[Federal Register Volume 84, Number 121 (Monday, June 24, 2019)]
[Proposed Rules]
[Pages 29399-29413]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2019-12754]
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Proposed Rules
Federal Register
________________________________________________________________________
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. 84, No. 121 / Monday, June 24, 2019 /
Proposed Rules
[[Page 29399]]
SMALL BUSINESS ADMINISTRATION
13 CFR Part 121
RIN 3245-AH16
Small Business Size Standards: Calculation of Annual Average
Receipts
AGENCY: U.S. Small Business Administration.
ACTION: Proposed rule.
-----------------------------------------------------------------------
SUMMARY: The U.S. Small Business Administration (SBA or Agency)
proposes to modify its method for calculating annual average receipts
used to prescribe size standards for small businesses. Specifically,
consistent with a recent amendment to the Small Business Act, SBA
proposes to change its regulations on the calculation of annual average
receipts for all receipts-based SBA size standards and other agencies'
proposed size standards for service-industry firms from a 3-year
averaging period to a 5-year averaging period.
DATES: SBA must receive comments to this proposed rule on or before
August 23, 2019.
ADDRESSES: Identify your comments by RIN 3245-AH16 and submit them by
one of the following methods: (1) Federal eRulemaking Portal: https://www.regulations.gov, follow the instructions for submitting comments;
or (2) Mail/Hand Delivery/Courier: Khem R. Sharma, Ph.D., Chief, Office
of Size Standards, U.S. Small Business Administration, 409 Third Street
SW, Mail Code 6530, Washington, DC 20416.
SBA will post all comments to this proposed rule on https://www.regulations.gov. If you wish to submit confidential business
information (CBI) as defined in the User Notice at https://www.regulations.gov, you must submit such information to Khem R.
Sharma, Ph.D., Chief, Office of Size Standards, U.S. Small Business
Administration, 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 withhold this information as confidential. SBA will review your
information and determine whether it will make it public.
FOR FURTHER INFORMATION CONTACT: Khem R. Sharma, Ph.D., Chief, Office
of Size Standards, (202) 205-6618 or [email protected].
SUPPLEMENTARY INFORMATION:
I. Background Information
Public Law 115-324 (the ``Small Business Runway Extension Act of
2018'') amended section 3(a)(2)(C)(ii)(II) of the Small Business Act,
15 U.S.C. 632(a)(2)(C)(ii)(II), to modify the requirements for proposed
small business size standards prescribed by an agency without separate
statutory authority to issue size standards.
Under section 3(a)(2)(C)(ii) of the Small Business Act as amended,
an agency without separate statutory authority to issue size standards
must satisfy three requirements to prescribe a size standard. First,
the agency must propose the size standard with an opportunity for
public notice and comment. Second, the agency must provide for
determining the size of a manufacturing concern based on a 12-month
average of the concern's employment, the size of a services concern
based on a 5-year average of gross receipts, and the size of another
business concern on the basis of data of not less than 3 years. Third,
the agency must obtain approval of the size standard from the SBA
Administrator.
In contrast to agencies subject to section 3(a)(2)(C), SBA has
independent statutory authority to issue size standards. Under section
3(a)(2)(A) of the Small Business Act, the SBA Administrator may specify
detailed definitions or standards by which a business concern may be
determined to be a small business concern for the purposes of SBA's
programs or any other Federal Government program. Section 3(a)(2)(B) of
the Small Business Act further provides that such definitions may
utilize the number of employees, dollar volume of business, net worth,
net income, a combination thereof, or other appropriate factors. To
determine eligibility for Federal small business assistance, SBA
establishes detailed size definitions for small businesses (usually
referred to as ``size standards'') that vary from industry to industry
reflecting differences among the various industries. SBA typically uses
two primary measures of business size for size standards purposes: (i)
Annual average gross receipts for businesses in services, retail trade,
agricultural, and construction industries, and (ii) average number of
employees for businesses in all manufacturing and most mining and
utilities industries. SBA uses financial assets for certain financial
industries and refining capacity, in addition to employees, for the
petroleum refining industry to measure business size.
The SBA's size standards establish eligibility for a variety of
Federal small business assistance programs, including Federal
government contracting and business development programs designed to
assist small businesses in obtaining Federal contracts, and for SBA's
loan guarantee programs, which provide access to capital for small
businesses that are unable to qualify for conventional loans elsewhere.
The government contracting programs that use SBA's size standards
include the SBA's 8(a) Business Development (BD) program, the
Historically Underutilized Business Zones (HUBZone) program, the
Service Disabled Veteran-Owned Small Business (SDVOSB) program, the
Woman-Owned Small Business (WOSB) program, and the Economically
Disadvantaged Woman-Owned Small Business (EDWOSB) program. In fiscal
year 2017, small businesses received $105.7 billion in Federal
contracts, including $42.0 billion in set-aside contracts for small
businesses. Small businesses received $25.6 billion in Federal set-
aside contracts in fiscal year 2017 through the SBA's 8(a), HUBZone,
SDVOSB, WOSB, and EDWOSB programs. (In addition to using SBA's size
standards, SBA's Small Business Investment Company (SBIC), Certified
Development Company (CDC/504), and 7(a) loan programs use either the
industry-based size standards or tangible net worth and net income
based alternative size standards to determine eligibility for those
programs.)
SBA has long interpreted section 3(a)(2)(C) of the Small Business
Act as not applying to SBA's size standards issued under section
3(a)(2)(A). In the preambles to the proposed and final rules
implementing 3(a)(2)(C), SBA explained that the Small Business Act
[[Page 29400]]
requires that other Federal agencies use SBA's size standards or else
use their own size standards that meet the requirements as set forth in
that section. 65 FR 4176 (Jan. 26, 2000) and 67 FR 13714 (March 26,
2002). In the final implementation in 2002, SBA interpreted section
3(a)(2)(C) as applying only to non-SBA agencies, stating, ``Unless a
statute specifies size standards for an agency's program or gives an
agency direct authority to establish size standards, the agency must
use the applicable size standards established by SBA.'' However, the
Act allows an agency to ``prescribe a size standard for categorizing a
business concern as a small business concern (see sec. 3(a)(2)(C) of
the Act) provided that the contemplated size standard meets certain
criteria and the agency obtains approval of the SBA Administrator.'' 67
FR 13714. Since 2002, SBA has repeated this interpretation of section
3(a)(2)(C) in the Federal Register 52 times: 67 FR 48423; 67 FR 61835;
68 FR 74841; 70 FR 68373; 70 FR 72582; 71 FR 28610; 72 FR 41242; 72 FR
61577; 73 FR 41241; 73 FR 42519; 74 FR 53953; 74 FR 53923; 74 FR 53937;
75 FR 61596; 75 FR 61602; 75 FR 61608; 76 FR 14339; 76 FR 27950; 76 FR
63524; 76 FR 63228; 76 FR 70693; 76 FR 70679; 77 FR 7513; 77 FR 11016;
77 FR 10945; 77 FR 42211; 77 FR 42224; 77 FR 42453; 77 FR 55753; 77 FR
55767; 77 FR 58746; 77 FR 58754; 77 FR 58759; 77 FR 72775; 77 FR 72701;
77 FR 72707; 78 FR 37415; 78 FR 37403; 78 FR 37421; 78 FR 37408; 78 FR
77342; 78 FR 77350; 79 FR 28645; 79 FR 33654; 79 FR 53665; 79 FR 54170;
81 FR 3947; 81 FR 3955; 81 FR 4466; 81 FR 4485; 82 FR 18263; 82 FR
44893. Additionally, in the final Size Standards Methodology that SBA
issued in April 2009, SBA stated, ``Paragraph 3(a)(2)(C) refers to the
establishment of size standards by other Federal agencies. SBA
generally applies these same provisions when it establishes its size
standards, but the Agency is not legally bound by them. On the other
hand, Paragraphs 3(a)(2)(A) and 3(a)(2)(B) give the Administrator the
flexibility to evaluate and establish size standards using a broader
range of criteria, depending on what the Administrator determines will
serve small businesses the best.'' Thus, section 3(a)(2)(C) pertains to
special size standards that agencies prescribe for defining small
businesses for their programs when they determine that SBA's size
standards are not appropriate for such programs.
SBA grounds this long-standing interpretation of section 3(a)(2)(C)
on the following facts. First, SBA has applied a 3-year average for
receipts-based size standards since January 1956, see 21 FR 80, and the
requirement in section 3(a)(2)(C) for an agency lacking specific
authority to use a 3-year average was not passed into law until 38
years later on October 22, 1994 through the Small Business
Administration Reauthorization and Amendments Act of 1994, Public Law
103-403, section 301. Second, the legislative history from the U.S.
Senate Committee on Small Business and Entrepreneurship specifically
excepts SBA from section 3(a)(2)(C) by stating that the 1994 amendment
``clarifies that a Federal Department or agency, other than the
Administration, may issue a size standard set in terms of number of
employees, average annual gross receipts, or otherwise, only under
certain conditions. Those conditions are that the standard is set by
rulemaking, including a proposal and an opportunity for public comment,
and that the SBA Administrator has approved the standard.'' S. Rpt. No.
103-332 (emphasis added). Third, the predecessor statutory provision to
section 3(a)(2)(C), which is set forth in section 222(a) of Public Law
102-366, explicitly stated that the specified averaging period applied
only ``for the use of such department or agency'' where the department
or agency had issued its own size standard, and the 1994 amendment did
not evince any intent to change this rule of limited applicability.
Fourth, based on a literal reading of the Small Business Act, section
3(a)(2)(C) only applies where an agency is not specifically authorized
by statute to issue size standards, but SBA has specific authorization
to issue SBA's size standards in section 3(a)(2)(A) of the Small
Business Act. As such, section 3(a)(2)(C) requires that a non-SBA
agency obtain approval from the SBA's Administrator for adopting its
own size standard.
Nevertheless, to promote consistency government-wide on small
business size standards, SBA proposes to change its own size standards
to provide for a 5-year averaging period for calculating annual average
receipts for all receipts-based size standards. It would be confusing
for a service-industry business to use a 3-year average for SBA's
receipts-based size standards and switch to a 5-year average for
another agency's receipts-based size standards. Similarly, it would be
confusing to apply SBA's size standards for a business that is engaged
in both service- and non-service industries to use a 5-year average for
determining small business status in a service industry but switch to a
3-year average for a non-service industry. Thus, although section
3(a)(2)(C), as amended, permits any agency to use a 3-year average
outside of the service industries, SBA proposes to adopt a 5-year
averaging period for calculating the annual receipts of businesses for
all industries that are subject to receipts-based size standards,
including the retail trade, agricultural, and construction industries.
SBA's proposed rule carries out the intent of Public Law 115-324,
as expressed in the Report of the House Committee on Small Business, H.
Rpt. 115-939. The Committee report states that, to help advanced small
businesses successfully navigate the middle market as they reach their
small business size thresholds, the bill would lengthen the time in
which the SBA measures size through revenue, from the average of the
past 3 years to the average of the past 5 years. The Committee report
states that the bill would reduce the impact on small businesses from
rapid-growth years which would result in spikes in revenue that may
prematurely eject a small business out of their small size standard.
The Committee report adds that the bill would allow small businesses at
every level more time to grow and develop their competitiveness and
infrastructure, before entering the open marketplace. The bill, as the
report states, would also protect Federal investment in SBA's small
business programs by promoting greater chances of success in the middle
market for newly graduated firms, resulting in enhanced competition
against large prime contractors.
As stated in the Committee report, during the period when annual
revenues are rising, the 5-year average will generally be lower than
the 3-year average, thereby allowing: (i) Mid-sized businesses who have
just exceeded size standards to regain their small business status, and
(ii) advanced small businesses close to exceeding the size standard to
retain their small business status for a longer period. It is notable
that, when annual revenues are declining, the 5-year average may be
higher than the 3-year average. This would cause small businesses near
the size thresholds to lose their small business status sooner under
the 5-year average than under the 3-year average. This is more likely
to happen during economic downturns. Businesses that lose their small
business status under the 5-year average may be disadvantaged further
because they may have to wait several years more to regain their small
business status, as compared to under a 3-year average. Newly
established firms that have been in business for less than 5 years will
[[Page 29401]]
receive no benefit from a change to a 5-year average. A firm that has
been in business for less than the averaging period simply annualizes
the receipts from its full existence.
Additionally, by enabling mid-size businesses to regain small
business status and by lengthening the small business status of
advanced and successful larger small businesses, the longer averaging
period may disadvantage smaller small businesses in more need of
Federal assistance than their more advanced and larger counterparts in
competing for Federal opportunities. Similar to concerns from mid-size
businesses that they lack necessary resources, past performance
qualifications and expertise to be able to compete against very large
businesses in the full and open market, SBA has also received concerns
from smaller small businesses that they also lack resources, past
performance qualifications and expertise to be able to compete against
more resourceful, qualified, and experienced large small businesses for
Federal opportunities for small businesses.
SBA's proposed rule satisfies the requirements of section 3(a)(6)
of the Small Business Act, which requires that, to revise, modify, or
establish size standards pursuant to section 3(a), SBA must issue a
notice of proposed rulemaking that includes, among other things, the
anticipated effect of the proposed rulemaking on industry. In this
regard, the United States Supreme Court has ruled that agencies must
``use the same procedures when they amend or repeal a rule as they used
to issue the rule in the first instance.'' Perez v. Mortgage Bankers
Assn., 135 S. Ct 1199, 1206 (2015).
II. Section-by-Section Analysis
A. Section 121.104
The proposed rule removes ``Schedule K'' from the definition of
receipts. SBA has found that reviewing Schedule K is generally not
useful, but SBA reserves the ability to request a Schedule K as part of
SBA's review of the other Internal Revenue Service (IRS) forms listed
in section 121.104(a).
For consistency with the size standard averaging period being
changed in Sec. 121.104, for the purposes of applying SBA's receipts-
based size standards, the proposed rule changes the averaging period
for a business that has been in business for 5 or more fiscal years to
a 5-year period, i.e., the business calculates its total receipts over
the 5-year period and divides by 5. Under the proposed rule, if a
business has been in business for less than 5 complete fiscal years,
the business calculates its total receipts, divides by the number of
weeks in business, and multiplies by 52. This is the same process SBA
currently uses when a business has less than 3 complete fiscal years.
If a business has a short year as one of its 5 years, the business
calculates its total receipts over the 5-year period, divides by the
number of weeks in the short year and its other 4 fiscal years, and
multiplies by 52. This too is the same process SBA currently uses.
SBA proposes that the 5-year averaging period in Sec. 121.104
would not distinguish between firms in service industries and other
firms subject to receipts-based size standards. Although section
3(a)(2)(C) of the Small Business Act, as amended, permits other
agencies to use a 5-year averaging period for service-industry firms
and a 3-year averaging period for other firms, SBA believes that, in
applying SBA's own size standards, separating out service-industry
firms would cause confusion and create a greater compliance burden on
firms that participate in both services industries and non-services
industries (such as agriculture, construction, and retail trade) with
receipts-based size standards.
This proposed rule only would affect the application of SBA's size
standard rules after the effective date of a final rule. Thus, until
the effective date of a final rule, SBA will continue to apply the 3-
year averaging period in the present Sec. 121.104 for calculating
annual average receipts for all SBA's receipts-based size standards.
Since size is determined as of the date when a firm certifies its size
as part of its initial offer which includes price, the 3-year
calculation period will apply to any offer submitted prior to the
effective date of a final rule. Thus, even if SBA receives a request
for a size determination or size appeal after the effective date of the
final rule, SBA will still use a 3-year calculation period if the
determination or appeal relates to a certification submitted prior to
the final rule's effective date.
SBA also proposes to clarify how it believes annual receipts should
be calculated in connection with the acquisition or sale of a division.
Specifically, the proposed rule would provide that the annual receipts
of a concern would not be adjusted where the concern sells or acquires
a segregable division during the applicable period of measurement or
before the date on which it self-certified as small. This would be
different from how SBA treats the sale or acquisition of a subsidiary.
In the case of a subsidiary, SBA's regulations provide that ``[t]he
annual receipts of a former affiliate are not included if affiliation
ceased before the date used for determining size. This exclusion of
annual receipts of a former affiliate applies during the entire period
of measurement, rather than only for the period after which affiliation
ceased.'' 13 CFR 121.104(d)(4).
SBA believes that the sale or acquisition of a division is
different from buying or selling a separate legal entity and, as such,
should be treated differently. Any receipts attributable to a specific
division of a concern are certainly receipts earned by the concern.
Even if that division is later sold, its receipts were always part of
the receipts directly received by the concern itself, and SBA believes
that those receipts should remain a part of the concern's receipts
after the sale for purposes of determining the concern's size.
Similarly, where a concern acquires a segregable division from another
business entity during the applicable period of measurement, the
proposed rule would not increase the concern's overall receipts by the
amount of receipts attributable to that division. This proposal is
consistent with decisions of SBA's Office of Hearings and Appeals
(OHA). See, e.g. Size Appeal of Global, A 1st Flagship Co., SBA No.
SIZ-5462 (2013) (``OHA has repeatedly held that a firm which acquires
most of the assets of a subsidiary or division of a larger firm is
affiliated only with that subsidiary or division, and not with the
entire parent company.'').
SBA understands that some may feel that distinguishing the sale of
a division from that of a subsidiary would elevate form over substance,
and would merely require a seller to move assets into a separate
subsidiary and then sell that subsidiary in order to bring the
transaction under the rule. However, SBA believes that there really is
an important distinction between a division and a separate legal
entity. SBA specifically requests comments on this issue.
B. Section 121.903
As required by Public Law 115-324, SBA is proposing to amend the
requirements for agencies that seek to propose and adopt size standards
for their own programs, instead of applying SBA's size standards. Under
the proposed rule, a non-SBA agency's receipts-based size standard
applying to services-industry firms must be proposed with an averaging
period of at least 5 years.
SBA is not proposing to change the requirement that other agency's
size
[[Page 29402]]
standards for firms other than service and manufacturing firms use data
over a period of at least 3 years. Such a change is not mandated by
Public Law 115-324. Section 3(a)(2)(ii)(III) of the Small Business Act
still provides that other agencies prescribe size standards for
industries other than services or manufacturing using ``data over a
period of not less than 3 years.'' Because Congress did not change this
statutory language, SBA is reluctant to change it administratively.
However, SBA believes that it could also require other agencies
establishing size standards for industries other than services or
manufacturing to use data over a 5-year period. Since requiring 5 years
instead of 3 is not inconsistent with the statutory provision (i.e., 5
years is ``not less than 3 years''), SBA specifically requests comments
on whether SBA should require other agencies to use 5 years' worth of
data for all industries.
This new calculation period does not affect existing non-SBA size
standards. The averaging period for existing non-SBA size standards is
not changed unless the responsible agency proposes and finalizes
changes to such size standards. This is consistent with the change in
Public Law 115-324 to the requirements for prescribing a non-SBA size
standard, given the lack of any restrictions in the Small Business Act
or Public Law 115-324 on applying an existing size standard. In
proposing a change to the averaging period for its existing size
standard, the responsible agency should coordinate with SBA using the
procedure in Sec. 121.903.
III. Request for Comments
SBA invites comments, input, or suggestions from interested parties
on its proposal to change the period for the calculation of annual
average receipts for all receipts-based size standards from 3 years to
5 years. The comments should address the following specific issues
pertaining to the SBA's proposal.
1. SBA seeks feedback, along with supporting facts and analyses, on
whether the Agency should calculate annual average receipts over 5
years for all industries subject to receipts-based size standards or on
whether it should use a 5-year annual receipts average for businesses
in services industries only and continue using a 3-year annual average
for other businesses. SBA is concerned that the latter option may
create confusion for both businesses in reporting their size based on
annual average receipts and contracting personnel in verifying the size
of bidders to Federal contracts.
2. SBA invites input on how the use of annual average receipts over
5 years instead of 3 years would impact both smaller small businesses
and more advanced, larger small businesses in terms of getting access
to Federal opportunities for small businesses.
IV. Compliance With Executive Orders 12866, 12988, 13132, 13563, and
13771, the Regulatory Flexibility Act (5 U.S.C. 601-612), and the
Paperwork Reduction Act (44 U.S.C. Ch. 35)
A. 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. However, in the next section, SBA provides a
benefit-cost analysis of this proposed rule, including: (1) A statement
of the need for the proposed action, and (2) an evaluation of the
benefits and costs--both quantitative and qualitative--of the proposed
action and alternatives considered. This rule is also not a ``major
rule'' under the Congressional Review Act, 5 U.S.C. 800, et seq.
a. Benefit-Cost Analysis
1. What is the need for this regulatory action?
As stated elsewhere, the Small Business Act delegates to SBA's
Administrator the responsibility for establishing small business size
definitions (usually referred to as ``size standards''). Recently,
Public Law 115-324 modified the requirements for proposed small
business size standards prescribed by an agency without separate
statutory authority to issue size standards.
The need of this proposed rule is to carry out Public Law 115-324
and to ensure consistency in the calculation of annual average receipts
for SBA's size standards. In addition to the averaging requirements,
size standards prescribed under section 3(a)(2)(C)(ii) of the Small
Business Act must meet two other requirements: (1) Be proposed with an
opportunity for public notice and comment, and (2) be approved by the
Administrator. Public Law 115-324 does not undo these 2 requirements,
and this proposed rule satisfies these requirements.
SBA's mission is to aid and assist small businesses through a
variety of financial, procurement, business development and counseling,
and disaster assistance programs. This regulatory action promotes the
Administration's goals and objectives and meets the SBA's statutory
responsibility to implement a new law impacting size definitions for
small businesses. One of SBA's goals in support of promoting the
Administration's objectives is to help small businesses succeed through
access to capital, Federal Government contracts and purchases, and
management, technical and disaster assistance.
2. What are the potential benefits and costs of this regulatory action?
Changing the period for calculating annual average receipts from 3
years to 5 years may enable some mid-size businesses that have just
exceeded size standards to regain small business status. Similarly, it
could also allow some advanced and larger small businesses about to
exceed size standards to retain their small status for a longer period.
However, it could also result in some advanced small businesses having
a 5-year receipts average that happens to be higher than the 3-year
receipts average, thus ejecting them out of their small business status
sooner. Detailed impacts of the proposed change are discussed below.
It is difficult to determine the actual number of small and mid-
size businesses that would be impacted by Public Law 115-324 and this
regulatory action because there is no data on annual receipts of
businesses. The annual receipts data from the Economic Census special
tabulation are only available once every 5 years. Similarly, the System
for Award Management (SAM) only records the data on 3-year annual
average receipts of businesses over their three preceding fiscal years,
but not their annual receipts for each fiscal year. For example, the
receipts data for year 2018 is an average of annual receipts for 2017,
2016, and 2015. Similarly, the receipts data for 2017 is an average of
annual receipts for 2016, 2015, and 2014, and so on. A 5-year receipts
average for 2018 would be an average of annual receipts for 2017, 2016,
2015, 2014, and 2013.
Given the lack of annual receipts for each year, SBA approximates a
firm's 5-year annual average revenue for 2018 as follows:
[[Page 29403]]
[GRAPHIC] [TIFF OMITTED] TP24JN19.008
This result may slightly underestimate the 5-year revenue average
when annual revenues are rising (i.e., 2014 revenue > 2013 revenue >
2012 revenue) and overestimate it if annual revenues are declining
(i.e., 2014 revenue < 2013 revenue < 2012 revenue).
To estimate the 5-year receipts average for 2018 using the above
formula, SBA analyzed the 2018 SAM extracts (as of September 1, 2018)
and 2015 SAM extracts (as of September 1, 2015). The above 5-year
annual average receipts formula would only work for businesses that
were present in both 2015 and 2018 SAM extracts. One challenge was that
some businesses found in 2018 SAM could not be found in 2015 SAM and
vice versa. Excluding entities registered in SAM for purposes other
than government contracting and entities ineligible for small business
consideration (such as foreign governments and state-controlled
institutions of higher learning), there were a total of 346,958 unique
business concerns in SAM subject to at least one receipts-based size
standard. Of these concerns, 293,524 (or about 84.6 percent) were
``small'' in all North American Industry Classification System (NAICS)
industries, 9,990 (or 2.9 percent) were ``small'' in some industries
and ``not small'' in other industries, and 43,444 (or 12.5 percent)
were ``not small'' in any industry.
Excluding entities with ``null'' or ``zero'' receipts values,
194,686 firms (or about 56 percent) appeared both in 2018 SAM and in
2015 SAM and were included in the 5-year annual average receipts
approximation and calculation of number of businesses impacted. Of
those 194,686 matched firms subject to a receipts-based size standard,
154,220 (or about 79 percent) were ``small'' in all NAICS industries,
8,049 (or 4.1 percent) were ``small'' in some industries and other than
small (``not small'') in other industries, and 32,417 (or about 17
percent) were ``not small'' in any industry. In other words, 303,514
(or 87.5 percent) of 346,958 total concerns in SAM 2018 and 162,269 (or
83.3 percent) of 194,686 total matched firms were small in at least one
NAICS industry with a receipts-based size standard. These results are
summarized in Table 1, ``Size Status of Businesses in Industries
Subject to Receipts-Based Size Standards,'' below.
Table 1--Size Status of Businesses in Industries Subject to Receipts-Based Size Standards
--------------------------------------------------------------------------------------------------------------------------------------------------------
Total firms in 2018 SAM Firms in both 2015 SAM and
subject to at least one 2018 SAM (matched)
receipts-based standard -------------------------------- Total to
Size status -------------------------------- % Matched matched ratio
Number of Number of % *
firms % firms
--------------------------------------------------------------------------------------------------------------------------------------------------------
Small in at least one industry.......................... 303,514 87.5 162,269 83.3 53.5 1.809
Small in all industries................................. 293,524 84.6 154,220 79.2 52.5 1.903
Small in some and not small in others................... 9,990 2.9 8,049 4.1 80.6 1.241
Large in all industries................................. 43,444 12.5 32,417 16.7 74.6 1.340
-----------------------------------------------------------------------------------------------
Total............................................... 346,958 100.0 194,686 100 56.1 1.782
--------------------------------------------------------------------------------------------------------------------------------------------------------
* To be used to translate the results from the matched data to overall 2018 SAM data.
According to Table 2, ``Distribution of Business Concerns Subject
to Receipts-Based Size Standards by Number of NAICS Codes,'' below, the
distribution of firms by the number of NAICS codes in the matched data
is very similar to that for the overall 2018 SAM data. About 42-44
percent of firms were in only one NAICS code that has a receipts-based
size standard, about 35 percent in 2-5 NAICS codes, about 12 percent in
6-10 NAICS codes, and about 8-10 percent in more than 10 NAICS codes.
In other words, 56-58 percent of firms were in multiple NAICS codes
with receipts-based size standards. Thus, it is quite possible that the
proposed change may impact a firm's
[[Page 29404]]
small business status in multiple industries. For purposes of this
analysis, an impacted firm is defined as one that would be impacted by
the change in terms of gaining, regaining, extending, or losing small
business status in at least one industry with a receipts-based size
standard.
Table 2--Distribution of Business Concerns Subject to Receipts-Based Size Standards by Number of NAICS Codes
----------------------------------------------------------------------------------------------------------------
Total firms in 2018 SAM with Matched firms between 2018 and
at least one receipts-based 2015 SAM
Number of NAICS codes NAICS code -------------------------------
--------------------------------
Count % Count %
----------------------------------------------------------------------------------------------------------------
1 NAICS code.................................... 153,184 44.2 82,082 42.2
2 to 5 NAICS codes.............................. 123,277 35.5 68,458 35.2
6 to 10 NAICS codes............................. 41,518 12.0 24,529 12.6
> 10 NAICS codes................................ 28,979 8.4 19,617 10.1
---------------------------------------------------------------
Total....................................... 346,958 100.0 194,686 100.0
----------------------------------------------------------------------------------------------------------------
Note: A business concern is defined in terms of a unique local (vendor) DUNS number.
A central premise of Public Law 115-324 is that a 5-year annual
receipts average (as opposed to a 3-year annual receipts average) would
enable some mid-size businesses who have recently exceeded the size
standard to regain small business status and some advanced small
businesses close to exceeding the size standard to retain their small
business status for a longer period. However, this premise would only
hold true when businesses' annual revenues are rising. When businesses'
annual revenues are declining, due to economic downturns or other
factors, the 5-year annual receipts average could be higher than the 3-
year annual receipts average, thereby causing small businesses close to
their size standards to lose their small business status sooner.
b. Impacts on Businesses From the Proposed Change
By comparing the approximated 5-year annual receipts average with
the current receipts-based size standard for each of the 194,686
matched business concerns in each NAICS code subject to a receipts-
based size standard, SBA first estimated the following:
i. The number of mid-size businesses that have exceeded the size
standard and would regain small business status in at least one NAICS
industry with a receipts-based size standard (i.e., 3-year average >
size standard >= 5-year average)--positive impact;
ii. the number of advanced small businesses within 10 percent below
the size standard that would have their small business status extended
for a longer period in at least one NAICS industry with a receipts-
based standard (5-year average < 3-year average <= size standard and
0.9*size standard < 3-year average <= size standard)--positive impact;
iii. the number of currently small businesses that would lose their
small business status in at least one NAICS industry subjected to at
least one receipts-based size standard (i.e., 3-year average <= size
standard < 5-year average)--negative impact; and
iv. the number of advanced small businesses within 10 percent below
the size standard that would have their small status shortened in at
least one NAICS industry subject to a receipts-based standard (3-year
average < 5-year average <= size standard and 0.9*size standard < 3-
year average <= size standard)--negative impact.
In this proposed rule, SBA is changing the period for calculation
of average annual receipts for all of its receipts-based size standards
from 3 years to 5 years. The purpose of Public Law 115-324 is to allow
small businesses more time to grow and develop competitiveness and
infrastructure so that they are better prepared to succeed under full
and open competition once they outgrow the size threshold. However, as
stated previously, a longer 5-year averaging period may not always and
necessarily provide relief to every small business concern. As
discussed previously, when annual revenues are declining or when annual
revenues for the latest 3 years are lower than those for the earliest 2
years of the 5-year period, the 5-year average would be higher than the
3-year average, thereby ejecting some advanced small businesses out of
their small business status sooner or rendering some small businesses
under the 3-year average not small immediately.
As discussed earlier, the change in the averaging period for annual
receipts from 3 years to 5 years results in four different types of
impacts on small businesses: (i) Enabling current large or mid-size
businesses to gain small business status (impact i); (ii) enabling
current advanced small businesses to lengthen their small business
status (impact ii); (iii) causing current small businesses to lose
their small business status (impact iii); and (iv) causing current
small businesses to shorten their small business status (impact iv).
Table 3, `Percentage Distribution of Impacted Firms by the Number of
NAICS Codes,' below, provides these results based on the 2018 SAM--2015
SAM matched firms.
Table 3--Percentage Distribution of Impacted Firms by the Number of NAICS Codes
--------------------------------------------------------------------------------------------------------------------------------------------------------
% Distribution of impacted firms by number of NAICS codes
Number of -------------------------------------------------------------------------------
Impact * impacted 2-5 NAICS 6-10 NAICS >10 NAICS
firms 1 NAICS code codes codes codes Total
--------------------------------------------------------------------------------------------------------------------------------------------------------
Currently small in all NAICS codes:
Impact (ii)......................................... 1,255 25.3 39.6 16.3 18.8 100.0
Impact (iii)........................................ 1,176 35.5 32.5 14.9 17.2 100.0
Impact (iv)......................................... 112 20.5 33.9 25.0 20.5 100.0
[[Page 29405]]
Currently large business in all NAICS codes:
Impact (i).......................................... 914 36.0 36.1 13.6 14.3 100.0
Currently small in some NAICS and not small in others:
Impact (i).......................................... 1,640 0.0 24.6 24.2 51.2 100.0
Impact (ii)......................................... 1,138 0.0 25.0 26.0 49.0 100.0
Impact (iii)........................................ 497 0.0 23.7 20.9 55.3 100.0
Impact (iv)......................................... 108 0.0 23.1 23.1 53.7 100.0
Total Impact by Impact Type:
Impact (i).......................................... 2,554 12.9 28.7 20.4 38.0 100.0
Impact (ii)......................................... 2,393 13.3 32.6 20.9 33.2 100.0
Impact (iii)........................................ 1,673 24.9 29.9 16.7 28.5 100.0
Impact (iv)......................................... 220 10.5 28.6 24.1 36.8 100.0
Overall Impact:
Positive............................................ 4,687 13.8 31.8 20.7 33.8 100.0
Negative............................................ 1,890 23.3 29.8 17.6 29.4 100.0
Both................................................ 6,577 16.5 31.2 19.8 32.5 100.0
--------------------------------------------------------------------------------------------------------------------------------------------------------
* Impact (i) = Current large businesses gaining small status; Impact (ii) = Current small businesses extending small status; Impact (iii) = Current
small businesses losing small status; Impact (iv) = Current small businesses shortening small status.
It is highly notable that the distribution of impacted firms by the
number of NAICS codes, as shown in Table 3, is very different as
compared to a similar distribution based on the overall matched and
total 2018 SAM data (see Table 2), especially with respect to firms
with only one NAICS code and those with more than 5 NAICS codes. For
example, more than 40 percent of all firms in the overall data were
associated with only one NAICS code, as compared to less than 20
percent among impacted firms. Similarly, firms with more than 5 NAICS
codes accounted for about 20 percent of all firms in the original data,
as compared to more than 50 percent among impacted firms. It is also
notable that NAICS Sectors 54, 56, and 23 together accounted for more
than 70 percent of impacted firms (both negatively and positively
impacted), with Sector 54 (Professional, Scientific and Technical
Services) accounting for about 35 percent, Sector 23 (Construction)
about 25 percent, and Sector 56 (Administrative and Support, Waste
Management and Remediation Services) about 12-13 percent.
Each of these impacts was then multiplied by an applicable factor
or ratio, as shown in the last column of Table 1, to obtain the
respective impacts corresponding to all firms in 2018 SAM subject to at
least one receipts-based size standard. These results are presented
below in Table 4, ``Impacts from Changing the Averaging Period for
Receipts from 3 Years to 5 Years.'' The last column of the table shows
the percent of firms impacted relative to all business concerns in 2018
SAM.
Because the SAM data only captures businesses that are primarily
interested in Federal procurement opportunities, the SAM-based results
do not capture the impacts the proposed change may have on businesses
participating in various non-procurement programs that apply to SBA's
receipts-based size standards, such as SBA loan programs and exemptions
from compliance with paperwork and other regulatory requirements.
Table 4--Impacts From Changing the Averaging Period for Receipts from 3 Years to 5 Years
----------------------------------------------------------------------------------------------------------------
Firms
impacted in Total to Total firms Total firms in
Impact \1\ matched matched ratio impacted in 2018 SAM % Impacted
dataset 2018 SAM
----------------------------------------------------------------------------------------------------------------
Entities only small under all
NAICS code(s):
Impact (ii)................. 1,255 1.903 2,389 293,524 0.8
Impact (iii)................ 1,176 1.903 2,238 293,524 0.8
Impact (iv)................. 112 1.903 213 293,524 0.1
Entities other than small under
all NAICS code(s):
Impact (i).................. 914 1.340 1,225 43,444 2.8
Entities small in some NAICS
code(s) and other than small in
other(s):
Impact (i).................. 1,640 1.241 2,035 9,990 20.4
Impact (ii)................. 1,138 1.241 1,412 9,990 14.1
Impact (iii)................ 497 1.241 617 9,990 6.2
Impact (iv)................. 108 1.241 134 9,990 1.3
Total impact by impact type:
Impact (i).................. 2,554 .............. 3,260 53,434 6.1
Impact (ii)................. 2,393 .............. 3,801 303,514 1.3
Impact (iii)................ 1,673 .............. 2,855 303,514 0.9
Impact (iv)................. 220 .............. 347 303,514 0.1
Overall total by positive or
negative impact: \2\
[[Page 29406]]
Positive [impact (i) or 4,687 .............. 6,690 346,958 1.9
impact (ii)]...............
Negative [impact (iii) or 1,890 .............. 3,197 346,958 0.9
impact (iv)]...............
-------------------------------------------------------------------------------
Total impact............ 6,577 .............. 9,887 346,958 2.8
----------------------------------------------------------------------------------------------------------------
\1\ Impact (i) = Current large businesses gaining small business status; Impact (ii) = Current small businesses
extending small status; Impact (iii) = Current small businesses losing small status; Impact (iv) = Current
small businesses shortening small status.
\2\ Number of firms under overall positive, negative and total impacts refer to the number of unique firms. Some
firms could appear in multiple impact types and hence individual impacts may not add up to overall impact.
The Economic Census, combined with the Census of Agriculture and
County Business Patterns Reports, provides for each NAICS code
information on the number of total small and large businesses subjected
to a receipts-based size standard. Based on the matched SAM data, SBA
computed percentages of businesses impacted under each impact category
for each NAICS industry subject to a receipts-based size standard. By
applying such percentages to the 2012 Economic Census tabulation, SBA
estimated the number of all businesses impacted under each impact type
for each NAICS code subject to a receipts-based size standard. These
results are presented in Table 5, ``Impacts from Changing the Averaging
Period for Receipts from 3 Years to 5 Years (2012 Economic Census),''
below.
Table 5--Impacts from Changing the Averaging Period for Receipts From 3 Years to 5 Years
[2012 Economic Census]
----------------------------------------------------------------------------------------------------------------
Total firms Estimate of
Impact \1\ (in million) impacted firms % Impacted
----------------------------------------------------------------------------------------------------------------
Impact (i)...................................................... 271,505 7,822 2.9
Impact (ii)..................................................... 6,896,633 62,822 0.9
Impact (iii).................................................... 6,896,633 62,662 0.9
Impact (iv)..................................................... 6,896,633 5,945 0.1
Overall impact:
Positive [impact (i) or impact (ii)]........................ 7,168,138 70,644 1.0
Negative [impact (iii) or impact (iv)]...................... 7,168,138 68,607 1.0
-----------------------------------------------
Total impact............................................ 7,168,138 139,251 1.9
----------------------------------------------------------------------------------------------------------------
\1\ Impact (i) = Current large businesses gaining small status; Impact (ii) = Current small businesses extending
small status; Impact (iii) = Current small businesses losing small status; Impact (iv) = Current small
businesses shortening small status.
Currently large or mid-size businesses regaining small business
status would get various benefits as small business concerns, including
access to Federal set-aside contracts, SBA's guaranteed loans and
disaster assistance, reduced patent fees, and exemptions from various
compliance and paperwork requirements. With their small business status
extended, advanced small businesses would continue to receive such
benefits for a longer period. However, the proposed change may also
cause some small businesses to lose their small business status in at
least one receipts-based size standard and access to small business
assistance, especially Federal set-aside opportunities.
c. The Baseline
OMB directs agencies to establish an appropriate baseline to
evaluate benefits, costs, or transfer impacts of regulatory actions and
alternative approaches considered, if any. The baseline should
represent the agency's best assessment of what the world would look
like absent the regulatory action. For a new regulatory action
modifying an existing regulation (such as changing the annual average
receipts calculation from 3 years to 5 years), a baseline assuming no
change to the regulation (i.e., maintaining the status quo) generally
provides an appropriate benchmark for evaluating benefits, costs, or
transfer impacts of proposed regulatory changes and their alternatives.
Based on the 2012 Economic Census special tabulations (the latest
available), 2012 County Business Patterns Reports (for industries not
covered by the Economic Census), and 2012 Agricultural Census
tabulations (for agricultural industries), of a total of about 7.2
million firms in all industries with receipts-based size standards,
about 96 percent are considered small and 4 percent other than small
under the 3-year annual receipts average. Similarly, of 346,958
businesses that were subject to at least one receipts-based size
standard and eligible for Federal contracting, 87.5 percent were small
in at least one NAICS code and 12.5 percent other than small in all
NAICS codes.
Based on the data from the Federal Procurement Data System--Next
Generation (FPDS-NG) for fiscal years 2015-2017, on average, about
88,770 unique firms in industries subject to receipts-based size
standards received at least one Federal contract during that period, of
which 83 percent were small. Businesses subject to receipts-based
standards received $182 billion in annual average Federal contract
dollars during that period, of which nearly $64 billion or about 35
percent went to small businesses. Of total dollars awarded to small
businesses subject to receipts-based size standards, $45 billion or 71
percent was awarded through various small business set-aside programs
and another 29 percent was awarded through non-set aside contracts.
[[Page 29407]]
Based on SBA's internal data on its loan programs, small businesses
subject to receipts-based size standards received, on an annual basis,
a total of nearly 58,600 7(a) and 504 loans for fiscal years 2016-2018,
totaling $24.5 billion, of which 85 percent was issued through the 7(a)
program and 15 percent was issued through the CDC/504 program. During
fiscal year 2018, small businesses in those industries also received
about 11,350 loans through the SBA's Economic Injury Disaster Loan
(EIDL) program, totaling about $1.0 billion on an annual basis. Table
6, ``Baseline Analysis of Receipts-Based Size Standards,'' below,
provides these baseline results.
Besides set-aside contracting and financial assistance discussed
above, small businesses also benefit through reduced fees, less
paperwork, and fewer compliance requirements that are available to
small businesses through Federal agencies that use SBA's size
standards. However, SBA has no data to estimate the number of small
businesses receiving such benefits. Similarly, due to the lack of data,
SBA is not able to determine impacts the proposed rule will have on
small businesses participating in other agencies' programs that are
subject to their own size standards based on annual average receipts.
Table 6--Baseline Analysis of Receipts-Based Size Standards
------------------------------------------------------------------------
Measure Value
------------------------------------------------------------------------
Total industries subject to receipts-based standards.... 518
Total firms subject to at least one receipts-based 7.17
standard (million)--2012 Economic Census...............
Total small firms subject to at least one receipts-based 6.9
standard (million)--2012 Economic Census...............
Total small firms subject to at least one receipts-based 96.2
standard as % of total firms--2012 Economic Census.....
Total business concerns in SAM \1\ (as of September 1, 420,381
2018)..................................................
Total business concerns subject to a receipts-based size 346,958
standard in at least one NAICS code \2\ (SAM)..........
Total businesses that are small in at least one NAICS 303,514
code subject to a receipts-based size standard.........
Small business concerns as % of total business concerns 87.5
subject to receipts-based standards (2018 SAM).........
Average total number of unique Eligible vendors getting 126,500
Federal contracts \1\--FPDS-NG (2015-2017).............
Average total number of unique firms with receipts-based 88,770
size standards getting Federal contracts \2\--FPDS-NG
(2015-2017)............................................
Average total contract dollars awarded to business $182
concerns, subject to receipts-based standards ($
billion)...............................................
Average total small business contract dollars awarded to $63.7
businesses subject to receipts-based standards ($
billion)...............................................
Small business dollars as % of total dollars awarded to 34.9
firms subject to receipts-based standards..............
Annual average number of 7(a) and 504 loans to 58,569
businesses subject to receipts-based standards (2015-
2018)..................................................
Annual average amount of 7(a) and 504 loans ($ billion) $24.5
(2015-2018)............................................
Number of EIDL loans to businesses subject to receipts- 11,345
based size standards (2018)............................
Amount of EIDL loans ($ billion)........................ $1.0
------------------------------------------------------------------------
\1\ Entities in SAM and FPDS-NG presented above only include business
concerns that can be eligible to qualify as small for Federal
contracting. That is, entities that can never qualify as small (e.g.,
foreign, not-for-profit and government entities) are excluded as they
are not impacted by this rule.
\2\ A business concern could appear in multiple NAICS industries
involving both receipts-based and size standards and those based on
other measures (such as employees). Similarly, a business could be
small in some industries and other than small in others.
As mentioned previously, businesses that would regain or lose small
business status can be identified by comparing their 5-year receipts
average with the size standard. That is, if the 5-year receipts average
of a firm currently above the size standard is lower than the
applicable size standard, that firm will gain or regain small business
status. Similarly, if the 5-year annual receipts average of a currently
small business is higher than the size standard, that business will
lose its small business status. However, to estimate the number of
small businesses that would benefit by having their small business
status extended for a longer period or would be penalized by having
their small size status shortened, SBA considered small businesses
whose 3-year annual average receipts average was within 10 percent
below their receipts-based size thresholds. Small businesses that are
not immediately impacted may be impacted either negatively or
positively someday as they continue to grow and approach the size
standard threshold.
d. Benefits
The most significant benefits to businesses from the proposed
change in the period for calculation of annual average receipts from 3
years to 5 years include: (i) Enabling some mid-size businesses
currently categorized above their corresponding size standards to gain
or regain small business size status and thereby qualify for
participation in Federal assistance intended for small businesses, and
(ii) allowing some advanced and larger small businesses close to their
size thresholds to lengthen their small business status for a longer
period and thereby continue their participation in Federal small
business programs. These include SBA's loan programs, EIDL program, and
Federal procurement programs intended for small businesses. Federal
procurement programs provide targeted, set-aside opportunities for
small businesses under SBA's various business development and
contracting programs, including 8(a)/BD, HUBZone, WOSB, EDWOSB, and
SDVOSB programs. Benefits accruing to businesses gaining and extending
small status are presented below in Table 7, ``Positive Impacts of
Changing the Averaging Period for Receipts from 3 Years to 5 Years.''
The results in Table 7 pertain to businesses and industries subject to
receipts-based size standards only.
As shown in Table 7, of 43,444 firms not currently considered small
in any receipts-based size standards, 3,260 (or 7.5 percent) would
benefit from the proposed change by gaining or regaining small status
under the 5-year receipts average in at least one NAICS industry that
is subject to a receipts-based size standard. Additionally, about 3,800
or 1.3 percent of small businesses within 10 percent below size
standards would see their annual receipts decrease under the 5-year
averaging period, consequently enabling them to keep their size status
for a longer period.
Using the 2012 Economic Census, SBA estimated that about 7,800 or
2.9 percent of currently large businesses would gain or regain small
status and more than 62,800 or 0.9 percent of total small businesses
would see their small business status extended for a longer period as
the result of this proposed
[[Page 29408]]
rule. These results are shown in Table 7, below.
With more businesses qualifying as small under the proposed change,
Federal agencies will have a larger pool of small businesses from which
to draw for their small business procurement programs. Growing small
businesses that are close to exceeding the current size standards will
be able to retain their small business status for a longer period under
the 5-year receipts average, thereby enabling them to continue to
benefit from the small business programs.
Table 7--Positive Impacts of Changing the Averaging Period for Receipts From 3 Years to 5 Years
----------------------------------------------------------------------------------------------------------------
Large firms Small firms
Impact of proposed change gaining small extending Total positive
status small status impact
----------------------------------------------------------------------------------------------------------------
No. of impacted industries...................................... 372 361 \1\ 420
No. of large firms becoming small or/and small firms extending 3,260 3,801 \2\ 6,690
small status--SAM (as of Sept 1, 2018).........................
Large firms becoming small or/and small firms with extended 7.5 1.3 1.9
small status as % of total large or/and small firms in the
baseline--SAM (as of Sept 1, 2018).............................
No. of large firms becoming small or/and small firms extending 7,822 62,822 70,644
small status--2012 Economic Census.............................
Large firms becoming small or/and small firms extending small 2.9 0.9 1.0
status as % of total large or/and small firms in the baseline--
2012 Economic Census...........................................
No. of large firms becoming small or/and small firms extending 910 838 \2\ 1,700
small status for small business contracts (FPDS-NG)............
Additional small business dollars available to newly qualified $961 $133 $1,094
firms or/and current small firms with extended small status ($
million).......................................................
Additional small business dollars as % total small business 1.5 0.2 1.7
contract dollars in the baseline...............................
No. of additional 7(a) and 504 loans to newly qualified firms or/ 54 478 532
and current small firms extending small status.................
Additional 7(a) and 504 loan amount to newly qualified firms or/ $22 $189 $211
and current small firms extending small status ($ million).....
Additional 7(a) and 504 loan amount as % of total EIDL loan 0.1 0.8 0.9
amount in the baseline.........................................
No. of additional EIDL loans to newly qualified for/firms and 21 84 105
small firms extending small status.............................
Additional EIDL loan amount to newly qualified firms or/and $2.2 $7.8 $10.0
small firms with extended small status ($ million).............
Additional EIDL loan amount as % of total loan amount in the 0.2 0.8 1.0
baseline.......................................................
----------------------------------------------------------------------------------------------------------------
\1\ Total impact represents total unique industries impacted to avoid double counting as some industries have
large firms gaining small status and small firms extending small status.
\2\ Total impact represents total unique firms impacted to avoid double counting as some firms may gain small
business status in at least one NAICS code, while extending small business status in at least one other NAICS
code.
Based on the FPDS-NG data for fiscal years 2015-2017, as shown in
Table 7, SBA estimates that those newly qualified small businesses
(i.e., large businesses gaining small status) under the proposed rule,
if adopted, could receive $961 million in small business contract
dollars annually under SBA's small business, 8(a)/BD, HUBZone, WOSB,
EDWOSB, and SDVOSB programs. That represents a 1.5 percent increase to
total small business contract dollars from the baseline. Additionally,
small businesses could receive approximately $133 million in additional
small business contract dollars because of extension of their small
business status, which is about a 0.2 percent increase from the total
small business contract dollars in the baseline. That is, businesses
gaining or extending small business status could receive about $1.1
billion in additional small business contract dollars, which is a 1.7
percent increase to the total small business dollars in the baseline.
Under SBA's 7(a) and 504 loan programs, based on the data for
fiscal years 2016-2018, SBA estimates up to about 54 SBA 7(a) and 504
loans totaling nearly $22.0 million could be made to these newly
qualified small businesses under the proposed change. Additionally,
small businesses could receive up to 478 SBA 7(a) and 504 loans
totaling $189 million due to the extension of their size status. These
are, respectively, 0.1 percent and 0.8 percent increases to the loan
amount in the baseline.
Newly qualified small businesses and those with extended small
business status will also benefit from the SBA's EIDL program. Since
the benefit provided through this program is contingent on the
occurrence and severity of a disaster in the future, SBA cannot make a
meaningful estimate of this impact. However, based on the historical
trends of the EIDL data, SBA estimates that, on an annual basis, the
newly defined small businesses under the proposed change could receive
about 21 EIDL loans, totaling about $21 million. Similarly, extending
small business status for a longer period could result in small
businesses receiving 84 EIDL loans, totaling about $7.8 million. These
results are presented in Table 7, above.
The added competition from more businesses qualifying as small may
result in lower prices to the Federal Government for procurements set
aside or reserved for small businesses, but SBA cannot quantify this
impact. Costs could be higher when full and open contracts are awarded
to HUBZone businesses that receive price evaluation preferences.
However, with agencies likely setting aside more contracts for small
businesses in response to a larger pool of small businesses under the
proposed change, HUBZone firms might actually end up getting more set-
aside contracts and fewer full and open contracts, thereby resulting in
some cost savings to agencies. While SBA cannot estimate such costs
savings, as it is impossible to determine the number and value of
unrestricted contracts to be otherwise awarded to HUBZone firms that
will be awarded as set-asides, such cost savings are likely to be
relatively small as only a small fraction of full and open contracts
are awarded to HUBZone businesses.
Additionally, the newly defined small businesses, as well as those
with a longer small business status, would also
[[Page 29409]]
benefit from reduced fees, less paperwork, and fewer compliance
requirements but SBA has no data to quantify this impact.
The proposed change will also address some of the challenges and
uncertainties small businesses face in the open market once they
graduate from their small business status. Small and mid-size
businesses experience a considerable disadvantage in competing for full
and open contracts against large businesses, including the largest in
the industry. These large businesses have several competitive
advantages over small and mid-size firms, including vast past
performance qualifications and experience, strong brand-name
recognition, a plethora of professional certifications, security
clearances, and greater financial and marketing resources. Small and
mid-size businesses cannot afford to maintain these resources, leaving
them at a considerable disadvantage.
With contracts getting bigger, one large set-aside contract could
throw a firm out of its small business size status, thereby subjecting
it to certain requirements that apply to other-than-small firms, such
as developing subcontracting plans. That firm may not have the
infrastructure, existing business processes, and/or other resources in
place in order to comply with such requirements. This may also result
in constant shuffling between small and other-than-small status.
By allowing smaller mid-size companies that have just exceeded the
size threshold to regain small business status and advanced small
businesses close to size standards to prolong their small business
status for a longer period, this proposed rule can expand the pool of
qualified small firms for agencies to draw upon to meet their small
business requirements.
e. The Costs
As stated previously, the change enacted under Public Law 115-324
may not always and necessarily benefit every small business concern.
When businesses' annual revenues are declining or when annual revenues
for the latest 3 years are lower than those for the earliest 2 years of
the 5-year period, the 5-year average would be higher than the 3-year
average, thereby ejecting small businesses out of their small status
sooner or rendering some small businesses other than small immediately.
Such small businesses would no longer be eligible for Federal small
business opportunities, such as SBA's loans, Federal small business
contracts, and other Federal assistance available to small businesses.
These impacts are provided in Table 8, ``Negative Impacts from Changing
the Averaging Period for Receipts from 3 Years to 5 Years,'' below.
Table 8--Negative Impacts From Changing the Averaging Period for Receipts From 3 Years to 5 Years
----------------------------------------------------------------------------------------------------------------
Small firms Small firms
Impact of proposed change losing small shortening Total negative
status small status impact
----------------------------------------------------------------------------------------------------------------
No. of industries impacted...................................... 370 184 \1\ 383
No. of small firms losing or/and shortening small status--SAM 2,855 347 \2\ 3,197
(as of Sept 1, 2018)...........................................
Small firms losing or shortening small status as % of total 0.9 0.1 1.1
small firms--SAM (as of Sept 1, 2018)..........................
No. of small firms losing or extending small status--2012 62,662 5,945 68,607
Economic Census................................................
Small firms losing or shortening small status as % of total 0.9 0.1 1.0
small firms in the baseline--2012 Economic Census..............
No. of small firms losing or shortening small business 416 82 498
eligibility for set-aside contracts--FPDS-NG (2015-17).........
Small business dollars unavailable to small firms losing or $289 $46 $335
shortening small status ($ million)............................
Small business dollars as % of total small business dollars in 0.5 0.07 0.5
the baseline...................................................
No. of 7(a) and 504 loans unavailable to small firms losing or 565 52 617
shortening small status........................................
7(a) and 504 loan amount unavailable to small firms losing or $256 $22 $278
shortening ($ million).........................................
Unavailable 7(a) and 504 loan amount as % of total loan amount 1.0 0.1 1.1
in the baseline (baseline = $24.5 billion).....................
No. of EIDL loans unavailable to small firms losing or 100 21 121
shortening small status........................................
Unavailable EIDL loan amount to small firms losing or extending $9.6 $2.2 $11.8
small status ($ million).......................................
Unavailable EIDL loan amount as % of total EIDL loan amount in 1.0 0.2 1.2
the baseline (baseline = $1.0 billion).........................
----------------------------------------------------------------------------------------------------------------
\1\ Total impact represents total unique industries impacted to avoid double counting as some industries have
small firms losing small status and small firms shortening small status.
\2\ Total impact represents total unique firms impacted to avoid double counting as some firms may gain small
business status in at least one NAICS code, while extending small business status in at least one other NAICS
code.
SBA estimates that, of 303,514 firms in 2018 SAM that were small
under at least one receipts-based size standard based on the 3-year
receipts average, 2,855 firms (or 0.9 percent) would lose their small
status and another 347 firms (or 0.1 percent) would see their size
status shortened as a result of the proposed change. Similarly, based
on the 2012 Economic Census data, about 62,650 firms would lose their
small business status and about 5,950 firms would see their size status
shortened, which represent, respectively, 0.9 percent and 0.1 percent
of total small firms subject to a receipts-based size standard.
Based on the contract awards data from FPDS-NG for fiscal years
2015-2017, businesses losing or shortening small status would lose
access to about $335 million in Federal small business contract
collars, which is about a 0.5 percent decrease from the corresponding
value in the baseline. Similarly, based on the SBA's loan data for
fiscal years 2016-2018 and the number of impacted firms from the
Economic Census, SBA estimates that businesses losing or shortening
small status would also lose access to about $277 million in SBA 7(a)
and 504 loans and $12 million in EIDL loans. These are, respectively,
1.1 percent and 1.2 percent of the corresponding baseline values.
Businesses losing small status and those with size status shortened
would also be deprived of other Federal benefits available, including
reduced fees and exemptions from certain paperwork and compliance
[[Page 29410]]
requirements. However, there exists no data to quantify this impact.
Additionally, by enabling mid-size businesses to regain small
business status and lengthening the small business status of advanced
and successful larger small businesses, the proposed rule may
disadvantage smaller small businesses in more need of Federal
assistance than their larger counterparts in competing for Federal
opportunities. SBA frequently receives concerns from smaller small
businesses that they also lack resources, past performance
qualifications and expertise to be able to compete against more
resourceful, qualified and experienced large small businesses for
Federal opportunities for small businesses.
Besides having to register in SAM to be able to participate in
Federal contracting and update the SAM profile annually, small
businesses incur no direct costs to gain or retain their small business
status. All businesses willing to do business with the Federal
Government have to register in SAM and update their SAM profiles
annually, regardless of their size status. SBA believes that a vast
majority of businesses that are willing to participate in Federal
contracting are already registered in SAM. Furthermore, this proposed
rule does not establish the new size standards for the first time;
rather, it merely proposes to modify the calculation of annual average
receipts that apply to the existing size standards in accordance with a
statutory requirement.
The proposed change may entail some additional administrative costs
to the Federal Government because more businesses may qualify as small
for Federal small business programs. For example, there will be more
firms seeking SBA's loans; more firms eligible for enrollment in the
Dynamic Small Business Search (DSBS) database or in certify.sba.gov;
more firms seeking certification as 8(a)/BD or HUBZone firms or
qualifying for small business, WOSB, EDWOSB, and SDVOSB status; and
more firms applying for SBA's 8(a)/BD and All-Small Mentor-
Prot[eacute]g[eacute] programs. With an expanded pool of small
businesses, it is likely that Federal agencies will set aside more
contracts for small businesses under the proposed change. One may
surmise that this might result in a higher number of small business
size protests and additional processing costs to agencies. However, the
SBA's historical data on size protests actually shows that the number
of size protests actually decreased after an increase in the number of
businesses qualifying as small as a result of size standards revisions
as part of the first 5-year review of size standards. Specifically, on
an annual basis, the number of size protests dropped from about 600
during fiscal years 2011-2013 (review of most receipts-based size
standards was completed by the end of fiscal year 2013) to about 500
during fiscal years 2014-2016. However, with more years of data to be
reviewed, 5-year averaging may increase time needed by size specialists
to process a size protest. Among those newly defined small businesses
seeking SBA's loans, there could be some additional costs associated
with compliance and verification of their small business status.
However, small business lenders have an option of using the tangible
net worth and net income based alternative size standard instead of
using the industry-based size standard to establish eligibility for
SBA's loans. For these reasons, SBA believes that these added
administrative costs will be minor because necessary mechanisms are
already in place to handle these added requirements.
Additionally, some Federal contracts may possibly have higher
costs. With a greater number of businesses defined as small under the
proposed change, Federal agencies may choose to set aside more
contracts for competition among small businesses only instead of using
full and open competition. The movement of contracts from unrestricted
competition to small business set-aside contracts might result in
competition among fewer total bidders, although there will be more
small businesses eligible to submit offers under the proposed change.
However, the additional costs associated with fewer bidders are
expected to be minor since, by law, procurements may be set aside for
small businesses under the 8(a)/BD, HUBZone, WOSB, EDWOSB, or SDVOSB
programs only if awards are expected to be made at fair and reasonable
prices.
Costs may also be higher when full and open contracts are awarded
to HUBZone businesses that receive price evaluation preferences.
However, with agencies likely setting aside more contracts for small
businesses in response to the availability of a larger pool of small
businesses under the proposed increases to size standards, HUBZone
firms might actually end up getting fewer full and open contracts,
thereby resulting in some cost savings to agencies. However, such cost
savings are likely to be minimal as only a small fraction of
unrestricted contracts are awarded to HUBZone businesses.
f. Net Impact
As discussed elsewhere, the proposed rule would result in four
primary impacts, which can be categorized as either having a `positive
impact' or `negative impact' on size status of both currently large and
small businesses. Allowing some currently large firms to gain small
business status and some advanced small firms to remain small for a
longer period represents the positive impact of the proposed rule.
Causing some currently small firms to lose or shorten their small
business is the negative impact.
Although businesses in a majority of industries with receipts-based
size standards would be both positively and negatively impacted by this
proposed rule, in totality the number firms with positive impacts was
generally greater than the number of firms with negative impacts. The
proposed rule would result in a net gain of about $759 million (or 1.2
percent) in Federal small business dollars. However, due to the
relative sizes of the industries in terms of the number of firms, the
net impact of the proposed rule on SBA loans was slightly negative. SBA
estimates a net loss of 0.3 percent of 7(a) and 504 loans and 0.2
percent of EIDL loans to small firms as a result of changing the period
for calculating annual average receipts from 3 years to 5 years. Net
impacts of the proposed rule are summarized in Table 9, ``Net Impact
from Changing the Averaging Period for Receipts from 3 Years to 5
Years,'' below.
Table 9--Net Impact From Changing the Averaging Period for Receipts From 3 Years to 5 Years
----------------------------------------------------------------------------------------------------------------
Total Total
Impact of proposed change positive negative Net impact
impact impact
----------------------------------------------------------------------------------------------------------------
Total no. of impacted firms--SAM (as of Sept 1, 2018)........... 6,690 3,197 3,493
Impacted firms as % of total firms in the baseline--SAM (as of 1.9 0.9 1.0
Sept 1, 2018)..................................................
Number of impacted firms--2012 Economic Census.................. 70,644 68,607 2,037
Impacted firms as % of total firms in the baseline--2012 1.0 1.0 0.03
Economic Census................................................
[[Page 29411]]
Number of impacted firms eligible for set-aside contracts (FPDS- 1,700 498 1,200
NG)............................................................
Small business dollars impacted ($ million)..................... $1,094 $335 $759
Small business dollars impacted as % total set-aside dollars in 1.7 0.5 1.2
the baseline...................................................
Number of 7(a) and 504 loans impacted........................... 532 617 -85
7(a) and 504 loan amount impacted ($ million)................... $211 $277 -$66
7(a) and 504 loan amount impacted as % of total 7(a) and 504 0.9 1.1 -0.3
loan amount in the baseline....................................
No. of EID loans impacted....................................... 105 121 -16
EID loan amount impacted ($ million)............................ $10.0 $11.8 -$1.8
EID loan amount impacted as % of total loan amount in the 1.0 1.2 -0.2
baseline.......................................................
----------------------------------------------------------------------------------------------------------------
g. Transfer Impacts
The proposed change may result in some redistribution of Federal
contracts between businesses gaining or extending small status and
large businesses, and between businesses gaining or extending small
status and other existing small businesses. However, it would have no
impact on the overall economic activity since the total Federal
contract dollars available for businesses to compete for will not
change. While SBA cannot quantify with certainty the actual outcome of
the gains and losses from the redistribution of contracts among
different groups of businesses, it can identify several probable
impacts in qualitative terms. With the availability of a larger pool of
small businesses under the proposed change, some unrestricted Federal
contracts may be set aside for small businesses. As a result, large
businesses may lose access to some Federal contracts. Similarly, some
currently small businesses may obtain fewer set-aside contracts due to
the increased competition from some large businesses qualifying as
small and advanced small businesses remaining small for a longer
period. This impact may be offset by a greater number of procurements
being set aside for all small businesses. With large businesses
qualifying as small and advanced larger small businesses remaining
small for a longer period under the proposed rule, smaller small
businesses could face some disadvantages in competing for set-aside
contracts against their larger counterparts. However, SBA cannot
quantify these impacts.
B. 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. This action does
not have retroactive or preemptive effect.
C. 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.
D. Executive Order 13563
Executive Order 13563 emphasizes the importance of quantifying both
costs and benefits, reducing costs, harmonizing rules, and promoting
flexibility. 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 Benefit-Cost Analysis under Executive Order 12866.
Additionally, Executive Order 13563, Section 6, calls for retrospective
analyses of existing rules.
Following the enactment of Public Law 115-324, SBA issued a public
notice advising business and contracting communities that SBA must go
through a rulemaking process to implement the new law and that
businesses still must report their receipts based on a 3-year average
until SBA changes its regulations. SBA updated the Small Business
Procurement Advisory Council (SBPAC) at its March 26, 2019, and April
23, 2019, meetings about SBA's rulemaking process to implement Public
Law 115-324. On April 18, 2019, SBA also presented an update on the
implementation of Public Law 115-324 at the 2019 Annual Government
Procurement Conference. Through phone calls and emails, SBA also
advised business and contracting communities and other interested
parties about the SBA's process to implement the new law.
Additionally, SBA issued a revised draft white paper titled ``Small
Business Size Standards: Revised Size Standards Methodology'' and
published a notice in the April 27, 2018, issue of the Federal Register
(83 FR 18468) to advise the public that the document is available for
public review and comments. The Revised Size Standards Methodology
explains how SBA establishes, reviews, and modifies its receipts-based
and employee-based small business size standards. On April 11, 2019,
SBA published a Federal Register Notice (84 FR 14587) advising the
public that the Agency has issued the revised final white paper.
E. Executive Order 13771
This proposed rule is not expected to be an Executive Order 13771
regulatory action because this proposed rule is not significant under
Executive Order 12866.
F. 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 industries subject to receipts-based size standards. As
described above, this rule may affect small businesses in those
industries seeking Federal contracts, loans under SBA's 7(a), 504 and
EIDL programs, and assistance under other Federal small business
programs.
Immediately below, SBA sets forth an initial regulatory flexibility
analysis (IRFA) of this proposed rule to address the following
questions: (1) What is the need for and objective of the rule?; (2)
What is SBA's description and estimate of the number of small
businesses to which the rule will apply?; (3) What are the projected
reporting, record-keeping, and other compliance requirements of the
rule?; (4) What are the relevant Federal rules that may duplicate,
[[Page 29412]]
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?
Recently, Public Law 115-324 amended section 3(a)(2)(C)(ii)(II) of
the Small Business Act by modifying the period for calculating annual
average receipts of business concerns providing services in a proposed
size standard prescribed by an agency without separate statutory
authority to issue size standards from 3 years to 5 years. This
proposed rule is needed to implement Public Law 115-324 and to make
consistent changes to SBA's definition of annual receipts by amending
the SBA's regulations on the calculation of annual average receipts for
all receipts-based standards from over 3 years to over 5 years.
2. What are SBA's description and estimate of the number of small
businesses to which the rule will apply?
This proposed rule applies to all small businesses that are subject
to a receipts-based size standard. Based on the 2012 Economic Census
special tabulations, 2012 County Business Patterns Reports, and 2012
Agricultural Census tabulations, of a total of about 7.2 million firms
in all industries with receipts-based size standards to which the rule
will apply, 6.9 million or about 96.0 percent are considered small
under the 3-year annual receipts average. Of 346,958 total concerns in
SAM 2018 to which the rule will apply, about 303,500 or 87.5 percent
were small in at least one NAICS industry with a receipts-based size
standard. Similarly, based on the data from FPDS-NG for fiscal years
2015-2017, on average, about 88,770 unique firms in industries subject
to receipts-based size standards received at least one Federal contract
during that period, of which 83 percent, or 73,825 were small.
3. What are the projected reporting, record-keeping and other
compliance requirements of the rule?
The proposed rule changes existing reporting or record-keeping
requirements for small businesses. In reporting receipts to SBA for an
SBA size determination, businesses will report a 5-year average rather
than a 3-year average. To qualify for Federal procurement and a few
other programs requires businesses to register in SAM and to self-
certify that they are small at least once annually. Therefore,
businesses opting to participate in those programs must comply with SAM
requirements. There are no costs associated with SAM registration or
certification. Changing size standards alters 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 section 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)).
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. As stated elsewhere, the objective of this
proposed rule is to change SBA regulations on the calculation of
business size in terms of annual average receipts to implement Public
Law 115-324 and there are no other alternatives to achieve that
objective.
G. Paperwork Reduction Act
For purposes of the Paperwork Reduction Act, 44 U.S.C. Chapter 35,
SBA has determined that this proposed rule would amend an information
collection (SBA Form 355, Information for Small Business Size
Determination, which was previously approved under OMB Control Number
3245-0101). In addition to seeking reinstatement of this information
collection, SBA will also submit it to OMB for approval of the changes
described below. Certain proposed revisions in Parts III and IV of Form
355 address the change from 3 years to 5 years for calculating annual
average receipts. Other proposed revisions to the form would be to
delete unnecessary questions, clarify certain previously approved
requests for information, and in some instances, to request additional
information where SBA has determined there is a programmatic need. The
proposed deletions and clarifications, though not required by the
statute, will alleviate the additional burden posed by changing from 3
years to 5 years for calculating annual average receipts.
First, SBA will amend the General Instructions section to define
``concern'' and ``principal stockholders''; state that separate
affiliation rules apply in some of SBA's loan and research programs;
remove the requirement to identify a labor surplus county, as well as
obsolete information about industries with special size standards; and
to include in the certification a statement that accompanying
documentation is true and correct.
Second, in Part 1, SBA will clarify that the information relates to
the applicant business; add a checkbox for the firm to identify its
corporate organization structure; require a firm to disclose whether it
is organized for profit; and remove various obsolete or unnecessary
information regarding county/city, purpose of the size determination,
the contracting agency, the business's major products or services and
shares of sales, addresses of owners or officers, and recently
completed mergers. Part 1 will also be amended to request ownership
information for owners that are entities until the respondent
identifies the ultimate owners that are natural persons.
Third, in Part II, SBA will limit the information requested about
employees to businesses that are being evaluated under an employee-
based size standard.
Fourth, in Part III, SBA will limit the information request about
receipts to businesses that are being evaluated under a receipts-based
size standard. SBA will add 2 additional lines to the entries for
annual receipts so that a business that has been in business for 5
years provides information about its most recently competed 5 fiscal
years.
Fifth, in Part IV, SBA will add that the business must provide
information for any business that the applicant's owner
[[Page 29413]]
reports on a Schedule C or Schedule E of the owner's personal tax
returns if the owner or an immediate family member has a controlling
interest in the business, remove the request for addresses of
individual owners and managers, request ownership information for
owners that are entities until the respondent identifies the ultimate
owners that are natural persons, limit the request for employee
information to applicants being evaluated under an employee-based size
standard, limit the information request for receipts information to
applicants being evaluated under a receipts-based size standard, and
add two rows to the receipts table so that the receipts of acknowledged
affiliates are reported based on a 5-year average.
Sixth, in Part V, SBA will remove requests about acknowledged
affiliates that are covered in Part IV; delete questions about
performance of work on the contract, financial impact of termination
for default, and specific terms and conditions of the contract; and add
a question about actual or proposed subcontracts between the applicant
and any of its alleged affiliates.
SBA determines that these changes to the information collection
will cause the paperwork burden to remain at 4 hours. The changes will
require a business in an industry with a receipts-based size standard
to gather information about the business's 5 prior fiscal years and
complete information about its 5 prior fiscal years and the 5 prior
fiscal years for acknowledged affiliates. However, a business with a
receipts-based size standard will not complete information about its
number of employees. Similarly, a business with an employee-based size
standard will not complete information about its receipts.
Additionally, SBA has removed all requests for the addresses of
individual owners and managers, and deleted 3 questions from Part V.
The deadline and method for submitting comments are as stated above
in the DATES and ADDRESSES sections, respectively. The title, summary
of the amended information collection, description of respondents, and
an estimate of the reporting burden are discussed below. Included in
the estimate is the time for reviewing instructions, searching existing
data, and completing and reviewing each collection of information.
1. Title and Description: SBA Form 355, Information for Small
Business Size Determination. The information provided in this form will
be used by SBA for a size determination of a business applying for
assistance available to small businesses under any program administered
by this Agency, except for its SBIC Program which uses SBA Form 480, or
at the request of another Federal agency for purposes of its small
business program.
Need and Purpose: This information collection is necessary for SBA
to, among other things, evaluate the eligibility of an applicant for
SBA's small business programs.
OMB Control Number: 3245-0101.
Description of and Estimated Number of Respondents: This
information will be collected from small businesses seeking an SBA
determination of size. Based on historical information, SBA estimates
this number to be between 500 and 600 each year.
Estimated Response Time: 4 hours.
Total Estimated Annual Hour Burden: 2,000-2,400.
SBA invites comments on: (1) Whether the proposed changes to this
collection of information are necessary for the proper performance of
SBA's functions, including whether the information will have a
practical utility; (2) the accuracy of SBA's estimate of the burden of
the proposed collection of information, including the validity of the
methodology and assumptions used; (3) ways to enhance the quality,
utility, and clarity of the information to be collected; and (4) ways
to minimize the burden of the collection of information on respondents,
including through the use of automated collection techniques, when
appropriate, and other forms of information technology.
List of Subjects in 13 CFR Part 121
Administrative practice and procedure, Government procurement,
Government property, Grant programs--business, Individuals with
disabilities, Loan programs--business, Reporting and recordkeeping
requirements, Small businesses.
For the reasons set forth in the preamble, SBA proposes to amend 13
CFR part 121 as follows:
PART 121--SMALL BUSINESS SIZE REGULATIONS
0
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. 121.104 revise the second sentence of paragraphs (a),
paragraphs (c) and (d)(3) to read as follows:
Sec. 121.104 How does SBA calculate annual receipts?
(a) * * * Generally, receipts are considered ``total income'' (or
in the case of a sole proprietorship ``gross income'') plus ``cost of
goods sold'' as these terms are defined and reported on Internal
Revenue Service (IRS) tax return forms (such as Form 1120 for
corporations; Form 1120S for S corporations; Form 1120, Form 1065 or
Form 1040 for LLCs; Form 1065 for partnerships; Form 1040, Schedule F
for farms; Form 1040, Schedule C for other sole proprietorships) * * *
* * * * *
(c) Period of measurement. (1) Annual receipts of a concern that
has been in business for 5 or more completed fiscal years means the
total receipts of the concern over its most recently completed 5 fiscal
years divided by 5.
(2) Annual receipts of a concern which has been in business for
less than 5 complete fiscal years means the total receipts for the
period the concern has been in business divided by the number of weeks
in business, multiplied by 52.
(3) Where a concern has been in business 5 or more complete fiscal
years but has a short year as one of the years within its period of
measurement, annual receipts means the total receipts for the short
year and the 4 full fiscal years divided by the total number of weeks
in the short year and the 4 full fiscal years, multiplied by 52.
(d) Annual receipts of affiliates.
* * * * *
(3) If the business concern or an affiliate has been in business
for a period of less than 5 years, the receipts for the fiscal year
with less than a 12-month period are annualized in accordance with
paragraph (c)(2) of this section. Receipts are determined for the
concern and its affiliates in accordance with paragraph (c) of this
section even though this may result in using a different period of
measurement to calculate an affiliate's annual receipts.
* * * * *
0
3. Amend by Sec. 121.903 by revising paragraphs (a)(1)(ii) as follows:
Sec. 121.903 How may an agency use size standards for its programs
that are different than those established by SBA?
(a) * * *
(1) * * *
(i) * * *
(ii) The size of a services concern by its average annual receipts
over a period of at least 5 years, determined according to Sec.
121.104;
* * * * *
Dated: June 6, 2019.
Christopher M. Pilkerton,
Acting Administrator.
[FR Doc. 2019-12754 Filed 6-21-19; 8:45 am]
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