBA's 
research has found that for travel agencies involved in arranging 
travel services for large corporate clients and the Federal Government, 
start-up costs are higher as compared with the firms involved in 
leisure travel services. Corporate clients and the Federal government 
require firms to have dedicated equipment, secure lines, and access to 
two or more airline ticketing reservation services. The Federal 
Government and the corporate world insist on seamless travel management 
and back-end systems. Firms must be able to link to corporate and 
Federal travel systems that links customer, travel agent, billing 
systems, credit card reconciliation systems, provide 24 hour and seven 
days a week service centers; train government and contractor personnel; 
and provide quality control and inspection plans. Start-up costs for 
these requirements amount up to $160,000 to $200,000 on an average 
contract of approximately $8.5 million in travel bookings. These 
clients also require that travel agencies prepare periodic reports on 
their travel activities. This reporting responsibility requires travel 
agencies to utilize management information systems to monitor their 
clients and represents a service activity beyond the arrangement of 
travel and related accommodations. Therefore, higher start-up costs 
associated with serving Federal and corporate clients support an 
increase in the size standard for the Travel Agencies industry of at 
least twice the current size standard. SBA welcomes public comment on 
start-up costs for Travel Agencies, in particular, how these costs are 
relevant to corporate and Federal government contracts. Comments 
supporting these costs should include information and costs associated 
with what type of specialized equipment, bonding, management 
information systems, security and training requirements are needed for 
corporate and Federal government clients, along with any other relevant 
requirements and information.
    The Travel Agencies four-firm concentration ratio, however, is 
relatively low, indicating that the industry is not dominated by large 
businesses. This factor does not support a basis for a higher size 
standard for Travel Agencies.
    SBA Program Considerations: SBA also reviews its size standards in 
relationship to its programs. This

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interim final rule gives more consideration to the pattern of Federal 
contract awards than to the level of financial assistance to small 
businesses to assess whether its size standard should be revised.
    In fiscal year 2000, 45 loans for $4.5 million were guaranteed to 
Travel Agencies, with 78% of these loans going to firms with less than 
$545,000 in receipts. It's unlikely that an increase to the size 
standard will have much impact on the financial programs and, 
consequently, this factor is not part of the assessment of the size 
standard.
    The Federal government spends approximately $7 billion on official 
travel per year. In addition, the Department of Defense awards 
contracts for leisure travel services, which are worth $5 billion per 
year (as reported to the House of Representatives, Small Business 
Committee on November 4, 1999 by the Society of Travel Agencies in 
Government (STAG)). Federal Procurement Data System (FPDS) statistics 
for the fiscal years 1998 through 2000 show that awards to small 
businesses averaged less than 1% of the total dollars awarded for 
Travel Agencies services. For Fiscal Year 2000, $206,000 out of $25 
million was reportedly awarded to small businesses. However, Federal 
travel services are procured mostly through General Services 
Administration (GSA) Travel Management Centers (TMCs) and the Defense 
Travel System. Awards made through these contract vehicles are on a 
transaction fee basis and all travel costs that are purchased with a 
government credit card, are not recorded in the FPDS. In fiscal year 
2002, the Department of Defense (DoD) hopes to set aside six of its 24 
contracts to small business. Currently, GSA has awarded contracts to 49 
firms for TMCs of which 20 firms are small businesses. Out of the 20 
firms, 17 have task orders. GSA also provided SBA with its estimate for 
the fiscal year 2001 tickets, sales, revenues, and fees received by its 
TMCs.

                           Table 3.--GSA TMC Small Business Contractor's Sales Revenue
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                                     Number of                                      Transaction
                                      tickets        Sales ($)      Commissions        fees        Total revenue
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Total TMCs......................       1,292,917    $518,966,320     $24,423,055     $12,630,279     $33,647,038
Percentage of Total to Small                 3.8             3.5             3.4             6.7             3.5
 Business TMCs..................
----------------------------------------------------------------------------------------------------------------

    These statistics reveal that small business, despite the fact that 
they are awarded 41% of the number of contracts, receive very little of 
the ticket orders, commissions, fees, and revenues. These statistics 
also support the Federal contracting officers concerns that the pool of 
small businesses capable of submitting viable proposals for their 
travel service contracts is dwindling because of the sophistication and 
significant investments required of these firms. New procurements for 
travel management services require firms to provide automation of the 
travel arrangements process through the use of on-line booking 
products; 24 hour and seven days a week service centers; interfaces 
with an agency's finance system; complex travel management information 
systems; secure or dedicated lines that meet privacy and security 
requirements; training for government and contractor personnel; 
compliance costs; and quality control and inspection plans. As 
mentioned earlier, the SGTP estimates these start-up costs to be 
$200,000 on an average contract of $8.5 million in travel bookings.
    The FPDS statistics, plus other contract factors such as large 
start-up costs to implement a Federal travel service contract and the 
declining pool of small businesses submitting proposals suggest that a 
size standard significantly higher than $1 million may be appropriate 
for Travel Agencies.
    Overview: Based on the analysis of each evaluation factor, SBA is 
proposing a $3 million size standard. Four out of the five factors 
support an increase to the current $1 million size standard for Travel 
Agencies. Two factors support a size standard approximately half of the 
nonmanufacturer anchor size standard--average firm size and 
distribution of travel agencies. Two factors support an increase at 
least twice the current $1 million. Start-up costs, especially for 
those firms that have corporate and Federal clients, have higher costs 
due to client requirements than for travel agencies offering primarily 
leisure travel. Travel agencies providing services to corporate and 
government clients tend to be larger in size than travel agencies 
offering leisure travel in order to finance needed investment in the 
equipment and personnel. Procurement statistics, increasingly 
sophisticated procurement requirements, and higher contract start-up 
costs have lead to the decline in the pool of viable small businesses 
that have the ability to compete on travel service contracts, as 
evidenced by the extremely low small business percentages for tickets, 
sales, commissions, fees, and total revenues. A size standard at least 
twice the nonmanufacturer size standard will increase the pool of small 
businesses that can meet the government's requirements.
    Dominant in Field of Operation: Section 3(a) of the Small Business 
Act defines a small concern as one that is (1) independently owned and 
operated, (2) not dominant in its field of operation and (3) within 
detailed definitions or size standards established by the SBA 
Administrator. SBA considers as part of its evaluation of a size 
standard whether a business concern at or below an amended size 
standard would be considered dominant in its field of operation. This 
assessment generally considers the market share of firms at the 
proposed or final size standard or other factors that may show whether 
a firm can exercise a major controlling influence on a national basis 
in which significant numbers of business concerns are engaged.
    The SBA has determined that no firm at or below the amended size 
standards for Travel Agencies would be of a sufficient size to dominate 
its field of operation. For Travel Agencies, a firm $3 million in size 
would generate an estimated .01% of the total industry receipts. This 
level of market share effectively precludes any ability for a firm at 
or below the amended size standard to exert a controlling effect on 
these industries.
    Alternative Size Standards: SBA considered doubling the Travel 
Agencies size standard from $1 million to $2 million, but believed that 
this level would not fully capture the small business segment of the 
Travel Agencies industry. A survey of Travel Agencies showed that those 
with $1 million and less in revenues have declined by more than one-
third while Travel Agencies with more than $2 million have almost 
doubled. This fact indicates that Travel Agencies have needed to expand 
their operations to remain competitive. In addition, SBA is very 
concerned about the capabilities of smaller Travel

[[Page 11878]]

Agencies to satisfy the requirements of government and corporate 
clients. The initial capital resources and recurring costs to obtain 
and maintain travel systems and to provide other travel related 
services also suggest a size standard greater than $2 million. These 
trends are reflected in the analysis of Travel Agencies' industry data. 
Two factors, distribution for receipts by firm size and average firm 
size, supported size standards of at least $2 million and as high as $3 
million to $3.5 million. These considerations, along with the 
uncertainties with regard to compensation for travel services and the 
expanding use of internet technology for travel reservations, convinced 
SBA that a size standard higher than $2 million should be considered.
    SBA also contemplated as an alternative size standard adopting the 
$6 million anchor size standard to the Travel Agencies industry. As 
discussed in the description of SBA's size standards methodology, SBA 
applies the $6 million anchor size standard to the nonmanufacturing 
industries unless the industry's characteristics are significantly 
different from the typical nonmanufacturing industry. The analysis of 
the various industry factors shows that the characteristics of Travel 
Agencies are significantly below those of the nonmanufacturing anchor 
group industries. Thus, a size standard below the anchor size standard 
is appropriate for this industry. As discussed above, SBA believes the 
characteristics of Travel Agencies support a size standard higher than 
the $1 million but lower than the anchor nonmanufacturing size 
standard.

II. Justification for Changing Date of Determination of Size Status

    SBA is also changing the date as of which size status is determined 
for purposes of Economic Injury Disaster Loan (EIDL) applications 
related to the September 11, 2001, terrorist attacks. Existing sections 
121.302(c), 123.300(b), and 123.601(b) require an applicant for an EIDL 
loan to be small as of the date the disaster commenced, as set forth in 
the disaster declaration. SBA is changing the date size status is 
determined for September 11 EIDL assistance to ``the date SBA accepts 
the application for processing.''
    SBA believes that this change will have only a minimal impact on 
eligibility. Under the size regulations, the receipts size of a 
business is calculated as an average for the business' last three 
completed fiscal years.
    For purposes of September 11 EIDL assistance, receipts after 
September 11 to the end of the business' fiscal year would influence 
its three-year average if it filed an application after the end of that 
fiscal year. Most businesses use the calendar year as their fiscal 
year. The short period of time between September 11 and December 31 
would have a relatively minor impact on the number of new firms that 
could qualify as small as a result of changing the date of size status 
to the date of application. A worst case example using the proposed $3 
million Travel Agencies size standard demonstrates why this would 
affect few businesses.
    Example: A business that averages $3.33 million per year could 
become an eligible small business if it had no receipts for the period 
September 11 to December 31. For Year 3, $2.34 million represents $3.3 
million in annualized receipts.

Year 1  $3.33 million
Year 2  $3.33 million
Year 3 + $2.34 million
           ____________
Sum = $9.00 million
Average = $3.00 million

    Based on SBA's analysis of the Travel Agencies' industry and 
discussions with members of the industry, SBA has concluded that this 
scenario is highly unlikely.
    SBA also believes this change is necessary to assist Travel 
Agencies and other small businesses that should have been considered 
small for purposes of September 11, 2001 EIDL assistance.
    On January 23, 2002, SBA increased its size standards to reflect 
the effects of inflation since 1994. Businesses recognized as small 
under that rule will be able to file applications for September 11, 
2001 EIDL assistance. Moreover, of all the industries severely impacted 
by the September 11 attacks, the Travel Agencies industry is the only 
one that did not have its size standard adjusted on January 23, 2002, 
to reflect the effect of inflation. SBA did not increase the size 
standard for Travel Agencies at that time since SBA was already in the 
process of re-evaluating the Travel Agencies size standard to reflect 
changing industry conditions, as further described under 
``Justification for Increasing the Size Standard'' in this preamble.
    The combination of these unique circumstances necessitate changing 
the date of determination of size status for purposes of September 11 
EIDL assistance only. SBA does not foresee the need to apply this 
approach in the future.
    In addition, to avoid the burden of re-submitting an application, 
any previously submitted application which was pending or denied 
because of size status will be deemed to have been resubmitted on the 
effective date of this rule.

III. Justification for Publication as an Interim Final Rule

    This interim final rule is specifically for EIDL assistance 
attributable to the September 11, 2001 terrorist attacks on the World 
Trade Center in New York, New York and the Pentagon in Arlington, 
Virginia. SBA is also publishing a separate proposed rule elsewhere in 
this issue of the Federal Register that addresses the Travel Agencies 
size standard for all other small business purposes.
    In general, SBA publishes a rule for public comment before issuing 
a final rule, in accordance with the Administrative Procedure Act and 
SBA regulations. 5 U.S.C. 553 and 13 CFR 101.108. The Administrative 
Procedure Act provides an exception to this standard rulemaking 
process, however, where an agency finds good cause to adopt a rule 
without prior public participation. 5 U.S.C. 553(b)(3)(B). The good 
cause requirement is satisfied when prior public participation is 
impracticable, unnecessary, or contrary to the public interest. Under 
such circumstances, an agency may publish an interim final rule without 
soliciting public comment.
    In enacting the good cause exception to standard rulemaking 
procedures, Congress recognized that emergency situations might arise 
where an agency must issue a rule without public participation. On 
September 16, 2001, the President declared a national emergency as a 
result of the events of September 11, 2001. The events of that day have 
directly impacted Travel Agencies. The traveling public cancelled and 
rescheduled existing travel arrangements and many postponed further 
travel. Consequently, airlines rescinded travel agencies' commissions 
on flights cancelled or rescheduled due to the terrorist attacks. Thus, 
many small travel agencies have seen their business decline 
precipitously by 20% to 50% due the events of September 11, 2001. On 
January 23, 2002, SBA issued an inflation adjustment as an interim 
final rule which increased revenue based size standards by 15.8%. The 
interim final rule had an applicability date of September 11, 2001, for 
this adjustment for the purposes of eligibility for economic injury 
disaster loans assistance as a result of the terrorist attacks on small 
businesses located in the declared disaster areas. The Travel Agencies 
$1 million size standard was not increased because the SBA decided

[[Page 11879]]

to handle this industry by this separate rulemaking. A proposed 
adjustment to the Travel Agencies size standard under NAICS Code 561510 
was already under development at SBA when the tragic events of 
September 11, 2001 occurred. SBA now believes that any delay in the 
adoption of this size standard adjustment could cause serious harm to 
those Travel Agencies.
    Accordingly, SBA finds that good cause exists to publish this rule 
as an interim final rule in light of the urgent need to make disaster 
loans available to businesses that should be considered small, but that 
do not qualify under SBA's existing size standards. Advance 
solicitation of comments for this rulemaking would be impracticable and 
contrary to the public interest, as it would delay the delivery of 
critical assistance to these businesses by a minimum of three to six 
months. Any such delay would be extremely prejudicial to the affected 
businesses. It is likely that some would be forced to cease operations 
before a rule could be promulgated under standard notice and comment 
rulemaking procedures.
    Furthermore, SBA has a statutory obligation to act in the public 
interest in determining eligibility for Federal assistance under the 
Small Business Act. 15 USC 633(d). Pursuant to that authority, SBA has 
determined that it is in the public interest to give immediate effect 
to SBA's current determination of small size status and that it would 
be impracticable to delay such implementation. SBA also notes the 
failure to adopt this rule immediately would work to the detriment of 
many small Travel Agencies.
    By changing the date of determination of the small business size 
status for purposes of EIDL assistance attributable to the September 
11, 2001 attacks, SBA will be able to assist these small businesses 
before the deadlines for application of September 11, 2001 EIDL 
assistance. The application deadline for expanded EIDL assistance 
(under 13 CFR Part 123, subpart G, Secs. 123.600-.606) is April 22, 
2002. The application deadline for EIDL assistance (under 13 CFR part 
123, subpart D, Secs. 123.300-.303) to the declared disaster areas of 
New York and Virginia is June 11, 2002.
    Although this rule is being published as an interim final rule, 
comments are hereby solicited from interested members of the public. 
These comments must be received on or before April 15, 2002. SBA will 
consider these comments in making any necessary revisions to these 
regulations.

IV. Justification for Immediate Effective Date of Interim Final 
Rule

    The APA requires that ``publication or service of a substantive 
rule shall be made not less than 30 days before its effective date, 
except * * * as otherwise provided by the agency for good cause found 
and published with the rule,'' 5 U.S.C. 553(d)(3). SBA finds that good 
cause exists to make this final rule effective the same day it is 
published in the Federal Register.
    The purpose of the APA provision is to provide interested and 
affected members of the public sufficient time to adjust their behavior 
before the rule takes effect. For the reasons set forth above in II, 
Justification For Publication As An Interim Final Rule, SBA finds that 
good cause exists for making this interim final rule effective 
immediately, instead of observing the 30-day period between publication 
and effective date. SBA believes that this action is both in the public 
interest and does not tend to adversely affect any interested parties. 
SBA also believes, based on its contacts with interested members of the 
public, that there is strong interest in immediate implementation of 
this rule.

Compliance With Executive Orders 12866, 12988, and 13132, and the 
Paperwork Reduction Act (44 U.S.C. Ch. 35)

    The Office of Management and Budget (OMB) has determined that the 
interim final rule is a ``significant'' regulatory action for purposes 
of Executive Order 12866. Size standards determine which businesses are 
eligible for Federal small business programs. This is not a major rule 
under the Congressional Review Act, 5 U.S.C. 800.

Regulatory Impact Analysis

    i. Is there a need for the regulatory action?
    SBA is chartered to aid and assist small businesses through a 
variety of financial, procurement, business development, and advocacy 
programs. To effectively assist intended beneficiaries of these 
programs, SBA must establish distinct definitions of which businesses 
are deemed small businesses. The Small Business Act (15 U.S.C. 632(a)) 
delegates to the SBA Administrator the responsibility for establishing 
small business definitions. It also requires that small business 
definitions vary to reflect industry differences. The preamble of this 
rule explains the approach SBA follows when analyzing a size standard 
for a particular industry. Based on that analysis, SBA believes that a 
revision to the current size standard for Travel Agencies is needed to 
better define small businesses in this industry for purposes of EIDL 
resulting from the September 11, 2001 terrorist attacks.
    ii. What are the potential benefits and costs of this regulatory 
action?
    The most significant benefit to businesses obtaining small business 
status as a result of this rule is eligibility for EIDL assistance 
resulting from the September 11, 2001 attacks. Under this rule, 723 
additional Travel Agencies may obtain small business status and become 
eligible for this assistance. SBA estimates that $1.3 to $2.8 million 
in additional EIDL assistance may result from increasing the size 
standard for Travel Agencies. SBA also estimates an additional $2.3 
million to $2.7 million in EIDL assistance to businesses that became 
eligible small businesses as a result of the recent inflation 
adjustment to monetary size standards. These estimates are based on 
participation rates and EIDL loan amounts of Travel Agencies and small 
businesses in the industries covered by the size standard inflation 
adjustment.
    The revision to current size standards for Travel Agencies is 
consistent with SBA's statutory mandate to assist small businesses. 
This regulatory action promotes the Administration's objectives. One of 
SBA's goals in support of the Administration's objectives is to help 
individual small businesses succeed through fair and equitable access 
to capital and credit, government contracts, and management and 
technical assistance. Reviewing and modifying size standards when 
appropriate ensures that intended beneficiaries have access to small 
business programs designed to assist them. Size standards do not 
interfere with state, local, and tribal governments in the exercise of 
their government functions. In a few cases, State and local governments 
have voluntarily adopted SBA's size standards for their programs to 
eliminate the need to establish an administrative mechanism for 
developing their own size standards.
    For the purpose of the Paperwork Reduction Act, 44 U.S.C. Ch. 35, 
the SBA has determined that this rule would not impose new reporting or 
record keeping requirements, other than those required of SBA. For 
purposes of Executive Order 13132, the SBA has determined that this 
rule does not have any federalism implications warranting the 
preparation of a Federalism Assessment. For purposes of Executive Order 
12988, the SBA has determined that this rule is drafted, to the extent 
practicable, in accordance with the standards set forth in that order.

[[Page 11880]]

List of Subjects

13 CFR Part 121

    Administrative practice and procedure, Government procurement, 
Government property, Grant programs--business, Loan programs--business, 
Small businesses.

13 CFR Part 123

    Disaster assistance, Loan programs--business, Reporting and 
recordkeeping requirements, Small businesses.


    Accordingly, for the reasons set forth in the preamble, amend parts 
121 and 123 of title 13 of the Code of Federal Regulations as follows:

PART 121--SMALL BUSINESS SIZE REGULATIONS

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

    Authority: 15 U.S.C. 632(a), 634(b)(6), 637(a), 644(c) and 
662(5) and Sec. 304, Pub. L. 103-403, 108 Stat. 4175, 4188.

    2. In Sec. 121.201, the table ``Small Business Size Standards by 
NAICS Industry'', under the heading NAICS Subsector 561--Administrative 
and Support Services, revise the entry for 561510 to read as follows:


Sec. 121.201  What size standards has SBA identified by North American 
Industry Classification System codes?

* * * * *

             Small Business Size Standards by NAICS Industry
------------------------------------------------------------------------
                                          Description            Size
                                  --------------------------  standards
                                                              in number
            NAICS Code                                            of
                                     (N.E.C.=Not Elsewhere    employees
                                          Classified)         or million
                                                              of dollars
------------------------------------------------------------------------
 
*                  *                  *                  *
                  *                  *                  *
           Subsector 561--Administrative and Support Services
------------------------------------------------------------------------
*                  *                  *                  *
                  *                  *                  *
561510...........................  Travel Agencies.........      \10\ $1
EXCEPT...........................  Travel Agencies applying      \10\ $3
                                    for economic injury
                                    disaster loan
                                    assistance resulting
                                    from the September 11,
                                    2001 Terrorist Attacks.
*                  *                  *                  *
                    *                  *              *
------------------------------------------------------------------------
          *                  *                  *                  *
               *                  *              *
\10\ NAICS codes 488510 (part), 531210, 541810, 561510 and 561920--As
  measured by total revenues, but excluding funds received in trust for
  an unaffiliated third party, such as bookings or sales subject to
  commissions. The commissions received are included as revenue.

* * * * *

    3. In Sec. 121.302(c), add a new sentence at the end of the 
paragraph to read as follows:


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

* * * * *
    (c) * * * For economic injury disaster loan assistance under 
disaster declarations for the September 11, 2001 terrorist attacks or 
under subpart G of part 123 of this chapter, size status is determined 
as of the date SBA accepts the application for processing, and for 
applications submitted before March 15, 2002, whether denied because of 
size status or pending, such applications shall be deemed resubmitted 
on March 15, 2002.
* * * * *

PART 123--DISASTER LOAN PROGRAM

    4. The authority citation of part 123 continues to read as follows:

    Authority: 15 U.S.C. 634(b)(6), 636(b), 636(c) and 636(f); 
Public Law 102-395, 106 Stat.1828, 1864; Public Law 103-75, 107 
Stat. 739; and Public Law 106-50, 113 Stat. 245.


    5. Revise Sec. 123.300(b) to read as follow:


Sec. 123.300  Is my business eligible to apply for an economic injury 
disaster loan?

* * * * *
    (b) Economic injury disaster loans are available only if you were a 
small business (as defined in part 121 of this chapter) when the 
declared disaster commenced (except disaster declarations for the 
September 11, 2001 terrorist attacks, for which size status is 
determined as of the date SBA accepts the application for processing 
and for applications submitted before March 15, 2002, whether denied or 
pending, such applications shall be deemed resubmitted on March 15, 
2002), you and your affiliates and principal owners (20% or more 
ownership interest) have used all reasonably available funds, and you 
are unable to obtain credit elsewhere (see Sec. 123.104).
* * * * *

    6. Revise paragraph Sec. 123.601(b) to read as follows:


Sec. 123.601  Is my business eligible to apply for an economic injury 
disaster loan under this subpart?

* * * * *
    (b) Economic injury disaster loans are available under this subpart 
only if you were a small business (as defined in part 121 of this 
chapter) on the date SBA accepts your application for processing (and 
for applications submitted before March 15, 2002, whether denied or 
pending, such applications shall be deemed resubmitted on March 15, 
2002, you and your affiliates and principal owners (20% or more 
ownership interest) have used all reasonable available funds, and you 
are unable to obtain credit elsewhere (see Sec. 123.104).
* * * * *

    Dated: March 8, 2002.
Hector V. Barreto,
Administrator.
[FR Doc. 02-6194 Filed 3-14-02; 8:45 am]
BILLING CODE 8025-01-P