[Federal Register Volume 74, Number 202 (Wednesday, October 21, 2009)]
[Proposed Rules]
[Pages 53924-53940]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: E9-25193]


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SMALL BUSINESS ADMINISTRATION

13 CFR Part 121

RIN: 3245-AF69


Small Business Size Standards: Retail Trade

AGENCY: U.S. Small Business Administration.

ACTION: Proposed Rule.

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SUMMARY: The U.S. Small Business Administration (SBA) proposes to 
increase small business size standards for 48 industries in North 
American Industry Classification System (NAICS) Sector 44-45, Retail 
Trade, and retain the current standards for the remaining 28 industries 
in the Sector. As part of its ongoing initiative to review all size 
standards, SBA has evaluated each industry in Sector 44-45 to determine 
whether the existing size standards should be retained or revised. This 
proposed rule is one of a series of proposals that will examine 
industries grouped by an NAICS Sector. As part of this series of 
proposed rules SBA is publishing concurrently in this issue of the 
Federal Register a proposed rule to modify small business size 
standards in Sector 72, Accommodation and Food Services, and in Sector 
81, Other Services. SBA has established its ``Size Standards 
Methodology'' and published elsewhere in this issue of the Federal 
Register a notice of its availability on SBA's Web site at http://www.sba.gov/size. SBA has applied ``Size Standards Methodology'' to 
this proposed rule.

DATES: SBA must receive comments to this proposed rule on or before 
December 21, 2009.

ADDRESSES: You may submit comments, identified by RIN 3245-AF69 by one 
of the following methods: (1) Federal eRulemaking Portal: http://www.regulations.gov. Follow the instructions for submitting comments; 
or (2) Mail/Hand Delivery/Courier: Khem R. Sharma, Chief, Size 
Standards Division, 409 Third Street, SW., Mail Code 6530, Washington, 
DC 20416.
    SBA will post all comments on http://www.regulations.gov. If you 
wish to submit confidential business information (CBI) as defined in 
the User Notice at http://www.regulations.gov, please submit the 
information to U.S. Small Business Administration, Khem R. Sharma, 
Chief, Size Standards Division, 409 Third Street, SW., Mail Code 6530, 
Washington, DC 20416, or send an e-mail to [email protected]. 
Highlight the information that you consider to be CBI and explain why 
you believe SBA should hold this information as confidential. SBA will 
review the information and make the final determination of whether it 
will publish the information or not.

FOR FURTHER INFORMATION CONTACT: Carl J. Jordan, Program Analyst, Size 
Standards Division, (202) 205-6618 or [email protected].

SUPPLEMENTARY INFORMATION: To determine eligibility for Federal small 
business assistance programs, SBA establishes small business 
definitions (referred to as size standards) for private sector 
industries in the U.S. SBA's existing size standards use two primary 
measures of business size--receipts and number of employees. Financial 
assets, electric output, and refining capacity are used as size 
measures for a few specialized industries. In addition, SBA's Small 
Business Investment Company (SBIC) and the Certified Development 
Company (CDC) Programs determine small business eligibility using 
either the industry based size standards or net worth and net income 
size standards. Currently, SBA's size standards consist of 45 different 
size levels, covering 1,141 NAICS industries and 17 sub-industry 
activities. Of these size levels, 32 are based on average annual 
receipts, eight are based on number of employees, and five are based on 
other measures. In addition, SBA has established 11 other size 
standards for its financial and procurement programs.
    Over the years, SBA has received comments that its size standards 
have not kept up with changes in the economy and, in particular, that 
they do not reflect the changes in the Federal contracting marketplace. 
The last overall review of size standards occurred during the late 
1970s to early 1980s. Since then, most reviews of size standards have 
been limited to in-depth analyses of specific industries in response to 
requests from the public and Federal agencies. SBA also makes

[[Page 53925]]

periodic inflation adjustments to its monetary based size standards. 
The latest inflation adjustment to size standards was published in the 
Federal Register on July 18, 2008 (73 FR 41237).
    The evaluation of the size standards in the Retail Trade is also 
necessary to account for changes in the industry classification. The 
development of NAICS in 1997 included a significant change in the 
definition of industries in the Retail and Wholesale Trade Sectors. 
Many businesses engaged in retail trade activities that had been 
classified in the Wholesale Trade Sector under the earlier Standard 
Industrial Classification (SIC) System were reclassified into the 
Retail Trade Sector under NAICS (see NAICS Clarification Memorandum No. 
1, ``NAICS Sector 42--Wholesale Trade Scope and Implementation 
Guidelines for U.S. Statistical Agencies''). Furthermore, the NAICS 
codes used in the 2002 Economic Census included a different set of 
businesses in the Retail Trade Sector than that in the 1997 Economic 
Census. For example, the 2002 NAICS included 11 new industries in 
Retail Trade. These changes in the industry classification have led SBA 
to evaluate if the existing size standards for the Retail Trade 
industries are appropriate. Most of the Retail Trade size standards 
have not been reviewed since the 1980s, and many have not been changed 
since the 1960s, except for periodic adjustments for inflation.
    SBA recognizes that industrial changes over time have rendered 
existing size standards for some industries no longer supportable by 
current data. Accordingly, SBA has begun a comprehensive review of its 
size standards to ensure that existing size standards have supportable 
bases and, where necessary, to make revisions to current size 
standards. This proposed rule affords the public an opportunity to 
review and comment on the data and methodology SBA uses to evaluate and 
revise a size standard.
    Rather than review all size standards at one time, SBA believes 
that a more manageable approach would be to examine a group of related 
industries within an NAICS Sector in phases. Except for manufacturing, 
an NAICS Sector generally consists of 25 to 75 industries. Once a 
review of size standards for industries within an NAICS Sector is 
completed, SBA will issue a proposed rule for those industries in which 
the analysis of industry data supports a change to the existing size 
standards. SBA expects to complete a review of all NAICS Sectors in two 
years.
    Below is a discussion of SBA's size standards methodology, 
including analyses of industry structure, Federal procurement trends 
and other factors for industries within Sector 44-45, Retail Trade, and 
the impact of the proposed revisions to size standards on Federal small 
businesses assistance.

Size Standards Methodology

    SBA has recently developed a ``Size Standards Methodology'' that it 
uses for developing and modifying size standards when necessary. SBA 
has published the document which is available at http://www.sba.gov/size. SBA does not apply all features of its ``Size Standards 
Methodology'' to all cases because not all are appropriate. However, 
SBA does make it available in its entirety for parties with an interest 
in SBA's overall approach to evaluating, establishing and modifying 
small business size standards. SBA always explains its analysis in the 
proposed and final rules that relate to size standards for specific 
industries. The following discussion is of SBA's size standard analysis 
applied to industries in Sector 44-45, Retail Trade.
    SBA welcomes comments from the public on a number of issues. SBA is 
aware that different choices among size standards can involve complex 
tradeoffs among relevant variables; SBA invites comments on how to 
identify and weigh those variables. Suggestions are invited on 
alternative methodologies for determining small businesses; on how 
these size standards affect competition in general and within the 
specific industry; on alternative or additional factors that SBA should 
consider; on whether SBA's approach to small business size standards 
makes sense in the current economic environment; on whether SBA's using 
anchor size standards is appropriate in the current economy; on whether 
there are gaps in SBA's methodology because of the lack of 
comprehensive data; and on alternative datasets SBA should consider for 
a specific sector.
    Congress granted SBA's Administrator discretion to establish 
detailed small business size standards (15 U.S.C. 632(a)(2)). Section 
3(a)(3) of the Small Business Act (15 U.S.C. 632 (a)(3)) requires that 
size standards vary by industry to the extent necessary to reflect 
differing characteristics among various industries. Accordingly, the 
economic structure of an industry serves as the underlying basis for 
developing and modifying small business size standards. By examining 
data on economic characteristics defining the industry structure (as 
described below), the small business segment of an industry is 
identified. In addition to the industry structure, SBA also takes into 
consideration its program objectives and whether a size standard 
successfully excludes businesses that are dominant in the industry. 
Discussed below is SBA's analysis of the economic characteristics of 
each industry in Sector 44-45, Retail Trade, the impact of proposed 
size standards on SBA programs, and the evaluation of whether a revised 
size standard would exclude dominant firms in the industry from being 
considered as small.

Industry Analysis

    For the current comprehensive size review, SBA has established 
three ``base'' or ``anchor'' size standards that apply to most 
industries--$7.0 million in average annual receipts for industries that 
have receipts based size standards, 500 employees for manufacturing and 
other industries that have employee based size standards (except for 
Wholesale Trade), and 100 employees for industries in the Wholesale 
Trade Sector. SBA established 500 employees as the anchor size standard 
for the manufacturing industries at SBA's inception in 1953 and shortly 
thereafter established a receipts based anchor size standard of $1 
million in average annual receipts for the nonmanufacturing industries. 
The receipts based anchor size standard has been adjusted periodically 
for inflation. The inflation adjustment over the years has increased it 
to $7.0 million today. Since 1986, all industries in the Wholesale 
Trade Sector have had the 100-employee size standard for non-
procurement SBA programs. The size standard for a non-manufacturer in 
Federal procurement is 500 employees. A procuring agency must classify 
a procurement for supplies with a manufacturing NAICS code, not a 
wholesale or retail NAICS code. 13 CFR 121.402(b).
    These long standing anchor size standards have gained legitimacy 
through practice and general public acceptance. An anchor size standard 
is neither a minimum nor a maximum size standard. It is a common size 
standard for a large number of industries that have similar economic 
characteristics and serves as a reference point in evaluating size 
standards for individual industries. SBA uses the anchor in lieu of 
trying to establish precise small business size standards for each 
industry. Otherwise, theoretically, that could require that the number 
of size standards be as high as the number of industries for which SBA 
establishes size standards. SBA presumes an anchor size standard is 
appropriate for a particular industry unless that industry displays 
significantly different economic characteristics, as compared

[[Page 53926]]

to the characteristics of industries with the anchor size standard, 
thereby suggesting a need for revision to an existing size standard.
    When evaluating a size standard, the economic characteristics of a 
specific industry under review are compared to the average 
characteristics of industries with one of the three anchor size 
standards (referred to as ``anchor comparison group'') to assess 
industry structure and to determine whether the industry displays 
significant differences relative to the industries in the anchor size 
standard group. If the characteristics of a specific industry under 
review are similar to the average characteristics of the anchor 
comparison group, the anchor size standard would be considered 
appropriate for that industry. SBA will consider adopting a size 
standard below the anchor size standard only when (1) all or most of 
the industry characteristics are significantly smaller than the average 
characteristics of the anchor comparison group, or (2) other industry 
considerations strongly suggest that the anchor size standard would be 
an unreasonably high size standard for the industry.
    If the specific industry's characteristics are significantly higher 
than those of the anchor comparison group, a size standard higher than 
the anchor size standard may be considered appropriate. The larger the 
differences are between the characteristics of the industry under 
review and those in the anchor comparison group, the larger will be the 
difference between the appropriate industry size standard and the 
anchor size standard. To determine the level of a size standard above 
the anchor size standard, the characteristics of a second comparison 
group are analyzed. For industries with receipts based size standards, 
SBA has developed a second comparison group consisting of industries 
with the highest levels of receipts based size standards. The size 
standards for this group of industries range from $23 million to $35.5 
million in average receipts, with the weighted average size standard 
for the group equaling $29 million. SBA refers to this comparison group 
as the ``higher level receipts based size standard group.''
    The primary factors that SBA evaluates in analyzing the structural 
characteristics of an industry include average firm size, startup costs 
and entry barriers, industry competition, and distribution of firms by 
size (13 CFR 121.102(a) and (b)). SBA also evaluates the possible 
impact of both existing and revised size standards on Federal 
contracting assistance to small businesses as an additional primary 
factor. SBA generally considers these five factors as the most 
important ones for establishing or revising a size standard for an 
industry. However, SBA will also consider and evaluate other 
information that it believes relevant to the decision on a size 
standard for a particular industry (such as technological changes, 
growth trends, SBA financial assistance and other program factors, 
etc.). Public comments on a proposed size standard rule also provide 
important additional information. SBA thoroughly reviews all public 
comments before making a final decision on its proposed size standard. 
Below is a brief description of each of the five primary evaluation 
factors. A more detailed description of this analysis is provided in 
``SBA Size Standards Methodology'' paper which is available at http://www.sba.gov/size.
    1. Average firm size. SBA computes two measures of average firm 
size: simple average firm size and weighted average firm size. For 
industries with receipts based standards (including Retail Trade 
industries), the simple average firm size is calculated as total 
receipts of an industry divided by the total number of firms in that 
industry. The weighted average firm size is computed as the sum of 
weighted simple average firm size in different receipts size classes 
where weights are the shares of total industry receipts for respective 
size classes. The simple average firm size weighs all firms within an 
industry equally regardless of their size. The weighted average 
overcomes that limitation by giving more weights to larger firms.
    If the average firm size of an industry under review is 
significantly higher than the average firm size of industries in the 
anchor comparison industry group, this would generally support a size 
standard higher than the anchor size standard. Conversely, if the 
industry's average firm size is similar to or significantly lower than 
that of the anchor comparison industry group, it would be a basis to 
adopt the anchor size standard or, in rare cases, a standard lower than 
the anchor.
    2. Startup costs. Startup costs reflect a firm's initial size in an 
industry. New entrants to an industry must have sufficient capital to 
start and maintain a viable business. If firms entering a particular 
industry have greater capital requirements than firms do in industries 
in the anchor comparison group, this will form a basis for establishing 
a size standard higher than the anchor standard. In lieu of data on 
actual startup costs, SBA uses average assets size as a proxy measure 
to assess the levels of capital requirements for new entrants to an 
industry.
    SBA calculates the average assets size within a particular industry 
by applying the sales to total assets ratios from the Risk Management 
Association's Annual Statement Studies, 2006-2008 to the average 
receipts size of firms in that industry. An industry with a 
significantly higher level of average assets size than that of the 
anchor comparison group is likely to have higher startup costs, which 
would support a size standard higher than the anchor size standard. 
Conversely, if the industry has a significantly smaller average assets 
size compared to the anchor comparison group, the anchor size standard, 
or in rare cases one lower than the anchor, would be considered 
appropriate.
    3. Industry competition. Industry competition is generally assessed 
by measuring the share of total industry receipts obtained by firms 
that are among the largest in an industry. In this proposed rule, SBA 
evaluates the share of industry receipts generated by the four largest 
firms in the industry. This is referred to as the ``four-firm 
concentration ratio.'' SBA then compares the four-firm concentration 
ratio for an industry under review to the average four-firm 
concentration ratio for industries in the anchor comparison group. If a 
significant share of economic activity within the industry is 
concentrated among a few relatively large companies, SBA would 
establish a size standard relatively higher than the anchor size 
standard. SBA would not consider the four-firm concentration ratio as 
an important factor in assessing a size standard if its value for an 
industry under review is less than 40 percent. For industries in which 
the four largest firms account for 40 percent or more of an industry's 
total receipts, SBA examines the average size of the four largest firms 
in determining a size standard.
    4. Distribution of firms by size. SBA examines the shares of 
industry total receipts accounted for by firms of different receipts 
and employment size classes in an industry. This is an additional 
factor SBA evaluates in assessing competition within an industry. If 
the preponderance of an industry's economic activity is attributable to 
smaller firms, this would indicate that small businesses are 
competitive in that industry and supports adopting the anchor size 
standard. A size standard higher than the anchor size standard would be 
supported for an industry in which the distribution of firms indicates 
that most

[[Page 53927]]

of the economic activity is concentrated among the larger firms.
    Concentration among firms is a measure of inequality of 
distribution. To evaluate the degree of inequality of distribution 
within an industry, SBA computes the Gini coefficient by constructing 
the Lorenz curve. The Gini coefficient values vary between zero and 
one. If receipts are distributed perfectly equally among all the firms 
in an industry, the value of the Gini coefficient would equal to zero. 
If an industry's total receipts are attributed to a single firm, the 
Gini coefficient would equal to one.
    SBA compares the degree of inequality of distribution for an 
industry under review with that for industries in the anchor comparison 
group. If an industry shows a higher degree of inequality of 
distribution (i.e., higher Gini coefficient) compared to industries in 
the anchor comparison industry group this would, all else being equal, 
warrant a higher size standard than the anchor. Conversely, for 
industries with similar or more equal distribution (i.e., similar or 
lower Gini coefficient values) than the anchor group, the anchor 
standard, or in some cases a standard lower than the anchor, would be 
adopted
    5. Impact on SBA programs. SBA examines the possible impact a size 
standard change may have on the level of Federal small business 
assistance. This assessment most often focuses on the share of Federal 
contracting dollars awarded to small businesses in the industry in 
question. In general, if the share of Federal contracting dollars 
awarded to small businesses in an industry that receives a significant 
amount of Federal assistance is significantly less than the small 
business share of the industry's total receipts, a justification would 
exist for considering a size standard higher than the existing size 
standard. The disparity between the small business Federal market share 
and industry-wide share may be attributed to a variety of reasons, such 
as extensive administrative and compliance requirements associated with 
Federal contracts, the different skill set required on Federal 
contracts as compared to typical commercial contracting work, and the 
size of contracting requirements of Federal customers. These, as wells 
as other factors, are likely to influence the type of firms within an 
industry that compete for Federal contracts and, hence, the firms 
receiving such contracts are expected to possess different 
characteristics than the average characteristics for all firms in that 
industry. By comparing the small business Federal contracting share 
with the industry-wide small business share, SBA includes in its size 
standards analysis the latest Federal contracting trends. This analysis 
may indicate a size standard larger than the current standard.
    For this proposed rule, SBA considered Federal procurement trends 
in the size standards analysis only if (1) the small business share of 
Federal contracting dollars is at least 10 percentage points lower than 
the small business share of total industry receipts and (2) the amount 
of total Federal contracting averages $100 million or more during 
fiscal years 2006-2008 (the latest years for which complete Federal 
procurement data are available). SBA has selected these thresholds 
because they reflect a significant level of contracting in which a 
revision to a size standard may have an impact on expanding small 
business opportunities.
    Another factor that SBA evaluates is the impact of a proposed size 
standard on SBA's loan programs, that is, the volume of SBA guaranteed 
loans within an industry and the size of firms obtaining those loans. 
This factor is examined to assess whether the existing or the proposed 
size standard for a particular industry may be restricting the level of 
financial assistance to small firms in that industry. If the analysis 
shows a reduction in financial assistance to small businesses, a higher 
size standard would be supportable. If small businesses have already 
been receiving significant amounts of financial assistance through 
SBA's loan programs, or if the financial assistance has been provided 
mainly to businesses that are much smaller in size than the existing 
size standard, consideration of this factor for determining the size 
standard may not be necessary.

Sources of Industry and Program Data

    The primary source of data for SBA's industry analysis is a special 
tabulation of the 2002 Economic Census (see http://www.census.gov/econ/census02/) prepared by the U.S. Bureau of the Census (Census Bureau) 
for SBA. The special tabulation provides SBA with industry-specific 
data on the number of firms, number of establishments, number of 
employees, annual payroll and annual receipts of companies by the size 
of firm reporting the data to Census. That is, the data are by the size 
class of the total company; however, the data itself, within a 
particular size class, represents the company's total data in that 
industry only. The special tabulation enables SBA to evaluate average 
firm size, the four-firm concentration ratio, and distribution of firms 
by receipts and employment size.
    In some cases, where Census data were not available due to 
disclosure prohibitions, SBA either estimated missing values using 
available relevant data, or examined data at a higher level of industry 
aggregation, such as at the 2- or 3-digit NAICS level. In some 
instances, SBA had to base its analysis only on those factors for which 
data were available or missing values could be estimated. Data sources 
and estimation procedures SBA uses in its size standards analysis are 
documented in detail in the ``SBA Size Standards Methodology'' paper, 
which is available at http://www.sba.gov/size.
    Sales to total assets ratios used to calculate average assets size 
are from the Risk Management Association's Annual Statement Studies, 
2006-2008.
    To evaluate Federal contracting trends, SBA examined Federal 
contract award data for fiscal years 2006-2008 from the U.S. General 
Service Administration's Federal Procurement Data System--Next 
Generation (FPDS-NG). SBA's internal data on its guaranteed loan 
programs for fiscal years 2006-2008 were analyzed to assess the impact 
on financial assistance to small businesses.

Dominant in Field of Operation

    Section 3(a) of the Small Business Act (15 U.S.C. Sec.  632(c) 
defines a small business concern as one that is (1) independently owned 
and operated, (2) not dominant in its field of operation, and (3) 
within a specific small business definition or size standard 
established by the SBA Administrator. SBA considers as part of its 
evaluation of a size standard whether a business concern at a proposed 
size standard would be considered dominant in its field of operation. 
For this, SBA generally examines the industry's market share of firms 
at the proposed standard or other factors that may indicate whether a 
firm can exercise a major controlling influence on a national basis in 
which significant numbers of business concerns are engaged. If SBA's 
analysis indicates that a proposed size standard would include a 
dominant firm, a lower size standard would be considered to exclude the 
dominant firm from being defined as small.

Selection of Size Standards

    To simplify size standards, for the ongoing comprehensive size 
standards review, SBA has proposed to select a size standard for an 
industry from a limited number of receipts based size standard levels. 
For many years, SBA

[[Page 53928]]

has been concerned about the complexity of determining small business 
status caused by a large number of varying receipts based size 
standards (see 69 FR 13130, March 4, 2004, and 57 FR 62515, December 
31, 1992). Currently, there are 32 different levels of receipts based 
size standards, ranging from $0.75 million to $35.5 million, with many 
of those levels applying to one or just a few industries only. SBA 
believes that such a large number of variations with small variations 
are both unnecessary and difficult to justify analytically. Simplifying 
the administration of SBA's size standards to a fewer number of size 
standard levels will produce more common size standards for businesses 
operating in multiple related industries and greater consistency in the 
size standards among industries that are similar in their economic 
characteristics.
    This proposed rule, therefore, applies one of eight receipts based 
size standards to each industry in Sector 44-45, Retail Trade. These 
eight ``fixed'' size standard levels are $5 million, $7 million, $10 
million, $14 million, $19 million, $25.5 million, $30.0 million and 
$35.5 million. These eight receipts based size standard levels are 
established by taking into consideration the minimum, maximum, and the 
more commonly used receipts based size standards. Currently, the more 
commonly used receipts based size standards cluster around the 
following six levels--$2.5 million to $4.5 million, $7 million, $9.0 
million to $10 million, $12.5 million to $14.0 million, $25.0 million 
to $25.5 million, and $33.5 million to $35.5 million. SBA has selected 
$7 million as one of eight fixed levels of receipts based size 
standards because this is also an anchor standard for receipts based 
standards. A lower or minimum receipts based size level is established 
at $5 million. Excluding monetary standards for agriculture and those 
based on net commissions (such as real estate brokers and travel 
agents), $5 million is in the close neighborhood of the current minimum 
receipts based standard of $4.5 million. Among the higher levels size 
clusters, $10 million, $14 million, $25.5 million, and $35.5 million 
are selected as other four levels of the fixed size standards. Because 
of a large gap between two of the size standard intervals, SBA has 
established intermediate levels of $19 million between $14 million and 
$25.5 million, and $30 million between $25.5 million and $35.5 million. 
These two intermediate size levels reflect roughly similar proportional 
differences between the two successive size standard levels.
    In a further effort to simplify size standards, SBA may propose a 
common size standard for certain closely related group of industries. 
Although the size standard analysis may support a specific size 
standard level for each industry, SBA believes that establishing 
different size standards for closely related industries may not be 
appropriate. For example, in cases where many of the same businesses 
operate in the same two industries, establishing the common size 
standard would better reflect the industry marketplace than 
establishing separate size standards for each of those industries. This 
situation has led SBA to establish a common size standard for the 
information technology (IT) services industries (NAICS 541511, NAICS 
541112, NAICS 541513 and NAICS 541519), even though the industry data 
might support a distinct size standard for each industry. Businesses 
engaged in IT related services typically perform activities in two or 
more other related industries. Whenever SBA proposes a common size 
standard for closely related industries it will provide a justification 
for that in the proposed rule.

Evaluation of Industry Structure

    SBA has evaluated the structure of each industry in the Retail 
Trade Sector to assess the appropriateness of the current size 
standards. As described above, SBA compared data on the economic 
characteristics of each industry in that Sector to the average 
characteristics of industries in two comparison groups. The first 
comparison group is comprised of all industries with $7.0 million size 
standards--referred to as the ``receipts based anchor comparison 
group.'' Because the goal of SBA's size review is to assess whether a 
specific industry's size standard should be at or different from the 
anchor size standard, this is the most logical set of industries to 
group together for the industry analysis. In addition, this group 
includes a sufficient number of firms to provide a meaningful 
assessment and comparison of industry characteristics.
    If the characteristics of an industry under review are similar to 
the average characteristics of industries in the anchor comparison 
group, the anchor size standard would be considered an appropriate 
standard for that industry. If an individual industry's structure is 
significantly different from that of the anchor group, a size standard 
lower or higher than the anchor size standard would be selected. The 
level of the new size standard is determined based on the difference 
between the characteristics of the anchor comparison group and a second 
industry comparison group. As described above, the second comparison 
group for receipts based standards consists of industries with the 
highest receipts based size standards, ranging from $23 million to 
$35.5 million, with the average size standard for the group equaling 
$29 million. SBA refers to this group of industries as the ``higher 
level receipts based size standard comparison group.'' Differences in 
industry structure between an industry under review and the industries 
in the two comparison groups are determined by comparing data on each 
of the industry factors, including average firm size, average assets 
size, four-firm concentration ratio, and the Gini coefficient of 
distribution of firms by size. Table 1 shows two measures of the 
average firm size (simple and weighted), average assets size, four-firm 
concentration ratio, average receipts of the four largest firms, and 
the Gini coefficient for both anchor level and higher level comparison 
groups for receipts based size standards.

                                          Table 1--Average Characteristics of Receipts Based Comparison Groups
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                            Avg. Firm Size ($ million)                                     Avg. Receipts
                                                         --------------------------------   Avg. Assets   Avg. Four-firm      of Four
             Receipts Based Comparison Group                                                  Size ($      Concentration   Largest Firms       Gini
                                                          Simple Average     Weighted        million)        Ratio (%)      ($ million)     Coefficient
                                                                              Average                                           \a\
--------------------------------------------------------------------------------------------------------------------------------------------------------
Anchor Level............................................            1.19           17.64            0.71            18.7           189.9           0.599
Higher Level............................................            4.77           52.27            2.05            22.3           639.4           0.725
--------------------------------------------------------------------------------------------------------------------------------------------------------
\a\ To be used for industries with a four-firm concentration ratio of 40% or greater.


[[Page 53929]]

Derivation of Size Standards Based on Industry Factors

    For each of the industry factors shown in Table 1, SBA derives a 
separate size standard based on the amount of differences between their 
values for an industry under review and those for the two comparison 
groups. An estimated size standard that is supported by each industry 
factor is derived by comparing its value for a specific industry under 
review to the corresponding value for the two comparison groups. If the 
industry value for a particular factor is near that for the anchor 
comparison group, the $7.0 million anchor size standard would be 
considered appropriate for that factor.
    If an industry's value for a factor is significantly above or below 
the anchor comparison group value, a size standard above or below the 
$7.0 million anchor size would be warranted. The level of the new size 
standard in these cases is derived based on the proportional difference 
between the industry value and the values for the two comparison 
groups.
    For example, if an industry's simple average receipts size equals 
$3.0 million, SBA's analysis would supports a size standard of $19 
million. The $3.0 million level is 50.6 percent between the average 
firm size of $1.19 million for the anchor comparison group and $4.77 
million for the higher level comparison group (($3.00 million-$1.19 
million) / ($4.77 million-$1.19 million) = 0.506 or 50.6%). This 
proportional difference is applied to the difference between the $7.0 
million anchor size standard and average size standard of $29 million 
for the higher level size standard group and then added to $7.0 million 
to estimate a size standard of $18.12 million ([{$29.0 million-$7.0 
million{time}  * 0.506] + $7.0 million = $18.12 million). The final 
step rounds the estimated size standard of $18.12 million to the 
nearest fixed size standard level, in this case to $19 million.
    SBA applies the above method of calculation to derive a size 
standard for each industry factor. Detailed formulas involved in these 
calculations are presented in ``SBA Size Standards Methodology'' which 
is available at http://www.sba.gov/size. Table 2 shows ranges of values 
for each industry factor and the levels of size standards supported by 
those values.

                                            Table 2--Values of Industry Factors and Supported Size Standards
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                     Or if weighted avg.                               Or if avg. receipts of                                Then size
 If Simple avg. receipts size ($      receipts size ($       Or if avg. assets size     largest four firms ($    Or if gini coefficient   standard is ($
            million)                      million)                 ($ million)                million)                                       million)
--------------------------------------------------------------------------------------------------------------------------------------------------------
<1.03...........................  <16.07                    <0.65                     <169.4                    <0.593                               5.0
1.03 to 1.43....................  16.07 to 20.00            0.65 to 0.80              169.4 to 220.5            0.593 to 0.608                       7.0
1.44 to 2.00....................  20.01 to 25.51            0.81 to 1.02              220.6 to 292.0            0.609 to 0.628                      10.0
2.01 to 2.74....................  25.52 to 32.59            1.03 to 1.29              292.1 to 384.0            0.629 to 0.653                      14.0
2.75 to 3.67....................  32.60 to 41.65            1.30 to 1.64              384.1 to 501.5            0.654 to 0.686                      19.0
3.68 to 4.57....................  41.66 to 50.30            1.65 to 1.97              501.6 to 613.8            0.687 to 0.718                      25.5
4.58 to 5.38....................  50.31 to 58.17            1.98 to 2.28              613.9 to 716.1            0.719 to 0.746                      30.0
> 5.38..........................  >58.17                    >2.28                     >716.1                    >0.746                              35.5
--------------------------------------------------------------------------------------------------------------------------------------------------------

    Table 3 shows the results of analyses of industry data and latest 
Federal contracting trends for each industry in Sector 44-45, Retail 
Trade. It is important to note, however, that the Federal procurement 
of supplies must be classified under the appropriate manufacturing 
NAICS code. See 13 CFR 121.402(b). However, because there were Federal 
procurements during the years analyzed that were classified in the 
Retail Sector, SBA is including the data because they affect its 
evaluation of size standards for the Retail Trade Sector. Each NAICS 
industry row in columns 2, 3, 4, 6, 7 and 8 shows two numbers. The 
upper number is the value for the industry factor shown on the top of 
the column, while the lower number is the size standard supported by 
that factor. For the four-firm concentration ratio, a size standard is 
estimated based on the average receipts of the top four firms if its 
value is 40 percent or more. If the four-firm concentration ratio for 
an industry is less than 40 percent, no size standard is estimated for 
that factor and column 5 is left blank. The value for Federal 
contracting factor in column 8 is shown only for industries that 
averaged $100 million or more annually in Federal contracting dollars 
during fiscal years 2006-2008. A size standard for that factor is 
derived only if the small business share of total Federal contracting 
dollars is 10 percentage points less than the small business share of 
industry's total receipts. Otherwise column 8 is also left blank. 
Column 9 shows the proposed or revised size standard for each industry 
in the Retail Trade Sector, calculated as the average of size standards 
supported by each industry factor and rounded to the nearest fixed size 
level. Analytical details involved in the averaging procedure are 
described in the SBA ``Size Standards Methodology'' paper which is 
available at http://www.sba.gov/size. For comparison, the current size 
standards for industries in Sector 44-45 are also shown in column 10 of 
Table 3.

                                                Table 3--Size Standards Supported by Each Industry Factor
                                                                  [Millions of dollars]
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                      (3)                                 (6) Four-                                              (10)
                                      (2) Simple    Weighted   (4) Average   (5) Four-       firm       (7) Gini   (8) Federal  (9) Revised    Current
             (1) NAICS                 average      average    assets size   firm ratio    average    coefficient    contract       size         size
                                      firm size    firm size                    (%)          size                   factor (%)    standard     standard
--------------------------------------------------------------------------------------------------------------------------------------------------------
441110.............................        $27.4       $102.6         $7.6          5.6     $9,110.3        0.638  ...........        $30.0        $29.0
New Car Dealers....................         35.5         35.5         35.5  ...........  ...........        $14.0  ...........  ...........  ...........
441120.............................          2.0         14.7          0.5          7.1        854.7        0.561  ...........          5.0         23.0
Used Car Dealers...................         10.0          5.0          5.0  ...........  ...........          5.0  ...........  ...........  ...........
441210.............................          5.2         45.2          2.2         10.5        388.7        0.702         72.4         30.0          7.0
Recreational Vehicle Dealers.......         30.0         25.5         30.0  ...........  ...........         25.5  ...........  ...........  ...........
441221.............................          3.4         10.4          1.4          2.4         97.8        0.576  ...........         14.0          7.0

[[Page 53930]]

 
Motorcycle, ATV, and Personal               19.0          5.0         19.0  ...........  ...........          5.0  ...........  ...........  ...........
 Watercraft Dealers................
441222.............................          2.6         23.3          1.4         10.1        310.7        0.624  ...........         14.0          7.0
Boat Dealers.......................         14.0         10.0         19.0  ...........  ...........         10.0  ...........  ...........  ...........
441229.............................          1.8         11.1          0.7          8.6         85.3        0.545  ...........          5.0          7.0
All Other Motor Vehicle Dealers....         10.0          5.0          5.0  ...........  ...........          5.0  ...........  ...........  ...........
Except.............................          3.8  ...........          1.3  ...........  ...........  ...........  ...........  ...........  ...........
Aircraft Dealers, Retail...........         25.5  ...........         19.0  ...........  ...........  ...........  ...........         25.5         10.0
441310.............................          1.6        109.5          0.6         30.7      3,004.6        0.643  ...........         14.0          7.0
Automotive Parts and Accessories            10.0         35.5          5.0  ...........  ...........         14.0  ...........  ...........  ...........
 Stores............................
441320.............................          2.0         92.0          0.6         25.9      1,399.2        0.647  ...........         14.0          7.0
Tire Dealers.......................         14.0         35.5          5.0  ...........  ...........         14.0  ...........  ...........  ...........
442110.............................          2.4         66.4          0.9          8.1      1,017.8        0.683  ...........         19.0          7.0
Furniture Stores...................         14.0         35.5         10.0  ...........  ...........         19.0  ...........  ...........  ...........
442210.............................          1.3          6.4          0.4          2.1         93.7        0.441  ...........          5.0          7.0
Floor Covering Stores..............          7.0          5.0          5.0  ...........  ...........          5.0  ...........  ...........  ...........
442291.............................          0.6          5.6  ...........         20.9         58.9        0.341  ...........          5.0          7.0
Window Treatment Stores............          5.0          5.0  ...........  ...........  ...........          5.0  ...........  ...........  ...........
442299.............................          1.8        146.4          0.6         39.1      2,175.8        0.776  ...........         19.0          7.0
All Other Home Furnishings Stores..         10.0         35.5          5.0  ...........  ...........         35.5  ...........  ...........  ...........
443111.............................          1.6         40.2          0.5         16.8        584.6        0.630  ...........         10.0          9.0
Household Appliance Stores.........         10.0         19.0          5.0  ...........  ...........         14.0  ...........  ...........  ...........
443112.............................          3.6        575.9          1.0         68.9      8,351.1        0.869  ...........         25.5          9.0
Radio, Television and Other                 19.0         35.5         14.0  ...........         35.5         35.5  ...........  ...........  ...........
 Electronics Stores................
443120.............................          2.2        285.2          0.6         52.5      2,192.0        0.782          9.7         25.5          9.0
Computer and Software Stores.......         14.0         35.5          5.0  ...........         35.5         35.5  ...........  ...........  ...........
443130.............................          2.6        423.0          0.7         54.3        427.9        0.770  ...........         19.0          7.0
Camera and Photographic Supplies            14.0         35.5          7.0  ...........         19.0         35.5  ...........  ...........  ...........
 Stores............................
444110.............................         37.3      4,210.0         13.2         91.1     21,591.9        0.960  ...........         35.5          7.0
Home Centers.......................         35.5         35.5         35.5  ...........         35.5         35.5  ...........  ...........  ...........
444120.............................          2.7        302.7          0.9         47.3        943.7        0.767  ...........         25.5          7.0
Paint and Wallpaper Stores.........         14.0         35.5         10.0  ...........         35.5         35.5  ...........  ...........  ...........
444130.............................          1.3         21.7          0.5         13.4        556.5        0.496        -10.2          7.0          7.0
Hardware Stores....................          7.0         10.0          5.0  ...........  ...........          5.0         10.0  ...........  ...........
444190.............................          3.3         36.9          1.1          8.7      2,100.2        0.695  ...........         19.0          7.0
Other Building Material Dealers....         19.0         19.0         14.0  ...........  ...........         25.5  ...........  ...........  ...........
444210.............................          1.1          3.3          0.4          2.1         23.4        0.391  ...........          5.0          7.0
Outdoor Power Equipment Stores.....          7.0          5.0          5.0  ...........  ...........          5.0  ...........  ...........  ...........
444220.............................          1.9         22.1          0.7         12.1        800.1        0.634  ...........         10.0          7.0
Nursery and Garden Centers.........         10.0         10.0          7.0  ...........  ...........         14.0  ...........  ...........  ...........
445110.............................          9.3        852.4          1.8         32.5     32,122.8        0.915         66.3         30.0         27.0
Supermarkets and Other Grocery              35.5         35.5         25.5  ...........  ...........         35.5  ...........  ...........  ...........
 (except Convenience) Stores.......
445120.............................          0.8         15.9          0.2         15.5        791.3        0.353  ...........          5.0         27.0
Convenience Stores.................          5.0          5.0          5.0  ...........  ...........          5.0  ...........  ...........  ...........
445210.............................          0.8          4.4          0.2          6.5         71.6        0.336  ...........          5.0          7.0
Meat Markets.......................          5.0          5.0          5.0  ...........  ...........          5.0  ...........  ...........  ...........
445220.............................          0.8          3.1  ...........          5.3         19.9        0.340  ...........          5.0          7.0
Fish and Seafood Markets...........          5.0          5.0  ...........  ...........  ...........          5.0  ...........  ...........  ...........
445230.............................          0.9          5.5          0.1          5.4         37.6        0.428         26.1          5.0          7.0
Fruit and Vegetable Markets........          5.0          5.0          5.0  ...........  ...........          5.0  ...........  ...........  ...........
445291.............................          0.5         19.6          0.2         36.1        126.0        0.499  ...........          5.0          7.0
Baked Goods Stores.................          5.0          7.0          5.0  ...........  ...........          5.0  ...........  ...........  ...........
445292.............................          0.7         25.4          0.3         41.2        139.3        0.627  ...........          7.0          7.0
Confectionery and Nut Stores.......          5.0         10.0          5.0  ...........          5.0         10.0  ...........  ...........  ...........
445299.............................          0.4          3.5          0.1         11.3         46.4        0.264  ...........          5.0          7.0
All Other Specialty Food Stores....          5.0          5.0          5.0  ...........  ...........          5.0  ...........  ...........  ...........
445310.............................          1.1         14.9          0.3          8.3        583.0        0.403  ...........          5.0          7.0
Beer, Wine and Liquor Stores.......          7.0          5.0          5.0  ...........  ...........          5.0  ...........  ...........  ...........
446110.............................          7.8        376.9          1.6         52.8     20,311.0        0.804        -20.2         25.5          7.0
Pharmacies and Drug Stores.........         35.5         35.5         19.0  ...........         35.5         35.5         10.0  ...........  ...........
446120.............................          1.2        162.6          0.5         56.8        892.5        0.748  ...........         25.5          7.0
Cosmetics, Beauty Supplies and               7.0         35.5          5.0  ...........         35.5         35.5  ...........  ...........  ...........
 Perfume Stores....................
446130.............................          1.1         88.3          0.4         44.1        733.0        0.642  ...........         19.0          7.0
Optical Goods Stores...............          7.0         35.5          5.0  ...........         35.5         14.0  ...........  ...........  ...........
446191.............................          0.8         67.5  ...........         31.1        361.8        0.527  ...........         14.0          7.0
Food (Health) Supplement Stores....          5.0         35.5  ...........  ...........  ...........          5.0  ...........  ...........  ...........
446199.............................          1.1          5.3  ...........         11.4        188.2        0.492  ...........          7.0          7.0
All Other Health and Personal Care           7.0          5.0  ...........  ...........  ...........          5.0  ...........  ...........  ...........
 Stores............................

[[Page 53931]]

 
447110.............................          4.2        150.8          0.7         10.4      4,854.2        0.723  ...........         25.5         27.0
Gasoline Stations with Convenience          25.5         35.5          7.0  ...........  ...........         30.0  ...........  ...........  ...........
 Stores............................
447190.............................          2.7         35.7          0.4         19.2      2,993.6        0.645  ...........         14.0          9.0
Other Gasoline Stations............         14.0         19.0          5.0  ...........  ...........         14.0  ...........  ...........  ...........
448110.............................          1.4         41.5          0.6         27.6        546.9        0.635  ...........         10.0          9.0
Men's Clothing Stores..............         10.0         19.0          5.0  ...........  ...........         14.0  ...........  ...........  ...........
448120.............................          2.2        180.2          0.8         30.5      2,334.0        0.812  ...........         25.5          9.0
Women's Clothing Stores............         14.0         35.5          7.0  ...........  ...........         35.5  ...........  ...........  ...........
448130.............................          2.5        176.3  ...........         58.5      1,035.4        0.851  ...........         30.0          7.0
Children's and Infants' Clothing            14.0         35.5  ...........  ...........         35.5         35.5  ...........  ...........  ...........
 Stores............................
448140.............................          8.1        526.1          3.1         47.5      7,579.2        0.930  ...........         35.5          9.0
Family Clothing Stores.............         35.5         35.5         35.5  ...........         35.5         35.5  ...........  ...........  ...........
448150.............................          1.1         46.1          0.4         52.9        360.9        0.728  ...........         14.0          7.0
Clothing Accessories Stores........          7.0         25.5          5.0  ...........         14.0         30.0  ...........  ...........  ...........
448190.............................          1.1         59.7          0.4         43.6        868.0        0.663  ...........         19.0          7.0
Other Clothing Stores..............          7.0         35.5          5.0  ...........         35.5         19.0  ...........  ...........  ...........
448210.............................          3.3        256.6          1.4         39.9      2,292.5        0.842  ...........         25.5          9.0
Shoe Stores........................         19.0         35.5         19.0  ...........  ...........         35.5  ...........  ...........  ...........
448310.............................          1.2        113.2          0.8         23.8      1,385.1        0.625  ...........         14.0          7.0
Jewelry Stores.....................          7.0         35.5          7.0  ...........  ...........         10.0  ...........  ...........  ...........
448320.............................          2.0         61.0  ...........         49.8        192.3        0.750  ...........         25.5          7.0
Luggage and Leather Goods Stores...         14.0         35.5  ...........  ...........          7.0         35.5  ...........  ...........  ...........
451110.............................          1.4        102.4          0.6         18.1      1,134.1        0.636         54.4         14.0          7.0
Sporting Goods Stores..............          7.0         35.5          5.0  ...........  ...........         14.0  ...........  ...........  ...........
451120.............................          2.7        488.2          1.0         71.7      2,903.1        0.853  ...........         25.5          7.0
Hobby, Toy and Game Stores.........         14.0         35.5         14.0  ...........         35.5         35.5  ...........  ...........  ...........
451130.............................          1.1        194.2  ...........         59.4        580.9        0.700  ...........         25.5          7.0
Sewing, Needlework and Piece Goods           7.0         35.5  ...........  ...........         25.5         25.5  ...........  ...........  ...........
 Stores............................
451140.............................          1.4         69.6          0.7         30.2        378.2        0.580  ...........         10.0          7.0
Musical Instrument and Supplies              7.0         35.5          7.0  ...........  ...........          5.0  ...........  ...........  ...........
 Stores............................
451211.............................          2.7        406.2          1.1         65.6      2,469.3        0.846  ...........         25.5          7.0
Book Stores........................         19.0         35.5         14.0  ...........         35.5         35.5  ...........  ...........  ...........
451212.............................          0.5          6.1  ...........         17.1         34.6        0.354  ...........          5.0          7.0
News Dealers and Newsstands........          5.0          5.0  ...........  ...........  ...........          5.0  ...........  ...........  ...........
451220.............................          2.2        259.4  ...........         57.7      1,042.1        0.836  ...........         30.0          7.0
Prerecorded Tape, Compact Disc and          14.0         35.5  ...........  ...........         35.5         35.5  ...........  ...........  ...........
 Record Stores.....................
452111.............................      2,227.1      3,926.7        890.8         72.1     15,654.5        0.434  ...........         30.0         27.0
Department Stores (except Discount          35.5         35.5         35.5  ...........         35.5          5.0  ...........  ...........  ...........
 Department Stores)................
452112.............................      3,433.0      8,326.5  ...........         95.0     31,807.8        0.588  ...........         25.5         27.0
Discount Department Stores.........         35.5         35.5  ...........  ...........         35.5          5.0  ...........  ...........  ...........
452910.............................     11,953.3     17,358.4  ...........         92.1     44,059.2        0.312  ...........         25.5         27.0
Warehouse Clubs and Superstores....         35.5         35.5  ...........  ...........         35.5          5.0  ...........  ...........  ...........
452990.............................          3.5        359.5          1.4         50.3      4,178.7        0.869  ...........         30.0         11.0
All Other General Merchandise               19.0         35.5         19.0  ...........         35.5         35.5  ...........  ...........  ...........
 Stores............................
453110.............................          0.3          1.1          0.1          1.7         27.9        0.112  ...........          5.0          7.0
Florists...........................          5.0          5.0          5.0  ...........  ...........          5.0  ...........  ...........  ...........
453210.............................          4.3        632.4          1.2         78.1      4,027.6        0.875          5.7         30.0          7.0
Office Supplies and Stationery              25.5         35.5         14.0  ...........         35.5         35.5  ...........  ...........  ...........
 Stores............................
453220.............................          0.6         14.9          0.2         12.3        491.1        0.464  ...........          5.0          7.0
Gift, Novelty and Souvenir Stores..          5.0          5.0          5.0  ...........  ...........          5.0  ...........  ...........  ...........
453310.............................          0.6          5.2          0.3          9.9        191.5        0.457  ...........          5.0          7.0
Used Merchandise Stores............          5.0          5.0          5.0  ...........  ...........          5.0  ...........  ...........  ...........
453910.............................          1.4        452.3          0.3         55.4      1,050.8        0.684  ...........         19.0          7.0
Pet and Pet Supplies Stores........          7.0         35.5          5.0  ...........         35.5         19.0  ...........  ...........  ...........
453920.............................          0.7         10.5          0.5          8.9         94.2        0.462  ...........          5.0          7.0
Art Dealers........................          5.0          5.0          5.0  ...........  ...........          5.0  ...........  ...........  ...........
453930.............................          2.6         48.7          1.3         20.2        481.0        0.592  ...........         14.0         13.0
Manufactured (Mobile) Home Dealers.         14.0         25.5         14.0  ...........  ...........          5.0  ...........  ...........  ...........
453991.............................          1.6          7.0          0.3         11.7        190.7        0.531  ...........          5.0          7.0
Tobacco Stores.....................         10.0          5.0          5.0  ...........  ...........          5.0  ...........  ...........  ...........
453998.............................          0.8          6.9          0.3          6.9        206.9        0.443          4.2          5.0          7.0
All Other Miscellaneous Store                5.0          5.0          5.0  ...........  ...........          5.0  ...........  ...........  ...........
 Retailers (except Tobacco Stores).
454111.............................          4.5         70.3          1.4  ...........  ...........        0.822  ...........         30.0         25.0
Electronic Shopping................         25.5         35.5         19.0  ...........  ...........         35.5  ...........  ...........  ...........

[[Page 53932]]

 
454112.............................         13.4        320.7  ...........  ...........  ...........        0.933  ...........         35.5         25.0
1Electronic Auctions...............         35.5         35.5  ...........  ...........  ...........         35.5  ...........  ...........  ...........
454113.............................         10.0        249.6          3.1  ...........  ...........        0.907  ...........         35.5         25.0
Mail Order Houses..................         35.5         35.5         35.5  ...........  ...........         35.5  ...........  ...........  ...........
454210.............................          1.4         30.6          0.5         20.7        365.5        0.658  ...........         10.0          7.0
Vending Machine Operators..........          7.0         14.0          5.0  ...........  ...........         19.0  ...........  ...........  ...........
454319.............................          0.3          0.7  ...........         15.3          2.5        0.098  ...........          5.0          7.0
Other Fuel Dealers.................          5.0          5.0  ...........  ...........  ...........          5.0  ...........  ...........  ...........
454390.............................          1.1         22.3          0.3         15.0        807.0        0.596  ...........          7.0          7.0
Other Direct Selling Establishments          7.0         10.0          5.0  ...........  ...........          7.0  ...........  ...........  ...........
--------------------------------------------------------------------------------------------------------------------------------------------------------

    As can be seen in Table 3, the results of SBA analyses of industry 
and Federal contracting data would support reducing the current size 
standards for 23 of 76 industries in the Retail Trade Sector. However, 
SBA believes that lowering size standard for those industries would not 
be in the best interests of small businesses in these difficult times 
when the economy is in a deep recession.
    Aiming to promote economic recovery and to preserve and create jobs 
the U.S. Congress passed and the President signed the American Recovery 
and Reinvestment Act of 2009 (Recovery Act). The purposes and goals of 
the Recovery Act are to promote economic recovery and to preserve and 
create jobs. Under the Recovery Act, SBA has changed its various 
programs to assist small businesses, including the following: (1) 
Temporary reduction or elimination of fees in the 7(a) and 504 loan 
guarantee programs; (2) creation of a temporary 90 percent guarantee 
loan program; (3) creation of a temporary Secondary Market Guarantee 
Authority to provide a Federal guarantee for pools of first lien 504 
loans that are to be sold to third-party investors; (4) new authority 
for refinancing community development loans under the 504 program; (5) 
revision of the job creation goals of the 504 program; (6) 
simplification of the maximum leverage limits and aggregate investment 
limits required of Small Business Investment Companies; (7) temporary 
authority to provide loans on a deferred basis to viable small business 
concerns that have a qualifying small business loan and are 
experiencing immediate financial hardship; (8) temporary increase in 
the surety bond maximum amount; (9) establishment of a Secondary Market 
Lending Authority to make loans to systemically important broker 
dealers in SBA's 7(a) secondary market; and (10) application of SBA's 
Certified Development Company (CDC) alternative size standard to its 
7(a) Business Loan Program (see 13 CFR 121.301).
    SBA believes that to reduce size standards and thereby reduce the 
number of firms that can participate in its financial and other 
assistance programs would run counter to what it is trying to do for 
small businesses. Again, the non-manufacturer size standard of 500 
employees applies for purposes of Federal procurement of supplies. 
Reducing size eligibility for Federal financial and other assistance 
would not preserve or create more jobs; rather, it would have the 
opposite effect. SBA intends for the proposed size standards, if 
adopted, to remain in effect unless and until it receives information 
or data that suggests a change is needed.

Evaluation of Federal Contracting and SBA Loan Data

    Besides industry structure, SBA also evaluates Federal contracting 
data to assess the extent to which small businesses are successful in 
getting Federal contracts under the existing size standards. However, 
the available data on Federal contracting are limited to identifying 
businesses as small or other than small, with no information on exact 
size of businesses receiving Federal contracts in order to conduct a 
more precise analysis. Moreover, a procurement for supplies should be 
classified under a manufacturing NAICS code. Consequently, the 
available data pertains to procurements that have been misclassified by 
procuring agencies.
    Given limited data, for the current comprehensive size review, SBA 
has decided to designate a size standard at one level higher than their 
current size standard for industries where the small business share of 
total Federal contracting dollars is between 10 and 30 percentage 
points lower than their shares in total industry receipts and at two 
levels higher than the current size standard if the difference is 
higher than 30 percentage points.
    SBA has chosen not to designate a size standard for the Federal 
contracting factor alone that is higher than two levels above the 
current size standard because doing so would result in most cases of 
designating a size standard more than twice the current size standard. 
Given the limitations of the FPDS data, and the complex relationships 
among a number of variables affecting small business participation in 
the Federal marketplace, SBA believes that a larger adjustment to size 
standards based on Federal contracting activity should be based on a 
more detailed analysis of the impact of any subsequent revision to the 
current size standard. In limited situations, however, SBA may conduct 
a more extensive examination of Federal contracting experience to 
support a different size standard than indicated by this general rule 
to take into consideration significant and unique aspects of small 
business competitiveness in the Federal contract market. SBA welcomes 
comment on its methodology of incorporating the Federal contracting 
factor in the size standard analysis and suggestions for alternative 
methods and other relevant information on small business experience in 
Federal contract market.
    Only nine industries in Sector 44-45, Retail Trade, received an 
average of $100 million or more annually in Federal contracting dollars 
during fiscal years 2006-2008. Those are the industries that have a 
Federal contracting factor in column 8 of Table 3. In seven of these 
nine industries, because the small business share of Federal 
contracting dollars was already higher than the small business share of 
industry's total receipts (positive values in column 8 of Table 3), no 
size standard was estimated for the Federal contracting factor. 
However, in two of these nine industries, namely NAICS 444130, Hardware 
Stores, and NAICS 446110, Pharmacies and Drug Stores, for

[[Page 53933]]

which small business share of Federal contracting dollars was more than 
10 percent lower than small business share of industry's total 
receipts, a separate size standard was estimated for the Federal 
contracting factor. The latest data show that Federal contracting 
activity is insignificant for most of the industries in Sector 44-45 
and, for a few industries where it is significant small businesses seem 
to be doing well in most cases in terms of their share in the Federal 
marketplace relative to their share in industry's total sales.
    Before deciding on an industry's size standard, SBA also considers 
the impact of new or revised standards on SBA's loan programs. SBA 
examined 7(a) Loan Program data for fiscal years 2006-2008 to assess 
whether the existing or proposed size standards need further 
adjustments to ensure credit opportunities for small businesses though 
that program. For the Retail Trade industries, primarily small 
businesses that are much smaller than the current size standards use 
the 7(a) Loan Program. Based on that analysis, no size standard in 
Sector 44-45, Retail Trade, needs an adjustment based on this factor.

Other Considerations

    Alternative Size Standards for New Car (NAICS 441110) and Used Car 
Dealers (NAICS 441120) Industries: SBA proposes to increase to the 
existing size standard for the New Car Dealers industry from $29 
million to $30 million in annual receipts and to retain the current 
standard of $23 million in annual receipts for the Used Car Dealers 
industry.
    However, based on industry data, SBA believes that an employee-
based size standard might also be appropriate for these two industries, 
in lieu of one based on annual receipts. Industry associations have 
also suggested this as an alternative. They cite the variation in 
prices of car models for creating inequity in size eligibility under 
the receipt-based standard. For example, two dealers selling the same 
number of units will have different receipt levels depending on the 
models they sell.
    SBA has traditionally applied a receipts-based measure to determine 
the size of a small business for most industries, including Retail 
Trade. Receipts is the preferred measure because it represents the 
value of a firm's output. Other measures of size are used for 
industries where receipts may skew the value added contributed by the 
firm in the production of goods and services. For example, number of 
employees is a better measure of size than receipts for industries in 
which firms have relatively low operational costs (labor and overhead, 
for example) in relation to their total receipts. This applies to the 
Wholesale Trade industries in which the value of the product sold 
greatly exceeds the cost of labor and capital used to generate a given 
level of receipts. Similarly, in the manufacturing industries, two 
manufacturers with the same number of employees may produce 
significantly different levels of receipts depending on the stage of 
manufacturing in the production process. Thus, SBA believes that number 
of employees more accurately reflects the value added by each 
manufacturer than the level of receipts.
    Car dealers have characteristics very similar to wholesale trade 
firms. A large proportion of the receipts of a car dealer account for 
the value of a manufactured product. A car dealer obtains a relatively 
small share of the total value of each unit sold, but generates 
significant receipts per employee. Furthermore, an unintended 
consequence of using receipts can arise from the variation in values of 
the car models sold--using receipts might exclude from eligibility for 
small business programs those car dealers that sell a greater 
proportion of high-valued automobiles than other dealers that sell 
lower priced models.
    SBA estimates the average revenue (sales) per employee in 2008 at 
$660,000 and $520,000 for New Car Dealers and Used Car Dealers, 
respectively, based on an analysis of data from the special tabulation 
of the 2002 Economic Census (as referenced above) with adjustment for 
inflation since 2002. Based on these values, the proposed receipts-
based size standard of $30 million for New Car Dealers would convert to 
a range of 45 to 50 employees. At the 50-employee size standard level, 
about 70 percent of firms in the New Car Dealers industry would be 
considered small compared to nearly 75 percent that would be considered 
small under the proposed $30 million receipts based standard. Thus, to 
ensure that firms that would be classified as small under the $30 
million receipts based standard are also classified as small under an 
employee-based size standard, the employee-based standard should be 
more than 50 employees. Similarly, at the current size standard of $23 
million in annual receipts would also convert to a range of 45 to 50 
employees for Used Car Dealers. At the 50-employee size standard, 
nearly 98 percent of firms in the Car Dealers industry would be 
considered small, almost the same as that under the existing $23 
million receipts based standard. Based on these estimates, SBA is also 
considering an alternative size standard of 100 employees for the New 
Car Dealers industry and 50 employees for the Used Car Dealers 
industry. SBA believes that these levels will ensure that small car 
dealers eligible under the receipts based size standards would also be 
eligible at these alternative employee based size standards.
    SBA requests comments on whether an employee-based size standard 
for these two industries is more appropriate than a receipts-based 
standard and on the alternative employee-based size standards. 
Depending upon the feedback received, SBA may consider adopting the 
alternative employee size standards in the final rule.
    Size Standard for Retail Aircraft Dealers: SBA has established a 
specific size standard of $10.0 million in average annual receipts for 
NAICS 441229, Retail Aircraft Dealers, as a separate category from the 
$7.0 million size standard for all other activities in NAICS 441229, 
All Other Motor Vehicle Dealers. As a sub-component of the industry, 
SBA has limited data on Retail Aircraft Dealers and cannot evaluate all 
industry factors to determine whether the current $10.0 million size 
standard is appropriate. The only useful source of data consists of the 
product line data from the Census Bureau's 2002 Economic Census 
publication titled ``Retail Trade, Subject Series, Product Lines, EC02-
44SL-LS, October 2005.'' The product line data include information on 
number of establishments and receipts at sub-industry levels, based on 
which SBA estimated the average establishment size of Aircraft Dealers 
and All Other Motor Vehicle Dealers. SBA estimated average assets size 
by applying the sales to assets ratio for the All Other Motor Vehicle 
Dealers industry to average establishment size estimated from the 
Census Bureau's product line data. These estimates, as shown in Table 
3, support an increase to the size standard for Retail Aircraft Dealers 
from $10 million to $19 million.
    SBA also analyzed the trends on average establishment size for 
Retail Aircraft Dealers and All Other Motor Vehicle Dealers between 
1997 and 2002 using the product line data from the 1997 and 2002 
Economic Censuses. The analysis showed that from 1997 to 2002 the 
average establishment size for Retail Aircraft Dealers increased at a 
much higher rate than for the overall industry, also suggesting an 
increase in the current size standard.
    While the data are limited on Retail Aircraft Dealers, the 
available data, nonetheless, support increasing its size

[[Page 53934]]

standard to $19 million. SBA welcomes comments on the appropriateness 
of the proposed size standard and alternative data sources for Retail 
Aircraft Dealers that may be used to more fully evaluate the size 
standard. Comments on an alternative higher or lower size standard 
should provide specific data or other information supporting the basis 
for that position.
    Size Standards for the Heating Oil Dealers (NAICS 454311) and 
Liquefied Petroleum Gas (Bottled Gas) Dealers (NAICS 454312) 
Industries: On July 22, 2008 (73 FR 42517), based on a review of the 
latest available data on industry characteristics and other relevant 
information, SBA changed the small business size standard for NAICS 
454311, Heating Oil Dealers, from $11.5 million in average annual 
receipts to 50 employees, and the size standard for NAICS 454312, 
Liquefied Petroleum Gas (Bottled Gas) Dealers, from $6.5 million in 
average annual receipts to 50 employees. SBA believes that those 
employee-based size standards are still appropriate for these 
industries and hence SBA is not proposing their revision here.
    Application of Retail Trade and Wholesale Trade Industry Size 
Standards to Federal Procurements and Subcontracts: This proposed rule 
also modifies SBA regulations to clarify the existing policy that 
Federal contracts and subcontracts for supplies shall not be classified 
with a Wholesale Trade (Sector 42) or Retail Trade (Sector 44-45) NAICS 
industry code. 13 CFR 121.402(b) requires a contracting officer to 
classify a Federal supply contract or subcontract to a Federal prime 
contract under an appropriate manufacturing NAICS industry code. A 
Retail Trade or Wholesale Trade business that supplies a manufactured 
product on a Federal procurement contract or on a subcontract to a 
Federal prime contract is deemed a ``nonmanufacturer'' and is a small 
business nonmanufacturer if it has 500 or fewer employees and meets 
other requirements set forth in the regulations. The Table of Size 
Standards (see 121.201) contains a note at the heading of the Retail 
Trade and Wholesale Trade Sectors stating that the industry size 
standards are ``Not applicable to Government procurement of supplies.'' 
However, SBA has observed numerous misclassifications of procurement 
solicitations and contract awards reported in the Federal Procurement 
Data System--Next Generation with Retail Trade and Wholesale Trade 
NAICS codes.
    To better inform Federal government contracting officers and other 
users of the proper NAICS classification of Federal supply prime 
contracts, and for supply subcontracts to Federal prime contractors, 
SBA proposes to modify the existing note at the heading to the 
Wholesale Trade and Retail Trade Sectors in the Table of Size Standards 
(13 CFR 121.201) to read as follows: ``These NAICS codes shall not be 
used to classify Government acquisitions for supplies. They also shall 
not be used by Federal government contractors when subcontracting for 
the acquisition for supplies. The applicable manufacturing NAICS code 
shall be used to classify acquisitions for supplies. A Wholesale Trade 
or Retail Trade business concern submitting an offer or a quote on a 
supply acquisition is categorized as a nonmanufacturer and deemed small 
if it has 500 or fewer employees and meets the requirements of 13 CFR 
121.406.''
    SBA is also proposing to revise the language in 13 CFR 121.402(b) 
to be consistent with the revised table headings by revising the end of 
the regulation to read ``Acquisitions for supplies must be classified 
under the appropriate manufacturing NAICS code, not under a wholesale 
trade or retail trade NAICS code. A concern that submits an offer or 
quote for a contract or subcontract where the NAICS code assigned to 
the contract or subcontract is one for supplies, and furnishes a 
product it did not itself manufacture or produce, is categorized as a 
nonmanufacturer and deemed small if it has 500 or fewer employees and 
meets the requirements of 13 CFR 121.406.''

Summary of Size Standards Changes

    Based on the analyses of currently available industry and Federal 
contracting data, SBA proposes to increase size standards for 48 of 76 
industries in Sector 44-45, Retail Trade. These industries and their 
proposed size standards are shown in Table 4. The analyses supported 
retaining the existing standards for five industries in that Sector.
    SBA's analyses support a decrease to the current size standard for 
23 industries in Retail Trade. However, as discussed above, SBA feels 
that proposing to lower small business size standards would be 
inconsistent with its ongoing effort to promote small business 
assistance under the Recovery Act. Therefore, SBA proposes to retain 
the current size standards for those industries. SBA intends for the 
proposed size standards, if adopted, to remain in effect unless and 
until it receives information or data that suggests a change is needed.

          Table 4--Summary of Proposed Size Standard Revisions
------------------------------------------------------------------------
                                           Current size    Revised size
                  NAICS                      standard        standard
------------------------------------------------------------------------
441110 New Car Dealers..................           $29.0           $30.0
441210 Recreational Vehicle Dealers.....             7.0            30.0
441221 Motorcycle, ATV, and Personal                 7.0            14.0
 Watercraft Dealers.....................
441222 Boat Dealers.....................             7.0            14.0
Except Aircraft Dealers, Retail.........            10.0            25.5
441310 Automotive Parts and Accessories              7.0            14.0
 Stores.................................
441320 Tire Dealers.....................             7.0            14.0
442110 Furniture Stores.................             7.0            19.0
442299 All Other Home Furnishings Stores             7.0            19.0
443111 Household Appliance Stores.......             9.0            10.0
443112 Radio, Television and Other                   9.0            25.5
 Electronics Stores.....................
443120 Computer and Software Stores.....             9.0            25.5
443130 Camera and Photographic Supplies              7.0            19.0
 Stores.................................
444110 Home Centers.....................             7.0            35.5
444120 Paint and Wallpaper Stores.......             7.0            25.5
444190 Other Building Material Dealers..             7.0            19.0
444220 Nursery and Garden Centers.......             7.0            10.0
445110 Supermarkets and Other Grocery               27.0            30.0
 (except Convenience) Stores............
446110 Pharmacies and Drug Stores.......             7.0            25.5
446120 Cosmetics, Beauty Supplies and                7.0            25.5
 Perfume Stores.........................

[[Page 53935]]

 
446130 Optical Goods Stores.............             7.0            19.0
446191 Food (Health) Supplement Stores..             7.0            14.0
447190 Other Gasoline Stations..........             9.0            14.0
448110 Men's Clothing Stores............             9.0            10.0
448120 Women's Clothing Stores..........             9.0            25.5
448130 Children's and Infants' Clothing              7.0            30.0
 Stores.................................
448140 Family Clothing Stores...........             9.0            35.5
448150 Clothing Accessories Stores......             7.0            14.0
448190 Other Clothing Stores............             7.0            19.0
448210 Shoe Stores......................             9.0            25.5
448310 Jewelry Stores...................             7.0            14.0
448320 Luggage and Leather Goods Stores.             7.0            25.5
451110 Sporting Goods Stores............             7.0            14.0
451120 Hobby, Toy and Game Stores.......             7.0            25.5
451130 Sewing, Needlework and Piece                  7.0            25.5
 Goods Stores...........................
451140 Musical Instrument and Supplies               7.0            10.0
 Stores.................................
451211 Book Stores......................             7.0            25.5
451220 Prerecorded Tape, Compact Disc                7.0            30.0
 and Record Stores......................
452111 Department Stores (except                    27.0            30.0
 Discount Department Stores)............
452990 All Other General Merchandise                11.0            30.0
 Stores.................................
453210 Office Supplies and Stationery                7.0            30.0
 Stores.................................
453910 Pet and Pet Supplies Stores......             7.0            19.0
453930 Manufactured (Mobile) Home                   13.0            14.0
 Dealers................................
454111 Electronic Shopping..............            25.0            30.0
454112 Electronic Auctions..............            25.0            35.5
454113 Mail Order Houses................            25.0            35.5
454210 Vending Machine Operators........             7.0            10.0
------------------------------------------------------------------------

Evaluation of Dominance in Field of Operation

    SBA has determined that for each industry in Sector 44-45, Retail 
Trade, no firm at or below the proposed size standard would be large 
enough to dominate its field of operation. A firm at the proposed size 
standard in each of these industries generates less than one percent of 
total industry receipts. This level of market share effectively 
precludes a firm at or below the proposed size standard from exerting a 
controlling effect on this industry.

Request for Comments

    SBA invites public comments on the proposed rule, especially on the 
following areas.
    1. In an effort to simplify size standards, for this proposed rule, 
SBA has proposed a set of eight fixed size levels for receipts based 
size standards: $5.0 million, $7.0 million, $10.0 million, $14.0 
million, $19.0 million, $25.5 million, $30.0 million, and $35.5 
million. SBA invites comments on whether simplification of size 
standards in this way is necessary and if these proposed fixed size 
levels are appropriate, or suggestions on alternative approaches to 
simplifying small business size standards.
    2. For all industries in Sector 44-45, Retail Trade, SBA has 
proposed receipts based size standards ranging from $7 million to $35.5 
million. SBA seeks feedback on whether the levels of size standards it 
proposes seem right given the economic characteristics of each 
industry. SBA also seeks feedback and suggestions on alternative 
standards, if they would be more appropriate, including whether an 
employee based standard for certain industries is a more suitable 
measure of size, and what that employee level size standard should be.
    3. SBA's proposed standards are based on its evaluation of five 
primary factors--average firm size, average assets size (as proxy of 
startup costs and entry barriers), four-firm concentration ratio, 
distribution of firms by size, and the level and small business share 
of Federal contracting dollars. SBA welcomes comments on these and 
other factors that interested parties believe are important to consider 
for describing industry characteristics when SBA evaluates its size 
standards. Please provide relevant data sources, if available.
    4. SBA derives its proposed standards by applying equal weights to 
each of the five primary factors in all industries. Should SBA continue 
with the equal weighting of each factor or should it give more weight 
to one or more factors? If it is more appropriate to weigh some factors 
more than others, SBA welcomes suggestions on specific weights for each 
factor along with supporting information.
    5. For some industries, SBA proposes to increase the existing size 
standards by a large amount, while for others the proposed increase is 
less. Should SBA, as a policy, limit the amount of increase or decrease 
to a size standard? Also should SBA, as a policy, establish certain 
minimum or maximum values for its size standards? SBA seeks suggestions 
on appropriate levels of change to size standards and on their minimum 
or maximum levels.
    6. For analytical simplicity and efficiency, SBA has refined its 
size standard methodology to obtain a single value as a proposed size 
standard instead of a range of values as was SBA's methodology in its 
past size regulations. SBA welcomes any comments on this procedure and 
suggestions for alternative methods.
    Public comments on the above issues are very critical for SBA to 
validate its size standard methodology and move forward in a timely 
manner with review of size standards of other industry groups under the 
two-year comprehensive size review.

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)

Executive Order 12866

    The Office of Management and Budget (OMB) has determined that this

[[Page 53936]]

proposed rule is a ``significant'' regulatory action for purposes of 
Executive Order 12866. Accordingly, the next section contains SBA's 
Regulatory Impact Analysis. This is not a major rule, however, under 
the Congressional Review Act, 5 U.S.C. 800.

Regulatory Impact Analysis

1. Is there a Need for the Regulatory Action?

    SBA believes that adjustments to certain size standards in Sector 
44-45, Retail Trade, are needed to better reflect the economic 
characteristics of small businesses in those industries. SBA's mission 
is to aid and assist small businesses through a variety of financial, 
procurement, business development, and advocacy programs. To assist 
effectively the 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 
SBA's Administrator the responsibility for establishing small business 
definitions. The Act also requires that small business definitions vary 
to reflect industry differences. The supplementary information section 
of this proposed rule explains SBA's methodology for analyzing a size 
standard for a particular 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 is eligibility for Federal small 
business assistance programs, including SBA's various financial 
assistance programs, but not for Federal procurement preference 
programs reserved for small businesses. Since NAICS codes in Sector 44-
45, Retail Trade, may not be used for Federal government procurement 
programs, the proposed size standards changes in this rule will not 
provide any benefits to companies that participate in these programs, 
and there will not be any additional costs to the Federal government's 
procurement programs resulting from these proposed changes, if adopted 
in final form.
    Other Federal agencies also may use SBA size standards for a 
variety of regulatory and program purposes. Through the assistance of 
these programs, small businesses become more knowledgeable, stable, and 
competitive businesses. In the 48 industries within Sector 44-45 for 
which SBA has proposed to increase their size standards, about 8,800 
additional firms are estimated to obtain small business status and 
become eligible for these programs. In the 23 industries for which 
SBA's analyses indicated a lower size standard as appropriate, about 
5,900 firms might have lost their small business status had SBA 
proposed lowering them. That number is about 2.0 percent of the total 
number of firms in those industries defined as small under the current 
standards. Thus, the net impact for the Sector as whole is about 8,800 
additional firms gaining and none losing small business status under 
the proposed rule. This will increase the small business share of total 
industry receipts for the Sector from 27 percent under the current size 
standards to 28 percent under the proposed standards.
    The benefits of increasing certain size standards to a more 
appropriate level would accrue to two groups: (1) Businesses that 
benefit by gaining small business status from the higher size standard 
that also use small business assistance programs; and (2) growing small 
businesses that may exceed the current size standards in the near 
future and that will retain small business status from the higher size 
standard.
    Nearly 72 percent of Federal contracting dollars spent in Sector 
44-45 during fiscal years 2006-2008 was accounted for by six of the 48 
industries for which size standards have been proposed to increase. If 
NAICS codes in Sector 44-45 could be used for Federal contracting, SBA 
estimates that additional firms gaining small business status in those 
six industries under the proposed size standards could potentially 
obtain Federal contracts totaling up to between $80 million and $100 
million per year. This represents nearly 2.0 percent of the $4.7 
billion in average Federal contracts awarded to the Retail Trade Sector 
during fiscal years 2006-2008. The added competition for many of these 
procurements also would likely result in a lower price to the 
Government for procurements reserved for small businesses, but SBA is 
not able to quantify this benefit. However, as stated above, NAICS 
codes in this Sector may not be used for Federal government 
procurement. SBA anticipates that the contracting amounts identified in 
this Sector will be redistributed in the future to contracts identified 
by NAICS codes in Sector 31-33, Manufacturing.
    Under SBA's 7(a) Guaranteed Loan Program and Certified Development 
Company (504) Program, SBA estimates that approximately 75 additional 
loans totaling between $35 million and $40 million in new Federal loan 
guarantees could be made to these newly defined small businesses. 
Because of the size of the loan guarantees, however, most loans are 
made to small businesses well below the size standard. Further, under 
the Recovery Act, effective February 17, 2009, SBA temporarily raised 
guarantees on its SBA's 7(a) loan program and also temporarily 
eliminated fees for borrowers on SBA 7(a) loans and for both borrowers 
and lenders on 504 Certified Development Company loans, through 
calendar year 2009, or until the funds are exhausted. The fee 
elimination is retroactive to February 17, 2009, the day the Recovery 
Act was signed. Furthermore, SBA is developing a mechanism for 
refunding fees paid on loans since then. In addition, since SBA has 
applied its CDC alternative size standard to its 7(a) Business Loan 
Program, more capital is available to small businesses. Thus, 
increasing the size standards will likely result in an increase in 
small business guaranteed loans to businesses in these industries, but 
it would be impractical to try to estimate the extent of their number 
and the total amount loaned.
    The newly defined small businesses would also benefit from 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 for future disasters.
    To the extent that 8,800 additional firms may become small under 
the proposed size standards there may be some additional administrative 
costs to the Federal Government associated with SBA guaranteed lending 
programs. Among businesses in this group seeking SBA assistance, there 
could be some additional costs associated with compliance and 
verification of small business status. These additional costs are 
likely to be minimal because mechanisms are already in place to handle 
these additional administrative requirements.
    The proposed size standards may have distributional effects among 
large and small businesses, but SBA cannot quantify its possible 
extent, because the data related to Federal procurement is a result of 
misclassification, because procurements for supplies should be coded in 
Sectors 31-33 rather than Sector 44-45. There will be more small 
businesses in Sector 44-45, but whether or not that will result in an 
increase in the number of small businesses in Sector 31-33 cannot be 
determined.
    The proposed revisions to the existing size standards for Retail 
Trade industries are consistent with SBA's statutory mandate to assist 
small business. This regulatory action promotes the Administration's

[[Page 53937]]

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.

Executive Order 12988

    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.

Executive Order 13132

    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.

Paperwork Reduction Act

    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 
record keeping requirements, other than those required of SBA.

Initial Regulatory Flexibility Analysis

    Under the Regulatory Flexibility Act (RFA), this rule, if 
finalized, may have a significant impact on a substantial number of 
small entities in Sector 44-45, Retail Trade. As described above, this 
rule may affect small entities seeking SBA (7a) and 504 Guaranteed Loan 
Programs, SBA Economic Injury Disaster Loans, and other Federal small 
business programs.
    Immediately below, SBA sets forth an initial regulatory flexibility 
analysis (IRFA) of this proposed rule addressing the following 
questions: (1) What is the need for and objective of the rule? (2) what 
is SBA's description and estimate of the number of small entities to 
which the rule will apply? (3) what are the projected reporting, record 
keeping, and other compliance requirements of the rule? (4) what are 
the relevant Federal rules which may duplicate, overlap or conflict 
with the rule? and (5) what alternatives will allow the Agency to 
accomplish its regulatory objectives while minimizing the impact on 
small entities?

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

    Most of SBA's size standards for Retail Trade industries have not 
been reviewed since the early 1980s, and many have not been changed 
since the 1960s, except for periodic adjustments for inflation. 
Technology, productivity growth, international competition, mergers and 
acquisitions, and updated industry definitions may have changed the 
structure of many industries. Such changes can be sufficient to support 
a revision to size standards for some industries. Based an analysis of 
the latest data available to the Agency, SBA believes that the revised 
standards in this proposed rule more appropriately reflect the size of 
businesses in those industries that need Federal assistance.

(2) What is SBA's Description and Estimate of the Number of Small 
Entities to which the Rule will Apply?

    If this rule is adopted in its present form, SBA estimates that 
approximately 8,800 additional firms will become small because of 
proposed increases in size standards in the 48 industries within Sector 
44-45. That represents about 2.0 percent of approximately 415,000 total 
firms in those industries. This will result in an increase in the small 
business share of total industry receipts for that Sector from about 
27.0 percent under the current size standards to about 28.0 percent 
under the proposed standards.

(3) What are the Projected Reporting, Record Keeping, and Other 
Compliance Requirements of the Rule and an Estimate of the Classes of 
Small Entities which Will Be Subject to the Requirements?

    A new size standard does not impose any additional reporting, 
record keeping or compliance requirements on small entities. Revising 
size standards alters the access to SBA programs that assist small 
businesses, but does not impose a regulatory burden as they neither 
regulate nor control business behavior.

(4) What are the Relevant Federal Rules which May Duplicate, Overlap or 
Conflict with the Rule?

    This proposed rule overlaps with other Federal rules that use SBA's 
size standards to define a small business. Under Sec.  3(a)(2)(C) of 
the Small Business Act, 15 U.S.C. 632(a)(2)(c), Federal agencies must 
use SBA's size standards to define a small business, unless 
specifically authorized by statute. In 1995, SBA published in the 
Federal Register a list of statutory and regulatory size standards that 
identified the application of SBA's size standards as well as other 
size standards used by Federal agencies (60 FR 57988-57991, dated 
November 24, 1995). SBA is not aware of any Federal rule that would 
duplicate or conflict with establishing size standards.
    However, the Small Business Act and SBA's regulations allow Federal 
agencies to develop different size standards if they believe that SBA's 
size standards are not appropriate for their programs, with the 
approval of SBA's Administrator (13 CFR 121.903). The Regulatory 
Flexibility Act authorizes an Agency to establish an alternative small 
business definition, after consultation with the Office of Advocacy of 
the U.S. Small Business Administration (5 U.S.C. 601(3). Thus, there 
may be instances where this rule conflicts with other rules.

(5) What Alternatives will Allow the Agency to Accomplish its 
Regulatory Objectives while Minimizing the Impact on Small Entities?

    SBA is required to develop numerical size standards for identifying 
businesses eligible for Federal small business programs. Other than 
varying the size standards, no viable alternative exists to the systems 
of numerical size standards.

List of Subjects in 13 CFR Part 121

    Administrative practice and procedure, Government procurement, 
Government property, Grant programs--business, Individuals with 
disabilities, Loan programs--business, Reporting and recordkeeping 
requirements, Small businesses.
    For the reasons set forth in the preamble, SBA proposes to amend 
part 13 CFR Part 121 as follows.

PART 121--SMALL BUSINESS SIZE REGULATIONS

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

    Authority: 15 U.S.C. 632, 634(b)(6), 636(b), 637(a), 644, and 
662(5); and Public Law 105-135, sec. 401 et seq., 111 Stat. 2592.
    2. Amend the table in Sec.  121.201 as follows:
    A. Revise the parenthetical phrase below the Sector 42 heading.
    B. Revise all entries under Sector 44-45.
    The revisions read as follows:


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

* * * * *

[[Page 53938]]



                                 Small Business Size Standards by NAICS Industry
----------------------------------------------------------------------------------------------------------------
                                                                                  Size standards  Size standards
              NAICS codes                       NAICS U.S. industry title         in millions of   in number of
                                                                                      dollars        employees
----------------------------------------------------------------------------------------------------------------
 
                                                  * * * * * * *
----------------------------------------------------------------------------------------------------------------
                                           Sector 42--Wholesale Trade
----------------------------------------------------------------------------------------------------------------
(These NAICS codes shall not be used to classify Government acquisitions for supplies. They also shall not be
 used by Federal government contractors when subcontracting for the acquisition for supplies. The applicable
 manufacturing NAICS code shall be used to classify acquisitions for supplies. A Wholesale Trade or Retail Trade
 business concern submitting an offer or a quote on a supply acquisition is categorized as a nonmanufacturer and
 deemed small if it has 500 or fewer employees and meets the requirements of 13 CFR 121.406.)
----------------------------------------------------------------------------------------------------------------
 
                                                  * * * * * * *
----------------------------------------------------------------------------------------------------------------
                                           Sector 44-45--Retail Trade
----------------------------------------------------------------------------------------------------------------
(These NAICS codes shall not be used to classify Government acquisitions for supplies. They also shall not be
 used by Federal government contractors when subcontracting for the acquisition for supplies. The applicable
 manufacturing NAICS code shall be used to classify acquisitions for supplies. A Wholesale Trade or Retail Trade
 business concern submitting an offer or a quote on a supply acquisition is categorized as a nonmanufacturer and
 deemed small if it has 500 or fewer employees and meets the requirements of 13 CFR 121.406.)
----------------------------------------------------------------------------------------------------------------
                                 Subsector 441--Motor Vehicle and Parts Dealers
----------------------------------------------------------------------------------------------------------------
441110.................................  New Car Dealers........................           $30.0  ..............
441120.................................  Used Car Dealers.......................            23.0  ..............
441210.................................  Recreational Vehicle Dealers...........            30.0  ..............
441221.................................  Motorcycle, ATV, and Personal                      14.0  ..............
                                          Watercraft Dealers.
441222.................................  Boat Dealers...........................            14.0  ..............
441229.................................  All Other Motor Vehicle Dealers........             7.0  ..............
Except,................................  Aircraft Dealers, Retail...............            25.5  ..............
441310.................................  Automotive Parts and Accessories Stores            14.0  ..............
441320.................................  Tire Dealers...........................            14.0  ..............
----------------------------------------------------------------------------------------------------------------
                              Subsector 442--Furniture and Home Furnishings Stores
----------------------------------------------------------------------------------------------------------------
442110.................................  Furniture Stores.......................            19.0  ..............
442210.................................  Floor Covering Stores..................             7.0  ..............
442291.................................  Window Treatment Stores................             7.0  ..............
442299.................................  All Other Home Furnishings Stores......            19.0  ..............
----------------------------------------------------------------------------------------------------------------
                                 Subsector 443--Electronics and Appliance Stores
----------------------------------------------------------------------------------------------------------------
443111.................................  Household Appliance Stores.............            10.0  ..............
443112.................................  Radio, Television and Other Electronics            25.5  ..............
                                          Stores.
443120.................................  Computer and Software Stores...........            25.5  ..............
443130.................................  Camera and Photographic Supplies Stores            19.0  ..............
----------------------------------------------------------------------------------------------------------------
                   Subsector 444--Building Material and Garden Equipment and Supplies Dealers
----------------------------------------------------------------------------------------------------------------
444110.................................  Home Centers...........................            35.5  ..............
444120.................................  Paint and Wallpaper Stores.............            25.5  ..............
444130.................................  Hardware Stores........................             7.0  ..............
444190.................................  Other Building Material Dealers........            19.0  ..............
444210.................................  Outdoor Power Equipment Stores.........             7.0  ..............
444220.................................  Nursery and Garden Centers.............            10.0  ..............
----------------------------------------------------------------------------------------------------------------
                                     Subsector 445--Food and Beverage Stores
----------------------------------------------------------------------------------------------------------------
445110.................................  Supermarkets and Other Grocery (except             30.0  ..............
                                          Convenience) Stores.
445120.................................  Convenience Stores.....................            27.0  ..............
445210.................................  Meat Markets...........................             7.0  ..............
445220.................................  Fish and Seafood Markets...............             7.0  ..............
445230.................................  Fruit and Vegetable Markets............             7.0  ..............
445291.................................  Baked Goods Stores.....................             7.0  ..............
445292.................................  Confectionery and Nut Stores...........             7.0  ..............
445299.................................  All Other Specialty Food Stores........             7.0  ..............
445310.................................  Beer, Wine and Liquor Stores...........             7.0  ..............
----------------------------------------------------------------------------------------------------------------
                                 Subsector 446--Health and Personal Care Stores
----------------------------------------------------------------------------------------------------------------
446110.................................  Pharmacies and Drug Stores.............            25.5  ..............
446120.................................  Cosmetics, Beauty Supplies and Perfume             25.5  ..............
                                          Stores.

[[Page 53939]]

 
446130.................................  Optical Goods Stores...................            19.0  ..............
446191.................................  Food (Health) Supplement Stores........            14.0  ..............
446199.................................  All Other Health and Personal Care                  7.0  ..............
                                          Stores.
----------------------------------------------------------------------------------------------------------------
                                        Subsector 447--Gasoline Stations
----------------------------------------------------------------------------------------------------------------
447110.................................  Gasoline Stations with Convenience                 27.0  ..............
                                          Stores.
447190.................................  Other Gasoline Stations................            14.0  ..............
----------------------------------------------------------------------------------------------------------------
                             Subsector 448--Clothing and Clothing Accessories Stores
----------------------------------------------------------------------------------------------------------------
448110.................................  Men's Clothing Stores..................            10.0  ..............
448120.................................  Women's Clothing Stores................            25.5  ..............
448130.................................  Children's and Infants' Clothing Stores            30.0  ..............
448140.................................  Family Clothing Stores.................            35.5  ..............
448150.................................  Clothing Accessories Stores............            14.0  ..............
448190.................................  Other Clothing Stores..................            19.0  ..............
448210.................................  Shoe Stores............................            25.5  ..............
448310.................................  Jewelry Stores.........................            14.0  ..............
448320.................................  Luggage and Leather Goods Stores.......            25.5  ..............
----------------------------------------------------------------------------------------------------------------
                           Subsector 451--Sporting Good, Hobby, Book and Music Stores
----------------------------------------------------------------------------------------------------------------
451110.................................  Sporting Goods Stores..................            14.0  ..............
451120.................................  Hobby, Toy and Game Stores.............            25.5  ..............
451130.................................  Sewing, Needlework and Piece Goods                 25.5  ..............
                                          Stores.
451140.................................  Musical Instrument and Supplies Stores.            10.0  ..............
451211.................................  Book Stores............................            25.5  ..............
451212.................................  News Dealers and Newsstands............             7.0  ..............
451220.................................  Prerecorded Tape, Compact Disc and                 30.0  ..............
                                          Record Stores.
----------------------------------------------------------------------------------------------------------------
                                    Subsector 452--General Merchandise Stores
----------------------------------------------------------------------------------------------------------------
452111.................................  Department Stores (except Discount                 30.0  ..............
                                          Department Stores).
452112.................................  Discount Department Stores.............            27.0  ..............
452910.................................  Warehouse Clubs and Superstores........            27.0  ..............
452990.................................  All Other General Merchandise Stores...            30.0  ..............
----------------------------------------------------------------------------------------------------------------
                                  Subsector 453--Miscellaneous Store Retailers
----------------------------------------------------------------------------------------------------------------
453110.................................  Florists...............................             7.0  ..............
453210.................................  Office Supplies and Stationery Stores..            30.0  ..............
453220.................................  Gift, Novelty and Souvenir Stores......             7.0  ..............
453310.................................  Used Merchandise Stores................             7.0  ..............
453910.................................  Pet and Pet Supplies Stores............            19.0  ..............
453920.................................  Art Dealers............................             7.0  ..............
453930.................................  Manufactured (Mobile) Home Dealers.....            14.0  ..............
453991.................................  Tobacco Stores.........................             7.0  ..............
453998.................................  All Other Miscellaneous Store Retailers             7.0  ..............
                                          (except Tobacco Stores).
----------------------------------------------------------------------------------------------------------------
                                        Subsector 454--Nonstore Retailers
----------------------------------------------------------------------------------------------------------------
454111.................................  Electronic Shopping....................            30.0  ..............
454112.................................  Electronic Auctions....................            35.5  ..............
454113.................................  Mail[dash]Order Houses.................            35.5  ..............
454210.................................  Vending Machine Operators..............            10.0  ..............
454311.................................  Heating Oil Dealers....................            12.5  ..............
454312.................................  Liquefied Petroleum Gas (Bottled Gas)              25.5  ..............
                                          Dealers.
454319.................................  Other Fuel Dealers.....................             7.0  ..............
454390.................................  Other Direct Selling Establishments....             7.0  ..............
----------------------------------------------------------------------------------------------------------------


[[Page 53940]]

* * * * *

    Dated: October 9, 2009.
Karen G. Mills,
Administrator.
[FR Doc. E9-25193 Filed 10-20-09; 8:45 am]
BILLING CODE 8025-01-P