[Federal Register Volume 68, Number 199 (Wednesday, October 15, 2003)]
[Rules and Regulations]
[Pages 59309-59315]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 03-26036]


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SMALL BUSINESS ADMINISTRATION

13 CFR Part 121

RIN 3245-AF03


Small Business Size Standards; Facilities Support Services 
(Including Base Maintenance)

AGENCY: U.S. Small Business Administration (SBA).

ACTION: Final rule.

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SUMMARY: The U.S. Small Business Administration (SBA) is adopting an 
increase to the size standard for the Facilities Support Services 
industry (North American Industry Classification System (NAICS) code 
561210) from $6 million in average annual receipts to $30 million and 
increases the size standard for the sub-category of Base Maintenance 
from $23 million to $30 million. These increased standards better 
define the size of businesses in this industry that the SBA believes 
should be eligible for Federal small business assistance programs. This 
final rule also changes the title of ``Base Housing Maintenance'' under 
NAICS code 238990 to ``Building and Property Specialty Trade Services'' 
to better identify the type of activities that fall under this 
category.

DATES: This rule is effective November 14, 2003.

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

SUPPLEMENTARY INFORMATION: On February 3, 2003, the SBA published a 
proposed rule in the Federal Register (68 FR 5234) to increase the size 
standard for the Facilities Support Services industry (NAICS code 
561210) from $6 million in average annual receipts to $30 million and 
the size standard for the sub-category of Base Maintenance from $23 
million to $30 million. The SBA proposed this increase after reviewing 
requests from firms in the Facilities Support Services industry to 
review the $6 million size standard for this industry and the $23 
million size standard for Base Maintenance, a sub-category of the 
industry. These size standards are based on annual receipts of the 
business, as described in 13 CFR 121.104. These firms argued that a 
size standard increase is warranted to reflect the size of Federal 
contracts issued in this industry. These contracts include a broad 
spectrum of services involving administrative support, custodial 
services, facilities repair and maintenance, and technical services, 
which often are $10 million per year or more in value. A small business 
can lose its small business status with only one or two contracts. 
Costs on these types of contracts have increased greater than the 
general inflation rate, especially due to changes in the mandated labor 
rates under the Service Contract Act and increased health insurance 
costs. The requestors believed that to help develop small businesses to 
be competitive with large businesses in this industry, the size 
standard should be increased to the $25 million to $30 million range.
    Based on these concerns, the SBA conducted a review of this 
industry's size standards. 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 
Facility Support Services, the SBA concluded that the activities 
comprising this industry and the characteristics of firms in the 
industry no longer support the need for separate size standards for 
Base Maintenance and for all other facilities support activities. The 
SBA also found that the data supported an increase in the size 
standards for all activities comprising Facility Support Services to 
$30 million in average annual receipts. (For more information on the 
reasons for the proposed size standard increase to $30 million, see the 
February 3, 2003, proposed rule, 68 FR 5234).
    The SBA received 16 comments on the proposed size standard. After 
giving careful consideration to the comments, the SBA has decided to 
adopt its proposed size standard of $30 million.

[[Page 59310]]

Discussion of Comments on the Proposed Rule

    The SBA received 16 timely comments on the proposed size standard 
from various business concerns. Nine commenters supported the proposed 
size standard and seven commenters opposed the change. The SBA also 
received a recommendation from its Office of Hearings and Appeals (OHA) 
to clarify the footnote. Below is a summary of the major issues raised 
by the comments received on the proposed rule and the SBA's position on 
those issues.

Comments Supporting a Higher Size Standard

    Four commenters remarked that increased costs, such as start up 
costs, wages, workers compensation, health insurance, fuels, and 
materials, have increased their revenues to the point where after two 
or three contracts their firms exceed the current size standard. One 
commenter pointed out that salary, wages, and taxes are the major costs 
and will normally comprise more than 50% of the contract expense. Two 
commenters acknowledged that the U.S. Department of Labor's increase in 
Service Contract Act wage determinations has had a direct impact on the 
costs of Facility Support Services contracts.
    The SBA agrees that increased costs have caused small business to 
exceed the current size standard with only two or three contracts. 
Facility Support Services contracts are larger requirements that 
include varied tasks from Base Maintenance to engineering and technical 
support. Because of the nature of these requirements, more than two-
thirds of total industry revenues go to large firms at or exceeding the 
current size standard. As presented in the preamble of the proposed 
rule, industry data on the distribution of revenues by firm size and 
other industry characteristics show that firms in the Facilities 
Support Services do have high costs and are much larger in size than 
firms in most other service industries.
    All nine supportive commenters pointed out that the increase in the 
size standard would increase competition and participation in Federal 
contracts. Two commenters stated that firms growing beyond the $6 
million size standard are not ready to compete with large firms. One 
commenter stated that the increased size standard would allow firms a 
longer period for growth and maturity. One commenter stated that the 
increase will secure a future for small businesses in this industry, as 
the current size standard limits a firm's ability to serve the Federal 
Government.
    The SBA agrees that an increase to the size standard will make 
small businesses more competitive in this industry. As stated in the 
preamble to the proposed rule, the share of Federal contracts awarded 
to small businesses supports an increase to the current size standard. 
During 1999 to 2001, small businesses accounted for 30.5% of total 
industry receipts but these firms received only 12% of the dollar value 
of Federal contracts. This is a disproportionate share of Federal 
contract dollars relative to industry receipts. Contract requirements 
make it difficult for smaller firms to perform on Federal Facilities 
Support Services contracts. For example, contracting data show that 
two-thirds of small business awards in this industry are made through 
programs reserved for small businesses rather than through full and 
open competition. The SBA believes that the increase in size standard 
will allow firms in this industry to grow to a more competitive size.
    Two commenters supported the SBA's proposal to give Facilities 
Support Services and Base Maintenance the same size standard. One of 
these commenters acknowledged that ``the same companies are likely to 
compete for contracts with either designation.''
    The SBA agrees with these comments. As stated in the preamble to 
the proposed rule, the SBA believes that the activities comprising this 
industry and the characteristics of firms in the industry no longer 
require separate size standards for Base Maintenance and for all other 
facilities support activities. The NAICS 2002 industry description of 
Facilities Support Services is very similar to the SBA's description of 
Base Maintenance (see footnotes 12 and 13 of the current 13 CFR 
121.201). The SBA believes that the firms performing Base Maintenance 
services also perform, or have the capability to perform, most other 
facilities support activities. Given the close similarity of the 
descriptions of Facilities Support Services and Base Maintenance, the 
SBA believes that a single size standard is appropriate for all 
activities within the Facilities Support Services industry.
    The SBA received a recommendation from OHA to clarify the title of 
``Base Housing Maintenance,'' an exception to NAICS 238990, ``All Other 
Specialty Trade Contractors,'' as it is often confused with ``Base 
Maintenance,'' an activity under Facilities Support Services. OHA 
suggested that the ``Base Housing Maintenance'' title should be revised 
to more accurately reflect the description of that category in Footnote 
13.
    The SBA agrees with this recommendation and has revised the title 
for the exception to NAICS code 238990 from ``Base Housing 
Maintenance'' to ``Building and Property Specialty Trade Services.'' 
This revision is appropriate in this rule making process as it does not 
change the meaning of the exception or the size standard for NAICS code 
238990. The new title better identifies the activities that fall under 
this category.

Comments Opposing a Size Standard Increase

    The SBA received four comments which stated that entry costs for 
this industry are low and that Facility Support Services contracts are 
performed in Government-provided facilities using Government-provided 
equipment. Five comments asserted that the increase is detrimental to 
emerging small businesses and that it will hinder small business 
growth. Four comments stated that the current size standard encourages 
large businesses to mentor ``emerging small businesses.''
    The SBA does not concur with these comments, and believes that 
these comments do not accurately characterize the Facility Support 
Services industry. The SBA does recognize that a higher size standard 
could have an impact on the smallest businesses in this industry. 
However, the smallest firms are usually limited to contracts for one 
type of industry or to work as subcontractors. The nature of the 
industry and the data presented in the preamble of the proposed rule 
show that the Facility Support Services industry is comprised 
predominately of larger firms. The industry characteristics show that 
start-up costs are high, and that Federal contracts for Facility 
Support Services contain varied tasks, including engineering and other 
technical support tasks, administrative functions, specialty trade 
tasks, and high-end equipment maintenance. Often, after two or three 
contracts, firms in this industry find that they have outgrown the 
current size standard. In addition, the SBA believes this increase will 
expand small business subcontracting opportunities and mentoring with 
large businesses. All requirements over $500,000 for Facility Support 
Services awarded to large businesses include incentives and goals for 
subcontracting with small businesses. The fact that an industry's size 
standard is $6 million or $30 million will not have a detrimental 
bearing on a large business's plans to subcontract to or mentor a small

[[Page 59311]]

business. The higher size standard would likely encourage more 
subcontracting with all small businesses since they would be able to 
remain as small subcontractors for a longer period of time and offer 
more capabilities to the large business contractor.
    The comments received supporting the SBA's actions agree that the 
increase is reasonable. They endorsed the SBA's findings that firms are 
quickly outgrowing the current size standard, that costs are high, and 
that the increase will augment the number of small business set-aside 
awards, thereby increasing competition in this industry. This increase 
will add to a small business's maturity and encourage small business 
growth.

Recommended Alternative Size Standards

    One commenter only supported an increase of 50%. However, the 
commenter did not provide any data to justify this alternative, nor did 
the commenter indicate whether the 50% increase was appropriate for 
both the $6 million and $23 million size standards. The SBA can only 
assume that the commenter meant 50% of the $6 million size standard, 
which equates to $9 million, and 50% of the $23 million which would put 
the size standard above $30 million.
    One commenter recommended a $12 million size standard. This 
commenter stated that $12 million will enable small businesses 
additional opportunities within the Facilities Support Services 
industry without forcing emerging small businesses to compete against 
larger firms.
    The SBA disagrees with both of these alternatives. Neither an 
increase to $9 million or $12 million would be representative of the 
overall characteristics of firms in the industry, nor would either 
alternative provide competition and growth for small businesses. In 
addition, Federal contract award data show that firms under the current 
$23 million size standard have only been able to obtain a relatively 
small share of Facilities Support Services contracts.

Non-Related Comments

    One commenter pointed out that the increase in bundled contracts 
has caused Federal agencies to contract with larger firms. This 
commenter called for a 12 month moratorium on any changes so that the 
effect of combining contracts and its impact on small businesses can be 
further analyzed.
    One commenter alleged that all mid-sized businesses are 8(a) firms 
and alleges that 8(a) certification is being abused. Another commenter 
stated that the 8(a) program (13 CFR 124) and the HUBZone program (13 
CFR 126) usually serve the same companies and that the success rate of 
companies after graduating from the 8(a) program will be hampered by 
this increase.
    The issues regarding the SBA's 8(a) and HUBZone programs concern 
program policy, and the 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 the recently proposed rule on this issue (68 FR 5134, 
dated January 31, 2003).
    One commenter stated that the definition of a small business is 
causing problems with emerging businesses, as it relates to the current 
set of NAICS codes for the Information Technology industry, which are 
``$6 million and $21 million.'' This commenter emphasized that emerging 
small businesses cannot compete with firms that produce $21 million in 
revenues. This commenter recommended that there be a category to 
identify mid-sized businesses.
    This comment does not relate specifically to the SBA's proposal to 
increase the size standard for Facilities Support Services. The 
commenter refers to the size standard of $6 million and $21 million for 
the Information Technology industry. With respect to that industry, the 
SBA published a proposed rule that would create a separate size 
standard for Information Technology Value Added Resellers (67 FR 48479, 
July 24, 2002). Additionally, the size standards are intended to define 
only small businesses, not a separate category of mid-size firms.

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

    The Office of Management and Budget (OMB) has determined that this 
rule is a significant regulatory action for purposes of Executive Order 
12866 because 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 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 recordkeeping requirements. 
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. 
Our Regulatory Impact Analysis follows.

Regulatory Impact Analysis

1. Is There a Need for This Regulatory Action?

    The SBA is chartered to aid and assist small businesses through a 
variety of financial, procurement, business development, and advocacy 
programs. To effectively assist the 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. The Act also requires that 
small business definitions vary to reflect industry differences. The 
supplementary information to the final 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 change in the 
Facilities Support Services size standard is needed to better reflect 
small businesses in this industry.

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 will be eligibility for Federal small 
business assistance programs. Under this rule, 177 additional firms may 
obtain small business status and become eligible for these programs. Of 
these 177, 19 are between the current $23 million Base Maintenance size 
standards and the $30 million proposed size standard. These programs 
include the SBA's financial assistance programs, economic injury 
disaster loans (EIDL), and Federal procurement preference programs for 
small businesses, 8(a) firms, small disadvantaged businesses (SDB), 
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 SDB price evaluation adjustment. 
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's size standards for their 
programs

[[Page 59312]]

for a variety of regulatory and program purposes. The SBA does not have 
information on each of these uses sufficient to evaluate the impact of 
the size standard change. If an agency believes that a different size 
standard is appropriate for its programs, it must contact the SBA. If 
an agency is seeking to change size standards in a general rulemaking 
context, then the agency should contact the SBA's Office of Size 
Standards (13 CFR 121.901-904). If the agency is seeking to change size 
standards for the purposes of a Regulatory Flexibility Act (RFA) 
analysis then the SBA's Office of Advocacy should be contacted pursuant 
to section 601(3) of the RFA. Section 601(3) of the RFA requires the 
agency to consult with the Office of Advocacy and provide an 
opportunity for public comment when using a different size standard for 
the RFA analysis.
    The benefits of a size standard increase to a more appropriate 
level would affect three groups: (1) Businesses that benefit by gaining 
small business status from the proposed size standard and use small 
business assistance programs; (2) growing small businesses that may 
exceed the current size standard in the near future and who will retain 
small business status under the proposed size standard; 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 7(a) 
Guaranteed Loan Program. The SBA estimates that approximately $2.5 
million to $5.5 million in new Federal loan guarantees could be made to 
these newly defined small businesses. Because of the $2 million maximum 
size of the SBA 7(a) loan guarantees, most loans are made to small 
businesses well below the size standard. Thus increasing the size 
standard will likely result in a smaller increase in guaranteed loans 
to small businesses than the estimated range. These additional loan 
guarantees, because of their limited magnitude, will have virtually no 
impact on the overall availability of loans for the SBA's loan 
programs, which have averaged about 40,000 loans totaling about $10 
billion per year in recent years.
    The newly defined small businesses would also benefit from the 
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.
    The SBA estimates that firms gaining small business status could 
potentially obtain Federal contracts worth $65 million to $95 million 
under the small business set-aside program, the 8(a), SDB, and HUBZone 
programs, or unrestricted contracts. This estimate is based on an 
analysis of small business participation in Federal contracting and the 
industry market share of businesses between the current and proposed 
size standards. During fiscal years 1999-2001, small businesses 
obtained 11.8% of Facilities Support Services contract dollars out of 
approximately $12 billion in total Federal Facilities Support Services 
contracts. About two-thirds of small business awards were made as small 
business set-aside or 8(a) contracts. Most Facilities Support Services 
contracts are for Base Maintenance services, which has a $23 million 
size standard. Businesses between $23 million and $30 million account 
for 3.6% of industry sales.
    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 obtain lower subcontract 
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 177 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 procurement programs, additional firms seeking access to the 
SBA guaranteed lending programs, and additional firms eligible for 
enrollment in the SBA's PRO-Net data base program. Among businesses in 
this group seeking the SBA's 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 contracting is likely to result 
in competition among fewer bidders. 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) or 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 losses among small and large businesses cannot be estimated with 
certainty, several trends are likely to emerge. First, there will 
likely be 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 concerns instead of large businesses since 
those two categories of small businesses may be eligible for a 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 are willing and able to 
sell to the Federal government will limit the 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 because the data on the size of 
business receiving a Federal contract are limited to identifying small 
or other-than-small businesses, without regard to the exact size of the 
business.
    The revision to current size standards for Facilities Support 
Services is consistent with the SBA's statutory

[[Page 59313]]

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, 
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 RFA, this rule may have a significant impact on a 
substantial number of small entities. This rule may impact small 
entities in two ways. The SBA estimates that an additional 177 
businesses may obtain small business status as a result of this rule. 
Also small businesses may obtain an additional $65 to $95 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, the SBA cannot fully estimate the impact of a size 
standard change on each and every Federal program that uses its size 
standards. In cases where an SBA's 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.
    Immediately below, the SBA sets forth a final regulatory 
flexibility analysis (FRFA), addressing the need for and objective of 
the rule; description and estimate of the number of small entities to 
which the rule will apply; the projected reporting, recordkeeping, and 
other compliance requirements of the rule; the relevant Federal rules 
which may duplicate, overlap or conflict with the final 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 revision to the size standards for Facilities Support Services 
more appropriately defines the size of businesses in these industries 
that the SBA believes should be eligible for Federal small business 
assistance programs. A review of the latest available industry data 
supports a change to the size standard.

(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 this rule.

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

    Within the Facilities Support Services industry, 896 out of 1,219 
businesses are currently small. With the adoption of this rule, the SBA 
estimates that 177 additional businesses out of 1,219 firms will be 
considered small. Of these 177, 19 are between the current $23 million 
Base Maintenance size standards and the new $30 million size standard. 
These businesses will be eligible to seek available SBA assistance 
provided that they meet other program requirements. As a result of this 
rule, businesses becoming eligible for SBA assistance cumulatively will 
generate approximately $25.8 billion out of a total of $75.8 billion in 
receipts, or 34.1% of industry receipts. The small business coverage in 
the Facilities Support Services industry will increase by 3.6% of total 
receipts.

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

    A new size standard does not impose any additional reporting, 
recordkeeping 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 determine ``voluntary'' 
access to the SBA and other Federal programs that assist small 
businesses, but do 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 Business?

    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, SDBs, and businesses located in HUBZones; 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 $65 million to $95 million per year 
under the small business set-aside programs, the 8(a) program, the 
HUBZone program, or unrestricted contracts. This represents less than 
1% of the $12 billion in total Federal expenditures for Facility 
Support Services. The SBA estimates that approximately $2.5 million to 
$5.5 million in new Federal loan guarantees could be made to these 
newly defined small businesses. Because of the $2 million maximum size 
of the SBA 7(a) loan guarantees, most loans are made to small 
businesses well below the size standard.

(6) Alternatives

(a) What Alternatives Will Allow the Agency To Accomplish Its 
Regulatory Objectives While Minimizing the Impact on Small Entities?
    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 
SBA's research showed that Facility Support Services contracts include 
a broad spectrum of services involving administrative support, 
custodial services, janitorial, facilities repair and maintenance, and 
technical services. The size standards for many of these industries, 
such as security guard services, janitorial services, and technical 
support for navigational waterways and military weapons systems, are 
well in excess of $6 million. Contract costs often are $10 million per 
year or more in value. A small business can lose its small business 
status with only one or two contracts. Costs on these types of 
contracts have increased greater than the general inflation rate, 
especially due

[[Page 59314]]

to changes in the mandated labor rates under the Service Contract Act 
and increased health insurance costs.
    The SBA's review of these issues and data on the Facilities Support 
Services industry, as described in the February 3, 2003, proposed rule, 
support increasing the size standard to $30 million.
(b) What Alternatives Did the SBA Reject?
    One commenter opposed to any increase except an increase of 50%, 
but no data was provided to justify this alternative. The commenter did 
not state 50% of which current size standard, $6 million or $23 
million. The SBA can only assume that the commenter meant 50% of the $6 
million size standard, which equates to $9 million. A 50% increase to 
the $23 million would put the size standard above $30 million.
    One commenter recommended a $12 million size standard. This 
commenter stated that $12 million will enable small businesses 
additional opportunities within the Facilities Support Services 
industry without forcing emerging small businesses to compete against 
larger firms.
    The SBA rejects both of these alternatives. Neither an increase to 
$9 million or $12 million would be representative of this industry, nor 
would either alternative provide competition and growth for small 
businesses. The industry data provided in the preamble to the proposed 
rule show that all of the characteristics measured firms in the 
Facilities Support Services industry were much larger than firms in 
most nonmanufacturing industries. This finding supports a size standard 
at the highest receipts levels. In addition, Federal contract award 
data show that firms under the current $23 million size standard have 
only been able to obtain a relatively small share of Facilities Support 
Services contracts.

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 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 NAICS Subsector 238, ``Specialty Trade Contractors,'' 
revise the entry for 238990; and under the heading NAICS Subsector 561, 
``Administrative and Support Services,'' revise the entry for 561210, 
to read as follows; and,
0
b. Revise footnotes 12 and 13 to read as follows:

                                 Small Business Size Standards by NAICS Industry
----------------------------------------------------------------------------------------------------------------
                                                                         Size standards in    Size standards in
            NAICS codes                  NAICS U.S. industry title      millions of dollars  number of employees
----------------------------------------------------------------------------------------------------------------
                                   Subsector 238--Specialty Trade Contractors
----------------------------------------------------------------------------------------------------------------
 
                                                  * * * * * * *
238990............................  All Other Specialty Trade                         $12.0  ...................
                                     Contractors.
                                    Except, Building and Property                 \13\ 12.0  ...................
                                     Specialty Trade Services \13\.
 
                                                  * * * * * * *
-----------------------------------
                               Subsector 561--Administrative and Support Services
----------------------------------------------------------------------------------------------------------------
 
                                                  * * * * * * *
561210............................  Facilities Support Services \12\..            \12\ 30.0  ...................
----------------------------------------------------------------------------------------------------------------
\12\ NAICS code 561210--Facilities Support Services:
(a) If one or more activities of Facilities Support Services as defined in paragraph (b) (below in this
  footnote) can be identified with a specific industry and that industry accounts for 50% or more of the value
  of an entire procurement, then the proper classification of the procurement is that of the specific industry,
  not Facilities Support Services.
(b) ``Facilities Support Services'' requires the performance of three or more separate activities in the areas
  of services or specialty trade contractors industries. If services are performed, these service activities
  must each be in a separate NAICS industry. If the procurement requires the use of specialty trade contractors
  (plumbing, painting, plastering, carpentry, etc.), all such specialty trade contractors activities are
  considered a single activity and classified as ``Building and Property Specialty Trade Services.'' Since
  ``Building and Property Specialty Trade Services'' is only one activity, two additional activities of separate
  NAICS industries are required for a procurement to be classified as ``Facilities Support Services.''
\13\ NAICS code 238990--Building and Property Specialty Trade Services: If a procurement requires the use of
  multiple specialty trade contractors (i.e., plumbing, painting, plastering, carpentry, etc.), and no specialty
  trade accounts for 50% or more of the value of the procurement, all such specialty trade contractors
  activities are considered a single activity and classified as Building and Property Specialty Trade Services.



[[Page 59315]]

    Dated: August 20, 2003.
Hector V. Barreto,
Administrator.
[FR Doc. 03-26036 Filed 10-14-03; 8:45 am]
BILLING CODE 8025-01-P