[Federal Register Volume 76, Number 220 (Tuesday, November 15, 2011)]
[Proposed Rules]
[Pages 70680-70694]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2011-29448]


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SMALL BUSINESS ADMINISTRATION

13 CFR Part 121

RIN 3245-AG28


Small Business Size Standards: Real Estate and Rental and Leasing

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 20 industries and one sub-
industry in North American Industry Classification System (NAICS) 
Sector 53, Real Estate and Rental and Leasing. As part of its ongoing 
comprehensive review of all size standards, SBA has evaluated all size 
standards in NAICS Sector 53 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 size standards of industries 
grouped by NAICS Sector. SBA issued a White Paper entitled ``Size 
Standards Methodology'' and published in the October 21, 2009 issue of 
the Federal Register. That ``Size Standards Methodology'' is available 
on its Web site at http://www.sba.gov/size for public review and 
comments. The ``Size Standards Methodology'' White Paper explains how 
SBA establishes, reviews and modifies its receipts based and employee 
based small business size standards. In this proposed rule, SBA has 
applied its methodology that pertains to establishing, reviewing, and 
modifying a receipts based size standard.

DATES: SBA must receive comments to this proposed rule on or before 
January 17, 2012.

ADDRESSES: You may submit comments, identified by RIN 3245-AG28, 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, Ph.D., Chief, Size 
Standards Division, 409 Third Street SW., Mail Code 6530, Washington, 
DC 20416. SBA will not accept comments to this proposed rule submitted 
by email.
    SBA will post all comments to this proposed rule 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, you must submit such information to: U.S. Small 
Business Administration, Khem R. Sharma, Ph.D., Chief, Size Standards 
Division, 409 Third Street SW., Mail Code 6530, Washington, DC 20416, 
or send an email to [email protected]. You should highlight the 
information that you consider to be CBI and explain why you believe SBA 
should hold this information as confidential. SBA will review your 
information and determine whether it will make the information public 
or not.

FOR FURTHER INFORMATION CONTACT: Khem R. Sharma, Ph.D., Chief, Size 
Standards Division, (202) 205-6618 or [email protected].

SUPPLEMENTARY INFORMATION: To determine eligibility for Federal small 
business assistance, SBA establishes small business size definitions 
(referred to as size standards) for private sector industries in the 
United States. SBA uses two primary measures of business size--average 
annual receipts and average number of employees. SBA uses financial 
assets, electric output, and refining capacity to measure the size of a 
few specialized industries. In addition, SBA's Small Business 
Investment Company (SBIC), Certified Development Company (504) and 7(a) 
Loan Programs use either the industry based size standards or net worth 
and net income based alternative size standards to determine 
eligibility for those programs. At the beginning of the current 
comprehensive size standards review, there were 41 different size 
standards covering 1,141 NAICS industries and 18 sub-industry 
activities (``exceptions'' in SBA's table of size standards). Thirty-
one of these size levels were based on average annual receipts, seven 
were based on average number of employees, and three were 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, in particular the changes 
in the Federal contracting marketplace and industry structure. The last 
time SBA conducted a comprehensive review of all size standards was 
during the late 1970s and 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 
reviews the effect of inflation on its standards and makes necessary 
adjustments to its monetary based size standards at least once every 
five years. SBA's latest inflation adjustment to size standards was 
published in the Federal Register on July 18, 2008 (73 FR 41237).
    Because of changes in the Federal marketplace and industry 
structure since the last overall review, SBA recognizes that current 
data may no longer support some of its existing size standards. 
Accordingly, in 2007, SBA began a comprehensive review of all size 
standards to determine if they are consistent with current data, and to 
adjust them when necessary. In addition, on September 27, 2010, the 
President of the United States signed the Small Business Jobs Act of 
2010 (Jobs Act). The Jobs Act directs SBA to conduct a detailed review 
of all size standards and to make appropriate adjustments to reflect 
market conditions. Specifically, the Jobs Act requires SBA to conduct a 
detailed review of at least one-third of all size standards during 
every 18-month period from the date of its enactment. In addition, the 
Jobs Act requires that SBA conduct a review of all size standards no 
less frequently than once every 5 years thereafter. Reviewing existing 
small business size standards and making appropriate adjustments based 
on current data are also consistent with Executive Order 13563 on 
improving regulation and regulatory review.
    Rather than review all size standards at one time, SBA has adopted 
a more manageable approach of reviewing a group of industries within a 
NAICS Sector. A NAICS Sector generally

[[Page 70681]]

consists of 25 to 75 industries, except for the manufacturing sector, 
which has considerably more. Once SBA completes its review of size 
standards for industries in a NAICS Sector, it will issue a proposed 
rule to revise size standards for those industries for which currently 
available data and other relevant factors support doing so.
    Below is a discussion of SBA's size standards methodology for 
establishing receipts based size standards that SBA applied to this 
proposed rule, including analyses of industry structure, Federal 
procurement trends and other factors for industries reviewed in this 
proposed rule, the impact of the proposed revisions to size standards 
on Federal small business assistance, and the evaluation of whether a 
revised size standard would exclude dominant firms from being 
considered small.

Size Standards Methodology

    SBA has developed a ``Size Standards Methodology'' for developing, 
reviewing, and modifying size standards when necessary. SBA has 
published the document on its Web site at http://www.sba.gov/size for 
public review and comments and included it as a supporting document in 
the electronic docket of this proposed rule at http://www.regulations.gov. SBA does not apply all features of its ``Size 
Standards Methodology'' to all industries because not all are 
appropriate. For example, since all industries in NAICS Sector 53 have 
receipts based size standards, the methodology described in this 
proposed rule applies to establishing receipts based size standards. 
However, the methodology is made available in its entirety for parties 
who have an interest in SBA's overall approach to establishing, 
evaluating, and modifying small business size standards. SBA always 
explains its analysis in individual proposed and final rules relating 
to size standards for specific industries.
    SBA welcomes comments from the public on a number of issues that it 
raises in its ``Size Standards Methodology,'' such as suggestions on 
alternative approaches to establishing and modifying size standards; 
whether there are alternative or additional factors that SBA should 
consider; whether SBA's approach to small business size standards makes 
sense in the current economic environment; whether SBA's using anchor 
size standards is appropriate in the current economy; whether there are 
gaps in SBA's methodology because of the lack of comprehensive data; 
and whether there are other facts or issues that SBA should consider. 
Comments on SBA's methodology should be submitted via (1) the Federal 
eRulemaking Portal: http://www.regulations.gov; the docket number is 
SBA-2009-0008; follow the instructions for submitting comments; or (2) 
Mail/Hand Delivery/Courier: Khem R. Sharma, Ph.D., Chief, Size 
Standards Division, 409 Third Street SW., Mail Code 6530, Washington, 
DC 20416. As with comments received to this and other proposed rules, 
SBA will post all comments on its methodology on http://www.regulations.gov. As of November 15, 2011, SBA has received seven 
comments to its ``Size Standards Methodology.'' The comments are 
available to the public at http://www.regulations.gov. SBA continues to 
welcome comments on its methodology from interested parties.
    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 
``* * * the [SBA] Administrator shall ensure that the size standard 
varies from industry to industry to the extent necessary to reflect the 
differing characteristics of the various industries and consider other 
factors deemed to be relevant by the Administrator.'' Accordingly, the 
economic structure of an industry is the basis for developing and 
modifying small business size standards. SBA identifies the small 
business segment of an industry by examining data on the economic 
characteristics defining the industry structure itself (as described 
below). In addition to analyzing an industry's structure when it 
establishes small business size standards, SBA considers current 
economic conditions, together with its own mission, program objectives, 
and the Administration's current policies; suggestions from industry 
groups and Federal agencies; and public comments on the proposed rule. 
SBA also examines whether a size standard based on industry and other 
relevant data successfully excludes businesses that are dominant in the 
industry.
    This proposed rule includes information regarding the factors SBA 
evaluated and the criteria the Agency used to propose any adjustments 
to size standards in NAICS Sector 53. It also explains why SBA has 
proposed to adjust some size standards in NAICS Sector 53 but not 
others. This proposed rule affords the public an opportunity to review 
and comment on SBA's proposals to revise size standards in NAICS Sector 
53, as well as on the data and methodology it uses to evaluate and 
revise a size standard.

Industry Analysis

    For the current comprehensive size standards review, SBA has 
established three ``base'' or ``anchor'' size standards--$7 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 manufacturing 
industries at its inception in 1953. Shortly thereafter SBA established 
$1 million in average annual receipts as the anchor size standard for 
nonmanufacturing industries. SBA has periodically increased the 
receipts based anchor size standard for inflation, and it stands today 
at $7 million. Since 1986, the size standard for all industries in the 
Wholesale Trade Sector has been 100 employees for SBA financial 
assistance and for most other Federal programs. However, NAICS codes 
for Wholesale Trade Industries (NAICS Sector 42) and their 100 employee 
size standards do not apply to Federal procurement programs. Rather, 
for Federal procurement the size standard for all industries in 
Wholesale Trade and for all industries in Retail Trade (NAICS Sector 
44-45) is 500 employees under SBA's nonmanufacturer rule (13 CFR 
121.406(b)).
    These long-standing anchor size standards have stood the test of 
time and gained legitimacy through practice and general public 
acceptance. An anchor size standard is neither a minimum nor a maximum. 
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, the number of 
size standards might be as high as the number of industries for which 
SBA establishes size standards (1,141). Furthermore, the data SBA 
analyzes are static, while the U.S. economy is not. Hence, absolute 
precision is impossible. Therefore, SBA presumes an anchor size 
standard is appropriate for a particular industry unless that industry 
displays economic characteristics that are considerably different from 
others with the same anchor size standard.
    When evaluating a size standard, SBA compares the economic 
characteristics of the specific industry under review to the average 
characteristics of industries

[[Page 70682]]

with one of the three anchor size standards (referred to as ``anchor 
comparison group''). This allows SBA to assess the industry structure 
and to determine whether the industry is appreciably different from the 
other industries in the anchor comparison 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 is considered appropriate for that industry. SBA may consider 
adopting a size standard below the anchor 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, then a size standard higher 
than the anchor size standard may be 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 a size standard above the anchor 
size standard, SBA analyzes the characteristics of a second comparison 
group. For industries with receipts based size standards, including 
those in NAICS Sector 53 that are reviewed in this proposed rule, 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 
being $29 million. SBA refers to this comparison group as the ``higher 
level receipts based size standard group.''
    The primary factors that SBA evaluates when analyzing the 
structural characteristics of an industry include average firm size, 
startup costs and entry barriers, industry competition, and 
distribution of firms by size. SBA also evaluates, as an additional 
primary factor, the impact that revising size standards might have on 
Federal contracting assistance to small businesses. These are, 
generally, the five most important factors SBA examines when 
establishing or revising a size standard for an industry. However, SBA 
will also consider and evaluate other information that it believes is 
relevant to a particular industry (such as technological changes, 
growth trends, SBA financial assistance and other program factors, 
etc.). SBA also considers the potential impact of size standard 
revisions on eligibility for Federal small business assistance, current 
economic conditions, the Administration's policies, and suggestions 
from industry groups and Federal agencies. Public comments on a 
proposed rule also provide important additional information. SBA 
thoroughly reviews all public comments before making a final decision 
on its proposed size standards. Below are brief descriptions of each of 
the five primary factors that SBA has evaluated for each industry in 
NAICS Sector 53 being reviewed in this proposed rule. A more detailed 
description of this analysis is provided in SBA's ``Size Standards 
Methodology,'' available at http://www.sba.gov/size.
    1. Average firm size. SBA computes two measures of average firm 
size: simple average and weighted average. For industries with receipts 
based size standards, the simple average is the total receipts of the 
industry divided by the total number of firms in the industry. The 
weighted average firm size is the sum of weighted simple averages in 
different receipts size classes, where weights are the shares of total 
industry receipts for respective size classes. The simple average 
weighs all firms within an industry equally regardless of their size. 
The weighted average overcomes that limitation by giving more weight 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 will 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 will be a basis to 
adopt the anchor size standard, or in rare cases, a standard lower than 
the anchor.
    2. Startup costs and entry barriers. Startup costs reflect a firm's 
initial size in an industry. New entrants to an industry must have 
sufficient capital and other assets to start and maintain a viable 
business. If new firms entering a particular industry have greater 
capital requirements than firms in industries in the anchor comparison 
group, this can be a basis for establishing a size standard higher than 
the anchor standard. In lieu of actual startup cost data, SBA uses 
average assets as a proxy to measure the capital requirements for new 
entrants to an industry.
    To calculate average assets, SBA begins with the sales to total 
assets ratio for an industry from the Risk Management Association's 
Annual Statement Studies. SBA then applies these ratios to the average 
receipts of firms in that industry. An industry with average assets 
that are significantly higher than those of the anchor comparison group 
is likely to have higher startup costs; this in turn will support a 
size standard higher than the anchor. Conversely, an industry with 
average assets that are similar to or significantly lower than those of 
the anchor comparison group is likely to have lower startup costs; this 
in turn will support the anchor standard, or in rare cases, one lower 
than the anchor may be appropriate.
    3. Industry competition. Industry competition is generally measured 
by the share of total industry receipts generated by the largest firms 
in an industry. SBA generally evaluates the share of industry receipts 
generated by the four largest firms in each industry. This is referred 
to as the ``four-firm concentration ratio,'' a commonly used economic 
measure of market competition. SBA 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, all else being 
equal, SBA will establish a size standard higher than the anchor size 
standard. SBA does 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-firm concentration ratio is 40 percent or more, 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 
most of an industry's economic activity is attributable to smaller 
firms, this generally indicates that small businesses are competitive 
in that industry. This can support adopting the anchor size standard. 
If most of an industry's economic activity is attributable to larger 
firms, this indicates that small businesses are not competitive in that 
industry. This can support adopting a size standard above the anchor.
    Concentration is a measure of inequality of distribution. To 
determine

[[Page 70683]]

the degree of inequality of distribution in an industry, SBA computes 
the Gini coefficient, using the Lorenz curve. The Lorenz curve presents 
the cumulative percentages of units (firms) along the horizontal axis 
and the cumulative percentages of receipts (or other measures of size) 
along the vertical axis. (For further detail, please refer to SBA's 
``Size Standards Methodology'' on its Web site at http://www.sba.gov/size.) Gini coefficient values vary from zero to one. If receipts are 
distributed equally among all the firms in an industry, the value of 
the Gini coefficient will equal zero. If an industry's total receipts 
are attributed to a single firm, the Gini coefficient will equal one.
    SBA compares the Gini coefficient value for an industry under 
review with that for industries in the anchor comparison group. If an 
industry shows a higher Gini coefficient value than industries in the 
anchor comparison industry group this may, all else being equal, 
warrant a higher size standard than the anchor. Conversely, if an 
industry's Gini coefficient is similar to or lower than that for the 
anchor group, the anchor standard, or in some cases a standard lower 
than the anchor, may be adopted.
    5. Impact on Federal contracting and SBA loan programs. SBA 
examines the impact a size standard change may have on Federal small 
business assistance. This most often focuses on the share of Federal 
contracting dollars awarded to small businesses in the industry in 
question. In general, if the small business share of Federal 
contracting in an industry with significant Federal contracting is 
appreciably less than the small business share of the industry's total 
receipts, there is justification for considering a size standard higher 
than the existing size standard. The disparity between the small 
business Federal market share and the industry-wide small business 
share may be due to various factors, such as extensive administrative 
and compliance requirements associated with Federal contracts, the 
different skill set required for Federal contracts as compared to 
typical commercial contracting work, and the size of Federal contracts. 
These, as well as other factors, are likely to influence the type of 
firms within an industry that compete for Federal contracts. 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.
    SBA considers Federal contracting trends in the size standards 
analysis only if (1) the small business share of Federal contracting 
dollars is at least 10 percent lower than the small business share of 
total industry receipts, and (2) the amount of total Federal 
contracting averages $100 million or more during the latest three 
fiscal years. These thresholds reflect significant levels of 
contracting where a revision to a size standard may have an impact on 
expanding contracting opportunities to small businesses.
    Besides the impact on small business Federal contracting, SBA also 
evaluates the impact of a proposed size standard on SBA's loan 
programs. For this, SBA examines the volume and number of SBA 
guaranteed loans within an industry and the size of firms obtaining 
those loans. This allows SBA to assess whether the existing or the 
proposed size standard for a particular industry may restrict the level 
of financial assistance to small firms. If the analysis shows that the 
current size standards have impeded financial assistance to small 
businesses, higher size standards are supportable. However, if small 
businesses under current size standards have 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 than the existing size standard, this factor is not 
considered for determining the size standard.

Sources of Industry and Program Data

    SBA's primary source of industry data used in this proposed rule is 
a special tabulation of the data from 2007 Economic Census (see http://www.census.gov/econ/census07/) prepared by the U.S. Bureau of the 
Census (Census Bureau) for SBA. The special tabulation provides SBA 
with data on the number of firms, number of establishments, number of 
employees, annual payroll, and annual receipts of companies by NAICS 
Sector (2-digit level), Subsector (3-digit level), Industry Group (4-
digit level), Industry (6-digit level). These data are arrayed by 
various classes of firms' size based on the overall number of employees 
and receipts of the entire enterprise (all establishments and 
affiliated firms) from all industries. The special tabulation enables 
SBA to evaluate average firm size, the four-firm concentration ratio, 
and distribution of firms by various receipts, and employment size 
classes.
    In some cases, where data were not available due to disclosure 
prohibitions in the Census Bureau's tabulation, SBA either estimated 
missing values using available relevant data or examined data at a 
higher level of industry aggregation, such as at the NAICS 2-digit 
(Sector), 3-digit (Subsector) or 4-digit (Industry Group) level. In 
some instances, SBA's analysis was based only on those factors for 
which data were available or estimates of missing values were possible.
    The data from the Census Bureau's tabulation are limited to the 6-
digit NAICS industry level and hence do not provide economic 
characteristics at the sub-industry level. Thus, when establishing, 
reviewing, or modifying size standards at the sub-industry level (that 
is, one of the ``exceptions'' in SBA's table of size standards), SBA 
evaluates the data from the U.S. General Service Administration's (GSA) 
Federal Procurement Data System--Next Generation (FPDS-NG) and the 
Central Contractor Registration (CCR) following a two-step procedure. 
First, using FPDS-NG, SBA identifies product service codes (PSCs) that 
correspond to specific sub-industry activities or ``exceptions'' and 
then identifies firms that are active in Federal contracting involving 
those PSCs. Then, SBA obtains those firms' revenue and employment data 
from the CCR database. SBA uses that data to evaluate the actual size 
of businesses that FPDS-NG identifies for those procurements. In this 
proposed rule, SBA applied this approach to evaluate industry and 
Federal contracting factors for ``Leasing of Building Space to Federal 
Government by Owners,'' which is an exception under NAICS 531190, 
Lessors of Other Real Estate Property.
    To calculate average assets, SBA used sales to total assets ratios 
from the Risk Management Association's Annual Statement Studies, 2007-
2009.
    To evaluate Federal contracting trends, SBA examined data on 
Federal contract awards for fiscal years 2007-2009. The data are 
available from GSA's FPDS-NG.
    To assess the impact on financial assistance to small businesses, 
SBA examined data on its own guaranteed loan programs for fiscal years 
2008-2010.
    Data sources and estimation procedures that SBA uses in its size 
standards analysis are documented in detail in SBA's ``Size Standards 
Methodology'' White Paper, which is available at http://www.sba.gov/size.

Dominance in Field of Operation

    Section 3(a) of the Small Business Act (15 U.S.C. 632(a)) defines a 
small business concern as one that is (1) independently owned and 
operated, (2) not dominant in its field of operation,

[[Page 70684]]

and (3) within a specific small business definition or size standard 
established by the SBA Administrator. SBA considers as part of its 
evaluation whether a business concern at a proposed size standard would 
be dominant in its field of operation. For this, SBA generally examines 
the industry's market share of firms at the proposed standard. Market 
share and other factors may indicate whether a firm can exercise a 
major controlling influence on a national basis in an industry where a 
significant number of business concerns are engaged. If a contemplated 
size standard includes a dominant firm, SBA will consider a lower size 
standard to exclude the dominant firm from being defined as small.

Selection of Size Standards

    To simplify size standards, for the ongoing comprehensive review of 
receipts based size standards, SBA has proposed to select size 
standards from a limited number of levels. For many years, SBA 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). At the 
beginning of SBA's comprehensive size standards review, there were 31 
different levels of receipts based size standards. They ranged from 
$0.75 million to $35.5 million, and many of them applied to one or only 
a few industries. SBA believes that size standards with such a large 
number of small variations among them are both unnecessary and 
difficult to justify analytically. To simplify managing and using size 
standards, SBA proposes that there be fewer size standard levels. This 
will produce more common size standards for businesses operating in 
related industries. This will also result in greater consistency among 
the size standards for industries that have similar economic 
characteristics.
    SBA proposes, therefore, to apply one of eight receipts based size 
standards to each industry and sub-industry in NAICS Sector 53. In 
NAICS Sector 53, all size standards are based on annual receipts. The 
eight ``fixed'' receipts based size standard levels are $5 million, $7 
million, $10 million, $14 million, $19 million, $25.5 million, $30 
million, and $35.5 million. To establish these eight receipts based 
size standard levels, SBA considered the current minimum, the current 
maximum, and the most commonly used current receipts based size 
standards. Currently, the most commonly used receipts based size 
standards cluster around the following--$2.5 million to $4.5 million, 
$7 million, $9 million to $10 million, $12.5 million to $14 million, 
$25 million to $25.5 million, and $33.5 million to $35.5 million. SBA 
selected $7 million as one of eight fixed levels of receipts based size 
standards because it is an anchor standard for receipts based 
standards. The lowest or minimum receipts based size level will be $5 
million. Other than the size standards for agriculture and those based 
on commissions (such as real estate brokers and travel agents), $5 
million will include those industries with the currently lowest 
receipts based standards, which range from $2 million to $4.5 million. 
Among the higher level size clusters, SBA has set four fixed levels, 
namely $10 million, $14 million, $25.5 million, and $35.5 million. 
Because there are large intervals between some of the fixed levels, SBA 
established two intermediate levels, namely $19 million between $14 
million and $25.5 million, and $30 million between $25.5 million and 
$35.5 million. These two intermediate levels represent roughly the same 
proportional differences as in the other two successive levels.
    To simplify size standards further, SBA may propose a common size 
standard for closely related 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 always be appropriate. For example, in cases 
where many of the same businesses operate in the same multiple 
industries, a common size standard for those industries might better 
reflect the Federal marketplace. This might also make size standards 
among closely related industries more consistent than separate size 
standards for each of those industries. This led SBA to establish a 
common size standard for the information technology (IT) services 
(NAICS 541511, NAICS 541112, NAICS 541513, and NAICS 541519), even 
though the industry data might support a distinct size standard for 
each industry (see 57 FR 27906, June 23, 1992). Within NAICS Sector 53, 
all industries in NAICS Industry Group 5313, Activities Related to Real 
Estate; all industries in NAICS Industry Group 5321, Automotive 
Equipment Rental and Leasing; and all industries in NAICS Industry 
Group 5322, Consumer Goods Rental, have common size standards of $2 
million, $25.5 million, and $7 million, respectively. In this rule, 
except for NAICS 5322, SBA proposes to retain common size standards for 
those industries and establish common size standards for similar 
industries in other NAICS Industry Groups as well. Whenever SBA 
proposes a common size standard for closely related industries it will 
provide its justification.

Evaluation of Industry Structure

    SBA evaluated the structure of the 24 industries and one sub-
industry in NAICS Sector 53, Real Estate and Rental and Leasing, to 
assess the appropriateness of the current size standards. As described 
above, SBA compared data on the economic characteristics of each 
industry and sub-industry to the average characteristics of industries 
in two comparison groups. The first comparison group consists of all 
industries with a $7 million size standard and is referred to as the 
``receipts based anchor comparison group.'' Because the goal of SBA's 
size standards review is to assess whether a specific industry's size 
standard should be the same as or different from the anchor size 
standard, this is the most logical group of industries to analyze. 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 is generally considered appropriate for 
that industry. If an industry's structure is significantly different 
from industries in the anchor group, a size standard lower or higher 
than the anchor size standard might be appropriate. The level of the 
new size standard is 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. The average size standard for this group is $29 million. SBA 
refers to this group of industries as the ``higher level receipts based 
size standard comparison group.'' SBA determines differences in 
industry structure between an industry under review and the industries 
in the two comparison groups by comparing data on each of the industry 
factors, including average firm size, average assets size, the 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, the four-firm concentration

[[Page 70685]]

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)                                         Average receipts
                                             ------------------------------------  Avgerage assets   Four[dash]firm    of four largest
       Receipts based comparison group                              Weighted          Size  ($        concentration       firms  ($     Gini coefficient
                                               Simple average        average          million)          ratio (%)        million) *
--------------------------------------------------------------------------------------------------------------------------------------------------------
Anchor Level................................              1.32             19.63              0.84              16.6             196.4             0.693
Higher Level................................              5.07            116.84              3.20              32.1           1,376.0             0.830
--------------------------------------------------------------------------------------------------------------------------------------------------------
* To be used for industries with a four-firm concentration ratio of 40% or greater.

Derivation of Size Standards Based on Industry Factors

    For each industry factor in Table 1, SBA derives a separate size 
standard based on the differences between the values for an industry 
under review and the values for the two comparison groups. If the 
industry value for a particular factor is near the corresponding factor 
for the anchor comparison group, SBA will consider the $7 million 
anchor size standard appropriate for that factor.
    An industry factor significantly above or below the anchor 
comparison group will generally warrant a size standard for that 
industry above or below the $7 million anchor. The new size standard in 
these cases is 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 are $3.3 
million, that can support a $19 million size standard. The $3.3 million 
level is 52.8 percent between $1.32 million for the anchor comparison 
group and $5.07 million for the higher level comparison group (($3.3 
million-$1.32 million) / ($5.07 million-$1.32 million) = 0.528 or 
52.8%). This proportional difference is applied to the difference 
between the $7 million anchor size standard and average size standard 
of $29 million for the higher level size standard group and then added 
to $7 million to estimate a size standard of $18.62 million ([{$29 
million-$7 million{time}  * 0.528] + $7 million = $18.62 million). The 
final step is to round the estimated $18.62 million size standard to 
the nearest fixed size standard, which in this example is $19 million.
    SBA applies the above calculation to derive a size standard for 
each industry factor. Detailed formulas involved in these calculations 
are presented in SBA's ``Size Standards Methodology,'' which is 
available at http://www.sba.gov/size. (However, it should be noted that 
figures in the ``Size Standards Methodology'' White Paper are based on 
2002 Economic Census data and are different from those presented in 
this proposed rule. That is because when SBA prepared its ``Size 
Standards Methodology,'' the 2007 Economic Census data were not yet 
available.) Table 2 (below) 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 average                       Then
                                 Or if weighted     Or if average      receipts of                        size
  If simple average receipts    average receipts   assets size  ($    largest four       Or if Gini     standard
       size  ($ million)            size  ($          million)          firms  ($        coefficient     is  ($
                                    million)                            million)                        million)
----------------------------------------------------------------------------------------------------------------
< 1.15........................  < 15.22.........  < 0.73..........  < 142.8.........  < 0.686.........   5.0
1.15 to 1.57..................  15.22 to 26.26..  0.73 to 1.00....  142.8 to 276.9..  0.686 to 0.702..   7.0
1.58 to 2.17..................  26.27 to 41.73..  1.01 to 1.37....  277.0 to 464.5..  0.703 to 0.724..  10.0
2.18 to 2.94..................  41.74 to 61.61..  1.38 to 1.86....  464.6 to 705.8..  0.725 to 0.752..  14.0
2.95 to 3.92..................  61.62 to 87.02..  1.87 to 2.48....  705.9 to 1,014.1  0.753 to 0.788..  19.0
3.93 to 4.86..................  87.03 to 111.32.  2.49 to 3.07....  1,014.2 to        0.789 to 0.822..  25.5
                                                                     1,309.0.
4.87 to 5.71..................  111.33 to 133.41  3.08 to 3.61....  1,309.1 to        0.823 to 0.853..  30.0
                                                                     1,577.1.
> 5.71........................  > 133.41........  > 3.61..........  > 1,577.1.......  > 0.853.........  35.5
----------------------------------------------------------------------------------------------------------------

Derivation of Size Standard Based on Federal Contracting Factor

    Besides industry structure, SBA also evaluates Federal contracting 
data to assess how successful small businesses are in getting Federal 
contracts under existing size standards. For industries where the small 
business share of total Federal contracting dollars is 10 to 30 percent 
lower than their share of total industry receipts, SBA has designated a 
size standard one level higher than their current size standard. For 
industries where the small business share of total Federal contracting 
dollars is more than 30 percent lower than their share of total 
industry receipts, SBA has designated a size standard two levels higher 
than the current size standard.
    Because of the complex relationships among several variables 
affecting small business participation in the Federal marketplace, SBA 
has chosen not to designate a size standard for the Federal contracting 
factor alone that is more than two levels above the current size 
standard. 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. This may 
enable SBA to support a different size standard than indicated by this 
general rule and take into consideration significant and unique aspects 
of small business competitiveness in the Federal contract market. SBA 
welcomes comments on its methodology for incorporating the Federal 
contracting factor in the size standard analysis and suggestions for

[[Page 70686]]

alternative methods and other relevant information on small business 
experience in the Federal contract market.
    Of the 24 industries and one sub-industry in NAICS Sector 53 
reviewed in this proposed rule, seven industries averaged $100 million 
or more annually in Federal contracting during fiscal years 2007-2009. 
The Federal contracting factor was significant (i.e., the difference 
between the small business share of total industry receipts and small 
business share of Federal contracting dollars was 10 percentage points 
or more) in three of those seven industries and a separate size 
standard was derived for that factor for each of them.

New Size Standards Based on Industry and Federal Contracting Factors

    Table 3 shows the results of analyses of industry and Federal 
contracting factors for each industry covered by this proposed rule. 
Many of the NAICS industries in columns 2, 3, 4, 6, 7, and 8 show two 
numbers. The upper number is the value for the industry or Federal 
contracting factor shown on the top of the column and the lower number 
is the size standard supported by that factor. For the four-firm 
concentration ratio, SBA estimates a size standard 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. 
If the four-firm concentration ratio is more than 40 percent, SBA 
indicates in column 6 the average size of the industry's top four firms 
together with a size standard based on that average. Column 9 shows a 
calculated new size standard for each industry. This is the average of 
the size standards supported by each factor and rounded to the nearest 
fixed size level. Analytical details involved in the averaging 
procedure are described in SBA's ``Size Standard Methodology.'' For 
comparison with the new standards, the current size standards are in 
column 10 of Table 3.

                                           Table 3--Size Standards Supported by Each Factor for Each Industry
                                                                  [Millions of dollars]
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                      (3)                                 (6) Four-                                 (9)          (10)
                                      (2) Simple    Weighted   (4) Average   (5) Four-       firm                  (8) Federal   Calculated    Current
(1) NAICS code/NAICS industry title    average      average    assets size   firm ratio    average      (7) Gini     contract       size         size
                                      firm size    firm size        ($          (%)        size  ($   coefficient  factor  (%)    standard     standard
                                     ($ million)  ($ million)    million)                  million)                             ($ million)  ($ million)
--------------------------------------------------------------------------------------------------------------------------------------------------------
531110--Lessors of Residential              $1.3        $32.2         $6.6         11.0     $1,851.5        0.713         22.8  ...........  ...........
 Buildings and Dwellings...........
                                             7.0         10.0         35.5  ...........  ...........        $10.0  ...........        $19.0         $7.0
531120--Lessors of Nonresidential            3.3         80.7         16.5         14.3      3,600.4        0.861         30.7  ...........  ...........
 Buildings (except Miniwarehouses).
                                            19.0         19.0         35.5  ...........  ...........        $35.5  ...........         30.0          7.0
531130--Lessors of Miniwarehouses            0.7         24.8          3.5         34.4        562.6        0.584  ...........  ...........  ...........
 and Self Storage Units............
                                             5.0          7.0         30.0  ...........  ...........         $5.0  ...........         14.0         25.5
531190--Lessors of Other Real                0.7          7.3          3.7         15.0        228.4        0.563        -19.6  ...........  ...........
 Estate Property...................
                                             5.0          5.0         35.5  ...........  ...........         $5.0        $10.0         14.0          7.0
Except Leasing of Building Space to        144.6      2,930.8  ...........         83.0     12,603.0        0.950  ...........  ...........  ...........
 Federal Government by Owners......
                                            35.5         35.5  ...........  ...........         35.5        $35.5  ...........         35.5         20.5
531210--Offices of Real Estate               0.8         35.0          0.6         11.3      2,388.9        0.711        -29.6  ...........  ...........
 Agents and Brokers................
                                             5.0         10.0          5.0  ...........  ...........        $10.0         $7.0          7.0          2.0
531311--Residential Property                 1.0         14.5          1.6          6.8  ...........        0.701  ...........  ...........  ...........
 Managers..........................
                                             5.0          5.0         14.0  ...........        483.9         $7.0  ...........         10.0          2.0
531312--Nonresidential Property              1.1          7.9          5.3          6.7        266.3        0.682  ...........  ...........  ...........
 Managers..........................
                                             5.0          5.0         35.5  ...........  ...........         $5.0  ...........         14.0          2.0
531320--Offices of Real Estate               0.3          3.8  ...........          7.8         96.6        0.397  ...........  ...........  ...........
 Appraisers........................
                                             5.0          5.0  ...........  ...........  ...........         $5.0  ...........          5.0          2.0
531390--Other Activities Related to          1.0         32.4          3.1         26.0      1,049.2        0.768  ...........  ...........  ...........
 Real Estate.......................
                                             5.0           10         25.5  ...........  ...........        $19.0  ...........         19.0          2.0
532111--Passenger Car Rental.......         11.3        922.8         15.4         82.0      4,877.9        0.963  ...........  ...........  ...........
                                            35.5         35.5         35.5  ...........         35.5        $35.5  ...........         35.5         25.5
532112--Passenger Car Leasing......         10.1        153.7         21.7         63.6        864.5        0.844  ...........  ...........  ...........
                                            35.5         35.5         35.5  ...........         19.0        $35.5  ...........         30.0         25.5
532120--Truck, Utility Trailer, and          7.4        116.8          9.6         54.7      2,548.3        0.895  ...........  ...........  ...........
 RV (Recreational Vehicle) Rental
 and Leasing.......................
                                            35.5         30.0         35.5  ...........         35.5        $35.5  ...........         35.5         25.5
532210--Consumer Electronics and             5.2        468.7          3.2  ...........  ...........        0.904  ...........  ...........  ...........
 Appliances Rental.................
                                            30.0         35.5         30.0  ...........  ...........        $35.5  ...........         35.5          7.0
532220--Formal Wear and Costume              1.0        141.4  ...........  ...........  ...........        0.750  ...........  ...........  ...........
 Rental............................
                                             5.0         35.5  ...........  ...........  ...........        $14.0  ...........         19.0          7.0
532230--Video Tape and Disc Rental.          1.9        659.7          0.9         77.4      1,791.4        0.896  ...........  ...........  ...........
                                            10.0         35.5          7.0  ...........         35.5        $35.5  ...........         25.5          7.0

[[Page 70687]]

 
532291--Home Health Equipment                7.0        106.0          4.1         66.6        978.1        0.863  ...........  ...........  ...........
 Rental............................
                                            35.5         25.5         35.5  ...........         19.0        $35.5  ...........         30.0          7.0
532292--Recreational Goods Rental..          0.4          1.5  ...........          7.0         12.0        0.410  ...........  ...........  ...........
                                             5.0          5.0  ...........  ...........  ...........         $5.0  ...........          5.0          7.0
532299--All Other Consumer Goods             1.3         13.7          0.8         16.5        155.0        0.664  ...........  ...........  ...........
 Rental............................
                                             7.0          5.0          7.0  ...........  ...........         $5.0  ...........          7.0          7.0
532310--General Rental Centers.....          1.4         48.7          1.0         36.8        390.7        0.672  ...........  ...........  ...........
                                             7.0         14.0          7.0  ...........  ...........         $5.0  ...........          7.0          7.0
532411--Commercial, Air, Rail, and          14.0        147.4         23.3         69.2      1,567.5        0.866         37.9  ...........  ...........
 Water, Transportation Equipment
 and Rental........................
                                            35.5         35.5         35.5  ...........         30.0        $35.5  ...........         35.5          7.0
532412--Construction, Mining and             6.6         76.7          7.1         41.8      1,782.1        0.846  ...........  ...........  ...........
 Forestry Machinery and Equipment
 Rental and Leasing................
                                            35.5         19.0         35.5  ...........         35.5        $30.0  ...........         30.0          7.0
532420--Office Machinery and                 3.5         21.3          5.5         30.6        163.6        0.784        -23.3  ...........  ...........
 Equipment Rental and Leasing......
                                            19.0          7.0         35.5  ...........  ...........        $19.0        $30.0         25.5         25.5
532490--Other Commercial, and                4.2         51.7          4.5         22.7      1,101.6        0.826         -4.3  ...........  ...........
 Industrial Machinery and Equipment
 Rental and Leasing................
                                            25.5         14.0         35.5  ...........  ...........        $30.0  ...........         30.0          7.0
5333110--Lessors of Nonfinancial            14.2        118.6         17.0         33.5      2,757.2        0.862  ...........  ...........  ...........
 Intangible Assets (except
 Copyrighted Works)................
                                            35.5         30.0         35.5  ...........  ...........        $35.5  ...........         35.5          7.0
--------------------------------------------------------------------------------------------------------------------------------------------------------

Common Size Standards

    When many of the same businesses operate in multiple industries, 
SBA believes that a common size standard can be appropriate for these 
industries even if the industry and relevant program data may support 
different size standards. For instance, in past rules, SBA has 
established a common size standard for Computer Systems Design and 
Related Services (NAICS 541511, NAICS 541112, NAICS 541513, NAICS 
541519 (excluding the ``exception''), and NAICS 811212). Another 
example is the common size standard for certain Architectural, 
Engineering and Related Services (NAICS 541310, NAICS 541330 (excluding 
the ``exceptions''), Map Drafting which is identified as ``exception'' 
under NAICS 541340, NAICS 541360, and NAICS 541370 (see 64 FR 28275, 
May 25, 1999). More recently, SBA established a common size standard 
for some of the industries in NAICS Sector 44-45, Retail Trade, as well 
(see 75 FR 61597, October 6, 2010). Similarly, SBA proposed common size 
standards for several other industries in NAICS Sector 54, 
Professional, Scientific and Technical Services (see 76 FAR 14323, 
March 16, 2011), NAICS Sector 48-49, Transportation and Warehousing 
(see 76 FAR 27935, May 13, 2011), and NAICS Sector 56, Administrative 
and Support, Waste Management and Remediation Services (see 76 FR 
63510, October 12, 2011).
    In this rule, SBA proposes, as an alternative to a separate size 
standard for each industry, common size standards for industries under 
several NAICS Industry Groups as shown in Table 4. SBA evaluated 
industry and Federal contracting factors and derived a common size 
standard for each Industry Group using the same method as described 
above. The results are in Table 5, which immediately follows Table 4, 
below. For two closely related NAICS Industry Groups, Real Estate 
Agents and Brokers (NAICS 5312) and Activities Related to Real Estate 
(NAICS 5313), SBA is also proposing to continue with a common size 
standard. The industries in these two Industry Groups were one industry 
under the former Standard Industrial Classification System. With the 
establishment of the NAICS in 1997, five industries were created for 
the various real estate related activities (see 62 FR 17288, April 9, 
1997). Firms in these two NAICS Industry Groups, however, often engage 
in related real estate activities of both Industry Groups, such as 
property sales, property rental, property management services, real 
estate consulting, real estate appraisal and relocations services. In 
consideration of the similar activities of firms within NAICS 5312 and 
NAICS 5312, and SBA's historical application of a common size standard 
for them, SBA has combined the data for the two NAICS Industry Groups 
in evaluating an appropriate size standard.

                               Table 4--Industry Groups for Common Size Standards
----------------------------------------------------------------------------------------------------------------
    Industry group: NAICS codes         Industry group titles            Industries: 6-digit NAICS codes
----------------------------------------------------------------------------------------------------------------
5311...............................  Lessors of Real Estate....  531110, 531120, 531130, 531190.

[[Page 70688]]

 
5312 & 5313........................  Real Estate Agents and      531210, 531311, 531312, 531320, 531390.
                                      Brokers, and Activities
                                      Related to Real Estate.
5321...............................  Automotive Equipment        532111, 532112, 532120.
                                      Rental and Leasing.
5324...............................  Commercial and Industrial   532411, 532412, 532420, 532490.
                                      Machinery and Equipment
                                      Rental and Leasing.
----------------------------------------------------------------------------------------------------------------


                                        Table 5--Size Standards Supported by Each Factor for Each Industry Group
                                                                  [Millions of dollars]
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                   (3)                                 (6)  Four-                   (8)          (9)
                                                  (2)  Simple    Weighted       (4)       (5)  Four-      firm      (7)  Gini     Federal     Calculated
         (1)  NAICS code/Industry title             average      average      Average     firm ratio    average    coefficient    contract       size
                                                   firm size    firm size   assets size      (%)          size                  factor  (%)    standard
--------------------------------------------------------------------------------------------------------------------------------------------------------
5311--Lessors of Real Estate....................         $1.8        $61.0         $9.2          8.1     $3,643.3        0.795         19.3        $25.5
                                                         10.0         14.0         35.5                                  $25.5
5312 & 5313--Real Estate Agents and Brokers               0.9         23.4          0.8  ...........  ...........        0.707        -13.4          7.0
 Activities, and Related to Real Estate.........          5.0          7.0          7.0                                   10.0          5.0
5321--Automotive Equipment Rental and Leasing...          9.4        276.7         13.2         47.4      5,335.8        0.931         20.8         35.5
                                                         35.5         35.5         35.5                      35.5         35.5
5324--Commercial and Industrial Machinery and             5.6         75.8          6.6         22.8      2,724.2        0.854          8.9         30.0
 Equipment Rental and Leasing...................         30.0         19.0         35.5                                   35.5
--------------------------------------------------------------------------------------------------------------------------------------------------------

Special Considerations

Leasing of Building Space to Federal Government by Owners

    The current size standard for Federal contracts for Leasing of 
Building Space to Federal Government by Owners (``exception'' to NAICS 
531190) is $20.5 million. This size standard applies only to certain 
Federal contracting opportunities that meet specific criteria. Footnote 
9 of SBA's table of size standards (13 CFR 121.201) reads: ``For 
Government procurement, a size standard of $20.5 million in gross 
receipts applies to the owners of building space leased to the Federal 
Government. This size standard does not apply to an agent.''
    To determine if the current $20.5 million size standard is 
appropriate, SBA evaluated average firm size, market concentration, and 
size distribution of firms involved in Leasing of Building Space to 
Federal Government by Owners. SBA used data from FPDS-NG and CCR and 
followed the procedure described under the section ``Sources of 
Industry and Program Data'' (above). Based on the data for fiscal years 
2007-2009, Federal contracts averaged less than $100 million annually. 
Therefore, the Federal contracting factor was not an important factor 
for evaluating this sub-industry. The results, as shown in Table 3, 
support increasing the current size standard to $35.5 million.

Evaluation of SBA Loan Data

    Before deciding on an industry's size standard, SBA also considers 
the impact of new or revised standards on SBA's loan programs. 
Accordingly, SBA examined its 7(a) and 504 Loan Program data for fiscal 
years 2008-2010 to assess whether the existing or proposed size 
standards need further adjustments to ensure credit opportunities for 
small businesses through those programs. For the industries reviewed in 
this rule, the data show that it is mostly businesses much smaller than 
the size standards that utilize SBA's 7(a) and 504 loans. Therefore, no 
size standard in NAICS Sector 53, Real Estate and Rental and Leasing, 
needs an adjustment based on this factor.

Proposed Changes to Size Standards

    Table 6, below, summarizes the results of SBA's analyses of 
industry specific size standards from Table 3 and the results for 
common size standards from Table 5. In terms of industry-specific size 
standards, the results in Table 3 support increases in size standards 
for 19 industries and one sub-industry (``exception''), decreases for 
two industries and no changes for three industries. Based on common 
size standards for certain NAICS Industry Groups, the results in Table 
5 appear to support increases in size standards for 20 industries and 
one sub-industry, a decrease for one industry, and no changes for three 
industries
    However, lowering small business size standards is not in the best 
interests of small businesses in the current economic environment. The 
U.S. economy was in recession from December 2007 to June 2009, the 
longest and deepest of any recessions since World War II. The economy 
lost more than eight million non-farm jobs during 2008-2009. In 
response, Congress passed and the President signed the American 
Recovery and Reinvestment Act of 2009 (Recovery Act) to promote 
economic recovery and to preserve and create jobs. Although the 
recession officially ended in June 2009, the unemployment rate was 9.4 
percent or higher from May 2009 to December 2010. It somewhat moderated 
to 8.8 percent in March 2011, but it has been 9 percent or higher for 
the May-July 2011 quarter. The unemployment rate is forecast to remain 
at this elevated level at least through the end of 2011. More recently, 
Congress passed and the President signed the Small Business Jobs Act of 
2010 (Jobs Act) to promote small business job creation. The Jobs Act 
puts more capital into the hands of entrepreneurs and small business 
owners; strengthens small businesses' ability to compete for contracts; 
includes recommendations from the President's Task Force on Federal 
Contracting Opportunities for Small Business; creates a better playing 
field for small businesses; promotes small business exporting, building 
on the President's National Export Initiative; expands training and 
counseling for small businesses; and provides $12 billion in tax relief 
to help small

[[Page 70689]]

businesses invest in their firms and create jobs.

                                   Table 6--Summary of Size Standards Analysis
----------------------------------------------------------------------------------------------------------------
                                                                                    Calculated
                                                                   Current size      industry       Calculated
           NAICS codes                 NAICS Industry titles       standard  ($    specific size    common size
                                                                     million)      standard  ($    standard  ($
                                                                                     million)        million)
----------------------------------------------------------------------------------------------------------------
531110..........................  Lessors of Residential                    $7.0           $19.0           $25.5
                                   Buildings and Dwellings.
531120..........................  Lessors of Nonresidential                  7.0            30.0            25.5
                                   Buildings (except
                                   Miniwarehouses).
531130..........................  Lessors of Miniwarehouses and             25.5            14.0            25.5
                                   Self Storage Units.
531190..........................  Lessors of Other Real Estate               7.0            14.0            25.5
                                   Property.
Except,.........................  Leasing of Building Space to              20.5            35.5  ..............
                                   Federal Government by Owners.
531210..........................  Offices of Real Estate Agents              2.0             7.0             7.0
                                   and Brokers.
531311..........................  Residential Property Managers.             2.0            10.0             7.0
531312..........................  Nonresidential Property                    2.0            14.0             7.0
                                   Managers.
531320..........................  Offices of Real Estate                     2.0             5.0             7.0
                                   Appraisers.
531390..........................  Other Activities Related to                2.0            19.0             7.0
                                   Real Estate.
532111..........................  Passenger Car Rental..........            25.5            35.5            35.5
532112..........................  Passenger Car Leasing.........            25.5            30.0            35.5
532120..........................  Truck, Utility Trailer, and RV            25.5            35.5            35.5
                                   (Recreational Vehicle) Rental
                                   and Leasing.
532210..........................  Consumer Electronics and                   7.0            35.5  ..............
                                   Appliances Rental.
532220..........................  Formal Wear and Costume Rental             7.0            19.0  ..............
532230..........................  Video Tape and Disc Rental....             7.0            25.5  ..............
532291..........................  Home Health Equipment and                  7.0            30.0  ..............
                                   Rental.
532292..........................  Recreational Goods Rental.....             7.0             5.0  ..............
532299..........................  All Other Consumer Goods                   7.0             7.0  ..............
                                   Rental.
532310..........................  General Rental Centers........             7.0             7.0  ..............
532411..........................  Commercial, Air, Rail, and                 7.0            35.5            30.0
                                   Water, Transportation
                                   Equipment and Rental.
532412..........................  Construction, Mining and                  12.5            30.0            30.0
                                   Forestry Machinery and
                                   Equipment Rental and Leasing.
532420..........................  Office Machinery and Equipment            25.5            25.5            30.0
                                   Rental and Leasing.
532490..........................  Other Commercial, and                      7.0            30.0            30.0
                                   Industrial Machinery and
                                   Equipment Rental and Leasing.
533110..........................  Lessors of Nonfinancial                    7.0            35.5  ..............
                                   Intangible Assets (except
                                   Copyrighted Works).
----------------------------------------------------------------------------------------------------------------

    Lowering size standards could decrease the number of firms that are 
able to participate in Federal financial and procurement assistance for 
small businesses. Furthermore, size standards based solely on 
analytical results without any other considerations could cut off 
currently eligible small firms from those programs. That would run 
counter to what SBA and the Federal Government are doing to help small 
businesses. Reducing size eligibility for Federal procurement 
opportunities, especially under current economic conditions, would not 
preserve or create more jobs; rather, it would have the opposite 
effect. Therefore, in this proposed rule, SBA does not propose to 
reduce size standards for any industries. For industries where analyses 
might seem to support lowering size standards, SBA proposes to retain 
the current size standards. SBA nevertheless invites comments and 
suggestions on whether it should lower size standards as suggested by 
analyses of industry and program data or retain the current standards 
for those industries in view of current economic conditions.
    Based on comparisons between industry specific size standards and 
common size standards within each Industry Group, SBA finds that for 
some industries common size standards are more appropriate for several 
reasons. First, analyzing industries at a more aggregated Industry 
Group level simplifies size standards analysis and the results are 
likely to be more consistent among related industries. Second, in most 
cases, industries within each Industry Group currently have the same 
size standards and SBA believes it is better to keep the revised size 
standards also the same. Third, within each Industry Group many of the 
same businesses tend to operate in the same multiple industries. SBA 
believes that common size standards reflect the Federal marketplace in 
those industries better than do different size standards for each 
industry. Fourth, industry specific size standards and common size 
standards are mostly within a reasonably close range.
    For industries where both industry specific size standards and 
common size standards have been calculated, SBA, for the above reasons, 
proposes to apply common size standards. For industries where SBA has 
not estimated common size standards, it proposes to apply industry-
specific size standards. As discussed above, SBA has decided that 
lowering small business size standards would be inconsistent with what 
the Federal Government is doing to stimulate the economy and encourage 
job growth through the Recovery Act and the Jobs Act. Therefore, for 
those industries for which its analyses suggested decreasing their size 
standards, SBA proposes to retain the current size standards. Of the 24 
industries and one sub-industry in NAICS Sector 53 that SBA reviewed 
for this proposed rule, the Agency proposes to increase size standards 
for 20 industries and one sub-industry and retain the current size 
standards for four industries. Industries for which SBA has proposed to 
increase their size standards and proposed standards are in Table 7 
(below).
    Not lowering size standards in NAICS Sector 53 is consistent with 
SBA's prior actions for NAICS Sector 44-45 (Retail Trade), NAICS Sector 
72 (Accommodation and Food Services), and NAICS Sector 81 (Other 
Services) that the Agency proposed (74 FR 53924, 74 FR 53913, and 74 FR 
53941, October 21, 2009) and adopted in its final rules (75 FR 61597, 
75 FR 61604, and 75 FR 61591, October 6, 2010). It is also consistent 
with the Agency's recently proposed rules for NAICS Sector 54, 
Professional, Technical, and Scientific

[[Page 70690]]

Services (76 FR 14323, March 16, 2011), NAICS Sector 48-49, 
Transportation and Warehousing (76 FR 27935, May 13, 2011), NAICS 
Sector 51, Information (76 FR 63216, October 12, 2011), and NAICS 
Sector 56, Administrative and Support, Waste Management and Remediation 
Services (76 FR 63510, October 12, 2011). In each of those final and 
proposed rules, SBA opted not to reduce small business size standards 
for the same reasons it has provided above in this proposed rule.

                              Table 7--Summary of Proposed Size Standards Revisions
----------------------------------------------------------------------------------------------------------------
                                                                                   Current size    Proposed size
               NAICS codes                         NAICS Industry titles           standard  ($    standard  ($
                                                                                     million)        million)
----------------------------------------------------------------------------------------------------------------
531110..................................  Lessors of Residential Buildings and              $7.0           $25.5
                                           Dwellings.
531120..................................  Lessors of Nonresidential Buildings                7.0            25.5
                                           (except Miniwarehouses).
531190..................................  Lessors of Other Real Estate Property.             7.0            25.5
Except,.................................  Leasing of Building Space to Federal              20.5            35.5
                                           Government by Owners.
531210..................................  Offices of Real Estate Agents and                  2.0             7.0
                                           Brokers.
531311..................................  Residential Property Managers.........             2.0             7.0
531312..................................  Nonresidential Property Managers......             2.0             7.0
531320..................................  Offices of Real Estate Appraisers.....             2.0             7.0
531390..................................  Other Activities Related to Real                   2.0             7.0
                                           Estate.
532111..................................  Passenger Car Rental..................            25.5            35.5
532112..................................  Passenger Car Leasing.................            25.5            35.5
532120..................................  Truck, Utility Trailer, and RV                    25.5            35.5
                                           (Recreational Vehicle) Rental and
                                           Leasing.
532210..................................  Consumer Electronics and Appliances                7.0            35.5
                                           Rental.
532220..................................  Formal Wear and Costume Rental........             7.0            19.0
532230..................................  Video Tape and Disc Rental............             7.0            25.5
532291..................................  Home Health Equipment and Rental......             7.0            30.0
532411..................................  Commercial, Air, Rail, and Water,                  7.0            30.0
                                           Transportation Equipment and Rental.
532412..................................  Construction, Mining and Forestry                 12.5            30.0
                                           Machinery and Equipment Rental and
                                           Leasing.
532420..................................  Office Machinery and Equipment Rental             25.5            30.0
                                           and Leasing.
532490..................................  Other Commercial, and Industrial                   7.0            30.0
                                           Machinery and Equipment Rental and
                                           Leasing.
533110..................................  Lessors of Nonfinancial Intangible                 7.0            35.5
                                           Assets (except Copyrighted Works).
----------------------------------------------------------------------------------------------------------------

Evaluation of Dominance in Field of Operation

    SBA has determined that for the industries in NAICS Sector 53, Real 
Estate and Rental and Leasing, for which it has proposed to increase 
size standards, no firm at or below the proposed size standard will be 
large enough to dominate its field of operation. At the proposed size 
standards, if adopted, small business shares of total industry receipts 
among those industries vary from less than .01 percent to 2.0 percent, 
with an average of 0.4 percent. These levels of market share 
effectively preclude a firm at or below the proposed size standards 
from exerting control on any of the industries.

Request for Comments

    SBA invites public comments on this proposed rule, especially on 
the following issues:
    1. To simplify size standards, SBA proposes eight fixed levels for 
receipts based size standards: $5 million, $7 million, $10 million, $14 
million, $19 million, $25.5 million, $30 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. SBA welcomes suggestions on alternative approaches to 
simplifying small business size standards.
    2. SBA seeks feedback on whether the proposed levels of size 
standards are appropriate given the economic characteristics of each 
industry and sub-industry reviewed in this proposed rule. SBA also 
seeks feedback and suggestions on alternative standards, if they would 
be more appropriate, including whether the number of employees is a 
more suitable measure of size for certain industries and what that 
employee level should be.
    3. SBA proposes common size standards for industries within certain 
NAICS Industry Groups, namely NAICS 5311, NAICS 5312 and 5313, NAICS 
5321, and NAICS 5324 (see Table 4, above). SBA invites comments or 
suggestions along with supporting information with respect to the 
following:
    a. Whether SBA should adopt common size standards for those 
industries or establish a separate size standard for each industry, or,
    b. Whether the proposed common size standards for those industries 
are at the correct levels or what are more appropriate size standards 
if the proposed standards are not suitable.
    4. SBA's analysis supports increasing the size standard for Leasing 
of Building Space to Federal Government by Owners (``exception'' to 
NAICS 531190) from $20.5 million to $35.5 million. SBA has also 
proposed, based on the use of a common size standard for NAICS Industry 
Group 5311, to increase the size standard for NAICS 531190 to $25.5 
million. Federal contracting under this NAICS code did not exceed $100 
million annually and was not, therefore, a significant factor. SBA 
invites comments or suggestions along with supporting information with 
respect to the following:
    a. Whether SBA should also apply the same common $25.5 million size 
standard for Leasing of Building Space to Federal Government by Owners 
and remove it as an exception to NAICS 531190; or
    b. Whether SBA should adopt a size standard of $35.5 million based 
on the analysis and retain it as an exception to NAICS 531190.
    5. SBA's proposed size standards are based on its evaluation of 
five primary factors--average firm size, average assets size (as a 
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 
factors and/or suggestions on other factors that it should consider for 
assessing industry characteristics when evaluating or revising size 
standards. SBA also seeks information on relevant data sources, if 
available.

[[Page 70691]]

    6. SBA gives equal weight to each of the five primary factors in 
all industries. SBA seeks feedback on whether it should continue giving 
equal weight to each factor or whether it should give more weight to 
one or more factors for certain industries. Recommendations to weigh 
some factors more than others should include suggestions on specific 
weights for each factor for those industries along with supporting 
information.
    7. For some industries, based on its analysis of industry and 
program data alone, SBA proposes to increase the existing size 
standards by a large amount (such as NAICS 532210, NAICS 532291, NAICS 
532411, NAICS 532490, and NAICS 533110), while for others the proposed 
increases are modest. SBA seeks feedback on whether it should, as a 
policy, limit the increase to a size standard and/or whether it should, 
as a policy, establish minimum or maximum values for its size 
standards. SBA seeks suggestions on appropriate levels of changes to 
size standards and on their minimum or maximum levels.
    Based on the analysis of industry and program data and use of 
common size standards for closely related industries, SBA has proposed 
to increase the size standard for NAICS 531210 (Offices of Real Estate 
Agents and Brokers) from $2.0 million to $7.0 million. To determine if 
a company meets the size standard for NAICS 531210, a firm may exclude 
``* * * funds received in trust for an unaffiliated third party, such 
as bookings or sales subject to commissions. The commissions received 
are included as revenue'' (see Footnote 10 to SBA's table of size 
standards). SBA seeks feedback on whether it should continue or 
terminate the exclusion of funds received in trust for an unaffiliated 
third party from receipts if it adopts its proposed standard or any 
other standard considerably higher than the existing standards for this 
industry. SBA also welcomes information and data on how businesses in 
this industry collect and report income for Federal Income Tax Returns, 
and what they recognize as business receipts (see 13 CFR 121.104 for 
SBA's definition of ``receipts'').
    9. For analytical simplicity and efficiency, in this proposed rule, 
SBA has refined its size standard methodology to obtain a single value 
as a proposed size standard instead of a range of values as in its past 
size regulations. SBA welcomes any comments on this procedure and 
suggestions on alternative methods.
    Public comments on the above issues are very valuable to SBA for 
validating both its size standard methodology and the proposed 
revisions to size standards in this proposed rule. This will help SBA 
to move forward with its review of size standards for other NAICS 
Sectors. Commenters addressing size standards for a specific industry 
or a group of industries should include relevant data and/or other 
information supporting their comments. If comments relate to using size 
standards for Federal procurement programs, SBA suggests that 
commenters provide information on the size of contracts, the size of 
businesses that can undertake the contracts, start-up costs, equipment 
and other asset requirements, the amount of subcontracting, other 
direct and indirect costs associated with the contracts, the use of 
mandatory sources of supply for products and services and the degree to 
which contractors can mark up those costs.

Compliance With Executive Orders 12866, 13563, 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 
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 the proposed size standards for a number of 
industries in NAICS Sector 53, Real Estate and Rental and Leasing, will 
better reflect the economic characteristics of small businesses and the 
Federal Government marketplace. SBA's mission is to aid and assist 
small businesses through a variety of financial, procurement, business 
development and advocacy programs. To assist 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 
recently enacted Small Business Jobs Act also requires SBA to review 
all size standards and make necessary adjustments to reflect market 
conditions. 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 because of this rule is gaining eligibility for Federal small 
business assistance programs. These include SBA's financial assistance 
programs, economic injury disaster loans, and Federal procurement 
programs intended for small businesses. Federal procurement programs 
provide targeted opportunities for small businesses under SBA's 
business development programs, such as 8(a), Small Disadvantaged 
Businesses (SDB), small businesses located in Historically 
Underutilized Business Zones (HUBZone), women-owned small businesses 
(WOSB), and service-disabled veteran-owned small business concerns 
(SDVO SBC). Federal agencies may also use SBA size standards for a 
variety of other regulatory and program purposes. These programs assist 
small businesses to become more knowledgeable, stable, and competitive. 
In the 20 industries and one sub-industry in NAICS Sector 53 for which 
SBA has proposed increasing size standards, SBA estimates that about 
13,000 additional firms will obtain small business status and become 
eligible for these programs. That represents nearly 5.0 percent of the 
total number of firms that are classified as small under the current 
standards in all industries within NAICS Sector 53. If adopted as 
proposed, this will increase the small business share of total industry 
receipts in all industries within NAICS Sector 53 from about 27 percent 
under the current size standards to nearly 39 percent.
    Three groups will benefit from these proposed size standards if 
they are adopted as proposed: (1) Some businesses that are above the 
current size standards may gain small business status under the higher 
size standards, thereby enabling them to participate in Federal small 
business assistance programs; (2) growing small businesses that are 
close to exceeding the current size standards will be able to retain 
their small business status under the higher size standards, thereby 
enabling them to continue their participation in the programs; and (3) 
Federal agencies will have larger pools of small businesses from which 
to draw for their small business procurement programs.
    During fiscal years 2007-2009, about 99 percent of Federal 
contracting dollars

[[Page 70692]]

spent in industries reviewed in this proposed rule were accounted for 
by the 20 industries and one sub-industry for which SBA has proposed to 
increase size standards. SBA estimates that additional firms gaining 
small business status in those industries under the proposed size 
standards could potentially obtain Federal contracts totaling up to $70 
million to $75 million annually under SBA's small business, 8(a), 
HUBZone, WOSB, and SDVO SBC Programs and other unrestricted 
procurements. The added competition for many of these procurements can 
also result in lower prices to the Federal Government for procurements 
reserved for small businesses, but SBA cannot quantify this benefit.
    Under SBA's 7(a) Business Loan and 504 Programs, based on the 2008-
2010 data, SBA estimates about 50 to 60 additional loans totaling about 
$15 million to $20 million in Federal loan guarantees could be made to 
these newly defined small businesses under the proposed standards. 
Increasing the size standards will likely result in more small business 
guaranteed loans to businesses in these industries, but it would be 
impractical to try to estimate exactly their number and the total 
amount loaned. Under the Jobs Act, SBA can now guarantee substantially 
larger loans than in the past. In addition, the Jobs Act established an 
alternative size standard for business concerns that do not meet the 
size standards for their industry ($15 million in tangible net worth 
and $5 million in net income after income taxes). Therefore, SBA finds 
it similarly difficult to quantify the impact of these proposed 
standards on its 7(a) and 504 Loan Programs.
    Newly defined small businesses will also benefit from SBA's 
Economic Injury Disaster Loan (EIDL) Program. Since this program is 
contingent on the occurrence and severity of a disaster, SBA cannot 
make a meaningful estimate of benefits for future disasters.
    To the extent that 13,000 newly defined additional small firms 
could become active in Federal procurement programs, if adopted, the 
proposed size standards changes may entail some additional 
administrative costs to the Federal Government associated with 
additional bidders for Federal small business procurement 
opportunities. In addition, there will be more firms seeking SBA 
guaranteed loans, more firms eligible for enrollment in the CCR's 
Dynamic Small Business Search database, and more firms seeking 
certification as 8(a) or HUBZone firms or those qualifying for small 
business, WOSB, SDVO SBC, and SDB status. Among those newly defined 
small businesses seeking SBA assistance, there could be some additional 
costs associated with compliance and verification of small business 
status and protests of small business status. These added costs will be 
minimal because mechanisms are already in place to handle these 
administrative requirements.
    The costs to the Federal Government may be higher on some Federal 
contracts. With a greater number of businesses defined as small, 
Federal agencies may choose to set aside more contracts for competition 
among small businesses rather than using full and open competition. The 
movement from unrestricted to small business set-aside contracting 
might result in competition among fewer total bidders, although there 
will be more small businesses eligible to submit offers. In addition, 
higher costs may result when more full and open contracts are awarded 
to HUBZone businesses that receive price evaluation preferences. The 
additional costs associated with fewer bidders, however, are expected 
to be minor since, as a matter of law, procurements may be set aside 
for small businesses or reserved for the 8(a), HUBZone, WOSB, or SDVO 
SBC Programs only if awards are expected to be made at fair and 
reasonable prices.
    The proposed size standards, if adopted, may have distributional 
effects among large and small businesses. Although SBA cannot estimate 
with certainty the actual outcome of the gains and losses among small 
and large businesses, it can identify several probable impacts. There 
may be a transfer of some Federal contracts to small businesses from 
large businesses. Large businesses may have fewer Federal contract 
opportunities as Federal agencies decide to set aside more Federal 
contracts for small businesses. In addition, some Federal contracts may 
be awarded to HUBZone concerns instead of large businesses since these 
firms may be eligible for a price evaluation preference for contracts 
when they compete on a full and open basis. Similarly, currently 
defined small businesses may obtain fewer Federal contracts due to the 
increased competition from more businesses defined as small. This 
transfer may be offset by a greater number of Federal procurements set 
aside for all small businesses. The number of newly defined and 
expanding small businesses that are willing and able to sell to the 
Federal Government will limit the potential transfer of contracts away 
from large and currently defined small businesses. SBA cannot estimate 
the potential distributional impacts of these transfers with any degree 
of precision because FPDS-NG data only identify the size of businesses 
receiving Federal contracts as ``small businesses'' or ``other than 
small businesses'' FPDS-NG does not provide the exact size of the 
business.
    The proposed revisions to the existing size standards for 
Industries in NAICS Sector 53, Real Estate and Rental and Leasing, are 
consistent with SBA's statutory mandate to assist small business. This 
regulatory action promotes the Administration's objectives. One of 
SBA's goals in support of the Administration's objectives is to help 
individual small businesses succeed through fair and equitable access 
to capital and credit, Federal Government contracts, and management and 
technical assistance. Reviewing and modifying size standards, when 
appropriate, ensures that intended beneficiaries have access to small 
business programs designed to assist them.

Executive Order 13563

    A description of the need for this regulatory action and benefits 
and costs associated with this action including possible distributional 
impacts that relate to Executive Order 13563 are included above in the 
Regulatory Impact Analysis under Executive Order 12866.
    In an effort to engage interested parties in this action, SBA has 
presented its methodology (discussed above under SUPPLEMENTARY 
INFORMATION) to various industry associations and trade groups. SBA 
also met with various industry groups to get their feedback on its 
methodology and other size standards issues. In addition, SBA presented 
its size standards methodology to businesses in 13 cities in the U.S 
and sought their input as part of the Jobs Act tours. The presentation 
also included information on the latest status of the comprehensive 
size standards review and on how interested parties can provide SBA 
with input and feedback on size standards review.
    Additionally, SBA sent letters to the Directors of the Offices of 
Small and Disadvantaged Business Utilization (OSDBU) at several Federal 
agencies with considerable procurement responsibilities requesting 
their feedback on how the agencies use SBA size standards and whether 
current standards meet their programmatic needs (both procurement and 
non-procurement). SBA gave appropriate consideration to all input, 
suggestions, recommendations, and relevant information obtained from 
industry groups, individual businesses, and

[[Page 70693]]

Federal agencies in preparing this proposed rule.
    The review of NAICS Sector 53, Real Estate and Rental and Leasing, 
is consistent with EO 13563, Sec 6, calling for retrospective analyses 
of existing rules. The last comprehensive review of size standards 
occurred during the late 1970s and early 1980s. Since then, except for 
periodic adjustments for monetary based size standards, most reviews of 
size standards were limited to a few specific industries in response to 
requests from the public and Federal agencies. SBA recognizes that 
changes in industry structure and the Federal marketplace 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 will revise them when necessary. In 
addition, on September 27, 2010, the President of the United States 
signed the Small Business Jobs Act of 2010 (Jobs Act). The Jobs Act 
directs SBA to conduct a detailed review of all size standards and to 
make appropriate adjustments to reflect market conditions. 
Specifically, the Jobs Act requires SBA to conduct a detailed review of 
at least one-third of all size standards during every 18 month period 
from the date of its enactment and do a complete review of all size 
standards not less frequently than once every five years thereafter.

Executive Order 12988

    This action meets applicable standards set forth in Sections 3(a) 
and 3(b)(2) of Executive Order 12988, Civil Justice Reform, to minimize 
litigation, eliminate ambiguity, and reduce burden. The action does not 
have retroactive or preemptive effect.

Executive Order 13132

    For purposes of Executive Order 13132, SBA has determined that this 
proposed rule will not have substantial, direct effects on the States, 
on the relationship between the national government and the States, or 
on the distribution of power and responsibilities among the various 
levels of government. Therefore, SBA has determined that this proposed 
rule has no federalism implications warranting preparation of a 
federalism assessment.

Paperwork Reduction Act

    For the purposes of the Paperwork Reduction Act, 44 U.S.C. Ch. 35, 
SBA has determined that this proposed rule will 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 NAICS Sector 53, Real Estate and Rental and Leasing. 
As described above, this rule may affect small entities seeking Federal 
contracts, loans under SBA's 7(a), 504 Guaranteed Loan and Economic 
Injury Disaster Loan Programs, and assistance under 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 are 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 that 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 are the need for and objective of the rule?

    Most of the size standards in NAICS Sector 53, Real Estate and 
Rental and Leasing Support Services, have not been reviewed since the 
early 1980s. Technology, productivity growth, international 
competition, mergers and acquisitions, and updated industry definitions 
may have changed the structure of many industries in the Sector. Such 
changes can be sufficient to support revisions to current size 
standards for some industries. Based on the 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. The recently enacted 
Small Business Jobs Act also requires SBA to review all size standards 
and make necessary adjustments to reflect market conditions.

(2) What is SBA's description and estimate of the number of small 
entities to which the rule will apply?

    If the proposed rule is adopted in its present form, SBA estimates 
that about 13,000 additional firms will become small because of 
increases in size standards in 20 industries and one sub-industry. That 
represents nearly 5.0 percent of total firms that are small under 
current size standards in all industries within NAICS Sector 53. This 
will result in an increase in the small business share of total 
industry receipts for this Sector from about 27 percent under the 
current size standards to nearly 39 percent under the proposed 
standards. The proposed standards, if adopted, will enable more small 
businesses to retain their small business status for a longer period. 
Many have lost their eligibility and find it difficult to compete at 
current size standards with companies that are significantly larger 
than they are. SBA believes the competitive impact will be positive for 
existing small businesses and for those that exceed the size standards 
but are on the very low end of those that are not small. They might 
otherwise be called or referred to as mid-sized businesses, although 
SBA only defines what is small; other entities are other than small.

(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?

    Proposed size standards changes do not impose any additional 
reporting or record keeping requirements on small entities. However, 
qualifying for Federal procurement and a number of other programs 
requires that entities register in the CCR database and certify at 
least once annually that they are small in the Online Representations 
and Certifications Application (ORCA). Therefore, businesses opting to 
participate in those programs must comply with CCR and ORCA 
requirements. There are no costs associated with either CCR 
registration or ORCA certification. Changing 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?

    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, November 24, 1995). SBA is not aware of any Federal rule that 
would duplicate

[[Page 70694]]

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)).

(5) What alternatives will allow the Agency to accomplish its 
regulatory objectives while minimizing the impact on small entities?

    By law, SBA is required to develop numerical size standards for 
establishing eligibility for Federal small business assistance 
programs. Other than varying size standards by industry and changing 
the size measures, no practical alternative exists to the system 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 13 
CFR Part 121 as follows:

PART 121--SMALL BUSINESS SIZE REGULATIONS

    1. Revise the authority citation for part 121 to read as follows:

    Authority: 15 U.S.C. 632, 634(b)(6), 662, and 694a(9).

    2. In Sec.  121.201, amend the table ``Small Business Size 
Standards by NAICS Industry'' as follows:
    a. Under the heading Sector 53 Real Estate and Rental and Leasing, 
revise the entries for ``531110,'' ``531120,'' ``531190,'' ``Except,'' 
``531210,'' ``531311,'' ``531312,'' ``531320,'' ``531390,'' ``532111,'' 
``532112,'' ``532120,'' ``532210,'' ``532220,'' ``532230,'' ``532291,'' 
``532411,'' ``532412,'' ``532420,'' ``532490,'' and ``533110,'' and
    b. Revise footnote 9 at the end of the table to read as follows:


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

* * * * *

----------------------------------------------------------------------------------------------------------------
                                                                                  Size standards  Size standards
               NAICS codes                       NAICS U.S. industry title        in millions of   in number of
                                                                                      dollars        employees
----------------------------------------------------------------------------------------------------------------
 
                                                  * * * * * * *
----------------------------------------------------------------------------------------------------------------
                                  Sector 53--Real Estate and Rental and Leasing
----------------------------------------------------------------------------------------------------------------
531110..................................  Lessors of Residential Buildings and             $25.5  ..............
                                           Dwellings.
531120..................................  Lessors of Nonresidential Buildings               25.5  ..............
                                           (except Miniwarehouses).
 
                                                   * * * * * *
531190..................................  Lessors of Other Real Estate Property.            25.5  ..............
Except,.................................  Leasing of Building Space to Federal          \9\ 35.5  ..............
                                           Government by Owners \9\.
531210..................................  Offices of Real Estate Agents and             \10\ 7.0  ..............
                                           Brokers \10\.
531311..................................  Residential Property Managers.........             7.0  ..............
531312..................................  Nonresidential Property Managers......             7.0  ..............
531320..................................  Offices of Real Estate Appraisers.....             7.0  ..............
531390..................................  Other Activities Related to Real                   7.0  ..............
                                           Estate.
 
                                          ......................................  ..............
532111..................................  Passenger Car Rental..................            35.5  ..............
532112..................................  Passenger Car Leasing.................            35.5  ..............
532120..................................  Truck, Utility Trailer, and RV                    35.5  ..............
                                           (Recreational Vehicle) Rental and
                                           Leasing.
532210..................................  Consumer Electronics and Appliances               35.5  ..............
                                           Rental.
532220..................................  Formal Wear and Costume Rental........            19.0  ..............
532230..................................  Video Tape and Disc Rental............            25.5  ..............
532291..................................  Home Health Equipment Rental..........            30.0  ..............
 
                                          ......................................  ..............
532411..................................  Commercial Air, Rail, and Water                   30.0  ..............
                                           Transportation Equipment Rental and
                                           Leasing.
532412..................................  Construction, Mining and Forestry                 30.0  ..............
                                           Machinery and Equipment Rental and
                                           Leasing.
532420..................................  Office Machinery and Equipment Rental             30.0  ..............
                                           and Leasing.
532490..................................  Other Commercial and Industrial                   30.0  ..............
                                           Machinery and Equipment Rental and
                                           Leasing.
 
                                          ......................................  ..............
533110..................................  Lessors of Nonfinancial Intangible                35.5  ..............
                                           Assets (except Copyrighted Works).
 
                                          ......................................  ..............
----------------------------------------------------------------------------------------------------------------

Footnotes
* * * * *
    9. NAICS code 531190--Leasing of building space to the Federal 
Government by Owners: For Government procurement, a size standard of 
$35.5 million in gross receipts applies to the owners of building space 
leased to the Federal Government. The standard does not apply to an 
agent.
* * * * *

    Dated: September 9, 2011.
Karen G. Mills,
Administrator.
[FR Doc. 2011-29448 Filed 11-14-11; 8:45 am]
BILLING CODE 8025-01-P