[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\
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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
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\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 ..............
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[[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