[Federal Register Volume 77, Number 176 (Tuesday, September 11, 2012)]
[Proposed Rules]
[Pages 55737-55755]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2012-22258]


 ========================================================================
 Proposed Rules
                                                 Federal Register
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 This section of the FEDERAL REGISTER contains notices to the public of 
 the proposed issuance of rules and regulations. The purpose of these 
 notices is to give interested persons an opportunity to participate in 
 the rule making prior to the adoption of the final rules.
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 

  Federal Register / Vol. 77, No. 176 / Tuesday, September 11, 2012 / 
Proposed Rules  

[[Page 55737]]



SMALL BUSINESS ADMINISTRATION

13 CFR Part 121

RIN 3245-AG45


Small Business Size Standards: Finance and Insurance and 
Management of Companies and Enterprises

AGENCY: U.S. Small Business Administration.

ACTION: Proposed rule.

-----------------------------------------------------------------------

SUMMARY: The U.S. Small Business Administration (SBA) proposes to 
increase small business size standards for 37 industries in North 
American Industry Classification System (NAICS) Sector 52, Finance and 
Insurance, and for two industries in NAICS Sector 55, Management of 
Companies and Enterprises. In addition, SBA proposes to change the 
measure of size from average assets to average receipts for NAICS 
522293, International Trade Financing. As part of its ongoing 
comprehensive size standards review, SBA evaluated all receipts based 
and assets based size standards in NAICS Sectors 52 and 55 to determine 
whether they should be retained or revised. This proposed rule is one 
of a series of proposed rules that will review size standards of 
industries grouped by NAICS Sector. SBA issued a White Paper entitled 
``Size Standards Methodology'' and published a notice in the October 
21, 2009 issue of the Federal Register to advise the public that the 
document is available on its Web site at 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 
November 13, 2012.

ADDRESSES: Identify your comments by RIN 3245-AG45 and submit them by 
one of the following methods: (1) Federal eRulemaking Portal: 
www.regulations.gov, following 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 
www.regulations.gov.. If you wish to submit confidential business 
information (CBI) as defined in the User Notice at 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]. 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.

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. For example, currently six size standards 
in NAICS Sector 52 are based on total assets. 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.
    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 were limited to a few specific industries in response to 
requests from the public and Federal agencies. SBA also adjusts its 
monetary based size standards for inflation 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 comprehensive size standards 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 at least once every five 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 is reviewing 
size standards on a Sector by Sector basis. A NAICS Sector generally 
includes 25 to 75 industries, except for NAICS Sector

[[Page 55738]]

31-33, Manufacturing, which has considerably more industries. Once SBA 
completes its review of size standards for industries in a given NAICS 
Sector, it issues a proposed rule to revise size standards for those 
industries for which it believes 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 relevant 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 recently developed a ``Size Standards Methodology'' for 
developing, reviewing, and modifying size standards when necessary. SBA 
published the document on its Web site at www.sba.gov/size for public 
review and comments, and has included it as a supporting document in 
the electronic docket of this proposed rule at www.regulations.gov, SBA 
does not apply all features of its ``Size Standards Methodology'' to 
all industries because not all features are appropriate for every 
industry. For example, since 36 of the 42 industries in NAICS Sectors 
52 and 55 reviewed in this rule have receipts based size standards, the 
methodology described in this proposed rule applies only to 
establishing receipts based size standards. For those interested in 
SBA's overall approach to establishing, evaluating, and modifying small 
business size standards, the methodology is available on SBA's Web site 
at www.sba.gov/size. 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 
concerning its ``Size Standards Methodology,'' such as whether there 
are other 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 use of anchor 
size standards is appropriate; whether there are gaps in SBA's 
methodology because the data it uses are not current or sufficiently 
comprehensive; and whether there are other data, facts, and/or issues 
that SBA should consider. Comments on SBA's size standards methodology 
should be submitted via (1) the Federal eRulemaking Portal: 
www.regulations.gov, following the instructions for submitting 
comments; the docket number is SBA-2009-0008, 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 it will do with comments to this and other proposed rules, SBA will 
post all comments on its methodology on www.regulations.gov. As of May 
31, 2012, SBA has received 14 comments to its ``Size Standards 
Methodology.'' The comments are available to the public at 
www.regulations.gov. SBA continues to welcome comments on its 
methodology from interested parties. SBA will not accept comments to 
its ``Size Standards Methodology'' submitted by email.
    Congress granted SBA's Administrator discretion to establish 
detailed small business size standards. 15 U.S.C. 632(a)(2). 
Specifically, 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 
(as described below). In addition, SBA considers current economic 
conditions, its mission and program objectives, 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 it used to propose adjustments to size 
standards in NAICS Sectors 52 and 55. This proposed rule affords the 
public an opportunity to review and to comment on SBA's proposals to 
revise size standards in NAICS Sectors 52 and 55, as well as on the 
data and methodology it used to evaluate and revise the size standards.

Industry Analysis

    For the current comprehensive size standards review, SBA has 
established three ``base'' or ``anchor'' size standards--$7.0 million 
in average annual receipts for industries that have receipts based size 
standards, 500 employees for manufacturing and other industries that 
have employee based size standards (except for Wholesale Trade), and 
100 employees for industries in the Wholesale Trade Sector. SBA 
established 500 employees as the anchor size standard for 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 
today it is $7 million. Since 1986, the size standard for all 
industries in the Wholesale Trade Sector for SBA financial assistance 
and for most Federal programs has been 100 employees. However, NAICS 
codes for the Wholesale Trade Sector 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 (NAICS Sector 42) 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 is neither a minimum nor a maximum size standard. 
It is a common size standard for a large number of industries that have 
similar economic characteristics and serves as a reference point in 
evaluating size standards for individual industries. SBA uses the 
anchor in lieu of trying to establish precise small business size 
standards for each industry. Otherwise, theoretically, 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. SBA presumes an anchor size standard is 
appropriate for a particular industry unless that industry displays 
economic characteristics that are considerably different from other 
industries with the same anchor size standard.
    When evaluating a size standard, SBA compares the economic 
characteristics of the industry under review to the average 
characteristics of industries with one of the three anchor size 
standards (referred to as the ``anchor comparison group''). This allows 
SBA to assess the industry structure and to

[[Page 55739]]

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 generally 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 Sectors 52 and 55, SBA has developed a second comparison 
group consisting of industries that have the highest of receipts based 
size standards. To determine a size standard above the anchor size 
standard, SBA analyzes the characteristics of this second comparison 
group. The size standards for this group of industries range from $23 
million to $35.5 million in average annual receipts; the weighted 
average size standard for the group is $29 million. SBA refers to this 
comparison group as the ``higher level receipts based size standard 
group.''
    The primary factors that SBA evaluates to examine industry 
structure include average firm size, startup costs and entry barriers, 
industry competition, and distribution of firms by size. SBA evaluates, 
as an additional primary factor, the impact that revised 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, other program factors, etc.). 
SBA also considers possible impacts 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 
Sectors 52 and 55 that has a receipts based size standard. 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 based 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 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 size 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 lower than those of the anchor 
comparison group is likely to have lower startup costs; this will 
support the anchor standard or one lower than the anchor.
    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 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 share of economic activity within the 
industry is less than 40 percent. For an industry with a four-firm 
concentration ratio of 40 percent or more, SBA examines the average 
size of the four largest firms to determine 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 in assessing industry competition. 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 the degree of inequality of distribution in an industry, SBA 
computes the Gini coefficient, using the Lorenz curve. The Lorenz curve 
presents the cumulative

[[Page 55740]]

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 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 with that 
for industries in the anchor comparison group. If the Gini coefficient 
value for an industry is higher than it is for industries in the anchor 
comparison industry group this may, all else being equal, warrant a 
size standard higher 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 possible 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, this could justify considering a size standard higher than 
the existing size standard. The disparity between the small business 
Federal market share and 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 support a size standard 
larger than the current size 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 
contracting opportunities to small businesses.
    Besides the impact on small business Federal contracting, SBA also 
evaluates the impact of a proposed size standard revision on SBA's loan 
programs. For this, SBA examines the data on volume and number of its 
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 current size standards have 
impeded financial assistance to small businesses, higher size standards 
may be 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 standards, SBA does not consider this factor when 
determining the size standard.

Sources of Industry and Program Data

    The primary source of industry data that SBA used in evaluating 
industries in NAICS Sectors 52 and 55 that have receipts based size 
standards is a special tabulation of the 2007 Economic Census (see 
www.census.gov/econ/census07/) prepared by the U.S. Bureau of the 
Census (Census Bureau) for SBA. The 2007 Economic Census data are the 
latest available. 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 Industry (6-digit level), 
Industry Group (4-digit level), Subsector (3-digit level), and Sector 
(2-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, 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.
    Five of the seven industries within NAICS Subsector 525 (Funds, 
Trusts and Other Financial Vehicles) are not covered by the 2007 
Economic Census. All industries in that Subsector currently have a 
common size standard. To maintain the common size standard, in this 
proposed rule, SBA applies the results for the two industries (NAICS 
525910, Open End Investment Funds, and NAICS 525990, Other Financial 
Vehicles) for which the Economic Census data are available to those 
five industries.
    To evaluate industries in NAICS Sector 52 that have assets based 
size standards, as discussed below, SBA obtained the data from the 
Statistics on Depository institutions (SDI) database of the Federal 
Depository Insurance Corporation (FDIC) between 1984 and 2011 (http://www2.fdic.gov/sdi/main.asp). SDI does not include a field to classify 
the institutions by the NAICS definition. However, it has a field that 
identifies an institution's primary specialization in terms of asset 
concentration and another field that identifies each institution as a 
bank or thrift. Since the SDI database does not identify minority owned 
financial institutions from others, SBA identified them using data on 
financial institutions that participate in the Department of the 
Treasury's Minority Bank Deposit Program, compiled by the Federal 
Reserve Board (FRB) (http://www.federalreserve.gov/releases/mob/). To 
examine characteristics of minority owned financial institutions, SBA 
merged the FRB data with SDI database using the common identification 
number for each institution.
    The SDI database does not include Credit Unions, NAICS 522130, 
while the FRB data is limited to minority-owned credit unions only. The 
data to evaluate the Credit Unions industry were based on call reports 
for the fourth quarters of 1994 and 2011 from the National Credit Union 
Administration (NCUA) Web site (http://www.ncua.gov/DataApps/QCallRptData/Pages/CallRptData.aspx). The earliest year for which these 
data were available on the NCUA Web site is 1994.
    To calculate average assets, SBA used sales to total assets ratios 
from the Risk Management Association's Annual Statement Studies, 2008-
2010.

[[Page 55741]]

    To evaluate Federal contracting trends, SBA examined data on 
Federal contract awards for fiscal years 2008-2010. The data are 
available from the U.S. General Service Administration's Federal 
Procurement Data System--Next Generation (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 SBA uses in its size 
standards analysis are documented in detail in SBA's ``Size Standards 
Methodology'' White Paper, which is available at 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, and (3) within a 
specific small business definition or size standard established by 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 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 the current 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 
applied to one or only a few industries. SBA believes that such a large 
number of different small business size standards are 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.
    The SBA proposes, therefore, to apply one of eight receipts based 
size standards to each industry in NAICS Sectors 52 and 55 that has a 
receipts based standard. 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. SBA 
established these eight receipts based size standard based on the 
current minimum, the current maximum, and the most commonly used 
current receipts based size standards. At the start of the current 
comprehensive review, the most commonly used receipts based size 
standards clustered around the following--$2.5 million to $4.5 million, 
$7 million, $9 million to $10 million, $12.5 million to $14.0 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. The lowest or minimum 
receipts based size level will be $5 million. Other than the size 
standards for agriculture that are statutorily set at $0.75 million and 
those based on commissions (such as real estate brokers and travel 
agents), $5 million includes those industries with the lowest receipts 
based standards, which ranged from $2 million to $4.5 million. Among 
the higher level size clusters, SBA has set four fixed levels: $10 
million, $14 million, $25.5 million, and $35.5 million. Because of the 
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 reflect roughly the same proportional 
differences as between 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 separate size standard 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 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, NAICS 541519, and NAICS 811212), even though the industry 
data might support a distinct size standard for each industry (57 FR 
27906 (June 23, 1992)). More recently SBA adopted common size standards 
for some of the industries in NAICS Sector 44-45, Retail Trade (75 FR 
61597 (October 6, 2010)), NAICS Sector 54, Professional, Scientific and 
Technical Services (77 FR 7490 (February 10, 2012)), and NAICS Sector 
48-49, Transportation and Warehousing (77 FR 10943 (February 24, 
2012)).
    In NAICS Sector 52, currently all industries in NAICS Industry 
Group 5221 and NAICS Industries 522210 and 522293 have a common size 
standard of $175 million in total assets. Similarly, all other 
industries in NAICS Sector 52, with an exception of NAICS Industry 
524126 which has a size standard of 1,500 employees, have a common size 
standard of $7 million in average annual receipts. Based on the 
characteristics of those industries, SBA proposes to retain common size 
standards for all industries within NAICS Industry Group 5222 (with the 
exception of NAICS 522210, Credit Card Issuing). NAICS 522210 currently 
has an assets based size standard and based on the evaluation of 
business operations and characteristics of firms in this industry SBA 
proposes to maintain the assets based size standard for this industry. 
NAICS 522293, International Trade Financing, also has an assets based 
size standard currently, but based on the evaluation of business 
operations and characteristics of firms involved in this industry, SBA 
proposes to replace the assets based size standard with a receipts 
based size standard for this industry. In addition, SBA proposes to 
apply the same common receipts based size standard for NAICS 522293 as 
that for NAICS Industry Group 5222 (except for NAICS 522210). SBA also 
proposes common size standards for industries within NAICS Subsector 
523, NAICS Industry Group 5241 (with exception of NAICS 524126), and 
NAICS Subsector 525. Whenever SBA proposes a common size standard for 
closely related industries it will provide its justification.

Evaluation of Industry Structure

    SBA evaluated 29 industries in NAICS Sector 52, Finance and 
Insurance, and two industries in NAICS Sector 55, Management of 
Companies and Enterprises (for which industry data were available from 
the 2007 Economic Census), to assess the appropriateness of

[[Page 55742]]

the current receipts based size standards. For this, as described 
above, SBA compared data on the economic characteristics of each of 
those industries to the average characteristics of industries in two 
comparison groups. The first comparison group consists of all 
industries with $7 million size standards and is referred to as the 
``receipts based anchor comparison group.'' Because the goal of SBA's 
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 are similar to the average 
characteristics of industries in the anchor comparison group, the 
anchor size standard is generally 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 proposed 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, Average Characteristics of 
Receipts Based Comparison Groups, shows the average firm size (both 
simple and weighted), average assets size, four-firm concentration 
ratio, average receipts of the four largest firms, and the Gini 
coefficient for both anchor level and higher level comparison groups 
for receipts based size standards.

                                          Table 1--Average Characteristics of Receipts Based Comparison Groups
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                           Average firm size ($ million)                                      Average
                                                         --------------------------------     Average        Four-firm      receipts of
             Receipts based comparison group                                               assets  size    concentration   four largest        Gini
                                                              Simple         Weighted       ($ million)     ratio  (%)       firms ($       coefficient
                                                              average         average                                       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, the $7 million anchor size standard is 
appropriate for that factor.
    An industry factor significantly above or below the anchor 
comparison group will generally imply 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 (($3.30 
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 $7.0 million to estimate a size standard of $18.61 million ([{$29.0 
million - $7.0 million{time}  * 0.528] + $7.0 million = $18.61 
million). The final step is to round the estimated $18.61 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 on its Web site at 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, Values of Industry Factors and Supported Size 
Standards, (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 avg.
                               Or if weighted     Or if avg.      receipts of                      Then implied
  If simple avg.  receipts     avg. receipts   assets size  ($    largest four      Or if Gini     size 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         0.753 to 0.788.            19.0
                                                                 1,014.1.
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.

[[Page 55743]]

 
4.87 to 5.71................  111.33 to        3.08 to 3.61...  1,309.1 to       0.823 to 0.853.            30.0
                               133.41.                           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 the success of small businesses in getting Federal 
contracts under the existing size standards. For industries where the 
small business share of total Federal contracting dollars is 10 to 30 
percent lower than the small business 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 the 
small business 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 
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 its size standard analysis and suggestions for alternative 
methods and other relevant information on small business experience in 
the Federal contract market that SBA should consider.
    Eight of the 29 industries in NAICS Sector 52 that have receipts 
based size standards averaged $100 million or more annually in Federal 
contracting during fiscal years 2008-2010. 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 
eight industries and a separate size standard was derived for that 
factor for each of them. Federal contracting averaged less than $100 
million annually for both industries in NAICS Sector 55 and was not 
included in the calculations of new size standards for them.

New Size Standards Based on Industry and Federal Contracting Factors

    Table 3, Size Standards Supported by Each Factor for Each Industry 
(millions of dollars), shows the results of analyses of industry and 
Federal contracting factors for each industry covered by this proposed 
rule. Many 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 only if its value is 
40 percent or more. If the four-firm concentration ratio is 40 percent 
or more, SBA indicates in column 6 the average size of the industry's 
four largest 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, 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]
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                                                                          Federal
                                                       Simple    Weighted   Average   Four-firm  Four-firm      Gini      contract   New size   Current
                  NAICS code/title                    average    average     assets   ratio (%)   average   coefficient    factor    standard     size
                                                     firm size  firm size     size                  size                    (%)                 standard
--------------------------------------------------------------------------------------------------------------------------------------------------------
522220.............................................      $48.8     $434.1     $162.7       42.1  $13,199.9        0.880  .........  .........  .........
Sales Financing....................................       35.5       35.5       35.5  .........       35.5        $35.5  .........       35.5       $7.0
522291.............................................       11.8      364.4       35.4       61.2    6,874.4        0.940  .........  .........  .........
Consumer Lending...................................       35.5       35.5       35.5  .........       35.5        $35.5  .........       35.5        7.0
522292.............................................       11.5      279.0       31.4       38.5    9,127.3        0.930  .........  .........  .........
Real Estate Credit.................................       35.5       35.5       35.5  .........  .........        $35.5  .........       35.5        7.0
522294.............................................      796.6    6,175.9    2,987.1       97.9   25,931.0        0.871  .........  .........  .........
Secondary Market Financing.........................       35.5       35.5       35.5  .........       35.5        $35.5  .........       35.5        7.0
522298.............................................       16.6      750.8       62.4  .........  .........        0.959  .........  .........  .........
All Other Nondepository Credit Intermediation......       35.5       35.5       35.5  .........  .........        $35.5  .........       35.5        7.0
522310.............................................        0.6        6.2        1.2        5.2      186.3        0.583  .........        7.0  .........
Mortgage and Nonmortgage Loan Brokers..............        5.0        5.0       10.0  .........  .........         $5.0  .........  .........        7.0
522320.............................................       18.9      387.6       12.9       33.1    3,624.7        0.934        1.9  .........  .........
Financial Transactions, Reserve, and Clearinghouse        35.5       35.5       35.5  .........  .........        $35.5  .........       35.5        7.0
 Activities........................................
522390.............................................        1.9       47.2        1.9       19.6      602.8        0.834      -17.0  .........  .........
Other Activities Related to Credit Intermediation..       10.0       14.0       19.0  .........  .........        $30.0       10.0       19.0        7.0
523110.............................................       74.9    1,453.1       86.4       51.7   26,248.4        0.941       -1.1  .........  .........
Investment Banking and Securities Dealing..........       35.5       35.5       35.5  .........       35.5        $35.5  .........       35.5        7.0
523120.............................................       17.4      581.4        9.7       36.9   14,369.4        0.952  .........  .........  .........
Securities Brokerage...............................       35.5       35.5       35.5  .........  .........        $35.5  .........       35.5        7.0

[[Page 55744]]

 
523130.............................................        8.4      118.6       13.3       43.4      756.7        0.903  .........  .........  .........
Commodity Contracts Dealing........................       35.5       30.0       35.5  .........       19.0        $35.5  .........       30.0        7.0
523140.............................................        4.5      120.3        1.0       46.9      654.9        0.886  .........  .........  .........
Commodity Contracts Brokerage......................       25.5       30.0        7.0  .........       14.0        $35.5  .........       19.0        7.0
523210.............................................      467.4      852.8  .........  .........  .........        0.454  .........  .........  .........
Securities and Commodity Exchanges.................       35.5       35.5  .........  .........  .........         $5.0  .........       19.0        7.0
523910.............................................        2.0       16.6        6.1       15.0      636.0        0.797      -27.7  .........  .........
Miscellaneous Intermediation.......................       10.0        7.0       35.5  .........  .........        $25.5       10.0       19.0        7.0
523920.............................................       10.2      212.6        6.5       12.0    5,350.2        0.914  .........  .........  .........
Portfolio Management...............................       35.5       35.5       35.5  .........  .........        $35.5  .........       35.5        7.0
523930.............................................        1.5       40.3        0.6       26.7    1,531.6        0.815  .........  .........  .........
Investment Advice..................................        7.0       10.0        5.0  .........  .........        $25.5  .........       14.0        7.0
523991.............................................        5.3       64.8        8.9       35.2      887.0        0.876  .........  .........  .........
Trust, Fiduciary and Custody Activities............       30.0       19.0       35.5  .........  .........        $35.5  .........       30.0        7.0
523999.............................................        6.7      124.9       28.8  .........  .........        0.909        7.0  .........  .........
Miscellaneous Financial Investment Activities......       35.5       30.0       35.5  .........  .........        $35.5  .........       35.5        7.0
524113.............................................      635.4    2,977.0    1,003.3       26.8   35,953.1        0.787  .........  .........  .........
Direct Life Insurance Carriers.....................       35.5       35.5       35.5  .........  .........        $19.0  .........       30.0        7.0
524114.............................................      554.7    1,746.5      256.0       36.9   45,842.3        0.684       -0.1  .........  .........
Direct Health and Medical Insurance Carriers.......       35.5       35.5       35.5  .........  .........         $5.0  .........       25.5        7.0
524127.............................................        8.9      493.1        4.1       84.3    3,628.8        0.954  .........  .........  .........
Direct Title Insurance Carriers....................       35.5       35.5       35.5  .........       35.5        $35.5  .........       35.5        7.0
524128.............................................       13.7      152.5       19.6       50.9      755.9        0.890  .........       30.0        7.0
Other Direct Insurance (except Life, Health and           35.5       35.5       35.5  .........       19.0        $35.5  .........       30.0        7.0
 Medical) Carriers.................................
524130.............................................      214.5      771.1  .........       50.9    5,405.7        0.724  .........  .........  .........
Reinsurance Carriers...............................       35.5       35.5  .........  .........       35.5        $14.0  .........       30.0        7.0
524210.............................................        0.8       26.0        0.5       10.3    2,729.8        0.667  .........        5.0  .........
Insurance Agencies and Brokerages..................        5.0        7.0        5.0  .........  .........         $5.0  .........  .........        7.0
524291.............................................        2.0       73.7  .........       46.7      841.7        0.840  .........  .........  .........
Claims Adjusting...................................       10.0       19.0  .........  .........       19.0        $30.0  .........       19.0        7.0
524292.............................................        8.7       76.2        4.1       21.7    1,622.9        0.847       -4.0  .........  .........
Third Party Administration of Insurance and Pension       35.5       19.0       35.5  .........  .........        $30.0  .........       30.0        7.0
 Funds.............................................
524298.............................................        1.9       25.5        0.8       30.6      278.7        0.817      -24.4  .........  .........
All Other Insurance Related Activities.............       10.0        7.0        7.0  .........  .........        $25.5      $10.0       14.0        7.0
525910.............................................       10.0       90.3  .........  .........  .........        0.865  .........  .........  .........
Open-End Investment Funds..........................       35.5       25.5  .........  .........  .........        $35.5  .........       35.5        7.0
525990.............................................        2.1       21.4  .........  .........  .........        0.811  .........  .........  .........
Other Financial Vehicles...........................       10.0        7.0  .........  .........  .........        $25.5  .........       19.0        7.0
551111.............................................        9.6       30.1       32.2  .........  .........        0.644  .........  .........  .........
Offices of Bank Holding Companies..................       35.5       10.0       35.5  .........  .........         $5.0  .........       19.0        7.0
551112.............................................        9.4       27.1       35.4  .........  .........        0.668  .........  .........  .........
Offices of Other Holding Companies.................       35.5       10.0       35.5  .........  .........         $5.0  .........       19.0        7.0
--------------------------------------------------------------------------------------------------------------------------------------------------------

Common Size Standards

    When many of the same businesses operate in several closely related 
industries, SBA believes that a common size standard can be more 
appropriate for these industries even if the industry and relevant 
program data might suggest different size standards. For instance, in 
past rules, SBA established a common size standard for Computer Systems 
Design and Related Services (NAICS 541511, NAICS 541112, NAICS 541513, 
NAICS 541519 (excluding the ``exception'' for Information Technology 
Value Added Resellers), and NAICS 811212). Another example is the 
common size standard for certain Architectural, Engineering and Related 
Services. These include NAICS 541310, NAICS 541330 (excluding the 
``exceptions''), Map Drafting (an ``exception'' under NAICS 541340), 
NAICS 541360, and NAICS 541370 (64 FR 28275 (May 25, 1999)). As stated 
previously, more recently SBA adopted common size standards for the 
industries in NAICS Sector 44-45, Retail Trade (75 FR 61597 (October 6, 
2010)), NAICS Sector 54, Professional, Scientific and Technical 
Services (77 FR 7490 (February 10, 2012)), and NAICS Sector 48-49, 
Transportation and Warehousing (77 FR 10943 (February 24, 2012)). 
Similarly, SBA proposed common size standards for several other 
industries in NAICS Sector 56, Administrative and Support, Waste 
Management and Remediation Services (76 FR 63510 (October 12, 2011)), 
NAICS Sector 53, Real Estate and Rental and Leasing (76 FR 70680 
(November 15, 2011)), and NAICS Sector 62, Health Care and Social 
Assistance (77 FR 11001 (February 24, 2012)).
    For NAICS Sector 52, SBA proposes, as an alternative to a separate 
size standard for each industry, common size standards for industries 
in two NAICS Subsectors and two NAICS Industry Groups, as shown in 
Table 4, NAICS Subsectors and Industry Groups for Common Size 
Standards. SBA evaluated industry and Federal contracting factors and 
derived a common size standard for each NAICS Subsector and Industry 
Group using the same method as described above. The results are in 
Table 5, Size Standards Supported by Each Factor for Subsectors and 
Industry Groups, which immediately follows Table 4, below.

[[Page 55745]]



 Table 4--NAICS Subsectors and Industry Groups for Common Size Standards
------------------------------------------------------------------------
 Subsectors/industry groups:   Subsector/industry    Industries: 6-digit
         NAICS codes               group title           NAICS codes
------------------------------------------------------------------------
5222 \a\ (except NAICS        Nondepository Credit  522220, 522291,
 522210).                      Intermediation.       522292, 522293,
                                                     522294, 522298.
523.........................  Securities,           523110, 523120,
                               Commodity             523130, 523140,
                               Contracts, and        523210, 523910,
                               Other Financial       523920, 523930,
                               Investments and       523991, 523999.
                               Related Activities.
5241 \b\ (except NAICS        Insurance Carriers..  524113, 524114,
 524126).                                            524127, 524128,
                                                     524130.
525 \c\.....................  Funds, Trusts, and    525110, 525120,
                               Other Financial       525190, 525910,
                               Vehicles.             525920, 525930,
                                                     525990.
------------------------------------------------------------------------
\a\ NAICS 522210 is excluded from this Industry Group as that industry
  currently has an asset based size standard. NAICS 522293 also has an
  assets based size standard currently, but SBA proposes to replace it
  with the same common size standard that SBA is proposing for NAICS
  Industry Group 5222 (except NAICS 522210).
\b\ NAICS 524126 is excluded from this Industry Group as that industry
  currently has an employee based size standard. This will be reviewed
  at a later date along with other employee based size standards.
\c\ The 2007 Economic Census special tabulation includes data only for
  two NAICS codes within NAICS Subsector 525, namely 525910 (Open-End
  Investment Funds) and 525990 (Other Financial Vehicles). Consequently,
  SBA proposes to apply the results from NAICS 525910 and 525990 to all
  remaining industries within this Subsector because they all share the
  same size standard currently.


                                   Table 5--Size Standards Supported by Each Factor for Subsectors and Industry Groups
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                     Simple    Weighted                                                           Calculated
                                                    average    average    Average              Four-firm                Federal      size       Current
   NAICS code/Subsector or Industry Group title    firm size  firm size    assets   Four-firm   average       Gini      contract   standard      size
                                                       ($         ($      size ($   ratio (%)   size ($   coefficient    factor       ($       standard
                                                    million)   million)   million)              million)                  (%)      million)   ($million)
(1)                                                      (2)        (3)        (4)        (5)        (6)          (7)        (8)         (9)        (10)
--------------------------------------------------------------------------------------------------------------------------------------------------------
5222 (except NAICS 522210).......................      $23.0     $550.3      $75.8  .........  .........        0.944  .........  ..........  ..........
Nondepository Credit Intermediation..............       35.5       35.5       35.5  .........  .........         35.5  .........        35.5         7.0
523..............................................       10.6      319.1        7.7       24.6   37,547.5       0. 938        4.5  ..........  ..........
Securities, Commodity Contracts, and Other              35.5       35.5       35.5  .........  .........         35.5  .........        35.5         7.0
 Financial Investments and Related Activities....
5241 (except NAICS 524126).......................      256.0    1,907.7      185.6  .........  .........        0.866       -0.2  ..........  ..........
Insurance Carriers...............................       35.5       35.5       35.5  .........  .........        35. 5  .........        35.5         7.0
525..............................................        3.6       43.8       14.7  .........  .........       0. 860  .........  ..........  ..........
Funds, Trusts, and Other Financial Vehicles......       19.0       14.0       35.5  .........  .........         35.5  .........        30.0         7.0
--------------------------------------------------------------------------------------------------------------------------------------------------------

Evaluation of the Assets Based Size Standard

    In 1984, SBA published a notice of policy allowing financial 
services that prime contractors procure from small minority owned and 
controlled financial institutions to qualify as subcontracts for 
purposes of meeting subcontracting goals and credits (see 49 FR 13091-
01 (April 2, 1984)). Concurrently, SBA also published a proposed rule 
that a financial institution with total assets of not more than $100 
million would be considered small (see 49 FR 13052-01 (April 2, 1984)). 
SBA adopted the $100 million in total assets as the size standard for 
financial institutions (see 49 FR 49398-01 (October 16, 1984)). Over 
time, the definition of small depository institution was extended to 
other financial institutions, such as Credit Cards Issuing and 
International Trade Financing. Since then, along with other monetary 
based size standards, SBA has periodically adjusted the assets based 
size standard for inflation, with the latest adjustment increasing it 
to $175 million (see 73 FR 41237 (July 18, 2008)).
    Currently, the $175 million assets based size standard applies to 
four industries within NAICS Industry Group 5221, Depository Credit 
Intermediation, and two industries within NAICS Industry Group 5222, 
Non-depository Credit Intermediation. These are NAICS 522110 
(Commercial Banking), NAICS 522120 (Savings Institutions), NAICS 522130 
(Credit Unions), NAICS 522190 (Other Depository Credit Intermediation), 
NAICS 522210 (Credit Card Issuing), and NAICS 522293 (International 
Trade Financing).
    Because only a small number of industries have assets based size 
standards, no comparison groups could be developed to assess differing 
characteristics of individual industries based on total assets. Thus, 
most of the SBA's size standards methodology is not applicable to 
analyzing the assets based size standards for financial institutions. 
Consequently, in this proposed rule, SBA has examined trends on 
financial industry factors since 1984 to assess whether the current 
$175 million assets based size standard should be modified to reflect 
today's financial industry structure. Specifically, SBA evaluated 
changes in average firm size, industry concentration, and distribution 
of firms by size (i.e., Gini coefficient) for financial institutions. 
Similarly in the 1984 proposed and final rules, SBA both evaluated 
depository institutions as a whole and the minority owned and 
controlled depository institutions separately.
    SBA evaluated all depository institutions (except for Credit 
Unions, NAICS 522130 which were evaluated using the NCUA data) using 
SDI data. SDI does not provide the NAICS definition for every firm 
included in the database. However, it has a field called Asset 
Concentration Hierarchy, which can be used to identify each 
institution's primary specialization in terms of asset concentration, 
such as credit card services. Another field, Bank Charter Class, 
identifies the institutions as banks or thrifts. Because the data are 
not separated by NAICS code, and also the differences among services 
offered by different financial instructions (such as commercial banks, 
saving institutions, and credit card issuing companies) have greatly 
diminished over the recent decades, SBA has analyzed these financial 
institutions as one industry group.
    Since the SDI database does not distinguish minority owned 
financial institutions from others, SBA identified them using the data 
on financial institutions that participate in the

[[Page 55746]]

Department of the Treasury's Minority Bank Deposit Program, compiled by 
the Federal Reserve Board (FRB) (http://www.federalreserve.gov/releases/mob/) for the 3rd quarter of 2011, and examined their 
characteristics using the assets data from the SDI database. The 
earliest period the FRB data are available is the 2nd quarter of 2003. 
Thus, to fully capture the changes in industry structure of minority 
owned financial institutions since 1984, SBA has compared the results 
based on the FRB and SDI data with those based on the data for minority 
owned banks from the 1984 proposed and final rules.
    SBA evaluated the changes in the industry structure of Credit 
Unions (NAICS 522130) between 1994 and 2011, using the data from the 
5300 Call Reports available on the NCUA Web site (http://www.ncua.gov/DataApps/QCallRptData/Pages/default.aspx).
    The number of all depository institutions (excluding Credit 
Unions), total assets and calculated industry factors for 1984 and 2011 
are shown in Table 6, Industry Factors for All Depository Institutions 
(excluding Credit Unions). Similar calculations for the minority owned 
depository institutions (excluding Credit Unions) are shown in Table 7, 
Industry Factors for Minority Owned Depository Institutions (excluding 
Credit Unions). The number of Credit Unions, total assets and 
calculated industry factors for 1995 and 2011 are shown in Table 8, 
Industry Factors for Credit Unions. For comparability, all monetary 
values are expressed in 2011 dollars.

                                   Table 6--Industry Factors for All Depository Institutions (Excluding Credit Unions)
                                                  [All monetary values are in millions of 2011 dollars]
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                              Simple         Weighted
                  Year                       Number of     Total assets    average firm    average firm      Four-firm       Four-firm         Gini
                                           institutions                        size            size          ratio (%)     average size     coefficient
--------------------------------------------------------------------------------------------------------------------------------------------------------
1984*...................................          17,901      $6,702,968            $374         $12,319            10.1        $168,843           0.798
2011....................................           7,445      13,843,140           1,859          81,690            41.4       1,433,933           0.907
--------------------------------------------------------------------------------------------------------------------------------------------------------
Source: SDI/FDIC (http://www2.fdic.gov/sdi/main.asp).
\*\ 1984 dataset is not available online, but is available from FDIC on request.


                             Table 7--Industry Factors for Minority Owned Depository Institutions (excluding Credit Unions).
                                                  [All monetary values are in millions of 2011 dollars]
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                              Simple         Weighted
                  Year                       Number of     Total assets    average firm    average firm      Four-firm       Four-firm         Gini
                                           institutions                        size            size          ratio (%)     average size     coefficient
--------------------------------------------------------------------------------------------------------------------------------------------------------
1984 \a\................................              96          $7,556             $79            $274             N/A             N/A           0.491
2011 \b\................................             108          39,138             362           1,662            40.0          $3,917           0.626
--------------------------------------------------------------------------------------------------------------------------------------------------------
Source: a. 1984 proposed (49 FR 13052-01 (April 2, 1984)) and final (49 FR 49398-01 (October 16, 1984)) rules.
b. FRB (http://www.federalreserve.gov/releases/mob/) and FDIC.


                                                       Table 8--Industry Factors for Credit Unions
                                                  [All monetary values are in millions of 2011 dollars]
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                              Simple         Weighted
                  Year                       Number of     Total assets    average firm    average firm      Four-firm       Four-firm         Gini
                                           institutions                        size            size          ratio (%)     average size     coefficient
--------------------------------------------------------------------------------------------------------------------------------------------------------
1994....................................          12,201        $420,606             $34            $733             5.5          $5,742           0.793
2011....................................           7,240         974,187             135           3,543             9.8           3,907           0.829
--------------------------------------------------------------------------------------------------------------------------------------------------------
Source: NCUA, http://www.ncua.gov/DataApps/QCallRptData/Pages/CallRptData.aspx.

    During the 1984 to 2011 span, as shown in Table 6, Industry Factors 
for All Depository Institutions (excluding Credit Unions), above, the 
financial industry saw a large drop in the total number of financial 
institutions, but at the same time it saw a significant increase in 
asset concentration among fewer of them. The total number of all 
financial institutions decreased more than half from 17,901 in 1984 to 
7,445 in 2011, while their total assets (measured in 2011 dollars) more 
than doubled during the same period. The average firm size (measured in 
total assets) also showed significant increase from 1984 to 2011, with 
their simple average firm size increasing by a factor of 5 and the 
weighted average firm size increasing by a factor of nearly 7. The four 
largest institutions' share of total assets (also referred to as four-
firm concentration ratio) more than quadrupled (from 10.1% to 41.4%) 
and their average size increased more than 8 times. The Gini 
coefficient value also increased from 0.798 in 1984 to 0.907 in 2011, 
thereby further confirming the trend of increased concentration in the 
financial industry. The average firm size and Gini coefficient value 
for the minority owned banks in Table 7, Industry Factors for Minority 
Owned Depository Institutions (excluding Credit Unions), also strongly 
confirmed the trend of increased concentration in the financial 
industry. As shown in Table 8, Industry Factors for Credit Unions, 
above, the number of Credit Unions decreased by 40 percent and their 
total assets more than doubled between 1995 and 2011. The average firm 
size, four-firm statistics, and Gini coefficient for Credit Unions also 
indicated increased concentration.
    For all the six industries in NAICS Subsector 522 that have the 
$175 million assets based size standard, Federal contracting dollars 
averaged only about $22 million per year during fiscal years 2008-2010. 
Thus, under SBA's methodology, Federal contracting was not a 
significant factor for

[[Page 55747]]

establishing a size standard for these industries.
    Besides the industry structure, SBA also reviewed the relevant 
literature and information to determine if total assets are a suitable 
measure of bank size given the current structure of the banking 
industry. SBA has found that total assets are still the commonly 
accepted measure of bank size. For example, the Federal Reserve Board, 
Federal Deposit Insurance Corporation, and U.S. Treasury Department all 
use total assets to measure bank size for their regulatory and program 
purposes. Accordingly, SBA proposes to retain total assets to measure 
the size of financial institutions.
    The current structure of the financial industry relative to that 
for the 1980s and 1990s, as discussed above, strongly supports 
increasing the current $175 million assets based size standard. The 
changes in industry factors for all financial institutions in Table 6 
as well as the results for the minority owned institutions in Table 7 
and Credit Unions in Table 8 support a size standard in the range of 
$500 million to $1 billion in total assets. SBA is proposing $500 
million as it would include about 82 percent of the financial 
institutions and 7 percent of total assets of all financial 
institutions as compared to 54 percent of institutions and only about 3 
percent of total assets under the current $175 million. It would 
include about 82 percent of institutions and one-third of the total 
assets of all minority owned institutions, as compared to 58 percent of 
institutions and 14 percent of total assets under the current $175 
million. Similarly, the $500 million size standard would include nearly 
95 percent of all Credit Unions and 36 percent of their total assets, 
compared to 87 percent of all Credit Unions and 19 percent of their 
total assets under the current $175 million size standard. SBA 
considered proposing $1 billion in total assets, but that would include 
all but the five largest minority owned banks, some of which may not be 
in need of Federal assistance.
    The proposed $500 million assets based size standard would apply to 
the following five industries within NAICS Subsector 522, Credit 
Intermediation and Related Activities: NAICS 522110 (Commercial 
Banking), NAICS 522120 (Savings Institutions), NAICS 522130 (Credit 
Unions), NAICS 522190 (Other depository Credit Intermediation), and 
NAICS 522210 (Credit Card Issuing).

Special Considerations

NAICS 522293, International Trade Financing

    NAICS 522293, International Trade Financing, currently has the $175 
million assets based size standard. However, there are no assets data 
available to evaluate this industry. Furthermore, most of the receipts 
and employment data for this industry are suppressed in the 2007 
Economic Census special tabulation due to the disclosure limitation. In 
terms of average size and distribution of firms by receipts and 
employment size based on SBA's estimated values for missing data, firms 
primarily engaged in NAICS 522293 are much more similar to those 
primarily engaged in other industries within NAICS Industry Group 5222 
(except for NAICS 522210) that have receipts based size standards than 
firms primarily engaged in industries in NAICS Industry Group 5221 and 
NAICS 522210 that have assets based sized standards. Accordingly, for 
NAICS 522293 SBA is proposing the same $35.5 million receipts based 
size standard that it has proposed for all industries in NAICS Industry 
Group 5222 (except for NAICS 522210). SBA welcomes feedback on this 
proposal.

NAICS Subsector 525, Funds, Trusts, and Other Financial Vehicles

    As noted earlier, the 2007 Economic Census special tabulation 
includes data only for two NAICS codes within NAICS Subsector 525: (1) 
NAICS 525910, Open-End Investment Funds: and (2) NAICS 525990, Other 
Financial Vehicles. Because all industries in that Subsector currently 
share the same $7 million receipts based size standard, SBA applies the 
results based on data for NAICS 525910 and 525990 to all remaining 
industries within this Subsector and proposes the same common size 
standard of $30 million in average annual receipts for all industries 
in the Subsector. SBA seeks comments on this proposal as well as 
suggestions on alternative data sources, if any, to evaluate those 
industries.

NAICS 524126, Direct Property and Causality Insurance Carriers

    The current size standard for NAICS 524126, Direct Property and 
Causality Insurance, is 1,500 employees, which SBA has not reviewed in 
this proposed rule. SBA will review this size standard together with 
other employee based size standards at a later date. Until then, SBA 
proposes to retain the current 1,500-employee size standard for NAICS 
524126.

Evaluation of SBA Loan Data

    Before deciding on an industry's size standard, SBA also considers 
the impact of new or revised size 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 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 current 
size standards that use SBA's 7(a) and 504 loans.
    Furthermore, the Jobs Act established an alternative size standard 
for SBA's 7(a) and 504 Loan Programs. Specifically, an applicant 
exceeding an NAICS industry size standard may still be eligible if its 
maximum tangible net worth does not exceed $15 million and its average 
net income after Federal income taxes (excluding any carry-over losses) 
for the 2 full fiscal years before the date of the application is not 
more than $5 million.
    Therefore, no size standard in NAICS Sectors 52 and 55 needs an 
adjustment based on this factor.

Proposed Changes to Size Standards

    Table 9, Summary of Size Standards Analysis, below, summarizes the 
results of SBA's analyses of industry specific size standards from 
Table 3, the results of common size standards analysis from Table 5, 
and the results of the analysis of the assets based size standard. With 
the proposed change of an assets based size standard to a receipts 
based size standard for NAICS 522293, International Trade Financing, 
the results show increases in size standards for 37 industries, a 
decrease for one, and no change for one industry in NAICS Sector 52. 
The results also show increases in size standards for both industries 
in NAICS Sector 55.

[[Page 55748]]



                                                       Table 9--Summary of Size Standards Analysis
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                                                    Calculated
                                                                                                     industry-
          NAICS code                  NAICS title           Current size standard  ($ million)     specific size    Calculated common size standard  ($
                                                                                                   standard  ($                  million)
                                                                                                     million)
--------------------------------------------------------------------------------------------------------------------------------------------------------
522110.......................  Commercial Banking......  175 million in assets..................  ..............  $500 million in assets.
522120.......................  Savings Institutions....  175 million in assets..................  ..............  500 million in assets.
522130.......................  Credit Unions...........  175 million in assets..................  ..............  500 million in assets.
522190.......................  Other Depository Credit   175 million in assets..................  ..............  500 million in assets.
                                intermediation.
522210.......................  Credit Card Issuing.....  175 million in assets..................  ..............  500 million in assets.
522220.......................  Sales Financing.........  7.0....................................           $35.5  35.5.
522291.......................  Consumer Lending........  7.0....................................            35.5  35.5.
522292.......................  Real Estate Credit......  7.0....................................            35.5  35.5.
522293.......................  International Trade       175 million in assets..................  ..............  35.5.
                                Financing.
522294.......................  Secondary Market          7.0....................................            35.5  35.5.
                                Financing.
522298.......................  All Other Nondepository   7.0....................................            35.5  35.5.
                                Credit Intermediation.
522310.......................  Mortgage and Nonmortgage  7.0....................................             7.0  ......................................
                                Loan Brokers.
522320.......................  Financial Transactions,   7.0....................................            35.5  ......................................
                                Reserve, and
                                Clearinghouse
                                Activities.
522390.......................  Other Activities Related  7.0....................................            19.0  ......................................
                                to Credit
                                Intermediation.
523110.......................  Investment Banking and    7.0....................................            35.5  35.5.
                                Securities Dealing.
523120.......................  Securities Brokerage....  7.0....................................            35.5  35.5.
523130.......................  Commodity Contracts       7.0....................................            30.0  35.5.
                                Dealing.
523140.......................  Commodity Contracts       7.0....................................            19.0  35.5.
                                Brokerage.
523210.......................  Securities and Commodity  7.0....................................            19.0  35.5.
                                Exchanges.
523910.......................  Miscellaneous             7.0....................................            19.0  35.5.
                                Intermediation.
523920.......................  Portfolio Management....  7.0....................................            35.5  35.5.
523930.......................  Investment Advice.......  7.0....................................            14.0  35.5.
523991.......................  Trust, Fiduciary and      7.0....................................            30.0  35.5.
                                Custody Activities.
523999.......................  Miscellaneous Financial   7.0....................................            35.5  35.5.
                                Investment Activities.
524113.......................  Direct Life Insurance     7.0....................................            30.0  35.5.
                                Carriers.
524114.......................  Direct Health and         7.0....................................            25.5  35.5.
                                Medical Insurance
                                Carriers.
524127.......................  Direct Title Insurance    7.0....................................            35.5  35.5.
                                Carriers.
524128.......................  Other Direct Insurance    7.0....................................            30.0  35.5.
                                (except Life, Health
                                and Medical) Carriers.
524130.......................  Reinsurance Carriers....  7.0....................................            30.0  35.5.
524210.......................  Insurance Agencies and    7.0....................................             5.0  ......................................
                                Brokerages.
524291.......................  Claims Adjusting........  7.0....................................            19.0  ......................................
524292.......................  Third Party               7.0....................................            30.0  ......................................
                                Administration of
                                Insurance and Pension
                                Funds.
524298.......................  All Other Insurance       7.0....................................            14.0  ......................................
                                Related Activities.
525110.......................  Pension Funds...........  7.0....................................  ..............  30.0.
525120.......................  Health and Welfare Funds  7.0....................................  ..............  30.0.
525190.......................  Other insurance Funds...  7.0....................................  ..............  30.0.
525910.......................  Open[dash]End Investment  7.0....................................            35.5  30.0.
                                Funds.
525920.......................  Trusts, Estates and       7.0....................................  ..............  30.0.
                                Agency Accounts.
525930.......................  Real Estate Investment    7.0....................................  ..............  30.0.
                                Trusts.
525990.......................  Other Financial Vehicles  7.0....................................            19.0  30.0.
551111.......................  Offices of Bank Holding   7.0....................................            19.0  ......................................
                                Companies.
551112.......................  Offices of Other Holding  7.0....................................            19.0  ......................................
                                Companies.
--------------------------------------------------------------------------------------------------------------------------------------------------------

    Although the results in Table 9, Summary of Size Standards 
Analysis, seem to support lowering the size industry for one industry 
(NAICS 524210, Insurance Agencies and Brokerages), SBA believes that 
lowering small business size standards is not in the best interest 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 into law 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 is still high at 
8.2 percent in June 2012 and is forecast to remain around this level at 
least through the end of 2012. Recently, Congress passed and the 
President signed the 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; and provides $12 billion in tax relief 
to help small businesses invest in their firms and create jobs. A 
proposal to reduce size standards will have an immediate impact on 
jobs, and it would be contrary to the expressed will of the President 
and the Congress.
    Lowering size standards would decrease the number of firms that 
participate in Federal financial and procurement assistance programs 
for small businesses. It would also affect small businesses that are 
now exempt from or receive some form of relief from myriad other 
Federal regulations that use SBA's size standards. That impact could 
take the form of increased fees,

[[Page 55749]]

paperwork, or other compliance requirements for small businesses. 
Furthermore, size standards based solely on analytical results without 
any other considerations can cut off currently eligible small firms 
from those programs and benefits. 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 intend to reduce size standards for any 
industries. For one industry where analysis might seem to support 
lowering the size standard, SBA proposes to retain the current size 
standard.
    Furthermore, as stated previously, the Small Business Act requires 
the Administrator to ``* * * consider other factors deemed to be 
relevant * * *'' to establishing small business size standards. The 
current economic conditions and the impact on job creation are quite 
relevant factors when establishing small business size standards. SBA 
nevertheless invites comments and suggestions on whether it should 
lower the size standard for NAICS 524210, Insurance Agencies and 
Brokerages, to $5 million, or retain the current $7 million, which is 
the anchor standard for receipts based standards.
    Comparing industry specific size standards and common size 
standards within each Industry Group or Subsector, SBA finds that for 
several industries, as shown in Tables 4 and 5 above, common size 
standards are more appropriate for several reasons. First, analyzing 
industries at the more aggregated Industry Group or Subsector levels 
simplifies size standards analysis, and the results will be more 
consistent among related industries. Second, in NAICS Sector 52 most 
industries within each Industry Group or Subsector currently have the 
same size standards and SBA believes it is better to keep the revised 
size standards also same unless industries are significantly different. 
Third, within each Industry Group or Subsector many of the same 
businesses tend to operate in the same multiple industries. Thus, SBA 
believes that common size standards would reflect the Federal 
marketplace in those industries better than different size standards 
for each industry.
    For industries where both industry specific size standards and 
common size standards have been calculated, for the above reasons, SBA 
proposes to apply common size standards. For industries for which SBA 
has not estimated common size standards it proposes to apply industry 
specific size standards. As discussed above, lowering small business 
size standards is inconsistent with what the Federal government is 
doing to stimulate the economy and would discourage job growth for 
which Congress established the Recovery Act and Jobs Act. In addition, 
it would be inconsistent with the Small Business Act requiring the 
Administrator to establish size standards based on industry analysis 
and other relevant factors such as current economic conditions.
    In addition, retaining current standards when the analytical 
results can suggest lowering them 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 proposed rule (76 FR 14323 (March 16, 2011)) and final 
rule (77 FR 7490 (February 10, 2012)) for NAICS Sector 54, 
Professional, Technical, and Scientific Services, the proposed rule (76 
FR 27935 (May 13, 2011)) and final rule ((77 FR 10943 (February 24, 
2012)) for NAICS Sector 48-49, Transportation and Warehousing, and 
proposed rules for NAICS Sector 51, Information (76 FR 63216 (October 
12, 2011)), NAICS Sector 56, Administrative and Support, Waste 
Management and Remediation Services (76 FR 63510 (October 12, 2011)), 
NAICS Sector 61, Educational Services (76 FR 70667 (November 15, 
2011)), NAICS Sector 53, Real Estate and Rental and Leasing (76 FR 
70680 (November 15, 2011)), NAICS Sector 62, Health Care and Social 
Assistance (forthcoming), NAICS Sector 71, Arts, Entertainment and 
Recreation (forthcoming), and NAICS Sector 23, Construction 
(forthcoming). 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.
    Thus, SBA proposes to increase size standards for 37 industries, 
and retain the current size standards for two industries in NAICS 
Sector 52. In addition, SBA proposes to change the measure of size for 
NAICS 522293, International Trade Financing, from total assets to 
annual receipts. SBA also proposes to increase size standards for two 
industries in NAICS Sector 55. The SBA's proposed changes are 
summarized in Table 10, Summary of Proposed Size Standards Revisions, 
below.

                             Table 10--Summary of Proposed Size Standards Revisions
----------------------------------------------------------------------------------------------------------------
                                                 Current size standard  ($         Proposed size standard  ($
       NAICS code            NAICS title                  million)                          million)
----------------------------------------------------------------------------------------------------------------
522110.................  Commercial Banking  175 million in assets............  500 million in assets.
522120.................  Savings             175 million in assets............  500 million in assets.
                          Institutions.
522130.................  Credit Unions.....  175 million in assets............  500 million in assets.
522190.................  Other Depository    175 million in assets............  500 million in assets.
                          Credit
                          intermediation.
522210.................  Credit Card         175 million in assets............  500 million in assets.
                          Issuing.
522220.................  Sales Financing...  7.0..............................  35.5.
522291.................  Consumer Lending..  7.0..............................  35.5.
522292.................  Real Estate Credit  7.0..............................  35.5.
522293.................  International       175 million in assets............  35.5.
                          Trade Financing.
522294.................  Secondary Market    7.0..............................  35.5.
                          Financing.
522298.................  All Other           7.0..............................  35.5.
                          Nondepository
                          Credit
                          Intermediation.
522320.................  Financial           7.0..............................  35.5.
                          Transactions,
                          Reserve, and
                          Clearinghouse
                          Activities.
522390.................  Other Activities    7.0..............................  19.0.
                          Related to Credit
                          Intermediation.
523110.................  Investment Banking  7.0..............................  35.5.
                          and Securities
                          Dealing.
523120.................  Securities          7.0..............................  35.5.
                          Brokerage.
523130.................  Commodity           7.0..............................  35.5.
                          Contracts Dealing.
523140.................  Commodity           7.0..............................  35.5.
                          Contracts
                          Brokerage.
523210.................  Securities and      7.0..............................  35.5.
                          Commodity
                          Exchanges.

[[Page 55750]]

 
523910.................  Miscellaneous       7.0..............................  35.5.
                          Intermediation.
523920.................  Portfolio           7.0..............................  35.5.
                          Management.
523930.................  Investment Advice.  7.0..............................  35.5.
523991.................  Trust, Fiduciary    7.0..............................  35.5.
                          and Custody
                          Activities.
523999.................  Miscellaneous       7.0..............................  35.5.
                          Financial
                          Investment
                          Activities.
524113.................  Direct Life         7.0..............................  35.5.
                          Insurance
                          Carriers.
524114.................  Direct Health and   7.0..............................  35.5.
                          Medical Insurance
                          Carriers.
524127.................  Direct Title        7.0..............................  35.5.
                          Insurance
                          Carriers.
524128.................  Other Direct        7.0..............................  35.5.
                          Insurance (except
                          Life, Health and
                          Medical) Carriers.
524130.................  Reinsurance         7.0..............................  35.5.
                          Carriers.
524291.................  Claims Adjusting..  7.0..............................  19.0.
524292.................  Third Party         7.0..............................  30.0.
                          Administration of
                          Insurance and
                          Pension Funds.
524298.................  All Other           7.0..............................  14.0.
                          Insurance Related
                          Activities.
525110.................  Pension Funds.....  7.0..............................  30.0.
525120.................  Health and Welfare  7.0..............................  30.0.
                          Funds.
525190.................  Other Insurance     7.0..............................  30.0.
                          Funds.
525910.................  Open-End            7.0..............................  30.0.
                          Investment Funds.
525920.................  Trusts, Estates,    7.0..............................  30.0.
                          and Agency Funds.
525930.................  Real Estate         7.0..............................  30.0.
                          Investments Funds.
525990.................  Other Financial     7.0..............................  30.0.
                          Vehicles.
551111.................  Offices of Bank     7.0..............................  19.0.
                          Holding Companies.
551112.................  Offices of Other    7.0..............................  19.0.
                          Holding Companies.
----------------------------------------------------------------------------------------------------------------

Evaluation of Dominance in Field of Operation

    SBA has determined that for the industries in NAICS Sectors 52 and 
55 for which it has proposed to increase size standards, no individual 
firm at or below the proposed size standard will be large enough to 
dominate its field of operation. At the proposed size standards for 
individual industries, if adopted, the small business share of total 
industry receipts among those industries with receipts based size 
standards is, in average, 0.3 percent, varying from .01 percent to 1.3 
percent and the small business share among the industries with assets 
based size standards is .004 percent. These levels of market shares 
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. Whether SBA's proposal to simplify size standards by using 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--is necessary and whether the proposed fixed size levels 
are appropriate. SBA welcomes suggestions on alternative approaches to 
simplifying small business size standards.
    2. Whether SBA's proposal to increase 32 receipts based and five 
assets based size standards and to retain two receipts based size 
standards in NAICS Sector 52, is appropriate given the economic 
characteristics of each industry.
    3. Whether SBA's proposal to increase the two size standards in 
NAICS Sector 55 is appropriate given the economic characteristics of 
each industry.
    4. Whether SBA should change the measure of size for NAICS 522293, 
International Trade Financing, from total assets to annual receipts.
    5. SBA also seeks feedback and suggestions on alternative size 
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.
    6. SBA proposes common receipts based size standards for industries 
within NAICS Subsectors 523 and 525 as well as NAICS Industry Groups 
5222 (except for NAICS 522210) and 5241 (except for NAICS 524126). 
Similarly, SBA proposes a common assets based size standard for three 
industries within NAICS Industry Group 5221 (except for NAICS 522130) 
and for NAICS 522210. 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, and
    b. Whether the proposed common size standards for those industries 
are at the correct levels or what would be more appropriate if what SBA 
has proposed are not appropriate.
    7. For several industries in NAICS Sectors 52 and 55, based on 
industry and program data, SBA proposes large increases, while for 
others the proposed increases are modest. The SBA seeks feedback on 
whether, as a policy, it should limit the increase to a size standard 
or establish minimum or maximum values for its size standards. The SBA 
seeks suggestions on appropriate levels of changes to size standards 
and on their minimum or maximum levels.
    8. SBA's proposed size standards are based on 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 total share and small business share of 
Federal contracting dollars of the evaluated industries. SBA welcomes 
comments on these factors and/or suggestions of other factors that it 
should consider when evaluating or revising size standards. SBA also 
seeks information on relevant data sources, other than what it uses, if 
available.
    9. 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 suggested weights for each 
factor along with supporting information.
    10. 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

[[Page 55751]]

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 its size standard methodology and its proposed size 
standards revisions 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 in their industries, 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 not a ``significant regulatory action'' for purposes 
of Executive Order 12866. In order to help explain the need of this 
rule and the rule's potential benefits and costs, SBA is providing a 
Cost Benefit Analysis in this section of the rule. This is also not a 
``major rule'' under the Congressional Review Act, 5 U.S.C. 800.

Cost Benefit Analysis

1. Is there a need for the regulatory action?
    SBA believes that proposed size standards revisions in NAICS Sector 
52, Finance and Insurance, and NAICS Sector 55, Management of Companies 
and Enterprises, will better reflect the economic characteristics of 
small businesses in this Sector 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 determine the intended beneficiaries of these programs, SBA 
establishes 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 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 businesses (SDVOSB). 
Federal agencies may also use SBA's size standards for a variety of 
other regulatory and program purposes. These programs help small 
businesses become more knowledgeable, stable, and competitive. SBA 
estimates that in the 34 industries for which it proposes to increase 
receipts based size standards in NAICS Sectors 52 and 55, more than 
5,400 firms, not small under the existing size standards, will become 
small under the proposed size standards and therefore eligible for 
these programs. That is about 2.2 percent of all firms classified as 
small under the current receipts based size standards in NAICS Sector 
52 and 55. If adopted as proposed, this will increase the small 
business share of total receipts of all industries with receipts based 
size standards within NAICS Sectors 52 and 55 from 5.1 percent to 7.5 
percent. Additionally, due to the proposed increase to the assets based 
size standard from $175 million to $500 million for four industries in 
NAICS Sector 52 (i.e., NAICS 522110, 522120, 522190 and 522210), 
approximately 2,000 additional depository institutions, including about 
25 minority owned financial institutions, will qualify as small. This 
will increase the small business share of total assets in those 
industries from 2.5 percent under the current assets based size 
standard to 7 percent for all financial institutions and from 14.4 
percent to 33 percent for minority owned institutions. This would also 
include about 550 additional Credit Unions, but they would not qualify 
as small business concerns for Federal programs intended for small 
businesses because they are not-for profit entities. However, they may 
qualify as small entities for other Federal programs and regulatory 
purposes.
    The following groups will benefit from the proposed size standards 
revisions in this rule, if 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; (3) Federal agencies will have a larger pool of small 
businesses from which to draw for their small business procurement 
programs; (4) prime contractors that could benefit from agreements with 
the minority owned depository institutions in meeting their 
subcontracting goals and credits; and (5) potentially small business 
communities could benefit from increased banking activities in the 
area.
    SBA estimates that firms gaining small business status under the 
proposed receipts based size standards could receive Federal contracts 
totaling $8 million to $10 million annually under SBA's small business, 
8(a), SDB, HUBZone, WOSB, and SDVOSB Programs, and other unrestricted 
procurements. The added competition for many of these procurements can 
also result in lower prices to the Government for procurements reserved 
for small businesses, but SBA cannot quantify this benefit.
    Under SBA's 7(a) and 504 Loan Programs, based on the fiscal years 
2008-2010 data, SBA estimates up to 30 additional loans totaling about 
$4 million to $5 million in Federal loan guarantees could be made to 
these newly defined small businesses under the proposed size standards. 
Increasing the size standards will likely result in more small business 
guaranteed loans to businesses in these industries, but it is be 
impractical to try to estimate exactly the number and total amount of 
loans. There are two reasons for this: (1) Under the Jobs Act, SBA can 
now guarantee substantially larger loans than in the

[[Page 55752]]

past; and, (2) as described above, the Jobs Act established an 
alternative size standard ($15 million in tangible net worth and $5 
million in net income after income taxes) for business concerns that do 
not meet the size standards for their industry. Therefore, SBA finds it 
difficult to quantify the actual impact of these proposed size 
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 this impact.
    To the extent that those 7,400 newly defined firms (including 5,400 
firms under the receipts based size standards in 34 industries and 
2,000 firms under the assets based size standards in four industries) 
could become active in Federal procurement programs, the proposed 
changes, if adopted, may entail some additional administrative costs to 
the government associated with there being more bidders on small 
business procurement opportunities. In addition, there will be more 
firms seeking SBA's guaranteed loans, more firms eligible for 
enrollment in the Central Contractor Registration (CCR)'s Dynamic Small 
Business Search database, and more firms seeking certification as 8(a) 
or HUBZone firms or qualifying for small business, WOSB, SDVOSB, 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. SBA believes that these added administrative 
costs will be minimal because mechanisms are already in place to handle 
these requirements.
    Additionally, Federal government contracts may have higher costs. 
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. However, the additional 
costs associated with fewer bidders are expected to be minor since, by 
law, procurements may be set aside for small businesses or reserved for 
the 8(a), HUBZone, WOSB, or SDVOSB Programs only if awards are expected 
to be made at fair and reasonable prices. In addition, there may be 
higher costs when more full and open contracts are awarded to HUBZone 
businesses that receive price evaluation preferences.
    The proposed size standards revisions, if adopted, may have some 
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 from large and currently defined small businesses. SBA cannot 
estimate the potential distributional impacts of these transfers with 
any degree of precision. The proposed revisions to the existing size 
standards in NAICS Sectors 52 and 55 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, 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 is included above in the 
Cost Benefit Analysis under Executive Order 12866.
    In an effort to engage interested parties in this action, SBA has 
presented its size standards methodology (discussed above under 
Supplementary Information) to various industry associations and trade 
groups. SBA also met with a number of 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 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's size standards and whether 
current size 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 Federal agencies in 
preparing this proposed rule.
    The review of size standards in NAICS Sectors 52 and 55 is 
consistent with EO 13563, Section 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, in 2007, SBA began a 
comprehensive review of its size standards to ensure that existing size 
standards have supportable bases and to revise them when necessary. In 
addition, the Jobs Act requires 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 
every18-month period from the date of its enactment and do a complete 
review of all size standards

[[Page 55753]]

not less frequently than once every 5 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 purpose of the Paperwork Reduction Act, 44 U.S.C. Ch. 35, 
SBA has determined that this proposed rule will not impose any new 
reporting or recordkeeping requirements.

Initial Regulatory Flexibility Analysis

    Under the Regulatory Flexibility Act (RFA), this proposed rule, if 
adopted, may have a significant impact on a substantial number of small 
businesses in NAICS Sector 52, Finance and Insurance, and NAICS Sector 
55, Management of Companies and Enterprises. As described above, this 
rule may affect small businesses seeking Federal contracts, loans under 
SBA's 7(a), 504 and Economic Injury Disaster Loan Programs, and 
assistance under other Federal small business programs, as well as 
subcontracting 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 are SBA's description and estimate of the number of small 
businesses to which the rule will apply? (3) What are the projected 
reporting, recordkeeping, 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 businesses?
1. What are the need for and objective of the rule?
    Changes in industry structure, technological changes, productivity 
growth, mergers and acquisitions, and updated industry definitions have 
changed the structure of many industries in NAICS Sectors 52 and 55. 
Such changes can be sufficient to support revisions to current size 
standards for some industries. Based on the analysis of the latest data 
available, SBA believes that the revised standards in this proposed 
rule more appropriately reflect the size of businesses that need 
Federal assistance. The recently enacted Jobs Act also requires SBA to 
review all size standards and make necessary adjustments to reflect 
market conditions.
2. What are SBA's description and estimate of the number of small 
businesses to which the rule will apply?
    If the proposed rule is adopted in its present form, SBA estimates 
that more than 5,400 additional firms will become small because of 
proposed increases to receipts based size standards for 36 industries 
in NAICS Sectors 52 and 55. That represents 2.2 percent of total firms 
that are small under current receipts based size standards in all 
industries within these Sectors. This will result in an increase in the 
small business share of total receipts in those industries from 5.1 
percent under the current size standards to 7.5 percent under the 
proposed size standards. Additionally, due to the proposed increase in 
the asset-based size standard for four industries within NAICS Sector 
52 about 2,000 additional financial institutions will qualify as small, 
including about 25 minority owned financial institutions that could be 
eligible to participate in agreements with prime contractors for 
subcontracting goals and credits. In addition, about 550 additional 
Credit Unions would qualify as small under the higher assets based size 
standard, but they would not qualify for Federal programs intended for 
small businesses because they are not-for profit entities. However, 
they may qualify as small entities for other Federal programs and 
regulatory purposes. The proposed size standards, if adopted, will 
enable more small businesses to retain their small business status for 
a longer period. Many firms may 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?
    The proposed size standard changes impose no additional reporting 
or record keeping requirements on small businesses. However, qualifying 
for Federal procurement and a number of other programs requires that 
businesses register in the CCR database and certify in the Online 
Representations and Certifications Application (ORCA) that they are 
small at least once annually. 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's programs that assist small businesses, but does not 
impose a regulatory burden because 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 to do 
otherwise. 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 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)).

[[Page 55754]]

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 systems of 
numerical size standards.

List of Subjects in 13 CFR Part 121

    Administrative practice and procedure, Government procurement, 
Government property, Grant programs--business, Individuals with 
disabilities, Loan programs--business, Reporting and recordkeeping 
requirements, Small businesses.

    For the reasons set forth in the preamble, SBA proposes to amend 
part 13 CFR Part 121 as follows:

PART 121--SMALL BUSINESS SIZE REGULATIONS

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

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

    2. In Sec.  121.201, amend the table ``Small Business Size 
Standards by NAICS Industry'' as follows:
    a. In Sec.  121.201, in the table, revise the entries for 
``522110'', ``522120'', ``522130'', ``522190'', ``522210'', ``522220'', 
``522291'', ``522292'', ``522293'', ``522294'', ``522298'', ``522320'', 
``522390'', ``523110'', ``523120'', ``523130'', ``523140'', ``523210'', 
``523910'', ``523920'', ``523930'', ``523991'', ``523999'', ``524113'', 
``524114'', ``524127'', ``524128'', ``524130'', ``524291'', ``524292'', 
``524298'', ``525110'', ``525120'', ``525190'', ``525910'', ``525920'', 
``525930'', ``525990'', ``551111'', and ``551112''
    b. Revise footnote 8 as shown below after the table.
    The revisions read as follows:


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

* * * * *

                                 Small Business Size Standards by NAICS Industry
----------------------------------------------------------------------------------------------------------------
                            NAICS U.S.        Size standards in millions of       Size standards in number of
      NAICS codes         industry title                 dollars                           employees
----------------------------------------------------------------------------------------------------------------
522110................  Commercial         500 million in assets \8\.........  .................................
                         Banking \ 8\.
522120................  Savings            500 million in assets \8\.........  .................................
                         Institutions \
                         8\.
522130................  Credit Unions....  500 million in assets \8\.........  .................................
522190................  Other Depository   500 million in assets \8\.........  .................................
                         Credit
                         Intermediation \
                         8\.
522210................  Credit Card        500 million in assets \8\.........  .................................
                         Issuing \ 8\.
522220................  Sales Financing..  35.5..............................  .................................
522291................  Consumer Lending.  35.5..............................  .................................
522292................  Real Estate        35.5..............................  .................................
                         Credit.
522293................  International      35.5..............................  .................................
                         Trade Financing.
522294................  Secondary Market   35.5..............................  .................................
                         Financing.
522298................  All Other          35.5..............................  .................................
                         Nondepository
                         Credit
                         Intermediation.
 
                                                  * * * * * * *
522320................  Financial          35.5..............................  .................................
                         Transactions,
                         Reserve, and
                         Clearing House
                         Activities.
522390................  Other Activities   19.0..............................  .................................
                         Related to
                         Credit
                         Intermediation.
 
                                                  * * * * * * *
523110................  Investment         35.5..............................  .................................
                         Banking and
                         Securities
                         Dealing.
523120................  Securities         35.5..............................  .................................
                         Brokerage.
523130................  Commodity          35.5..............................  .................................
                         Contracts
                         Dealing.
523140................  Commodity          35.5..............................  .................................
                         Contracts
                         Brokerage.
523210................  Securities and     35.5..............................  .................................
                         Commodity
                         Exchanges.
523910................  Miscellaneous      35.5..............................  .................................
                         Intermediation.
523920................  Portfolio          35.5..............................  .................................
                         Management.
523930................  Investment Advice  35.5..............................  .................................
523991................  Trust, Fiduciary   35.5..............................  .................................
                         and Custody
                         Activities.
523999................  Miscellaneous      35.5..............................  .................................
                         Financial
                         Investment
                         Activities.
 
                                                  * * * * * * *
524113................  Direct Life        35.5..............................  .................................
                         Insurance
                         Carriers.
524114................  Direct Health and  35.5..............................  .................................
                         Medical
                         Insurance
                         Carriers.
 
                                                  * * * * * * *
524127................  Direct Title       35.5..............................  .................................
                         Insurance
                         Carriers.
524128................  Other Direct       35.5..............................  .................................
                         Insurance
                         (except Life,
                         Health and
                         Medical)
                         Carriers.
524130................  Reinsurance        35.5..............................  .................................
                         Carriers.
 
                                                  * * * * * * *
524291................  Claims Adjusting.  19.0..............................  .................................
524292................  Third Party        30.0..............................  .................................
                         Administration
                         of Insurance and
                         Pension Funds.
524298................  All Other          14.0..............................  .................................
                         Insurance
                         Related
                         Activities.
 
                                                  * * * * * * *
525110................  Pension Funds....  30.0..............................  .................................
525120................  Health and         30.0..............................  .................................
                         Welfare Funds.
525190................  Other Insurance    30.0..............................  .................................
                         Funds.
525910................  Open[dash]End      30.0..............................  .................................
                         Investment Funds.
525920................  Trusts, Estates,   30.0..............................  .................................
                         and Agency Funds.
525930................  Real Estate        30.0..............................  .................................
                         Investments
                         Trusts.

[[Page 55755]]

 
525990................  Other Financial    30.0..............................  .................................
                         Vehicles.
 
                                                  * * * * * * *
551111................  Offices of Bank    19.0..............................  .................................
                         Holding
                         Companies.
551112................  Offices of Other   19.0..............................  .................................
                         Holding
                         Companies.
----------------------------------------------------------------------------------------------------------------
 * * * * * * *
Footnotes
\8.\ NAICS Codes 522110, 522120, 522130, 522190, and 522210--A financial Institution's assets are determined by
  averaging the assets reported on its four quarterly financial statements for the preceding year. ``Assets''
  for the purposes of this size standard means the assets defined according to the Federal Financial
  Institutions Examination Council 041 call report form for NAICS codes 522110, 522120, 522190, and 522210 and
  the National Credit Union Administration 5300 call report form for NAICS code 522130.
 * * * * * * *


    Dated, June 22, 2012.
Karen G. Mills,
Administrator.
[FR Doc. 2012-22258 Filed 9-10-12; 8:45 am]
BILLING CODE 8025-01-P