[Federal Register Volume 67, Number 105 (Friday, May 31, 2002)]
[Rules and Regulations]
[Pages 38186-38192]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 02-13605]


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SMALL BUSINESS ADMINISTRATION

13 CFR Part 121

RIN 3245-AE95


Small Business Size Standards; Travel Agencies

AGENCY: Small Business Administration (SBA).

ACTION: Final rule.

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SUMMARY: The U.S. Small Business Administration (SBA) is adopting the 
proposed increase to the size standard for Travel Agencies, North 
American Industry Classification System (NAICS) code 561510, from $1 
million to $3 million. 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.

DATES: This rule is effective July 1, 2002.

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

SUPPLEMENTARY INFORMATION: This final rule applies to all SBA small 
business programs. SBA is publishing elsewhere in this issue of the 
Federal Register a separate final rule addressing the Travel Agencies 
size standard for purposes of

[[Page 38187]]

economic injury disaster loan (EIDL) assistance attributed to the 
September 11 terrorist attacks.
    On March 15, 2002, SBA issued a proposed rule to increase the size 
standard for Travel Agencies, NAICS code 561510, from $1 million to $3 
million (67 FR 11881). We believe that this action will better define 
the size of businesses in this industry that should be eligible for 
Federal small business assistance programs. SBA proposed the new size 
standard based on recent changes in the Travel Agencies industry and 
its analysis of the latest industry data from the U.S. Bureau of the 
Census, Federal contract award data, and information provided by travel 
agencies trade associations. For more information on the reasons for 
proposing a $3 million size standard, see the March 15, 2002, proposed 
rule.
    SBA is adopting the $3 million proposed size standard for the 
Travel Agencies industry. The comments received endorsing the proposal 
provided support to SBA's basis for the size standard and the need for 
an increase. The comments opposing the proposal did not provide 
compelling reasons for SBA to consider a different size standard.

Discussion of Comments on the Proposed Rule

    SBA received five timely comments on the proposed size standard. 
Two of the comments were from travel agencies trade associations and 
three were from firms in the industry.
    In summary, two commenters supported the proposed size standard 
while one commenter supported a smaller increase to $2 million. Two 
commenters submitted their responses to SBA's inflation increase to its 
monetary size standard, published in the Federal Register on January 
22, 2002 (67 FR 3041). Both provided detailed reasons for supporting an 
increase to the Travel Agencies size standard no greater than the 15.8 
percent inflation factor applied to most monetary-based size standards. 
(The interim final rule did not apply an inflation adjustment to the 
Travel Agencies industry.) Both commenters also provided detailed 
reasons for their opposition to the proposed $3 million size standard. 
Below is a summary of the comments received on the proposed rule.

Support for Proposed Increase to $3 Million

    Two trade associations submitted comments supporting the size 
standard increase to $3 million. One association cited a number of 
changes in the Travel Agencies industry as supporting the need for a 
higher size standard. It stated that it is witnessing a dramatic change 
in the structure of the travel agencies industry distribution; the 
substitution of up-front capital intensive investments for the more 
flexible labor costs of prior travel processes; and the drying up of 
the pool of eligible small businesses performing government and 
corporate travel services. It also stated that the collapse of the 
airline and car rental commission structure creates a greater need for 
financially viable small travel agencies that can survive in the new 
corporate/government arena. It concluded by agreeing with SBA's 
analysis for increasing the size standard.
    The other association also cited changes in the marketplace for 
supporting a higher size standard and the need for assistance of SBA 
programs on the part of more travel agencies. It cited a 1998 Lou 
Harris survey of travel agencies showing that since 1995 the number of 
firms with revenues under $1 million has decreased by 35 percent and 
that the number with revenues over $2 million increased by 46 percent. 
The commenter attributed this pattern to the advancement of technology 
and a more diverse revenue base. It also stated that a size standard 
increase would restore competitive viability to locally-owned family 
businesses and encourage more small travel agencies to explore Federal 
contracting opportunities. This increase will provide an opportunity 
for hundreds of travel agencies to take advantage of SBA's loan 
programs which were ``off limits'' because many travel agencies were 
considered large under the $1 million size standard. The association 
stressed that this was made apparent when many travel agencies found 
themselves ineligible for Economic Injury Disaster Loans after the 
September 11, 2001, Terrorist Attacks.

Opposition to Proposed Increase to $3 Million

Increase Size Standard to $2 Million
    One firm stated that it supported an increase to $2 million ``as a 
compromise'' to the proposed $3 million size standard. It claimed that 
``this would satisfy most travel agencies.'' This firm, however, did 
not provide detailed reasons, statistics, or other data to support its 
position.
Increase No Greater Than 15.8 Percent Inflation Adjustment
    Two commenters opposed an increase to $3 million and recommended 
applying the 15.8 percent inflation adjustment that SBA recently 
applied to other monetary-based size standards. One commenter contended 
that increasing the size standard to $3 million is ``tantamount to 
declaring the entire Travel Agencies industry small except for the 
handful of mega-agencies.'' The commenter stated that under the current 
size standard, 18,000 travel agencies are small and that 200-300 
agencies are mid-sized. This commenter also contends that ``a small 
business travel agency is one that is actively owner operated'' and 
that it outgrows being small when it needs a ``high amount of internal 
structure is necessary.'' The commenter believes that the $1 million 
size standard has been effective in helping small travel agencies to 
develop and then compete against larger travel agencies. The commenter 
provided examples of two travel agencies that grew over $1 million and 
went on to successfully compete against large travel agencies for 
Federal travel contracts.
    The other commenter that recommended only an inflation adjustment 
to the travel agencies size standard provided two reasons for its 
position. First, it contended that increasing the size standard to a 
level between $2.5 million and $5 million would include all travel 
agencies as small except for 10-12 ``mega-sized'' agencies. Information 
was provided showing that the average size travel agency is about 
$125,000 in commissions and fees, and that 98 percent of the agencies 
qualify as small under the current size standard. The commenter 
believes these facts suggest that no large increase in the size 
standard is needed. Second, it cited industry statistics showing that 
the Travel Agencies industry is declining in all aspects of sales, 
revenue, number of locations, and number of employees. This contraction 
is making the industry smaller, and thus, an increase to the size 
standard beyond an inflation adjustment is inappropriate.

Response to Significant Issues Raised by Comments

    The comments opposing the $3 million size standard raised three 
significant issues as reasons for their position. These issues are 
discussed below along with SBA's assessment and response to each of 
them.

1. Almost All Travel Agencies Are Defined as Small Under a $3 Million 
Size Standard

    Two commenters contend that only an inflation adjustment to the 
travel agencies size standard is warranted since almost all travel 
agencies would be defined as small under a $3 million size standard. 
SBA does not agree with

[[Page 38188]]

this position. It is correct that under the current size standard 95 
percent of the firms are small and that by increasing the size standard 
to $3 million, 732 additional firms will be eligible for SBA assistance 
programs. The total percentage of firms that will be small would 
increase to 98 percent of the 22,687 travel agencies and their 29,332 
establishments. The Census Bureau's data also show that over 450 firms 
will be considered other than small businesses, not 10-12 as one 
commenter suggested. In fact, the Census Bureau's data shows that these 
450 firms, on average, generate $7.3 million in revenues and that the 
70 largest travel agencies generate, on average, $37 million in 
revenues.
    The coverage of a size standard based on the percent of small 
businesses masks the more important question as to the economic 
significance within the industry of small businesses. The 450 travel 
agencies not defined as small generate 47 percent of total Travel 
Agencies' industry revenues while the 22,237 travel agencies with $3 
million or less in revenues generate 53 percent. In relations to other 
SBA size standards, a size standard that results in small business 
coverage of approximately half of industry revenues is a reasonable and 
widely accepted size standard. Thus, we disagree with the argument that 
a high percentage of travel agencies defined as small is a reason not 
to adopt a $3 million size standard.

2. Travel Agencies Industry Is Declining

    One commenter pointed out that the revenues and number of travel 
agencies is declining as a result of changes in the industry and the 
terrorist attacks of September 11, 2001. SBA disagrees that these 
trends serve as the basis for not adopting a $3 million size standard. 
Rather, SBA believes, as did the two travel agencies associations that 
supported the proposed $3 million size standard, that the industry 
trends affecting compensation, technology, and government and corporate 
requirements justify a higher size standard. SBA realizes the impact on 
travel agencies evolving over the last several years from a commission-
based one to a fee-based industry. These are due to the reduction in 
airline commissions and the advances in technology, specifically, the 
use of the internet. Because of technology advances and demands by 
corporate and government clients, most firms must adapt to the higher 
costs of maintaining their businesses, making greater investments in 
technology to meet the needs of their customers, and switching to a 
fee-based compensation system from a commission-based system. A higher 
size standard makes travel agencies between $1 million and $3 million 
eligible for Federal small business programs that can help them meet 
these new challenges and become competitive with larger travel 
agencies. Furthermore, the industry trends of the last several years 
have had the greatest impact on the smallest travel agencies. Travel 
agencies with $1 million or less will continue to have access to small 
business programs. SBA strongly believes that travel agencies with up 
to $3 million need and should also have access to these programs.

3. Travel Agencies Above $1 Million in Size Are Competitive

    One commenter contended that SBA programs have been effective in 
developing small travel agencies to be competitive after they have 
grown beyond the $1 million level; and therefore, an increase beyond an 
inflation adjustment is not needed. SBA disagrees with this comment. 
Although some small travel agencies have successfully competed for 
Federal travel contracts against large travel agencies, the experiences 
of small travel agencies in Federal contracting clearly indicate that 
they are at a disadvantage. As shown in the proposed rule, small travel 
agencies have obtained an extremely small share of Federal contracting 
dollars. Data from the U.S. General Services Administration's (GSA) 
Travel Management Center's Program Office showed small travel agencies 
obtaining only 3.5 percent of total revenues to travel agencies, even 
though small travel agencies account for half of total industry 
revenues. The reasons for this outcome are directly related to change 
in the structure of how travel agencies and government clients, as well 
as corporate clients, do business. Travel agencies competing on Federal 
and corporate travel service contracts must be able to meet 
technological requirements that include interfacing with a Federal 
agency's, or corporation's systems, as well as various airline 
ticketing services, and other ticketing and reservation services. 
Today's travel agencies must also be able to handle various 
geographical requirements. These were discussed in the proposed rule 
and were part of the reasons given by the comments supporting the $3 
million size standard. The opposing commenter's argument is not 
consistent with the overwhelming evidence to the contrary.

Compliance With Executive Orders 12866, 12988, and 13132, the 
Paperwork Reduction Act (44 U.S.C. Ch. 35) and the Regulatory 
Flexibility Act (5 U.S.C. 601-612).

    This is not a major rule under the Congressional Review Act, 5 
U.S.C. 800. For the purpose of the Paperwork Reduction Act, 44 U.S.C. 
Ch.35, SBA has determined that this rule would not impose new reporting 
or recordkeeping requirements, other than those already required of 
SBA. For purposes of Executive Order 13132, 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, SBA has determined that this rule is drafted, to the extent 
practicable, in accordance with the standards set forth in that Order. 
The Office of Management and Budget (OMB) has determined that the 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. Below is a regulatory impact analysis 
of this size standard change. SBA received no comments on the analysis 
presented in the proposed rule.

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 the 
proposed rule explained 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.

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 Federal small 
business assistance programs. Under this rule, 732 additional firms may 
obtain small

[[Page 38189]]

business status and become eligible for these programs. These include 
SBA's financial assistance programs and Federal procurement preference 
programs for small businesses, 8(a) firms, small disadvantaged 
businesses, small businesses located in Historically Underutilized 
Business Zones (HUBZone), as well as those awarded through full and 
open competition after application of the HUBZone or small 
disadvantaged business price evaluation adjustment. Other Federal 
agencies use SBA size standards for a variety of regulatory and program 
purposes. SBA does not have information on each of these uses to 
evaluate the impact of size standards changes. In researching the 
Travel Agencies industry, SBA contacted representatives of GSA and the 
Depart of Defense. These two agencies account for the largest 
proportion of Federal contracting for travel services. Also, 
discussions with a major travel agencies association indicated that 
SBA's travel agencies size standard are not used for other Federal 
programs or regulations, other than those discussed in this rule, but 
are at times referred to by the private sector as guidelines for 
various purposes. In cases where SBA size standards are not 
appropriate, an agency may establish its own size standards with the 
approval of the SBA Administrator (see 13 CFR 121.801). Through the 
assistance of these programs, small businesses may benefit by becoming 
more knowledgeable, stable, and competitive businesses.
    The benefits of a size standard increase to a more appropriate 
level would affect three groups. First, businesses that benefit by 
gaining small business status from the proposed size standard and use 
small business assistance programs. Second, growing small businesses 
that may exceed the current size standard in the near future and who 
will retain small business status from the proposed size standard. 
Third, Federal agencies that award contracts under procurement programs 
that require small business status.
    Newly defined small businesses would benefit from the SBA's 7(a) 
Guaranteed Loan Program. SBA estimates that approximately $400,000 in 
new Federal loan guarantees could be made to these newly defined small 
businesses. This represents approximately 10 percent of the $3.8 
million in loans that were guaranteed by SBA under this financial 
program to travel agencies in FY 2001. Because of the size of the loan 
guarantees, most loans are made to small businesses well below the size 
standard. Thus increasing the size standard will likely result in only 
a small increase in small business guaranteed loans to travel agencies, 
and the $400,000 estimated figure may overstate the actual impact.
    The newly defined small businesses would also benefit from SBA's 
economic injury disaster loan program. Since this program is contingent 
upon the occurrence and severity of a disaster, no meaningful estimate 
of benefits can be projected.
    SBA estimates that firms gaining small business status could 
potentially obtain Federal contracts worth $347 million in sales out of 
approximately $9 billion in total Federal travel expenditures under the 
small business set-aside program, the 8(a), Small Disadvantaged 
Business, and HUBZone programs, or unrestricted contracts. Since most 
of these travel dollars will pass through to airlines, hotels, and 
automobile rental companies, SBA estimates actual revenues to travel 
agencies will range between $25 million and $42 million (7 percent to 
12 percent of the estimated $347 million in sales). This also 
represents approximately $36 million of additional Federal contracts 
that may be awarded to businesses becoming newly designated small 
businesses. These estimates reflect a 10 percent increase in the awards 
to small businesses that the Federal government expends for travel 
services.
    Federal agencies may benefit from the higher size standards if the 
newly defined and expanding small businesses compete for more set-aside 
procurements. The larger base of small businesses would likely increase 
competition and would lower the prices on set-aside procurements. A 
large base of small businesses may create an incentive for Federal 
agencies to set aside more procurements creating greater opportunities 
for all small businesses. Small business opportunities will be enhanced 
in open procurements as they gain experience in Federal contracting 
through the set-aside and other small business procurement preference 
programs. Large businesses with small business subcontracting goals may 
also benefit from a larger pool of small businesses by enabling them to 
better achieve their subcontracting goals and at lower prices. No 
estimate of cost savings from these contracting decisions can be made 
since data are not available to directly measure price or competitive 
trends on Federal contracts.
    To the extent that 732 additional firms become active in Government 
programs, this may entail some additional administrative costs to the 
Federal government associated with additional bidders for Federal small 
business SBA's procurement programs, additional firms seeking SBA 
guaranteed lending programs, and additional firms eligible for 
enrollment in SBA's PRO-Net data base program. Among businesses in this 
group seeking SBA assistance, there will be some additional costs 
associated with compliance and verification associated with 
certification of small business status and protests of small business 
status. These costs are likely to generate minimal incremental costs 
since mechanisms are currently in place to handle these administrative 
requirements.
    The costs to the Federal government may be higher on some Federal 
contracts. With greater number of businesses defined as small, Federal 
agencies may choose to set-aside more contracts for competition among 
small businesses rather than using full and open competition. The 
movement from unrestricted to set-aside is likely to result in 
competition among fewer bidders for a contract. Also, higher costs may 
result if additional full and open contracts are awarded to HUBZone and 
SDB businesses as a result of a price evaluation preference. The 
additional costs associated with fewer bidders, however, are likely to 
be minor since, as a matter of policy, procurements may be set-aside 
for small businesses or reserved for the 8(a), HUBZone Programs only if 
awards are expected to be made at fair and reasonable prices.
    The proposed size standard may have distributional effects among 
large and small businesses. Although the actual outcome of the gains 
and loses among small and large businesses cannot be estimated with 
certainty, several trends are likely to emerge. First, a transfer of 
some Federal contracts to small businesses from large businesses. Large 
businesses may have fewer Federal contract opportunities as Federal 
agencies decide to set-aside more Federal procurements for small 
businesses. Also, some Federal contracts may be awarded to HUZone or 
small disadvantaged businesses instead of a large businesses since 
those two categories of small business are eligible for price 
evaluation adjustment for contracts competed on a full and open basis. 
Similarly, currently defined small businesses may obtain fewer Federal 
contacts due to the increased competition from more businesses defined 
as small. This transfer may be offset by a greater number of Federal 
procurements set-aside for all small businesses. The number of newly 
defined and expanding small businesses that were willing and able to 
sell to the Federal Government would limit the

[[Page 38190]]

potential transfer of contracts away from large and currently defined 
small businesses. The potential distributional impacts of these 
transfers may not be estimated with any degree of precision since the 
data on the size of business receiving a Federal contract are limited 
to identifying small or other-than-small businesses.
    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.

Final Regulatory Flexibility Analysis

    Under the Regulatory Flexibility Act (RFA), this rule may have a 
significant impact on a substantial number of small entities. 
Immediately below, SBA sets forth a final regulatory flexibility 
analysis (FRFA) of this rule addressing the reasons and objective of 
the rule; SBA's description and estimate of small entities to which the 
rule will apply; the projected reporting, record keeping, and other 
compliance requirements of the rule; the relevant Federal rules which 
may duplicate, overlap or conflict with the rule; and alternatives to 
the final rule considered by SBA that minimize the impact on small 
businesses.

(1) What Is the Need for and Objectives of This Rule?

    The revision to the size standard for the Travel Agencies industry 
more appropriately defines the size of businesses in this industry that 
SBA believes should be eligible for Federal small business assistance 
programs. Significant changes in the industry and in the requirements 
of government and corporate clients support the need for a different 
size standard.

(2) What Significant Issues Were Raised by the Public Comments in 
Response to the Initial Regulatory Flexibility Act (IRFA)?

    There were no comments received in response to the IRFA in the 
proposed final rule.

(3) What is SBA's Description and Estimate of the Number of Small 
Entities to Which the Rule Will Apply?

    Within the Travel Agencies industry, 21,505 out of 22,687 
businesses are currently small. Only a small proportion of businesses 
in this industry utilize SBA programs. In SBA's PRO-Net (a SBA database 
of small businesses interested in contracting with the Federal 
Government) 166 travel agencies are currently registered. In fiscal 
year 2001, 40 small travel agencies received 7(a) guaranteed loans. 
Thus, with an increase in the size standard to $3 million, the likely 
impact of this rule would be limited to the 732 firms that will gain 
small business status as a result of this rule. This is based on the 
U.S. Census Bureau's special tabulation of the 1997 Economic Census for 
SBA's Office of Size Standards, using size distribution of firms' 
tables. The following table shows these data for the Travel Agencies 
Industry.

                 Table 1.--Travel Agencies Industry Data
------------------------------------------------------------------------
                                                                 Travel
                           Category                             agencies
------------------------------------------------------------------------
Total Businesses..............................................    22,687
Current Small Businesses......................................    21,505
Small Businesses with the adoption of this rule...............    22,237
Small Businesses Registered in PRO-Net........................       166
Small Businesses with 7(a) Loans..............................        54
------------------------------------------------------------------------

    The 732 travel agencies gaining small business status will become 
eligible to seek available SBA assistance provided that they meet other 
program requirements. These businesses cumulatively generate 
approximately $1.0 billion out of a total of $10 billion in revenues. 
The small business coverage in the Travel Agencies industry will 
increase by 10 percent of total industry receipts.

(4) Will This Rule Impose Any Additional Reporting or Record Keeping 
Requirements on Small Businesses?

    This rule does not impose any new information collection 
requirements from SBA which require approval by OMB under the Paperwork 
Reduction Act of 1980, 44 U.S.C. 3501-3520. A new size standard does 
not impose any additional reporting, record keeping or compliance 
requirements on small entities. Increasing size standards expands 
access to SBA programs that assist small businesses, but does not 
impose a regulatory burden as they neither regulate nor control 
business behavior.

(5) What Are the Steps SBA Has Taken To Minimize the Significant 
Economic Impact on Small Businesses?

    Most of the economic impact on small businesses will be positive. 
The most significant benefits to businesses that will obtain small 
business status as a result of this final rule are (1) eligibility for 
the Federal government's procurement preference programs for small 
businesses, 8(a) firms, small disadvantaged businesses, and businesses 
located in Historically Underutilized Business Zones; and (2) 
eligibility for SBA's financial assistance programs such as 7(a), 504 
business loans, and EIDL assistance. SBA estimates that firms gaining 
small business status could potentially obtain Federal contracts worth 
$347 million per year under the small business set-aside program, the 
8(a) program or unrestricted contracts. This represents approximately 4 
percent of the $9 billion in total Federal travel expenditures.
    Currently defined small businesses are obtaining a very small share 
of Federal contracting relative to their share of total industry 
revenues. (On GSA contracts, small travel agencies obtained 3.5 percent 
of total contracting dollars while their share of total industry 
revenues is 53 percent.) Increasing the size standard to $3 million 
will not significantly impact currently defined small businesses since 
contract requirements already make it difficult for them to 
successfully compete. This outcome will continue unless small travel 
agencies can grow to a size that enables them to develop and finance 
the capabilities to perform the Federal travel management requirements. 
In addition, the small increase in 7(a) business loans that may result 
from the size standard increase will not crowd out other small travel 
agencies or small businesses from obtaining SBA financial assistance. 
SBA estimates that 7(a) loans may increase by $400,000 out of program 
that approve approximately 50,000 loans for over $9 billion per year.

[[Page 38191]]

(6) Alternatives

(a) What Are the Legal Policies or Factual Reasons for Selecting the 
Alternative Adopted in the Final Rule?
    As stated in the Small Business Act 15 U.S.C. 631 and 13 CFR part 
121, SBA establishes size standards based on industry characteristics 
and for non-manufacturing concerns on the basis of the annual average 
gross receipts of a business concern over a period of three years. For 
certain industries, including the Travel Agencies industry, receipts 
are 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. The 
changing structure of the industry, Census Bureau data, Federal 
contracting data, and SBA EIDL assistance data support increasing the 
size standard from $1 million to $3 million.
(b) What Alternatives Did SBA Reject?
    SBA is adopting the $3 million size standard because under the 
current $1 million size standard for travel agencies. Small travel 
agencies are no longer competitive in the corporate and government 
travel markets. Because of technology advances and demands by corporate 
and government clients, most firm must adapt to deal with higher costs 
to maintain their businesses, making greater investments in technology 
to meet the needs of their customers, and switching to a fee-based 
compensation system from a commission-based system. Data from the GSA 
Travel Management Center's Program Office showed that small travel 
agencies obtained only 3.5 percent of total revenues to travel 
agencies, even though small travel agencies account for half of total 
industry revenues. In addition, many travel agencies were declared 
ineligible because of size reasons for EIDL assistance as a result of 
the September 11, 2001 terrorist attacks.
    SBA considered two additional alternatives to this rule. First, 
adopting the $6 million anchor size standard to the Travel Agencies 
industry. As discussed in the proposed rule SBA applies the $6 million 
anchor size standard to the nonmanufacturing industries unless an 
industry's characteristics are significantly different from the typical 
nonmanufacturing industry. The analysis of the various industry factors 
show that the characteristics of travel agencies are significantly 
below those of the nonmanufacturing anchor group industries. To 
establish a $6 million size standard would increase the size standard 
six fold and assist successful travel agencies that tend to operate at 
several locations and potentially take away assistance from small 
travel agencies this rule is intended to assist. Thus, a size standard 
below the anchor size standard is appropriate for this industry.
    Second, SBA considered the commenter's recommendation of increasing 
the travel agencies size standard by only the amount of inflation since 
1994 (15.8 percent). These commenters raised three significant issues 
pertaining to the percentage of travel agencies defined as small, the 
overall decline of the industry, and the competitiveness of currently 
defined small businesses. As discussed in the supplementary 
information, SBA rejected these comments as a basis to adopt the 
inflation alternative. The comments received supporting the $3 million 
size standard used, in part, similar facts to show the proposed size 
standard was needed. Also, SBA's analysis of the changing structure of 
the industry, Census Bureau data, Federal contracting data, and SBA 
EIDL assistance support the need and basis to substantially increase 
the size standard above $1 million.

List of Subjects in 13 CFR Part 121

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

    Accordingly, for reasons stated in the preamble, the Small Business 
Administration amends part 121 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 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
----------------------------------------------------------------------------------------------------------------
                                                                                               Size standards in
                                                                                                   number of
           NAICS codes                   Description (N.E.C.=not elsewhere classified)           employees or
                                                                                                  millions of
                                                                                                    dollars
----------------------------------------------------------------------------------------------------------------
 
*                  *                  *                  *                  *                  *
                                                        *
                                   Subsector 561--Administrative and Support Services
 
*                  *                  *                  *                  *                  *
                                                        *
561510...........................  Travel Agencies..........................................             \10\ $3
 
*                  *                  *                  *                  *                  *
                                                        *
----------------------------------------------------------------------------------------------------------------
 Footnotes
*                  *                  *                  *                  *                  *
   *
 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.


[[Page 38192]]

* * * * *

    Dated: May 15, 2002.
Hector V. Barreto,
Administrator.
[FR Doc. 02-13605 Filed 5-30-02; 8:45 am]
BILLING CODE 8025-01-P