[Federal Register Volume 68, Number 107 (Wednesday, June 4, 2003)]
[Rules and Regulations]
[Pages 33348-33355]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 03-14037]


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SMALL BUSINESS ADMINISTRATION

13 CFR Part 121

RIN 3245-AE89


Small Business Size Standards; Forest Fire Suppression and Fuels 
Management Services

AGENCY: Small Business Administration (SBA).

ACTION: Final rule.

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SUMMARY: The U.S. Small Business Administration (SBA) is adopting a 
size standard of $15 million in average annual receipts for the 
activities of ``Forest Fire Suppression and Fuels Management Service'' 
classified within the ``Support Activities for Forestry'' industry 
(North American Industry Classification System (NAICS) 115310). This 
action will better define the size of businesses in these activities 
that the SBA believes should be eligible for Federal small business 
assistance programs. The size standard for the remainder of activities 
in this industry remains at $6 million.

DATES: This rule is effective July 7, 2003.

FOR FURTHER INFORMATION CONTACT: Diane Heal, Program Analyst, Office of 
Size Standards, at (202) 205-6618 or [email protected].

SUPPLEMENTARY INFORMATION: On July 19, 2002, the SBA published a 
proposed rule in the Federal Register (67 FR 47480) to establish a $15 
million size standard for forest fire suppression and fuels management 
services under NAICS code 115310, the Support Activities for Forestry 
industry. The SBA proposed to establish a size standard for these 
activities after reviewing requests from firms in the forestry 
industry. These firms believe that this action is warranted in light of 
the increased emphasis by the Federal Government on removing biomass 
fuels from the Nation's forest, the dramatic increase in funding for 
this effort, and the Federal Government's growing reliance upon the 
private sector to perform fuels management tasks and to suppress forest 
fires.
    Based on these concerns, the SBA conducted a review of this 
industry's size standard. In addition to reviewing patterns of Federal 
procurement in this industry, it collected and evaluated data on the 
industry's structure. This review involved comparisons of average firm 
size, the size distribution of firms, measures of start-up costs, and 
the degree of concentration of economic activity among very large firms 
in the industry. Based on its review of each of these evaluation 
factors, and the nature and patterns of Federal contracting for forest 
fire suppression and fuels management services, the SBA concluded that 
the data supported a size standard for forest fire suppression and 
fuels management services industry activities of $15 million in average 
annual receipts. The SBA did not propose a change to the $6 million 
size standard for all the other remaining forestry activities within 
the industry. (For more information on the reasons for the proposed 
establishment of a $15 million size standard, see the July 19, 2002, 
proposed rule.) After careful consideration of the comments received on 
the proposed rule, the SBA has decided to adopt its proposed size 
standard of $15 million.

Discussion of Comments on the Proposed Rule

    The SBA received 19 comments on the proposed size standard from 
eight environmental and economic associations, five firms, three 
Federal agencies, two individuals, and one trade association. In 
summary, eight commenters supported the proposed size standard and 11 
commenters opposed that change. Below is a summary of the major issues 
raised by the comments received on the proposed rule and the SBA's 
response.

Comments Supporting a Higher Size Standard

    One organization supported the proposed increase in the size 
standard, but claimed that the increase could be greater than $15 
million due to the 2002 fire season. This commenter did not provide any 
supporting statistics or documentation.
    The SBA does not adopt this comment. In the proposed rule, the SBA 
discussed the reasons for proposing the size standard at $15 million. 
Even though the U.S. Forest Service (USFS) and Bureau of Land 
Management (BLM) expended record contract dollars for the 2002 fire 
season, the SBA found that the firms impacted the most were those whose 
revenues were below $6 million before the 2002 season. Several of these 
firms now exceed the current size standard. The increased revenues from 
this past fire season support the SBA's reasons for establishing a size 
standard above the current $6 million level for forest fire suppression 
and fuels management services activities. The SBA believes that a $15 
million size standard is sufficient to allow these companies to grow to 
a size to meet the capital requirements of forest fire suppression and 
fuels management services contracts. The SBA is reluctant to adopt a 
higher size standard than it proposed without more information on the 
structure of the industry that demonstrates a stronger basis for a 
higher size standard.
    Three commenters supported the proposed size standard because of 
the importance it has on firms engaged in forest fire suppression and 
fuels management services. One commenter pointed out that the firms 
performing these tasks have been developed primarily for Federal 
Government work. The commenter contends ``it is a logical extension of 
the effort that Federal agencies have pursued to allow companies that 
have been developed for Federal work to continue this work * * * The 
higher standard allows continued growth as well as expansion of the 
small business pool through subcontracting.'' Another commenter added 
that the Federal Government's reliance on the private sector is 
expected to significantly increase due to the emphasis on contract use 
under the National Fire Plan and the effort to outsource commercial 
work that can be done by private concerns.
    One Federal agency expressed concern about the shift in the 
forestry industries away from logging and into forest fire suppression 
and fuels management services. The commenter stated that if a firm 
exceeds the size standard, there is no commercial market for these 
types of firms, as ``The Government is in the only game in town.'' 
These firms make up a significant portion of one of its contracting 
offices' fire fighting resources. It also pointed out that normally 
small business set-aside programs are designed to help small businesses 
graduate and go onto bigger and more lucrative commercial contracts. In 
this industry, the Federal Government far exceeds the amount of work 
done by private landowners, or even by the states and counties.
    The SBA agrees with these comments. As stated in the preamble to 
the proposed rule, over the last several years the Federal Government 
has placed greater reliance upon contractors to perform these services, 
resulting in a dramatic increase in contract funding for forest fire 
suppression and fuels management activities. This is especially true in 
the western part of the country where the Federal Government

[[Page 33349]]

owns vast amounts of land. This development has significantly changed 
the size structure of firms engaged in these activities, and supports 
the need to establish a higher size standard.
    Two commenters cited increased contractor costs as a basis for 
increasing the size standard. One commenter identified the increasing 
prevailing wages mandated by the U.S. Department of Labor; the 
increases in fuels costs for mechanical equipment, chain saws, and drip 
torches for igniting prescribed fires; and the use of specialty 
personal protective clothing and equipment as factors leading to the 
increased costs. Another commenter applauded the SBA's acknowledgment 
of the increased capital costs placed upon companies due to the Federal 
Government's reliance upon these firms.
    The SBA agrees with these comments. As stated in the proposed rule, 
because of the shift in forest fire fighting and fuels management 
services policies by the Federal Government, many firms have had to 
make capital investments in equipment and specialized clothing. In 
addition, the SBA obtained from the National Interagency Fire Center 
(NIFC) information on the average fire crew labor costs for fiscal year 
2002. This information shows that the Federal Government's labor costs 
contracted for fire crews range between $23 and $35 per hour, with an 
average being $30 per hour. The level of labor costs and capital 
investments supports the SBA's proposal for a higher size standard.
    One Federal agency commented that the increase will benefit the 
Government by increasing the number of viable small businesses eligible 
for small business set-aside awards for forest fire suppression and 
fuels management services. This agency noted that it has witnessed a 
decreasing number of business bidding on fuels reduction road 
maintenance contracts. Many of the firms no longer qualify under the $6 
million size standard. Many of these firms qualify under the higher 
size standard of their primary industry (e.g., Other Waste Collection 
(which includes brush removal) with a $10.5 million size standard and 
Site Preparation Contractors with a $12 million size standard). In 
addition, the agency is aware of one contractor who is already hiring 
fewer crews and refusing fire assignments in order to stay under the 
size standard.
    The agency also expressed concern that it may receive little or no 
competition for small business set-aside projects because of the number 
of firms doing fire suppression work and who have also qualified to do 
prescribed burns are at or above the current size standard. The 
commenter pointed out that substantial costs are incurred in the 
acquisition and maintenance of equipment as well as the training and 
retention of quality employees. In addition, the agency has several 
contractors who are now running crews under State contracts, and ``with 
the number of fire emergencies in the 2 years, these firms are near or 
at the current size standard.''
    The agency's comments support the SBA's findings discussed in the 
proposed rule that due to the increased funding for fuels management 
services and the severe fire seasons, many firms who perform these 
services for the Federal Government have had a significant increase in 
their revenues. Without an increase to the size standard, the Federal 
Government may help small business to develop their abilities in forest 
fire suppression and fuels management services only to have them either 
restrict their growth or force the agency to find and develop a new 
group of inexperienced firms. This, coupled with the earlier comment 
that the Federal Government is the primary source of revenues for the 
industry, strongly supports increasing the current size standard.

Comments Opposing a Size Standard Increase

    Four commenters opposed an increase to the current size standard 
because they believe that there are ample small businesses to perform 
fuels management services. One of these commenters provided calendar 
year 2000 data on the number of employees in the Support Activities for 
Forestry industry for the State of Oregon from the U.S. Bureau of 
Census' County Business Patterns statistical database. These data show 
that firms with 99 or less employees comprise 97% of the firms in 
Oregon, while 60% of the firms have four employees or less. This 
commenter also stated that in fiscal year 2001, using the BLM and the 
USFS databases for contracts awarded to firms in the States of Oregon 
and Washington, $87 million was expended for forestry services. The 
average income per contractor was $156,000, with the largest contractor 
capturing $7.2 million. Only 16 firms captured more than $1 million in 
work, while 396 captured contracts totaling $100,000.
    The SBA does not agree with the comment that a size standard 
increase is unnecessary. The information presented by one of the 
commenters does not accurately reflect all firms, nationwide, that are 
involved in forest fire suppression and fuels management services. When 
developing size standards, the SBA looks at industry statistics on a 
national level, as its size standards affect all industry firms and 
Federal programs. One commenter relied on a Census Bureau report for 
the State of Oregon that presented information only on the number of 
employees in the Support Activities for Forestry industry. This report 
did not give data on industry receipts, which is a more accurate 
representation of the size distribution of firms in this industry 
because of its seasonal nature. The SBA's reasons for using receipts 
instead of employees were discussed in the proposed rule. In addition, 
the information presented by these commenters was for the entire 
Support Activities for Forest industry in Oregon, which includes firms 
that estimate timber, provide forest pest control services, consultant 
on wood attributes and reforestation, plant trees, and provide land 
treatment services. As explained in the proposed rule, the SBA could 
not use the Census Bureau data it usually relies upon to evaluate 
industry structure. Although that database (a special tabulation of the 
1997 Economic Census) provides national industry data on firms by 
receipts size, it does not provide firm data on specific activities 
within the industry. Moreover, the significant increase in spending for 
forest fire suppression and fuels management services occurred after 
the 1997 Economic Census, and thus, the data do not reflect the impact 
of this increased spending on the size distribution of firms in the 
industry.
    This commenter also presented Federal contract awards limited to 
firms in the States of Oregon and Washington for all forestry support 
services. As stated in the proposed rule, the SBA obtained information 
from the Federal Data Procurement Center on forest fire suppression and 
fuels management services contract awards from fiscal years 1998--2000, 
which showed that the contract awards to firms increased from $29 
million in fiscal year 1998 to $173 million in fiscal year 2000. During 
that period the percentage of Federal contract award dollars to small 
business for forest fire suppression decreased from 76% to 51%. During 
the period of 1998 through the first two quarters of fiscal year 2002, 
the percentage of Federal contract award dollars to small business for 
fuels management decreased from 100% to 75%. The SBA believes that 
these trends reflect the changing composition of businesses in forest 
fire suppression and fuels management services and the need to 
establish a new size standard.
    Two commenters stated that the SBA's approximation for forest fire

[[Page 33350]]

suppression firm size is unrealistically large. These commenters stated 
that the SBA's estimate of 20 fire crews (one crew has 20 members) for 
90 days is overestimated. They pointed out that the largest firms in 
the Pacific Northwest have 10 crews, and that 60 days is more of a 
realistic fire season. One of these commenters also used a labor cost 
of $20.25 per hour.
    The SBA does not agree with this comment. In the proposed rule, the 
SBA stated that it had received a request from an organization, 
representing forest fire suppression firms, to increase the size 
standard for forest fire suppression and fuels management services to 
500 employees or $27.5 million. This organization justified its 
recommendations, in part, by stating that 20 fire crews for 90 days 
could generate $10.8 million.
    The SBA obtained information on fire crew lists and labor and 
engine rates on the national fire fighting contract from NIFC for the 
2002 season. The national average labor rate for fire crews was $30 per 
hour and the average rate for a fire engine was $1,500 per day. The 
average number of fire crews was four and the average number of engines 
was three. In addition, the 2002 fire season was unusually long, 
starting in April and ending in October, a 150-180 day season. Using 
this information the SBA calculated the potential revenues of firms 
engaged in forest fire suppression. With the extended fire season, the 
SBA recognized that the crews would not work everyday, and used a 120 
estimate of days crews worked. The table below estimates the potential 
revenues by the number of crews.

                                 Table 1.--Potential Revenues by Number of crews
----------------------------------------------------------------------------------------------------------------
                                                                         of  Total  of         2002
                                              work day     days worked      crews       employees     revenues
----------------------------------------------------------------------------------------------------------------
$30.......................................            12           120             4            80         $3.5M
$30.......................................            12           120             9           180         $7.8M
$30.......................................            12           120            15           300        $12.9M
----------------------------------------------------------------------------------------------------------------

    Using these estimates, the average firm with four crews would have 
the potential to generate $3.5 million in revenues just from forest 
fire suppression activities. Add in the cost of three fire engines at 
$1,500 per engine, $4,500 per day, for the 120 days, $540,000, and the 
average firm's 2002 revenues for just fire suppression is greater than 
$4 million. Given that many of the firms that fight forest fires are in 
other industries, these firms potentially will have revenues in excess 
of $6 million. The SBA believes that the size standard must be set at a 
level above $6 million to properly take into account these higher cost 
activities.
    Two commenters stated that increasing the size standard will cause 
greater market concentration in the fuels management services. Two 
other commenters stated that an increase would allow for ``dominant 
industries'' to out-compete small businesses.
    The SBA disagrees with these comments. Federal procurement 
statistics show that there has been a dramatic drop in the percentage 
of award dollars going to small business in fuels management services. 
In 1998, 100% went to small businesses. However, in the first two 
quarters of fiscal year 2002 small business captured only 75% of the 
award dollars. The percentage of contract dollars going to small 
business will continue to decrease because of the dramatic increase in 
fire suppression dollars in 2002, the growth in Federal monies for 
fuels reduction, and because many of the fuels management firms also 
are forest fire suppression contractors. As discussed in the proposed 
rule, the SBA believes that increasing the size standard will increase 
competition in the industry, thereby increasing opportunities for small 
business.
    Seven commenters stated that the problem of size growth stems from 
the way the Federal Government is issuing contracts, i.e., the size of 
each requirement, the use of Request for Proposals and Indefinite 
Delivery Indefinite Quantity (IDIQ) type contracts, and the bundling of 
requirements. Two of these commenters recommended that Federal land 
management agencies issue smaller contracts that would be accessible to 
smaller businesses. Both claimed that the rapid growth of the largest 
firms in the industry is a result of the Federal Government offering 
increasing large contracts.
    The SBA does not agree with this comment. The SBA reviewed the 
fiscal year 2003 procurement forecasts for the BLM and USFS and found 
that these agencies were structuring their requirements for specific 
areas and not offering large bundled contracts. All but two of the 
BLM's fiscal year 2003 projected solicitations and three of the USFS 
fiscal year 2003 projected solicitations have estimated values not to 
exceed $250,000. Also, this issue is not relevant to adopting or 
rejecting the proposed size standard. Additionally, issues concerning 
contract bundling relate to the structuring of individual procurements 
and therefore are separate from the SBA's determination of the 
appropriate small business size standard for a particular industry. For 
more information about the SBA's efforts to address the impact of 
contract bundling on small businesses, see its recently proposed rule 
on this issue (68 FR 5134, dated January 31, 2003).
    One commenter stated that $15 million was not a small business. In 
fact, this commenter stated that $1 million is larger than any small 
business operation existing in her area. The commenter claimed that a 
$15 million business would not be a local forestry small business.
    The SBA does not agree with this recommendation. Firms with 
revenues below $1 million are not representative of all small 
businesses that perform forest fire suppression and fuels management 
contracts. Data the SBA analyzed on firms engaged in forest fire 
suppression and fuels management services clearly support a size 
standard above the current $6 million size standard.

Separate Forest Fire Suppression and Fuels Management Services 
Categories

    The SBA received five comments recommending that forest fire 
suppression be separated from fuels management services. All five 
commenters claimed that many of the small firms were well below the 
current size standard and are capable of doing fuels management 
services. Three of these commenters acknowledge that the forest fire 
suppression activity may have higher capital costs, start up costs, and 
training costs. These firms stated that the capital costs, start up 
costs, and training needs may be more limited for fuels management 
services. Two commenters claimed that combining

[[Page 33351]]

these two activities into one industry activity may inaccurately merge 
businesses of two different types together. Two different commenters 
stated that fuels management firms are more like firms in other 
forestry services than they are like forest fire suppression firms. The 
equipment and skill levels for mechanical thinning are unrelated to 
fire suppression equipment.
    The SBA acknowledges that some misinterpretation may have been 
caused by combining forest fire suppression and fuels management 
services into a single sub-industry description. Both are separate 
activities under the Support Activities for Forestry industry. Instead 
of listing one exemption for both forest fire suppression and fuels 
management services, the SBA will modify its table of small business 
size standards by listing two separate exceptions under Support 
Activities for Forestry--one for forest fire suppression and one for 
fuels management services.
    The SBA does not agree with the comments regarding mechanical 
thinning, capital costs, training, and skill levels. Mechanical 
thinning is only one aspect of fuels management services. As stated in 
the definition of fuels management services in the proposed rule, this 
activity also involves prescribed fire, establishment of fuel breaks, 
as well as thinning, pruning, and piling. In addition, contracts for 
these services include the removal and/or disposal of biomass. The use 
of prescribed fire for these services requires firms experienced in 
controlling forest fires. Firms who perform this portion of fuels 
management have expended capital on fire retardant clothing, fire 
fighting equipment, and training. These firms also pay higher insurance 
premiums because of the danger in working with controlled fire. These 
firms, along with their fire engines, are also certified for 
controlling fires by the USFS. Firms that establish fuel breaks as part 
of their fuel management services, require capital investment in heavy 
equipment such as yarders, and earth moving equipment. Many times, 
these firms are also involved as excavation contractors and heavy 
equipment contractors (site preparation contractors have a $12 million 
size standard and heavy equipment contractors have a $28.5 million size 
standard). In addition, fuels management contracts may include the 
removal and/or disposal of the biomass (brush removal contractors have 
a size standard of $10.5 million size standard). Fuels management 
services is not limited to mechanical thinning, as suggested by some 
commenters. The costs, training, and equipment for various fuels 
management contractors may be just as high as for forest fire 
suppression contractors.

Periodic Reviews and Adjustments Aside From Inflationary Adjustments

    One commenter recommended that the SBA perform periodic reviews on 
the Forestry industry aside from inflationary adjustments. The SBA 
agrees with this comment. As stated in the proposed rule, the SBA would 
continue to monitor this activity in the future to determine if another 
increase is warranted. If the review shows that another change in the 
size standard is needed, the SBA will issue a proposed rule, outlining 
the reasons for the change.

Use of Receipts Over Number of Employees

    One commenter, a contracting officer, supported the SBA's decision 
to establish this size standard by receipts instead of number of 
employees because of the great fluctuation in employment which rises 
and falls throughout the year due to the fire suppression season. 
During a severe fire season, like 2002, some firms may operate 25 20-
person crews for a period of weeks or a few months. The number of 
employees then drops to the amount needed to conduct fuels management.
    As discussed in the proposed rule, the SBA believes that using a 
number of employees size standard is not appropriate for forest fire 
suppression and fuels management services, as most firms performing 
these activities have fluctuating numbers of employees because of the 
seasonal nature of forest fire suppression. A receipts-based size 
standard is a more appropriate measure of a firm's operations in these 
activities.

Contrary to National Fire Plan

    Three commenters stated that the SBA's actions would be contrary to 
the National Fire Plan, which was developed to reduce forest fire 
hazards and increase preparedness for fire suppression. All three 
emphasized that Congress' approach was not to create larger businesses 
but to build new capacity in rural communities near national forests 
and other public lands, and that they provided authority to direct work 
to small and micro businesses.
    The SBA does not agree with this comment. The SBA believes its 
actions are aligned with Congress' intent for the National Fire Plan. 
Because of the devastating fire seasons during the past 5 years, and 
the establishment of National Fire Plan, funding to firms in forest 
fire suppression and fuels management services has dramatically 
increased. With this rule and because of the National Fire Plan, the 
SBA is recognizing the effect this dramatic increase in funding has 
had, and will continue to have, on firms in this industry.

Workers' Health and Safety in Jeopardy

    One commenter claimed that increasing the size standard would 
``allow firms to grow beyond the point where contractors can ensure 
adequate attention to worker health and safety.'' This issue does not 
pertain to factors related to establishing a size standard. Health and 
safety issues are the function of the administrative contracting 
officer as they monitor the compliance with the clauses in the contract 
that regulate these issues.

Negative Environmental Outcome

    One commenter stated that the SBA actions would ``open the doors to 
the potentially damaging new industry of removing unsustainable 
quantities of biomass fuel from the nation's forest.'' This comment 
deals with environmental issues and does not relate to the size of a 
firm in the forest fire suppression and fuels management services.

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)

    The Office of Management and Budget (OMB) has determined that the 
proposed 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. 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. 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 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. Below is a regulatory impact analysis of this 
size standard change.

Regulatory Impact Analysis

1. Is There a Need for the Regulatory Action?

    The SBA is chartered to aid and assist small businesses through a 
variety of

[[Page 33352]]

financial, procurement, business development, and advocacy programs. To 
effectively assist intended beneficiaries of these programs, the 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 the SBA follows when analyzing a size standard 
for a particular industry. Based on that analysis, the SBA believes 
that a size standard for forest fire suppression and fuels management 
services is needed to better define small businesses engaged in these 
industry activities.

2. 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, approximately 50 to 60 
additional firms will obtain small business status and become eligible 
for these programs. These programs include the SBA's financial 
assistance programs and Federal procurement preference programs for 
small businesses, 8(a) firms, small disadvantaged businesses (SDB), and 
small businesses located in Historically Underutilized Business Zones 
(HUBZone), including the application of a HUBZone or SDB price 
evaluation preference or adjustment for contracts awarded through full 
and open competition. Through the assistance of these programs, small 
businesses may benefit by becoming more knowledgeable, stable, and 
competitive businesses.
    Other Federal agencies also use the SBA size standards for a 
variety of regulatory and program purposes. In situations where the 
SBA's size standard is not appropriate for an agency's program, the 
agency may establish its own size standards with the approval of the 
SBA Administrator (see 13 CFR 121.902).
    The benefits of a size standard increase to a more appropriate 
level would accrue to three groups: (1) Businesses that benefit by 
gaining small business status from the proposed size standards and use 
small business assistance programs; (2) growing small businesses that 
may exceed the current size standards in the near future and who will 
retain small business status from the proposed size standards; and (3) 
Federal agencies that award contracts under procurement programs that 
require small business status.
    Newly defined small businesses would benefit from the SBA's 
financial programs, in particular its 7(a) Guaranteed Loan program. 
Under this program the SBA estimates that $100,000 in new Federal loan 
guarantees could be made to the newly defined small businesses. 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 to include 50 to 60 additional businesses will likely result 
in only one or two small business guaranteed loans to businesses in 
this industry.
    The newly defined small businesses would also benefit from the 
SBA's Economic Injury Disaster Loan (EIDL) program. Since this program 
is contingent upon the occurrence and severity of a disaster, no 
meaningful estimate of benefits can be projected. During fiscal years 
2001-02, however, no loans were made to firms in the Support Activities 
for Forestry industry.
    Awards to small businesses for forest fire suppression and fuels 
management services have decreased 27% over the last three fiscal 
years. Small business award dollars to firms in the forestry services 
activities, most of which were for forest fire suppression and fuels 
management services, amounted to $185 million. If this rule becomes 
final, small business status would be restored to several firms that 
have lost small business status because of the rapid growth in Federal 
funding and contracting in this industry. The SBA estimates that firms 
gaining small business status could potentially obtain Federal 
contracts worth $50 million per year ($185 million x 27%) under the 
small business set-aside program, the 8(a) and HUBZone programs, or 
unrestricted contracts.
    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 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, thus creating greater opportunities for 
all small businesses. Federal contractors with small business 
subcontracting goals may also benefit from a larger pool of small 
businesses by enabling them to better achieve their subcontracting 
goals 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 approximately 50 to 60 additional firms could 
become active in Federal Government programs, this may entail some 
additional administrative costs to the Federal Government associated 
with additional bidders for Federal small business procurement 
programs, additional firms seeking the SBA guaranteed lending programs, 
and additional firms eligible for enrollment in the SBA's PRO-Net 
database program. Among businesses in this group seeking the SBA 
assistance, there will be some additional costs associated with 
compliance and verification 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 as a result of this rule. With greater numbers 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 
contracting 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. However, the additional costs associated 
with fewer bidders are likely to be minor since procurements may be set 
aside for small businesses or under the 8(a), and HUBZone programs only 
if awards are expected to be made at fair and reasonable prices.
    The new size standard may have distributional effects among large 
and small businesses. Although the actual outcome of the gains and 
losses 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 HUBZone or 
SDB businesses instead of large businesses since those two categories 
of small businesses are eligible for price evaluation preferences for 
contracts competed on a full and open basis. Similarly, currently 
defined small businesses may obtain fewer Federal contracts due to the 
increased

[[Page 33353]]

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 potential transfer of contracts away from large 
and currently defined small businesses would be limited by the newly 
defined and expanding small businesses that were willing and able to 
sell to the Federal Government. The potential distributional impacts of 
these transfers cannot 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 the current size standard for forest fire 
suppression and fuels management services is consistent with the SBA's 
statutory mandate to assist small businesses. This regulatory action 
promotes the Administrator's objectives. One of the SBA's goals in 
support of the Administrator's objectives is to help individual small 
businesses succeed through fair and equitable access to capital and 
credit, Federal 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 the 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. The SBA 
estimates that an additional 50 to 60 businesses may obtain small 
business status as a result of this rule. Also, small businesses may 
obtain an additional $50 million in Federal contracts.
    The size standard may also affect small businesses participating in 
programs of other agencies that use the SBA size standards. As a 
practical matter, however, the SBA cannot estimate the impact of a size 
standard change on each and every Federal program that uses its size 
standards. In cases where an SBA size standard is not appropriate, the 
Small Business Act and the SBA's regulations allow Federal agencies to 
develop different size standards with the approval of the SBA 
Administrator (13 CFR 121.902). For purposes of a regulatory 
flexibility analysis, agencies must consult with the SBA's Office of 
Advocacy when developing different size standards for their programs 
(13 CFR 121.902(b)(4)).
    Immediately below, the SBA sets forth a final regulatory 
flexibility analysis (FRFA) of this rule addressing the need for and 
objective of the rule; a 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 the SBA that minimize the 
impact on small businesses.

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

    The SBA's objective of this rule is to establish an appropriate 
small business definition of businesses engaged in forest fire 
suppression and fuels management services, and therefore, eligible for 
Federal small business assistance programs. The significant increase in 
Federal funding and the Federal Government's increased use of 
contractors to perform these services has altered the structure of the 
industry and support the need for a new size standard for these 
activities.

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

    The SBA received no comments in response to the IRFA of the 
proposed rule.

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

    The SBA estimates that 200 to 300 businesses are engaged in forest 
fire suppression and fuels management services. These businesses come 
from industries in the Forestry and Logging Subsector (NAICS codes 
113110, 113210, 113310, and 115310). As this is an emerging industry, 
the SBA developed its estimate from discussions with, and information 
provided by the USFS, the BLM, and industry groups. From these 
discussions, the SBA estimates that approximately 50% of these firms 
are small businesses, many of which may be currently at or just below 
the $6 million threshold. With the adoption of this rule, 50 to 60 
additional businesses will gain small business status. Although this 
may not represent a substantial number of small businesses, the SBA is 
preparing an FRFA to ensure that the impact on small businesses of 
higher size standards are known and have been considered. These 
businesses would be eligible to seek available SBA assistance provided 
that they meet other program requirements.
    Based on the relative size of these firms and the SBA's knowledge 
of contracting in these areas, the SBA estimates that small business 
coverage will increase by 12% of total revenues in this activity. These 
revenue estimates were calculated from the size distributions of the 
parent industries in which forest fire suppression and fuels management 
service firms are presently classified.

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

    A new size standard does not impose any additional reporting, 
record keeping or other compliance requirements on small entities for 
the SBA programs. A change in a size standard would not create 
additional costs on a business to determine whether or not it qualifies 
as a small business. A business needs to only examine existing 
information to determine its size, such as Federal tax returns, payroll 
records, and accounting records. Size standards determines 
``voluntary'' access to the SBA and other Federal programs that assist 
small businesses, but does not impose a regulatory burden as they 
neither regulate nor control business behavior. In addition, this rule 
does not impose any new information collecting requirements from the 
SBA which requires approval by OMB under the Paperwork Reduction Act of 
1980, 44 U.S.C. 3501-3520.

(5) What Are the Steps the 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 (HUBZone); and (2) 
eligibility for the SBA's financial assistance programs such as 7(a) 
business loans, 504 business loans, and EIDL assistance. The SBA 
estimates that firms gaining small business status could potentially 
obtain Federal contracts worth $50 million per year under the small 
business set-aside program, the 8(a) program, the HUBZone program, or 
unrestricted contracts. This represents approximately 27% of the $185 
million

[[Page 33354]]

in total Federal expenditures for forest fire suppression and fuels 
management.

(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. 632, and 13 CFR part 
121, the SBA establishes size standards based on industry 
characteristics and for non-manufacturing concerns on the basis of 
gross receipts of a business concern over a period of 3 years. The 
increased emphasis by the Federal Government on removing biomass fuels 
from the Nation's forests, the dramatic increase in funding for this 
effort, and the Government's growing reliance upon the private sector 
to perform fuels management tasks and to suppress forest fires supports 
establishing a separate size standard of $15 million.
(b) What Alternatives Did the SBA Reject?
    One commenter recommended a $1 million size standard, stating that 
$15 million was not a small business. In fact, this commenter stated 
that $1 million is larger than any small business operation existing in 
the commenter's area and that a $15 million business would not be a 
local forestry small business.
    The SBA does not consider this alternative realistic. Firms with 
revenues below $1 million are not representative of all small 
businesses that perform forest fire suppression and fuels management 
services. A $1 million size standard is well below the $6 million size 
standard for all forestry industries, including Support Activities for 
Forestry. In addition, a $1 million size standard is below the base 
size standard for non-manufacturing industries.
    By adopting the size standard at $15 million, the SBA will minimize 
the impact on the small businesses in these emerging activities. 
Increased Federal funding and requirements, the Federal Government's 
growing reliance on the private sector for these services, and the 
severe fire seasons over the last several years have caused many firms 
to outgrow the $6 million size standard, thus reducing small business 
competition for these services. The $15 million size standard will 
allow firms in these activities to grow to an appropriate level without 
losing their small business status, but not to a level where a few 
firms would be able to control a significant portion of Federal 
contracts at the expense of other small businesses.

List of Subjects in 13 CFR Part 121

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


0
For the reasons stated in the preamble, amend part 121 of title 13 of 
the Code of Federal Regulations as follows:

PART 121--SMALL BUSINESS SIZE REGULATIONS

0
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.


0
2. Amend Sec.  121.201 as follows:
0
a. In the table ``Small Business Size Standards by NAICS Industry'' 
under the heading ``Subsector 115--Support Activities for Agriculture 
and Forestry,'' revise the entry for 115310 to read as follows; and
0
b. Add footnote 17 at the end of the table to read as follows:

                                 Small Business Size Standards by NAICS Industry
----------------------------------------------------------------------------------------------------------------
                                                                                       Size            Size
                                                                                   standards  in   standards  in
                NAICS codes                       NAICS U.S. industry title        millions  of      number of
                                                                                      dollars        employees
----------------------------------------------------------------------------------------------------------------
 
                                                 * * * * * * *
                         Subsector 115--Support Activities for Agriculture and Forestry
----------------------------------------------------------------------------------------------------------------
 
                                                  * * * * * * *
115310.....................................  Support Activities for Forestry....            $6.0  ..............
EXCEPT.....................................  Forest Fire Suppression \17\.......       \17\ 15.0  ..............
EXCEPT.....................................  Fuels Management Services \17\.....       \17\ 15.0  ..............
 
                                                 * * * * * * *
----------------------------------------------------------------------------------------------------------------
Footnotes
* * * * * * *
\17\ NAICS code 115310 (Support Activities for Forestry)--Forest Fire Suppression and Fuels Management Services
  are two components of Support Activities for Forestry. Forest Fire Suppression includes establishments which
  provide services to fight forest fires. These firms usually have fire-fighting crews and equipment. Fuels
  Management Services firms provide services to clear land of hazardous materials that would fuel forest fires.
  The treatments used by these firms may include prescribed fire, mechanical removal, establishing fuel breaks,
  thinning, pruning, and piling.



[[Page 33355]]

    Dated: April 25, 2003.
Hector V. Barreto,
Administrator.
[FR Doc. 03-14037 Filed 6-3-03; 8:45 am]
BILLING CODE 8025-01-P