[Federal Register Volume 85, Number 192 (Friday, October 2, 2020)]
[Proposed Rules]
[Pages 62372-62403]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2020-21593]
[[Page 62371]]
Vol. 85
Friday,
No. 192
October 2, 2020
Part II
Small Business Administration
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13 CFR Part 121
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Small Business Size Standards: Transportation and Warehousing;
Information; Finance and Insurance; Real Estate and Rental and Leasing;
Proposed Rule
Federal Register / Vol. 85 , No. 192 / Friday, October 2, 2020 /
Proposed Rules
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SMALL BUSINESS ADMINISTRATION
13 CFR Part 121
RIN 3245-AG90
Small Business Size Standards: Transportation and Warehousing;
Information; Finance and Insurance; Real Estate and Rental and Leasing
AGENCY: U.S. Small Business Administration.
ACTION: Proposed rule.
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SUMMARY: The U.S. Small Business Administration (SBA) proposes to
increase its receipts-based small business size definitions (commonly
referred to as ``size standards'') for North American Industry
Classification System (NAICS) sectors related to Transportation and
Warehousing, Information, Finance and Insurance, and Real Estate and
Rental and Leasing. SBA proposes to increase size standards for 45
industries in those sectors, including eighteen (18) industries in
NAICS Sector 48-49 (Transportation and Warehousing), eight (8)
industries in NAICS Sector 51 (Information), ten (10) industries in
NAICS Sector 52 (Finance and Insurance), and nine (9) industries in
NAICS Sector 53 (Real Estate and Rental and Leasing). SBA's proposed
revisions relied on its recently revised ``Size Standards Methodology''
(Methodology). SBA seeks comments on its proposed changes to size
standards in the above sectors, and the data sources it evaluated to
develop the proposed size standards.
DATES: SBA must receive comments to this proposed rule on or before
December 1, 2020.
ADDRESSES: Identify your comments by RIN 3245-AG90 and submit them by
one of the following methods: (1) Federal eRulemaking Portal:
www.regulations.gov, following the instructions for submitting
comments; or (2) Mail/Hand Delivery/Courier: Khem R. Sharma, Ph.D.,
Chief, Office of Size Standards, 409 Third Street SW, Mail Code 6530,
Washington, DC 20416.
SBA will post all comments to this proposed rule on
www.regulations.gov. If you wish to submit confidential business
information (CBI) as defined in the User Notice at www.regulations.gov,
you must submit such information to U.S. Small Business Administration,
Khem R. Sharma, Ph.D., Chief, Office of Size Standards, 409 Third
Street SW, Mail Code 6530, Washington, DC 20416, or send an email to
[email protected]. Highlight the information that you consider to
be CBI and explain why you believe SBA should hold this information as
confidential. SBA will review your information and determine whether it
will make the information public.
FOR FURTHER INFORMATION CONTACT: Jorge Laboy-Bruno, Ph.D., Economist,
Office of Size Standards, (202) 205-6618 or [email protected].
SUPPLEMENTARY INFORMATION: To determine eligibility for Federal small
business assistance, SBA establishes small business size definitions
(usually referred to as ``size standards'') for private sector
industries in the United States. SBA uses two primary measures of
business size for size standards purposes: Average annual receipts and
average number of employees. SBA uses financial assets for certain
financial industries in Sector 52 and refining capacity, in addition to
employees, for the petroleum refining industry in Sector 31-33 to
measure business size. In addition, 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 the
alternative size standards based on tangible net worth and net income
to determine eligibility for those programs.
In September 2010, Congress passed the Jobs Act (Pub. L. 111-240,
124 Stat. 2504, September 27, 2010), (Jobs Act) requiring SBA to review
all size standards every five years and make necessary adjustments to
reflect current industry and market conditions. In accordance with the
Jobs Act, in early 2016 SBA completed the first 5-year review of all
size standards--except those for agricultural enterprises for which
size standards were previously set by Congress--and made appropriate
adjustments to size standards for a number of industries to reflect
current industry and Federal market conditions.
During the previous 5-year comprehensive review of size standards
under the Jobs Act, SBA reviewed the receipts-based size standards for
forty-two (42) industries and one (1) exception within NAICS Sector 48-
49, twenty (20) industries within Sector 51, thirty-nine (39)
industries in Sector 52, and twenty-four (24) industries and one (1)
exception in Sector 53. These reviews of receipts-based size standards
occurred during October 2010 to December 2013. SBA's analysis of the
then-available relevant industry and Federal contracting data supported
lowering size standards for twenty-four (24) industries and one (1)
exception in these sectors. However, taking into consideration economic
conditions at the time, SBA decided to either retain these size
standards at existing levels or bring them up to the relevant common
size standard. In the final rules, SBA increased size standards for
ninety-three (93) of those industries and one (1) exception, including
twenty-two (22) industries in NAICS Sector 48-49 (77 FR 10943, February
24, 2012), fifteen (15) industries in NAICS Sector 51 (77 FR 72702,
December 6, 2012), thirty-six (36) industries in NAICS Sector 52 (78 FR
37409, June 20, 2013), and twenty (20) industries and one (1) exception
in NAICS Sector 53 (77 FR 58747, September 24, 2012). SBA changed the
basis for measuring the size of one industry (NAICS code 522293,
International Trade Financing) from assets to annual receipts. SBA
retained the size standards for the remaining thirty-two (32)
industries in these sectors. Table 1, Size Standards Revisions During
the Prior Comprehensive Review, provides a summary of these revisions
by NAICS sector.
Table 1--Size Standards Revisions During the Prior Comprehensive Review
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Number of type
Number of size Number of size Number of size Number of size of size
NAICS sector Sector name standards standards standards standards standards
reviewed increased lowered maintained changed
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48-49................................ Transportation and Warehousing... 43 22 0 21 0
51................................... Information...................... 20 15 0 5 0
52................................... Finance and Insurance............ 39 36 0 2 1
53................................... Real Estate and Rental and 25 21 0 4 0
Leasing.
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All Sectors...................... ................................. 127 94 0 32 1
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Currently, there are twenty-seven (27) different size standards
levels covering 1,023 NAICS industries and 14 subindustry activities
(commonly known as ``exceptions'' in SBA's table of size standards).
Sixteen (16) of these size levels are based on average annual receipts,
nine (9) are based on average number of employees, and two (2) are
based on other measures.
SBA also adjusts its monetary-based size standards for inflation at
least once every five years. An interim final rule on SBA's latest
inflation adjustment to size standards, effective August 19, 2019, was
published in the Federal Register on July 18, 2019 (84 FR 34261). SBA
also updates its size standards, also every five years, to adopt the
Office of Management and Budget's (OMB) quinquennial NAICS revisions to
its table of small business size standards. Effective October 1, 2017,
SBA adopted OMB's 2017 NAICS revisions for its size standards (82 FR
44886, September 27, 2017).
This proposed rule is one of a series of proposed rules that will
review size standards of industries grouped by various NAICS sectors.
Rather than review all size standards at one time, SBA is reviewing
size standards by generally grouping industries within various NAICS
sectors that use the same size measure (i.e., employees or monetary).
In the current review, SBA will review size standards in six (6) groups
of NAICS sectors. (In the prior review, SBA reviewed size standards
mostly on a sector by sector basis.) Once SBA completes its review of
size standards for a group of sectors, it issues for public comments a
proposed rule to revise size standards for those industries based on
the latest available data and other factors deemed relevant by the
SBA's Administrator.
Below is a discussion of SBA's revised ``Size Standards
Methodology'' (Methodology), available at www.sba.gov/size, for
establishing, reviewing, or modifying receipts-based size standards
that SBA has applied to this proposed rule. SBA examines the structural
characteristics of an industry as a basis to assess industry
differences and the overall degree of competitiveness of an industry
and of firms within the industry. Industry structure is typically
examined by analyzing four primary factors--average firm size, degree
of competition within an industry, start-up costs and entry barriers,
and distribution of firms by size. To assess the ability of small
businesses to compete for Federal contracting opportunities under the
current size standards, as the fifth primary factor, SBA also examines,
for each industry averaging $20 million or more in average annual
Federal contract dollars, the small business share in Federal contract
dollars relative to the small business share in total industry's
receipts. When necessary, SBA also considers other secondary factors as
they are relevant to the industries and the interests of small
businesses, including impacts of size standards changes on small
businesses.
Size Standards Methodology
SBA has recently revised its Methodology for establishing,
reviewing, or modifying size standards when necessary. See the
notification in the April 11, 2019 issue of the Federal Register (84 FR
14587). The revised methodology is available on SBA's size standards
web page at www.sba.gov/size. Prior to finalizing the revised
Methodology, SBA issued a notification in the April 27, 2018 issue of
the Federal Register (83 FR 18468) to solicit comments from the public
and notify stakeholders of the proposed changes to the Methodology. SBA
considered all public comments in finalizing the revised Methodology.
For a summary of comments and SBA's responses, refer to the SBA's April
11, 2019 Federal Register notification.
The revised Methodology represents a major change from the previous
methodology, which was issued on October 21, 2009 (74 FR 53940).
Specifically, in its revised Methodology SBA is replacing the
``anchor'' approach applied in the previous methodology with a
``percentile'' approach for evaluating differences in characteristics
among various industries. Under the ``anchor'' approach, SBA generally
evaluated the characteristics of individual industries relative to the
average characteristics of industries with the anchor size standard to
determine whether they should have a higher or a lower size standard
than the anchor. In the ``percentile'' approach, SBA ranks each
industry among all industries with the same measure of size standards
(such as receipts or employees) in terms of four primary industry
factors, discussed in the Industry Analysis subsection below. The
``percentile'' approach is explained more fully elsewhere in this
proposed rule. Additionally, as the fifth factor, SBA evaluates the
difference between the small business share in Federal contract dollars
and the small business share in total industry's receipts to compute
the size standard for the Federal contracting factor. The overall size
standard for an industry is then obtained by averaging all size
standards supported by each primary factor. The evaluation of the
Federal contracting factor is explained more fully elsewhere in this
proposed rule.
SBA does not apply all aspects of its Methodology to all proposed
rules because not all features are relevant for every industry covered
by each proposed rule. For example, since all industries covered by
this proposed rule have receipts-based size standards, the Methodology
described in this proposed rule applies only to establishing,
reviewing, or modifying receipts-based size standards. SBA's entire
Methodology is available on its website at www.sba.gov/size.
This proposed rule includes information regarding the factors SBA
evaluated and the criteria it used to propose adjustments to size
standards for industries reviewed herein. This proposed rule also
affords the public an opportunity to review and to comment on SBA's
proposed revisions to size standards for industries covered by the
rule.
Industry Analysis
Congress granted SBA's Administrator discretion to establish
detailed small business size standards (15 U.S.C. 632(a)(2)).
Specifically, Section 3(a)(3) of the Small Business Act (15 U.S.C.
632(a)(3)) requires that ``. . . the [SBA] Administrator shall ensure
that the size standard varies from industry to industry to the extent
necessary to reflect the differing characteristics of the various
industries and consider other factors deemed to be relevant by the
Administrator.'' Accordingly, the economic structure of an industry is
the underlying basis for establishing, reviewing, or modifying small
business size standards. In addition, SBA considers current economic
conditions, its mission and program objectives, the Administration's
current policies, impacts on small businesses under current and
proposed or revised size standards, suggestions from industry groups
and Federal agencies, and public comments on the proposed rule. SBA
also examines whether a size standard based on industry and other
relevant data successfully excludes businesses that are dominant in the
industry.
The goal of SBA's size standards review is to determine whether its
existing small business size standards reflect the current industry
structure and Federal market conditions and revise them, when the
latest available data suggest that revisions are warranted. In the
past, SBA compared the characteristics of each industry with the
average characteristics of a group of industries associated with the
``anchor'' size standard. For example, in the
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recently completed first 5-year comprehensive review of size standards
under the Jobs Act, $7 million (now $8.0 million due to the inflation
adjustment in 2019; see 84 FR 34261 (July 18, 2019)) was considered the
``anchor'' for receipts-based size standards and 500 employees was the
``anchor'' for employee-based size standards. If the characteristics of
a specific industry under review were similar to the average
characteristics of industries in the anchor group, SBA generally
adopted the anchor size standard for that industry. If the specific
industry's characteristics were significantly different from those in
the anchor group, SBA assigned a size standard that was higher or lower
than the anchor. To determine a size standard above or below the anchor
size standard, SBA evaluated the characteristics of a second comparison
group of industries with higher size standards. For industries with
receipts-based standards, the second comparison group consisted of
industries with size standards between $23 million and $35.5 million,
with the weighted average size standard for the group equaling $29
million. For manufacturing industries and other industries with
employee-based size standards (except for Wholesale Trade and Retail
Trade), the second comparison group included industries with a size
standard of 1,000 employees or 1,500 employees, with the weighted
average size standard of 1,323 employees. Using the anchor size
standard and average size standard for the second comparison group, SBA
computed a size standard for an industry's characteristic (factor)
based on the industry's position for that factor relative to the
average values of the same factor for industries in the anchor and
second comparison groups.
Under the ``percentile'' approach, for each industry factor, an
industry is ranked and compared with the 20th percentile and 80th
percentile values of that factor among the industries sharing the same
measure of size standards (i.e., receipts or employees). Combining that
result with the 20th percentile and 80th percentile values of size
standards among the industries with the same measure of size standards,
SBA computes a size standard supported by each industry factor for each
industry. In the previous Methodology, comparison industry groups were
predetermined independent of the data, while in the revised Methodology
they are established using the actual data. A more detailed description
of the percentile method is provided in SBA's Methodology, available at
www.sba.gov/size.
The primary factors that SBA evaluates to examine industry
structure include average firm size, startup costs and entry barriers,
industry competition, and distribution of firms by size. SBA also
evaluates, as an additional primary factor, small business success in
receiving Federal contracting assistance under the current size
standards. Specifically, for the Federal contracting factor, SBA
examines the small business share of Federal contract dollars relative
to small business share of total receipts within an industry. These
are, generally, the five most important factors SBA examines when
establishing, reviewing, or revising a size standard for an industry.
However, SBA will also consider and evaluate other secondary factors
that it believes are relevant to a particular industry (such as
technological changes, growth trends, SBA financial assistance, other
program factors, etc.). SBA also considers possible impacts of size
standard revisions on eligibility for Federal small business
assistance, current economic conditions, the Administration's policies,
and suggestions from industry groups and Federal agencies. Public
comments on proposed rules also provide important additional
information. SBA thoroughly reviews all public comments before making a
final decision on its proposed revisions to size standards. Below are
brief descriptions of each of the five primary factors that SBA has
evaluated for each industry being reviewed in this proposed rule. A
more detailed description of this analysis is provided in the SBA's
Methodology, available at www.sba.gov/size.
1. Average firm size. SBA computes two measures of average firm
size: Simple average and weighted average. For industries with
receipts-based size standards, the simple average is the total receipts
of the industry divided by the total number of firms in the industry.
The weighted average firm size is the summation of all the receipts of
the firms in an industry multiplied by their share of receipts in the
industry. The simple average weighs all firms within an industry
equally regardless of their size. The weighted average overcomes that
limitation by giving more weight to larger firms. The size standard
supported by average firm size is obtained by averaging size standards
supported by simple average firm size and weighted average firm size.
If the average firm size of an industry is higher than the average
firm size for most other industries, this would generally support a
size standard higher than the size standards for other industries.
Conversely, if the industry's average firm size is lower than that of
most other industries, it would provide a basis to assign a lower size
standard as compared to size standards for most other industries.
2. Startup costs and entry barriers. Startup costs reflect a firm's
initial size in an industry. New entrants to an industry must have
sufficient capital and other assets to start and maintain a viable
business. If firms entering an industry under review have greater
capital requirements than firms do in most other industries, all other
factors remaining the same, this would be a basis for a higher size
standard. Conversely, if the industry has smaller capital needs
compared to most other industries, a lower size standard would be
considered appropriate.
Given the lack of actual data on startup costs and entry barriers
by industry, SBA uses average assets as a proxy of startup costs and
entry barriers. To calculate average assets, SBA begins with the sales
to total assets ratio for an industry from the Risk Management
Association's Annual Statement Studies, available at https://rmau.org/.
SBA then applies these ratios to the average receipts of firms in that
industry obtained from the Economic Census tabulation. An industry with
average assets that are significantly higher than most other industries
is likely to have higher startup costs; this in turn will support a
higher size standard. Conversely, an industry with average assets that
are similar to or lower than most other industries is likely to have
lower startup costs; this will support either lowering or maintaining
the size standard.
3. Industry competition. Industry competition is generally measured
by the share of total industry receipts generated by the largest firms
in an industry. SBA generally evaluates the share of industry receipts
generated by the four largest firms in each industry. This is referred
to as the ``4-firm concentration ratio,'' a commonly used economic
measure of market competition. Using the 4-firm concentration ratio,
SBA compares the degree of concentration within an industry to the
degree of concentration of the other industries with the same measure
of size standards. If a significantly higher share of economic activity
within an industry is concentrated among the four largest firms
compared to most other industries, all else being equal, SBA would set
a size standard that is relatively higher than for most other
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industries. Conversely, if the market share of the four largest firms
in an industry is appreciably lower than the similar share for most
other industries, the industry will be assigned a size standard that is
lower than those for most other industries.
4. Distribution of firms by size. SBA examines the shares of
industry total receipts accounted for by firms of different receipts
and employment sizes in an industry. This is an additional factor SBA
considers in assessing competition within an industry besides the 4-
firm concentration ratio. If the preponderance of an industry's
economic activity is attributable to smaller firms, this generally
indicates that small businesses are competitive in that industry and
would support adopting a smaller size standard. A higher size standard
would be supported for an industry in which the distribution of firms
indicates that most of the economic activity is concentrated among the
larger firms.
Concentration is a measure of inequality of distribution. To
determine the degree of inequality of distribution in an industry, SBA
computes the Gini coefficient, using the Lorenz curve. The Lorenz curve
presents the cumulative percentages of units (firms) along the
horizontal axis and the cumulative percentages of receipts (or other
measures of size) along the vertical axis. (For further detail, see
SBA's Methodology on its website at www.sba.gov/size.) Gini coefficient
values vary from zero to one. If receipts are distributed equally among
all the firms in an industry, the value of the Gini coefficient will
equal zero. If an industry's total receipts are attributed to a single
firm, the Gini coefficient will equal one.
SBA compares the degree of inequality of distribution for an
industry under review with other industries with the same type of size
standards. If an industry shows a higher degree of inequality of
distribution (hence a higher Gini coefficient value) compared to most
other industries in the group this would, all else being equal, warrant
a size standard that is higher than the size standards assigned to most
other industries. Conversely, an industry with lower degree of
inequality (i.e., a lower Gini coefficient value) than most others will
be assigned a lower size standard relative to others.
5. Federal contracting. As the fifth factor, SBA examines the
success small businesses are having in winning Federal contracts under
the current size standard as well as the possible impact a size
standard change may have on Federal small business contracting
opportunities. The Small Business Act requires the Federal government
to ensure that small businesses receive a ``fair share'' of Federal
contracts. The legislative history also discusses the importance of
size standards in Federal contracting. To incorporate the Federal
contracting factor in the size standards analysis, SBA evaluates small
business participation in Federal contracting in terms of the share of
total Federal contract dollars awarded to small businesses relative to
the small business share of industry's total receipts. In general, if
the share of Federal contract dollars awarded to small businesses in an
industry is significantly smaller than the small business share of
total industry's receipts, all else remaining the same, a justification
would exist for considering a size standard higher than the current
size standard. In cases where small business share of the Federal
market is already appreciably high relative to the small business share
of the overall market, SBA generally assumes that the existing size
standard is adequate with respect to the Federal contracting factor.
The disparity between the small business Federal market share and
industry-wide small business share may be due to various factors, such
as extensive administrative and compliance requirements associated with
Federal contracts, the different skill set required to perform Federal
contracts as compared to typical commercial contracting work, and the
size of Federal contracts. These, as well as other factors, are likely
to influence the type of firms within an industry that compete for
Federal contracts. By comparing the small business Federal contracting
share with the industry-wide small business share, SBA includes in its
size standards analysis the latest Federal market conditions. Besides
the impact on Federal contracting, SBA also examines impacts on SBA's
loan programs both under the current and revised size standards.
Sources of Industry and Program Data
SBA's primary source of industry data used in this proposed rule is
a special tabulation of the Economic Census from the U.S. Census Bureau
(www.census.gov/econ/census). The tabulation based on the 2012 Economic
Census is the latest available, which SBA used for evaluating industry
characteristics and developing size standards in this proposed rule.
The special tabulation provides industry data on the number of firms,
number of establishments, number of employees, annual payroll, and
annual receipts of companies by Industry (6-digit level), Industry
Group (4-digit level), Subsector (3-digit level), and Sector (2-digit
level). These data are arrayed by various classes of firms' size based
on the overall number of employees and receipts of the entire
enterprise (all establishments and affiliated firms) from all
industries. The special tabulation also contains information for
different levels of NAICS categories on average and median firm size in
terms of both receipts and employment, total receipts generated by the
four and eight largest firms, the Herfindahl-Hirschman Index (HHI), the
Gini coefficient, and size distributions of firms by various receipts
and employment size groupings.
In some cases, where data were not available due to disclosure
prohibitions in the Census Bureau's tabulation, SBA either estimated
missing values using available relevant data or examined data at a
higher level of industry aggregation, such as at the NAICS 2-digit
(Sector), 3-digit (Subsector), or 4-digit (Industry Group) level. In
some instances, SBA's analysis was based only on those factors for
which data were available or estimates of missing values were possible.
To evaluate some industries that are not covered by the Economic
Census, SBA used a similar special tabulation of the latest County
Business Patterns (CBP) published by the U.S. Census Bureau
(www.census.gov/programs-surveys/cbp.html). Similarly, to evaluate
industries in NAICS Sector 11 that are also not covered by the Economic
Census and CBP, SBA evaluated a similar special tabulation based on the
2012 Census of Agriculture (www.nass.usda.gov) from the National
Agricultural Statistics Service (NASS). Besides the Economic Census,
Agricultural Census and CBP tabulations, SBA also evaluates relevant
industry data from other sources, when necessary, especially for
industries that are not covered by the Economic Census or CBP. These
include the Quarterly Census of Employment and Wages (QCEW, also known
as ES-202 data) (www.bls.gov/cew/) and Business Employment Dynamics
(BED) data (www.bls.gov/bdm/) from the U.S. Bureau of Labor Statistics.
Similarly, to evaluate certain financial industries that have assets-
based size standards SBA examines the data from the Statistics on
Depository Institutions (SDI) database (www5.fdic.gov/sdi/main.asp) of
the Federal Deposit Insurance Corporation (FDIC) data. Finally, to
evaluate the capacity component of the Petroleum Refiners (NAICS
324110) size standard, SBA evaluates the petroleum production data from
the Energy
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Information Administration (www.eia.gov).
To calculate average assets, SBA used sales to total assets ratios
from the Risk Management Association's Annual eStatement Studies, 2016-
2018 (https://rmau.org). To evaluate Federal contracting trends and
evaluate one exception in Sector 48-49 and one exception in Sector 53,
SBA examined the data on Federal prime contract awards from the Federal
Procurement Data System--Next Generation (FPDS-NG) (www.fpds.gov) for
fiscal years 2016-2018. To assess the impact on financial assistance to
small businesses, SBA examined its internal data on 7(a) and 504 loan
programs for fiscal years 2016-2018. For some portion of impact
analysis, SBA also evaluated the data from the System of Award
Management (www.sam.gov).
Data sources and estimation procedures SBA uses in its size
standards analysis are documented in detail in SBA's Methodology, which
is available at www.sba.gov/size.
Dominance in Field of Operation
Section 3(a) of the Small Business Act (15 U.S.C. 632(a)) defines a
small business concern as one that is: (1) Independently owned and
operated; (2) not dominant in its field of operation; and (3) within a
specific small business definition or size standard established by SBA
Administrator. SBA considers as part of its evaluation whether a
business concern at a proposed size standard would be dominant in its
field of operation. For this, SBA generally examines the industry's
market share of firms at the proposed or revised size standard as well
as the distribution of firms by size. Market share and size
distribution may indicate whether a firm can exercise a major
controlling influence on a national basis in an industry where a
significant number of business concerns are engaged. If a contemplated
size standard includes a dominant firm, SBA will consider a lower size
standard to exclude the dominant firm from being defined as small.
Selection of Size Standards
In the Methodology SBA applied to the first 5-year comprehensive
review of size standards, SBA adopted a fixed number of size standards
levels as part of its effort to simplify size standards. In response to
public comments to the 2009 Methodology white paper, and the 2013
amendment to the Small Business Act (section 3(a)(8)) under section
1661 for the National Defense Authorization Act of Fiscal Year 2013
(``NDAA 2013'') (Public Law 112-239, January 2, 2013), in the revised
Methodology, SBA has relaxed the limitation on the number of small
business size standards. Specifically, section 1661 of NDAA 2013 states
``SBA cannot limit the number of size standards, and shall assign the
appropriate size standard to each industry identified by NAICS.''
In the revised Methodology, which is used in the ongoing, second 5-
year review of size standards, SBA calculates a separate size standard
to each NAICS industry. However, to account for errors and limitations
associated with various data SBA evaluates in the size standards
analysis, SBA will round the calculated size standard value for a
receipts-based size standard to the nearest $500,000, except for
agricultural industries in Subsectors 111 and 112 for which the
calculated size standards will be rounded to the nearest $250,000. This
rounding procedure will be applied both in calculating a size standard
for each of the five primary factors and in calculating the overall
size standard for the industry.
As a policy decision, SBA will continue to maintain the minimum and
maximum levels for both receipts-based and employee-based size
standards. Accordingly, SBA will not generally propose or adopt a size
standard that is either below the minimum level or above the maximum,
even though the calculations yield values below the minimum or above
the maximum. The minimum size standard reflects the size an established
small business should be to have adequate capabilities and resources to
be able to compete for and perform Federal contracts (but does not
account for small businesses that are newly formed or just starting
operations). On the other hand, the maximum size standard represents
the level above which businesses, if qualified as small, would
outcompete much smaller businesses when accessing Federal assistance.
With respect to receipts-based size standards, SBA has established
$6 million and $41.5 million, respectively, as the minimum and maximum
size standard levels (except for most agricultural industries in NAICS
Subsectors 111 and 112). These levels reflect the current minimum of
$6.0 million and the current maximum of $41.5 million. The industry
data seems to suggest that $6 million minimum and $41.5 million maximum
size standards would be too high for agricultural industries.
Evaluation of Industry Factors
As mentioned earlier, to assess the appropriateness of the current
size standards SBA evaluates the structure of each industry in terms of
four economic characteristics or factors, namely average firm size,
average assets size as a proxy of startup costs and entry barriers, the
4-firm concentration ratio as a measure of industry competition, and
size distribution of firms using the Gini coefficient. For each size
standard type (i.e., receipts-based or employee-based) SBA ranks
industries both in terms of each of the four industry factors and in
terms of the existing size standard and computes the 20th percentile
and 80th percentile values for both. SBA then evaluates each industry
by comparing its value for each industry factor to the 20th percentile
and 80th percentile values for the corresponding factor for industries
under a particular type of size standard.
If the characteristics of an industry under review within a
particular size standard type are similar to the average
characteristics of industries within the same size standard type in the
20th percentile, SBA will consider adopting as an appropriate size
standard for that industry the 20th percentile value of size standards
for those industries. For each size standard type, if the industry's
characteristics are similar to the average characteristics of
industries in the 80th percentile, SBA will assign a size standard that
corresponds to the 80th percentile in the size standard rankings of
industries. A separate size standard is established for each factor
based on the amount of differences between the factor value for an
industry under a particular size standard type and 20th percentile and
80th percentile values for the corresponding factor for all industries
in the same type. Specifically, the actual level of the new size
standard for each industry factor is derived by a linear interpolation
using the 20th percentile and 80th percentile values of that factor and
corresponding percentiles of size standards. Each calculated size
standard is bounded between the minimum and maximum size standards
levels, as discussed before. As noted earlier, the calculated value for
a receipts-based size standard for each industry factor is rounded to
the nearest $500,000, except for industries in Subsectors 111 and 112
for which a calculated size standard is rounded to the nearest
$250,000.
Table 2, 20th and 80th Percentiles of Industry Factors for
Receipts-Based Size Standards, shows the 20th percentile and 80th
percentile values for average firm size (simple and weighted), average
assets size, 4-firm concentration ratio, and Gini coefficient for
industries with receipts based size standards.
[[Page 62377]]
Table 2--20th and 80th Percentiles of Industry Factors for Receipts-Based Size Standards
--------------------------------------------------------------------------------------------------------------------------------------------------------
Weighted
Simple average average receipts Average assets 4-firm Gini
Industries/percentiles receipts size size ($ size ($ concentration coefficient
($ million) million) million) ratio (%)
--------------------------------------------------------------------------------------------------------------------------------------------------------
Industries, excluding Subsectors 111 and 112
20th percentile............................................... 0.83 19.42 0.34 7.9 0.686
80th percentile............................................... 7.52 830.65 5.19 42.4 0.834
Industries in Subsectors 111 and 112
20th percentile............................................... 0.06 1.48 0.07 1.7 0.608
80th percentile............................................... 0.83 13.32 0.88 12.3 0.908
--------------------------------------------------------------------------------------------------------------------------------------------------------
Estimation of Size Standards Based on Industry Factors
An estimated size standard supported by each industry factor is
derived by comparing its value for a specific industry to the 20th
percentile and 80th percentile values for that factor. If an industry's
value for a particular factor is near the 20th percentile value in the
distribution, the supported size standard will be one that is close to
the 20th percentile value of size standards for industries in the size
standards group, which is $8.0 million. If a factor for an industry is
close to the 80th percentile value of that factor, it would support a
size standard that is close to the 80th percentile value in the
distribution of size standards, which is $35.0 million. For a factor
that is within, above, or below the 20-80th percentile range, the size
standard is calculated using linear interpolation based on the 20th
percentile and 80th percentile values for that factor and the 20th
percentile and 80th percentile values of size standards.
For example, if an industry's simple average receipts are $1.9
million that would support a size standard of $11.5 million. According
to Table 2, the 20th percentile and 80th percentile values of average
receipts are $0.83 million and $7.52 million, respectively. The $1.9
million is 15.9 percent between the 20th percentile value ($0.83
million) and the 80th percentile value ($7.52 million) of simple
average receipts (($1.9 million-$0.83 million) / ($7.52 million-$0.83
million) = 0.159 or 15.9%). Applying this percentage to the difference
between the 20th percentile value ($8 million) and 80th percentile
($35.0 million) value of size standards and then adding the result to
the 20th percentile size standard value ($8.0 million) yields a
calculated size standard value of $12.32 million ([{$35.0 million-$8.0
million{time} * 0.159] + $8.0 million = $12.32 million). The final
step is to round the calculated $12.32 million size standard to the
nearest $500,000, which in this example yields $12.5 million. This
procedure is applied to calculate size standards supported by other
industry factors.
Detailed formulas involved in these calculations are presented in
SBA's Methodology, which is available on its website at www.sba.gov/size.
Derivation of Size Standards Based on Federal Contracting Factor
Besides industry structure, SBA also evaluates Federal contracting
data to assess the success of small businesses in getting Federal
contracts under the existing size standards. For each industry with $20
million or more in annual Federal contract dollars, SBA evaluates the
small business share of total Federal contract dollars relative to the
small business share of total industry receipts. All other factors
being equal, if the share of Federal contracting dollars awarded to
small businesses in an industry is significantly less than the small
business share of that industry's total receipts, a justification would
exist for considering a size standard higher than the current size
standard. Conversely, if the small business share of Federal
contracting activity is near or above the small business share in total
industry receipts, this will support the current size standard.
SBA increases the existing size standards by certain percentages
when the small business share of total industry receipts exceeds the
small business share of total Federal contract dollars by 10 or more
percentage points. Proposed percentage increases generally reflect
receipts levels needed to bring the small business share of Federal
contracts at par with the small business share of industry receipts.
These proposed percentage increases for receipts-based size standards
are given in Table 3, Proposed Adjustments to Size Standards Based on
Federal Contracting Factor.
Table 3--Proposed Adjustments to Size Standards Based on Federal Contracting Factor
----------------------------------------------------------------------------------------------------------------
Percentage difference between the small business shares of total Federal
contract dollars in an industry and of total industry receipts
Size standards --------------------------------------------------------------------------
>-10% -10% to -30% <-30%
----------------------------------------------------------------------------------------------------------------
Receipts based standards
<$15 million..................... No change.............. Increase 30%........... Increase 60%
$15 million to <$25 million...... No change.............. Increase 20%........... Increase 40%
$25 million to <$41.5 million.... No change.............. Increase 15%........... Increase 25%
----------------------------------------------------------------------------------------------------------------
For example, if an industry with the current size standard of $8.0
million had an average of $50 million in Federal contracting dollars,
of which 15 percent went to small businesses, and if that small
businesses accounted for 40 percent of total receipts of that industry,
the small business share of total Federal contract dollars would be 25
percent less than the small business share of total industry receipts
(40%-15%). According to the above rule, the new size standard for the
Federal contracting factor for that industry would be set by
multiplying the current $8.0 million standard by 1.3 (i.e., 30%
increase) and then by rounding the result to the nearest $500,000,
yielding a size standard of $10.5 million. SBA evaluated the small
business share of total Federal contract dollars for fifty-six
[[Page 62378]]
(56) industries (including 23 in Sector 48-49, seven (7) in Sector 51,
12 in Sector 52, and 14 in Sector 53) covered by this proposed rule
which had $20 million or more in average annual Federal contract
dollars during fiscal years 2016-2018. The Federal contracting factor
was significant (i.e., the difference between the small business share
of total industry receipts and small business share of Federal
contracting dollars was 10 percentage points or more) in eighteen (18)
of these industries, prompting an upward adjustment of their existing
size standards based on that factor. For the remaining 38 industries
that averaged $20 million or more in average annual contract dollars,
the Federal contracting factor was not significant, and the existing
size standard was applied for that factor.
Derivation of Overall Industry Size Standard
The SBA's Methodology presented above results in five separate size
standards based on evaluation of the five primary factors (i.e., four
industry factors and one Federal contracting factor). SBA typically
derives an industry's overall size standard by assigning equal weights
to size standards supported by each of these five factors. However, if
necessary, SBA's Methodology would allow assigning different weights to
some of these factors in response to its policy decisions and other
considerations. For detailed calculations, see SBA's Methodology,
available at www.sba.gov/size.
Calculated Size Standards Based on Industry and Federal Contracting
Factors
Table 4, Size Standards Supported by Each Factor for Each Industry
(Receipts), below, shows the results of analyses of industry and
Federal contracting factors for each industry and subindustry
(exception) covered by this proposed rule. NAICS industries in columns
2, 3, 4, 5, 6, 7, and 8 show two numbers. The upper number is the value
for the industry or Federal contracting factor shown on the top of the
column and the lower number is the size standard supported by that
factor. Column 9 shows a calculated new size standard for each
industry. This is the average of the size standards supported by each
factor, rounded to the nearest $500,000 for non-agriculture industries
and rounded to the nearest $250,000 for agriculture industries.
Analytical details involved in the averaging procedure are described in
SBA's Methodology, which is available at www.sba.gov/size. For
comparison with the calculated new size standards, the current size
standards are in column 10 of Table 4.
Table 4--Size Standards Supported by Each Factor for Each Industry (Receipts)
[Upper value = calculated factor, lower value = size standard supported]
--------------------------------------------------------------------------------------------------------------------------------------------------------
Simple Weighted Calculated Current
average average Average Federal size size
NAICS code NAICS industry title Type firm size firm size assets Four-firm Gini contract standard standard
($ ($ size ($ ratio (%) coefficient factor ($ ($
million) million) million) (%) million) million)
(1) (2)............... (3) (4) (5) (6) (7) (8) (9) (10)
--------------------------------------------------------------------------------------------------------------------------------------------------------
481219 Other Nonscheduled Air Factor............ $3.6 $76.4 $2.2 36.8 0.803 -8.2 $22.0 $16.5
Transportation. Size Std.......... 19.0 10.0 18.5 30.5 29.5 16.5
484110 General Freight Trucking, Factor............ 0.9 10.7 0.3 1.8 0.717 .......... 9.0 30.0
Local. Size Std.......... 8.5 7.5 8.0 6.0 14.0
484121 General Freight Trucking, Factor............ 3.5 734.6 1.6 14.5 0.827 .......... 22.0 30.0
Long-Distance, Truckload. Size Std.......... 19.0 32.0 15.0 13.0 33.5
484122 General Freight Trucking, Factor............ 10.2 2,209.7 4.9 41.8 0.882 .......... 38.0 30.0
Long-Distance, Less Than Truckload. Size Std.......... 41.5 41.5 33.5 34.5 41.5
484210 Used Household and Office Factor............ 1.9 309.3 0.7 26.1 0.791 15.0 21.0 30.0
Goods Moving. Size Std.......... 12.5 17.5 10.0 22.0 27.0 30.0
484220 Specialized Freight (except Factor............ 1.2 30.7 0.5 3.9 0.733 -29.2 15.0 30.0
Used Goods) Trucking, Local. Size Std.......... 9.5 8.5 9.0 6.0 16.5 34.5
484230 Specialized Freight (except Factor............ 4.4 201.1 2.3 11.1 0.822 10.6 22.0 30.0
Used Goods) Trucking, Long- Size Std.......... 22.0 14.0 19.0 10.5 32.5 30.0
Distance.
485111 Mixed Mode Transit Systems.. Factor............ 6.5 .......... 3.6 .......... ........... -23.7 25.5 16.5
Size Std.......... 31.0 26.0 20.0
485112 Commuter Rail Systems....... Factor............ 117.7 .......... 65.4 .......... ........... .......... 41.5 16.5
Size Std.......... 41.5 41.5
485113 Bus and Other Motor Vehicle Factor............ 5.3 323.4 3.0 56.1 0.858 49.1 28.5 16.5
Transit Systems. Size Std.......... 26.0 18.0 22.5 41.5 39.0 16.5
485119 Other Urban Transit Systems. Factor............ 15.7 157.6 8.7 .......... 0.811 .......... 33.0 16.5
Size Std.......... 41.5 12.5 41.5 30.5
485210 Interurban and Rural Bus Factor............ 3.7 120.3 3.1 51.5 0.817 .......... 28.0 16.5
Transportation. Size Std.......... 19.5 11.5 23.0 41.5 32.0
485310 Taxi Service................ Factor............ 0.8 20.6 0.3 11.8 0.781 .......... 13.0 16.5
Size Std.......... 8.0 8.0 8.0 11.0 25.0
485320 Limousine Service........... Factor............ 0.9 29.5 0.4 12.1 0.759 .......... 12.5 16.5
Size Std.......... 8.5 8.5 8.0 11.0 21.5
485410 School and Employee Bus Factor............ 3.4 834.1 2.2 41.4 0.823 -14.2 26.5 16.5
Transportation. Size Std.......... 18.0 35.0 18.5 34.5 33.0 20.0
485510 Charter Bus Industry........ Factor............ 2.4 28.1 1.9 14.3 0.701 .......... 13.0 16.5
Size Std.......... 14.5 8.5 16.5 13.0 11.0
485991 Special Needs Transportation Factor............ 1.4 42.0 0.5 15.0 0.730 24.2 13.0 16.5
Size Std.......... 10.0 9.0 9.0 13.5 16.0 16.5
485999 All Other Transit and Ground Factor............ 1.1 28.8 0.5 22.9 0.787 1.4 16.0 16.5
Passenger Transportation. Size Std.......... 9.0 8.5 9.0 20.0 26.5 16.5
486210 Pipeline Transportation of Factor............ 183.9 1,264.9 73.6 34.5 0.833 .......... 36.5 30.0
Natural Gas. Size Std.......... 41.5 41.5 41.5 29.0 34.5
486990 All Other Pipeline Factor............ 21.4 80.7 8.6 93.0 0.737 .......... 31.5 40.5
Transportation. Size Std.......... 41.5 10.0 41.5 41.5 17.5
487110 Scenic and Sightseeing Factor............ 1.8 36.7 1.1 32.1 0.763 .......... 18.0 8.0
Transportation, Land. Size Std.......... 12.0 8.5 12.0 27.0 22.0
[[Page 62379]]
487210 Scenic and Sightseeing Factor............ 0.9 18.8 0.7 16.4 0.735 .......... 12.5 8.0
Transportation, Water. Size Std.......... 8.5 8.0 10.0 14.5 17.0
487990 Scenic and Sightseeing Factor............ 2.5 30.0 1.5 44.1 0.781 .......... 22.0 8.0
Transportation, Other. Size Std.......... 15.0 8.5 14.5 36.5 25.5
488111 Air Traffic Control......... Factor............ 20.5 64.0 12.8 90.7 0.691 0.1 30.5 35.0
Size Std.......... 41.5 9.5 41.5 41.5 9.0 35.0
488119 Other Airport Operations.... Factor............ 5.5 129.3 3.5 22.6 0.798 -1.0 25.5 35.0
Size Std.......... 27.0 11.5 25.5 19.5 28.5 35.0
488190 Other Support Activities for Factor............ 5.3 273.2 2.9 18.7 0.839 -21.3 27.5 35.0
Air Transportation. Size Std.......... 26.0 16.5 22.5 16.5 36.0 40.5
488210 Support Activities for Rail Factor............ 9.7 159.1 5.7 29.8 0.807 .......... 30.0 16.5
Transportation. Size Std.......... 41.5 12.5 37.5 25.0 30.0
488310 Port and Harbor Operations.. Factor............ 8.2 230.4 9.1 56.1 0.850 21.3 38.0 41.5
Size Std.......... 37.5 15.0 41.5 41.5 38.0 41.5
488320 Marine Cargo Handling....... Factor............ 34.2 680.6 34.2 49.1 0.837 -7.4 39.0 41.5
Size Std.......... 41.5 30.0 41.5 40.0 35.5 41.5
488330 Navigational Services to Factor............ 4.4 68.4 3.6 22.6 0.806 -32.6 26.5 41.5
Shipping. Size Std.......... 22.5 9.5 26.5 19.5 30.0 41.5
488390 Other Support Activities for Factor............ 2.7 41.4 2.1 23.0 0.791 -19.9 23.5 41.5
Water Transportation. Size Std.......... 15.5 8.5 17.5 20.0 27.0 41.5
488410 Motor Vehicle Towing........ Factor............ 0.6 4.7 0.3 4.1 0.620 .......... 7.0 8.0
Size Std.......... 7.0 7.5 7.5 6.0 6.0
488490 Other Support Activities for Factor............ 1.8 55.8 0.8 24.9 0.794 -16.3 16.0 8.0
Road Transportation. Size Std.......... 12.0 9.0 10.5 21.5 27.5 10.5
488510 Freight Transportation Factor............ 3.4 254.1 0.8 11.0 0.787 -39.0 17.5 16.5
Arrangement. Size Std.......... 18.0 16.0 10.5 10.5 26.5 23.0
488510 Exception, Non[dash]Vessel Factor............ NA NA NA NA NA .......... 30.0 30.0
Owning Common Carriers and Size Std.......... NA NA NA NA NA
Household Goods Forwarders.
488991 Packing and Crating......... Factor............ 1.5 22.5 0.6 15.8 0.752 -22.1 17.5 30.0
Size Std.......... 11.0 8.0 9.0 14.0 20.0 34.5
488999 All Other Support Activities Factor............ 13.2 48.2 4.7 .......... ........... 0.5 22.0 8.0
for Transportation. Size Std.......... 41.5 9.0 32.5 8.0
491110 Postal Service (Necessary Factor............ NA NA NA NA NA .......... 8.0 8.0
data not available to estimate the Size Std.......... NA NA NA NA NA
the factor and supported size
standard).
492210 Local Messengers and Local Factor............ 0.8 22.4 0.2 12.4 0.725 .......... 10.5 30.0
Delivery. Size Std.......... 8.0 8.0 7.5 11.5 15.0
493110 General Warehousing and Factor............ 3.5 444.9 2.1 22.6 0.842 21.3 25.0 30.0
Storage. Size Std.......... 19.0 22.0 17.5 19.5 36.5 30.0
493120 Refrigerated Warehousing and Factor............ 6.4 237.4 7.1 38.1 0.798 -17.6 32.0 30.0
Storage. Size Std.......... 30.5 15.5 41.5 31.5 28.5 34.5
493130 Farm Product Warehousing and Factor............ 2.1 13.5 1.2 19.1 0.723 .......... 13.5 30.0
Storage. Size Std.......... 13.0 8.0 12.5 16.5 14.5
493190 Other Warehousing and Factor............ 4.9 592.7 2.6 50.7 0.867 14.1 32.0 30.0
Storage. Size Std.......... 24.5 27.0 20.5 41.5 41.0 30.0
511210 Software Publishers......... Factor............ 29.1 11,979.9 24.2 41.4 0.871 17.9 40.0 41.5
Size Std.......... 41.5 41.5 41.5 34.0 41.5 41.5
512110 Motion Picture and Video Factor............ 4.6 3,814.6 2.2 46.4 0.865 75.4 33.0 35.0
Production. Size Std.......... 23.0 41.5 18.0 38.0 40.5 35.0
512120 Motion Picture and Video Factor............ 4.5 107.2 3.0 38.3 0.814 .......... 26.0 34.5
Distribution. Size Std.......... 22.5 11.0 22.5 32.0 31.5
512131 Motion Picture Theaters Factor............ 7.0 1,303.2 6.4 55.7 0.848 .......... 39.5 41.5
(except Drive-Ins). Size Std.......... 33.0 41.5 41.5 41.5 37.5
512132 Drive-In Motion Picture Factor............ 0.5 2.8 0.4 27.3 0.604 .......... 11.0 8.0
Theaters. Size Std.......... 6.5 7.5 8.5 23.0 6.0
512191 Teleproduction and Other Factor............ 2.2 110.7 1.3 23.8 0.817 .......... 19.5 34.5
Postproduction Services. Size Std.......... 13.5 11.0 13.5 20.5 32.0
512199 Other Motion Picture and Factor............ 2.8 86.7 1.4 66.6 0.815 .......... 25.0 22.0
Video Industries. Size Std.......... 16.0 10.0 14.0 41.5 31.5
512240 Sound Recording Studios..... Factor............ 0.6 7.9 0.4 13.4 0.696 .......... 9.5 8.0
Size Std.......... 7.0 7.5 8.0 12.5 10.0
512290 Other Sound Recording Factor............ 1.3 38.4 0.9 42.0 0.777 .......... 20.0 12.0
Industries. Size Std.......... 10.0 8.5 11.0 34.5 24.5
515111 Radio Networks.............. Factor............ 11.8 2,274.1 16.8 76.5 0.873 .......... 41.5 35.0
Size Std.......... 41.5 41.5 41.5 41.5 41.5
515112 Radio Stations.............. Factor............ 4.2 1,018.6 5.9 46.2 0.834 .......... 36.0 41.5
Size Std.......... 21.5 41.5 39.0 38.0 35.0
515120 Television Broadcasting..... Factor............ 53.4 3,348.2 66.8 52.0 0.879 .......... 41.5 41.5
Size Std.......... 41.5 41.5 41.5 41.5 41.5
515210 Cable and Other Subscription Factor............ 154.7 7,147.3 119.0 58.9 0.894 .......... 41.5 41.5
Programming. Size Std.......... 41.5 41.5 41.5 41.5 41.5
517410 Satellite Telecommunications Factor............ 15.8 753.3 6.6 48.1 0.865 1.5 38.5 35.0
Size Std.......... 41.5 32.5 41.5 39.5 40.5 35.0
[[Page 62380]]
517919 All Other Telecommunications Factor............ 6.8 764.1 3.1 39.5 0.869 -3.9 33.0 35.0
Size Std.......... 32.0 33.0 23.5 32.5 41.5 35.0
518210 Data Processing, Hosting, Factor............ 10.9 1,122.5 5.5 15.9 0.849 8.2 33.0 35.0
and Related Services. Size Std.......... 41.5 41.5 36.5 14.0 37.5 35.0
519110 News Syndicates............. Factor............ 7.7 263.9 2.6 59.5 0.859 .......... 32.0 30.0
Size Std.......... 35.5 16.0 21.0 41.5 39.5
519120 Libraries and Archives...... Factor............ 1.1 88.8 0.4 34.1 0.803 9.3 18.5 16.5
Size Std.......... 9.0 10.5 8.0 28.5 29.5 16.5
519190 All Other Information Factor............ 2.9 117.8 1.1 43.0 0.846 -25.8 26.5 30.0
Services. Size Std.......... 16.5 11.5 12.5 35.5 37.0 34.5
522220 Sales Financing............. Factor............ 34.7 3,705.1 115.7 33.6 0.885 .......... 38.0 41.5
Size Std.......... 41.5 41.5 41.5 28.0 41.5
522291 Consumer Lending............ Factor............ 9.7 2,845.5 32.2 52.3 0.873 .......... 41.5 41.5
Size Std.......... 41.5 41.5 41.5 41.5 41.5
522292 Real Estate Credit.......... Factor............ 28.9 8,476.2 57.7 43.7 0.869 .......... 40.0 41.5
Size Std.......... 41.5 41.5 41.5 36.0 41.5
522293 International Trade Factor............ 3.7 44.4 7.3 46.9 0.806 .......... 31.0 41.5
Financing. Size Std.......... 19.5 9.0 41.5 38.5 30.0
522294 Secondary Market Financing.. Factor............ 2,094.2 .......... 4,188.4 .......... ........... .......... 41.5 41.5
Size Std.......... 41.5 41.5
522298 All Other Nondepository Factor............ 6.0 .......... 30.0 .......... ........... .......... 35.5 41.5
Credit Intermediation. Size Std.......... 29.0 41.5
522310 Mortgage and Nonmortgage Factor............ 1.1 44.5 1.9 11.0 0.742 -10.5 13.0 8.0
Loan Brokers. Size Std.......... 9.0 9.0 16.5 10.5 18.0 10.5
522320 Financial Transactions Factor............ 21.3 2,801.2 14.2 37.0 0.886 0.8 39.5 41.5
Processing, Reserve, and Size Std.......... 41.5 41.5 41.5 31.0 41.5 41.5
Clearinghouse Activities.
522390 Other Activities Related to Factor............ 3.1 239.2 3.8 18.1 0.854 -16.0 25.0 22.0
Credit Intermediation. Size Std.......... 17.0 15.5 27.5 16.0 38.5 26.5
523110 Investment Banking and Factor............ 41.2 7,592.5 29.4 46.7 0.891 1.1 41.0 41.5
Securities Dealing. Size Std.......... 41.5 41.5 41.5 38.5 41.5 41.5
523120 Securities Brokerage........ Factor............ 13.3 5,432.2 5.5 33.9 0.886 .......... 37.0 41.5
Size Std.......... 41.5 41.5 37.0 28.5 41.5
523130 Commodity Contracts Dealing. Factor............ 11.5 314.6 4.1 35.9 0.872 .......... 32.5 41.5
Size Std.......... 41.5 18.0 29.0 30.0 41.5
523140 Commodity Contracts Factor............ 4.7 366.7 1.2 40.1 0.851 .......... 26.5 41.5
Brokerage. Size Std.......... 23.5 19.5 13.0 33.0 38.0
523210 Securities and Commodity Factor............ 692.4 2,097.6 314.7 84.8 0.683 .......... 33.0 41.5
Exchanges. Size Std.......... 41.5 41.5 41.5 41.5 7.5
523910 Miscellaneous Intermediation Factor............ 2.4 332.7 12.1 19.4 0.827 .......... 27.0 41.5
Size Std.......... 14.5 18.5 41.5 17.0 33.5
523920 Portfolio Management........ Factor............ 9.2 1,893.2 7.6 13.0 0.868 12.9 35.5 41.5
Size Std.......... 41.5 41.5 41.5 12.0 41.0 41.5
523930 Investment Advice........... Factor............ 2.3 847.8 0.9 29.2 0.842 -20.8 27.5 41.5
Size Std.......... 14.0 35.5 11.0 24.5 36.5 41.5
523991 Trust, Fiduciary, and Factor............ 8.7 2,183.6 9.6 58.7 0.873 1.4 41.5 41.5
Custody Activities. Size Std.......... 39.5 41.5 41.5 41.5 41.5 41.5
523999 Miscellaneous Financial Factor............ 12.1 1,063.7 20.2 63.5 0.884 23.7 41.5 41.5
Investment Activities. Size Std.......... 41.5 41.5 41.5 41.5 41.5 41.5
524113 Direct Life Insurance Factor............ 813.7 19,613.2 1,162.4 29.1 0.887 .......... 37.5 41.5
Carriers. Size Std.......... 41.5 41.5 41.5 24.5 41.5
524114 Direct Health and Medical Factor............ 866.5 28,836.1 393.9 34.4 0.866 3.1 38.5 41.5
Insurance Carriers. Size Std.......... 41.5 41.5 41.5 28.5 40.5 41.5
524127 Direct Title Insurance Factor............ 16.3 3,552.3 8.6 89.4 0.888 .......... 41.5 41.5
Carriers. Size Std.......... 41.5 41.5 41.5 41.5 41.5
524128 Other Direct Insurance Factor............ 26.0 813.3 52.1 43.1 0.877 .......... 39.0 41.5
(except Life, Health, and Medical) Size Std.......... 41.5 34.5 41.5 35.5 41.5
Carriers.
524130 Reinsurance Carriers........ Factor............ 363.4 3,744.8 403.7 49.4 0.831 .......... 39.5 41.5
Size Std.......... 41.5 41.5 41.5 40.5 34.5
524210 Insurance Agencies and Factor............ 0.9 488.3 0.5 11.2 0.735 -45.1 13.0 8.0
Brokerages. Size Std.......... 8.0 23.5 9.0 10.5 17.0 13.0
524291 Claims Adjusting............ Factor............ 1.7 119.8 0.6 21.8 0.812 .......... 18.0 22.0
Size Std.......... 11.5 11.5 9.5 19.0 31.0
524292 Third Party Administration Factor............ 48.1 34,890.1 28.3 76.3 0.886 58.1 40.0 35.0
of Insurance and Pension Funds. Size Std.......... 41.5 41.5 41.5 41.5 41.5 35.0
524298 All Other Insurance Related Factor............ 3.2 411.0 2.1 49.2 0.848 -14.7 27.0 16.5
Activities. Size Std.......... 17.5 21.0 18.0 40.5 37.5 20.0
525110, Pension Funds, 525120, Factor............ 2.7 216.2 13.8 .......... 0.8612 .......... 32.5 35.0
Health and Welfare Funds, and Size Std.......... 16.0 14.5 41.5 40.0
525190, Other Insurance Funds, and
525920, Trusts, Estates, and
Agency Accounts.
525910 Open-End Investment Funds... Factor............ 2.6 24.5 13.2 58.2 0.807 .......... 31.5 35.0
Size Std.......... 15.5 8.0 41.5 41.5 30.0
525990 Other Financial Vehicles.... Factor............ 2.8 244.0 13.9 .......... 0.865 .......... 32.5 35.0
Size Std.......... 16.0 15.5 41.5 40.5
[[Page 62381]]
531110 Lessors of Residential Factor............ 1.7 333.6 8.5 9.3 0.765 -3.8 23.5 30.0
Buildings and Dwellings. Size Std.......... 11.5 18.5 41.5 9.0 22.5 30.0
531120 Lessors of Nonresidential Factor............ 3.1 691.1 31.1 11.5 0.825 -6.2 28.0 30.0
Buildings (except Miniwarehouses). Size Std.......... 17.0 30.5 41.5 11.0 33.5 30.0
531130 Lessors of Miniwarehouses Factor............ 0.8 413.7 4.2 33.7 0.698 .......... 20.5 30.0
and Self-Storage Units. Size Std.......... 8.0 21.0 29.0 28.0 10.5
531190 Lessors of Other Real Estate Factor............ 0.9 84.1 4.4 18.0 0.689 .......... 16.0 30.0
Property. Size Std.......... 8.0 10.0 30.5 16.0 8.5
Exception to 531110,531120,531130, Factor............ 45.1 1,172.4 297.9 47.5 0.862 60.3 40.5 41.5
and 531190--Review footnote #9. Size Std.......... 41.5 41.5 41.5 39.0 40.0 41.5
531210 Offices of Real Estate Factor............ 0.9 398.6 0.4 13.3 0.758 -11.1 13.0 8.0
Agents and Brokers. Size Std.......... 8.0 20.5 8.0 12.0 21.0 10.5
531311 Residential Property Factor............ 1.0 44.2 1.1 4.7 0.756 28.3 11.0 8.0
Managers. Size Std.......... 9.0 9.0 12.5 6.0 20.5 8.0
531312 Nonresidential Property Factor............ 1.0 28.0 5.2 5.9 0.732 .......... 17.0 8.0
Managers. Size Std.......... 9.0 8.5 35.0 6.5 16.5
531320 Offices of Real Estate Factor............ 0.4 33.1 0.1 12.4 0.695 26.4 8.5 8.0
Appraisers. Size Std.......... 6.5 8.5 6.5 11.5 9.5 8.0
531390 Other Activities Related to Factor............ 0.8 95.8 4.1 15.6 0.764 -12.5 17.0 8.0
Real Estate. Size Std.......... 8.0 10.5 29.0 14.0 22.5 10.5
532111 Passenger Car Rental........ Factor............ 13.3 7,875.5 19.0 90.1 0.889 -0.9 41.5 41.5
Size Std.......... 41.5 41.5 41.5 41.5 41.5 41.5
532112 Passenger Car Leasing....... Factor............ 16.8 830.6 56.0 62.4 0.873 0.2 41.0 41.5
Size Std.......... 41.5 35.0 41.5 41.5 41.5 41.5
532120 Truck, Utility Trailer, and Factor............ 9.2 1,781.6 15.3 62.6 0.869 58.8 41.5 41.5
RV (Recreational Vehicle) Rental Size Std.......... 41.5 41.5 41.5 41.5 41.0 41.5
and Leasing.
532210 Consumer Electronics and Factor............ 10.7 2,040.5 5.9 80.1 0.866 .......... 40.5 41.5
Appliances Rental. Size Std.......... 41.5 41.5 39.0 41.5 40.5
532281 Formal Wear and Costume Factor............ 0.6 12.0 0.3 24.9 0.714 .......... 12.5 22.0
Rental. Size Std.......... 7.0 8.0 8.0 21.5 13.0
532282 Video Tape and Disc Rental.. Factor............ 2.3 1,168.7 1.2 86.1 0.865 .......... 31.0 30.0
Size Std.......... 14.0 41.5 13.0 41.5 40.5
532283 Home Health Equipment Rental Factor............ 7.6 851.4 4.7 65.5 0.830 15.5 36.0 35.0
Size Std.......... 35.0 35.5 32.5 41.5 34.5 35.0
532284 Recreational Goods Rental... Factor............ 0.5 4.7 0.2 10.0 0.632 .......... 7.5 8.0
Size Std.......... 6.5 7.5 7.5 9.5 6.0
532289 All Other Consumer Goods Factor............ 1.1 34.1 0.6 15.1 0.708 .......... 11.0 8.0
Rental. Size Std.......... 9.0 8.5 9.5 13.5 12.0
532310 General Rental Centers...... Factor............ 0.9 6.3 0.7 6.9 0.610 .......... 7.5 8.0
Size Std.......... 8.5 7.5 9.5 7.0 6.0
532411 Commercial Air, Rail, and Factor............ 18.8 2,011.1 46.9 61.4 0.882 33.4 40.0 35.0
Water Transportation Equipment Size Std.......... 41.5 41.5 41.5 41.5 41.5 35.0
Rental and Leasing.
532412 Construction, Mining, and Factor............ 7.8 655.5 9.8 32.8 0.824 3.3 34.0 35.0
Forestry Machinery and Equipment Size Std.......... 36.5 29.0 41.5 27.5 33.0 35.0
Rental and Leasing.
532420 Office Machinery and Factor............ 4.7 109.7 6.7 40.0 0.832 28.6 32.5 35.0
Equipment Rental and Leasing. Size Std.......... 23.5 11.0 41.5 33.0 34.5 35.0
532490 Other Commercial and Factor............ 5.3 372.8 6.6 21.0 0.822 18.2 30.0 35.0
Industrial Machinery and Equipment Size Std.......... 26.0 20.0 41.5 18.0 33.0 35.0
Rental and Leasing.
533110 Lessors of Nonfinancial Factor............ 14.0 795.5 28.0 23.0 0.867 .......... 35.0 41.5
Intangible Assets (except Size Std.......... 41.5 34.0 41.5 20.0 41.0
Copyrighted Works).
--------------------------------------------------------------------------------------------------------------------------------------------------------
Evaluation of Size Standards for Subindustry Categories or
``Exceptions''
In accordance with SBA's approach to evaluating size standards for
subindustry categories (or ``exceptions''), SBA has evaluated the two
(2) exceptions covered by this rule using the procedures described in
the revised SBA's Methodology. The results of that analysis are
discussed in the following two subsections.
Non-Vessel Owning Common Carriers and Household Goods Forwarders
Non-Vessel Owning Common Carriers and Household Good Forwarders is
an ``exception'' or subindustry under NAICS 488510 (Freight
Transportation Arrangement), with the size standard of $30.0 million in
average annual receipts. The data that SBA receives from the Census
Bureau's tabulation are limited to the 6-digit NAICS industry level and
therefore do not provide information on economic characteristics of
firms at the sub-industry level. Thus, for reviewing or modifying size
standards at the subindustry levels (``exceptions''), SBA normally
evaluates data from FPDS-NG and SAM using a two-step procedure.
[[Page 62382]]
First, using FPDS-NG, SBA identifies Product Service Codes (PSCs) that
correspond to specific exceptions. SBA then identifies firms that have
received federal contracts under those PSCs and evaluates their
receipts and employee data from SAM and FPDS-NG to derive the values
for industry and federal contracting factors.
Contracting activity for NAICS 488510 including the exception is
distributed over roughly 70 different PSCs. Using FPDS-NG data for
fiscal years 2016-2018, SBA identified 5 primary PSCs that correspond
to the overall industry including the exception, that amount to 95.6
percent of total dollars obligated on NAICS 488510. These PSCs are V119
(Transportation/Travel/Relocation-Transportation: Other), W023 (Lease-
Rent of Vehicles-Trailers-CYC), M1GZ (Operation of Other Warehouse
Buildings), V112 (Transportation/Travel/Relocation-Transportation:
Motor Freight) and R706 (Support-Management: Logistics Support). The
top PSC alone, V119, accounts for 70 percent of total dollars
obligated. Table 5, Primary PSCs of NAICS 488510 and Average Dollars
Obligated--Fiscal Years 2016-2018, below identifies these five (5) PSCs
and their average total dollars obligated for the fiscal years 2016-
2018.
SBA analyzed the contracting activity under these PSCs, but the
Agency was unable to reliably differentiate the level of activity
corresponding to the exception versus the overall industry, and to
identify any PSCs that would correspond uniquely to the exception.
Table 5--Primary PSCs of NAICS 488510 and Average Total Dollars Obligated Fiscal Years 2016-2018
----------------------------------------------------------------------------------------------------------------
Percentage of Cumulative
Dollars dollars percentage of
PSC PSC description obligated ($ obligated to total NAICS
million) primary PSCs 488510
----------------------------------------------------------------------------------------------------------------
V119............................. Transportation/Travel/ $126.76 70.2 70.2
Relocation-Transportation:
Other.
W023............................. Lease-Rent of Vehicles 32.17 17.8 88.0
Trailers-CYC.
M1GZ............................. Operation of Other Warehouse 7.96 4.4 92.4
Buildings.
V112............................. Transportation/Travel/ 3.14 1.7 94.1
Relocation-Transportation:
Motor Freight.
R706............................. Support Management: Logistics 2.62 1.5 95.6
Support.
-----------------------------------------------
Total........................ ............................. 180.64 100.0 ..............
----------------------------------------------------------------------------------------------------------------
Source: FPDS-NG.
SBA also reviewed the distribution of contracts awarded to small
and other than small businesses in the overall industry. SBA found that
only about $2 million or 1.1% of the $189.9 Million obligated to the
overall industry went to small businesses. Thus, while the total
contracting dollars obligated to all firms in the industry is
significant, the total dollars obligated to small firms is not.
Additionally, the top agencies using the NAICS code 488510, USTRANSCOM
and Federal Emergency Management Agency, which account for 91.3 percent
of total dollars obligated during the period evaluated, have no small
business dollars.
In an effort to differentiate the exception from the overall
industry and determine its economic characteristics, SBA evaluated 2012
Economic Census sub-industry data found in the US Census American
FactFinder. The data divide NAICS 488510 in two components identified
with an additional digit. First, the 7-digit level NAICS 4885101
(Freight Forwarders), and second the 7-digit level NAICS 4885102
(Arrangement of transportation of freight and cargo). The NAICS 4885101
includes Non-vessel operating common carrier service as one of the
principal activities. SBA understands that NAICS 4885101 corresponds to
the activity classified as an exception to the General NAICS 6 digit
488510. The NAICS 4885101 includes multimodal activities supporting
transportation, and the firms assume responsibility for delivery of the
goods.\1\
---------------------------------------------------------------------------
\1\ The Census definition is: ``This U.S. Census Bureau NAICS-
based industry comprises establishments primarily engaged in
undertaking the transportation of goods from shippers to receivers
for a charge covering the entire transportation, and in turn making
use of the services of various freight carriers in affecting
delivery, paying transportation charges, and assuming responsibility
for delivery of the goods. There is no relationship between shippers
and the various freight carriers delivering the goods.''
---------------------------------------------------------------------------
SBA evaluated the economic characteristics of NAICS 4885101 to the
overall industry and found them to be similar. Table 6, Industry
Comparison NAICS 488510 and NAICS 4885101, displays a comparison of
several economic factors between NAICS 488510 (overall industry) and
NAICS 4885101 (industry exception).
Table 6--Industry Comparison NAICS 488510 and NAICS 4885101
------------------------------------------------------------------------
NAICS 488510
Economic characteristic (factor) (overall NAICS 4885101
industry) (exception)
------------------------------------------------------------------------
Average Firm Size by Total $3.4 $4.0
Receipts ($ millions)............
Average Firm Size by Number of 16 17
Employees........................
Weighted Average Firm Size by $121.9 $100.6
Total Receipts ($ millions)......
Concentration Ratio of Top 4 11.0% 14.5%
Largest Firms by Total Receipts
(CR4) %..........................
Percentage of Small Firms (based 88.1% 85.6%
on current size standards) (%)...
------------------------------------------------------------------------
Source: U.S. Census Bureau, AmericanFactFinder and SBA calculations.
Despite the similarities between the overall industry and the
exception, SBA recognizes that there are important distinctions between
freight forwarders and NVOCCs. For example, the Federal Maritime
Commission defines a freight forwarder as a company that arranges cargo
movement to an international destination, dispatches shipments from
[[Page 62383]]
the United States via common carriers and books or otherwise arranges
space for those shipments on behalf of shippers and prepares and
processes the documentation and performs related activities pertaining
to those shipments.'' \2\ Conversely, the Federal Maritime Commission
defines an NVOCC as ``a common carrier that holds itself out to the
public to provide ocean transportation, issues its own house bill of
lading or equivalent document, and does not operate the vessels by
which ocean transportation is provided; a shipper in its relationship
with the vessel-operating common carrier involved in the movement of
cargo.'' Thus, the distinction between freight forwarders and NVOCCs
will be not on the activity or service provided, but in the level of
responsibility and the type of revenue that counts for the firm.
Product Service Codes within NAICS 488510 do not distinguish between
agents or NVOCCs, so it is a challenge to choose a PSC code to evaluate
the exception.
---------------------------------------------------------------------------
\2\ See Federal Maritime Commission web page for definitions of
Freight Forwarder and Non-Vessel Owning Common Carriers at: https://www.fmc.gov/resources-services/ocean-transportation-intermediaries/.
---------------------------------------------------------------------------
Prior to 2000, the exception under NAICS 488510 did not exist. SBA
did not recognize the differences between freight forwarders acting as
agents (or brokers) and freight forwarders that are Non-Vessel
Operating Common Carriers (NVOCCs) and Household Goods Forwarders, and
applied a similar size to both ($18.5 million).
On August 9, 2000, SBA adopted the differentiation between agents
and NVOCCs (65 FR 48601). SBA assigned a smaller size standard of $5
million to the overall industry which included the activity of agents
and a higher size standard of $18.5 million to the exception which
included the activities of NVOCCs and Household Goods Forwarders. SBA's
justification for a lower size for the overall industry was that the
revenues of freight forwarders, which typically act as agents or
brokers, do not correspond to their intermediation activity whereas the
revenues of NVOCCs, which typically act as wholesalers of cargo space,
may have substantial expenses not usually incurred by agent or broker
firms.
Despite these distinctions, SBA's preliminary analysis of industry
structure suggests that firms in the exception and overall industry may
be performing similar functions or that there may be significant
overlap in the services offered by freight forwarders and NVOCCs. The
absence of an easily identifiable PSC that is unique to the business
activities of NVOCCs also supports this finding. Moreover, SBA's
analysis of contracting data found that contracting officers prefer to
use the lower size standard of $16.5 million rather than the higher
size standard of $30 million available for the exception. This suggests
that agencies are able to obtain the services needed provided by the
overall NAICS using the lower size standard applicable to NAICS 488510.
For these reasons, SBA proposes to retain the sub-industry category
(``exception'') under NAICS 488510 and its $30.0 Million size standard.
SBA invites comments, along with supporting information, on this
proposal as well as suggestions on whether the proposed size standard
of $17.5 million for the overall industry is more appropriate for this
exception. SBA also welcomes comments on the percent of Federal
contracting dollars that correspond to NVOCCs versus the overall
industry. Finally, SBA requests comments on available data sources that
clearly define the economic characteristics of NVOCCs, and Household
Goods Forwarders as well.
Exception to NAICS Industry Group 5311: Leasing of Building Space to
the Federal Government by Owners
The current size standard for Federal contracts for Leasing of
Building Space to Federal Government by Owners (``exception'' to NAICS
industry group 5311 (531110, 531120, 531130, and 531190) is $41.5
million. This size standard applies only to certain Federal contracting
opportunities that meet specific criteria. Footnote 9 of SBA's table of
size standards (13 CFR 121.201) reads: ``For Government procurement, a
size standard of $41.5 million in gross receipts applies to the owners
of building space leased to the Federal Government. This size standard
does not apply to an agent.''
To determine if the current $41.5 million size standard is
appropriate, SBA evaluated average firm size, market concentration, and
size distribution of firms involved in Leasing of Building Space to
Federal Government by Owners. SBA used data from FPDS-NG and SAM.gov
and followed the procedure described under the section ``Sources of
Industry and Program Data'' (above). Based on the data for fiscal years
2016-2018, Federal contracts awarded to NAICS 6 digit industries
531110, 531120, 531130 and 531190 averaged about $221.0 million
annually, with the largest percentage going to NAICS 531120 (75.5
percent). SBA chose to analyze dollars awarded to product service codes
(PSC) X111/X1AA (Lease/Rental of Office Building), X1FZ (Lease or
rental of other residential buildings), and X179 (Lease or rent of
other warehouse buildings) across the four NAICS industries within
5311. Dollars obligated to these three PSCs add to $130.1 million in
average in fiscal years 2016-2018, which represents 58.9 percent of
total dollars obligated to these NAICS 6-digit industries. The results,
as shown in Table 4, support retaining the current size standard of
$41.5 million.
Evaluation of the Assets-Based Size Standard
In 1984, SBA published a notice of policy allowing financial
services that prime contractors procure from small minority owned and
controlled financial institutions to qualify as subcontracts for
purposes of meeting subcontracting goals and credits (see 49 FR 13091-
01 (April 2, 1984)). Concurrently, SBA also published a proposed rule
that a financial institution with total assets of not more than $100
million would be considered small (see 49 FR 13052-01 (April 2, 1984)).
SBA adopted the $100 million in total assets as the size standard for
financial institutions (see 49 FR 49398-01 (October 16, 1984)). Over
time, the definition of small depository institution was extended to
all financial institutions within NAICS 5221, Depository Credit
Intermediation. Since then, along with other monetary-based size
standards, SBA has periodically adjusted the assets-based size standard
for inflation, with the latest adjustment increasing it to $600 million
(see 84 FR 34261 (July 18, 2019)).
Currently, the $600 million assets-based size standard applies to
four industries within NAICS Industry Group 5221, and one industry
within NAICS Industry Group 5222, Non-depository Credit Intermediation.
These include NAICS 522110 (Commercial Banking), NAICS 522120 (Savings
Institutions), NAICS 522130 (Credit Unions), NAICS 522190 (Other
Depository Credit Intermediation), and NAICS 522210 (Credit Card
Issuing).
Because only a small number of industries have assets-based size
standards, no comparison groups could be developed to assess differing
characteristics of individual industries based on total assets. Thus,
most of the SBA's size standards methodology is not applicable to
analyzing the assets-based size standards for financial institutions.
Consequently, in this proposed rule, SBA has examined the changes since
2011 (the year that the assets-based size standard was last reviewed)
in other financial industry factors to assess whether the current $600
million assets-
[[Page 62384]]
based size standard should be modified to reflect today's financial
industry structure. Specifically, SBA evaluated changes from 2011 to
2018 (the latest year for which the financial institution data are
available) in average firm size, industry concentration, and
distribution of firms by size (i.e., Gini coefficient) for financial
institutions. As it did in the Sector 52 proposed and final rules (see
77 FR 55737 (September 11, 2012) and 78 FR 37409 (June 20, 2013)) in
the prior review, in this proposed rule, SBA both evaluated depository
institutions as a whole and the minority owned and controlled
depository institutions separately.
SBA evaluated all depository institutions using SDI data. SDI does
not provide the NAICS definition for every firm included in the
database. However, it has a field called Asset Concentration Hierarchy,
which can be used to identify each institution's primary specialization
in terms of asset concentration, such as credit card services. Another
field, Bank Charter Class, identifies the institutions as banks or
thrifts. SDI does not include data on Credit Unions (NAICS 522130).
Because the data are not separated by NAICS code, and also the
differences among services offered by different financial institutions
(such as commercial banks, saving institutions, and credit card issuing
companies) have greatly diminished over the recent decades, SBA has
analyzed all financial institutions as one industry group.
SBA identified Minority Depository Institutions using the list of
minority depository institutions compiled by the Federal Depository
Institutions (FDIC) (https://www.fdic.gov/regulations/resources/minority/mdi.html). SBA examined their characteristics using the assets
data from SDI database too fully capture the changes in industry
structure of minority-owned financial institutions since 2011.
The number of all depository institutions, total assets and
calculated industry factors for 2011 and 2018 are shown on Table 7,
Calculated Industry Factors for All Depository Institutions. All data
were collected at the end of the corresponding calendar year. Similar
calculations for the minority-owned depository institutions are shown
on Table 8, Calculated Industry Factors for Minority Owned Depository
Institutions. For comparability, all monetary values are expressed in
2018 dollars, using the Bureau of Economic Analysis (BEA) GDP deflator
for 2018 (Source: BEA's Table 1.1.4. Price Indexes for Gross Domestic
Product, https://apps.bea.gov/iTable/iTable.cfm?reqid=19&step=2#reqid=19&step=2&isuri=1&1921=survey).
Table 7--Calculated Industry Factors for All Depository Institutions
[All monetary values are in millions of 2018 dollars]
--------------------------------------------------------------------------------------------------------------------------------------------------------
Simple Weighted
Year Number of Total assets average firm average firm Four-firm Gini
institutions size size ratio (%) coefficient
--------------------------------------------------------------------------------------------------------------------------------------------------------
2011.................................................... 7,366 $15,682,868.5 $2,129.1 $84,083.9 41.0 0.907
2018.................................................... 5,415 18,034,370.5 3,330.4 91,644.4 39.4 0.911
--------------------------------------------------------------------------------------------------------------------------------------------------------
Source: SDI/FDIC (https://www7.fdic.gov/sdi/download_large_list_outside.asp). Data correspond to Fourth quarter of calendar year 2018 and deflated using
GDP deflator).
Table 8--Calculated Industry Factors for Minority Depository Institutions
[All monetary values are in millions of 2018 dollars]
--------------------------------------------------------------------------------------------------------------------------------------------------------
Simple Weighted
Year Number of Total assets average firm average firm Four-firm Gini
institutions size size ratio (%) coefficient
--------------------------------------------------------------------------------------------------------------------------------------------------------
2011.................................................... 187 $204,192.6 $1,091.9 $9,923.4 40.6 0.782
2018.................................................... 149 233,929.0 1,570.0 14,024.3 47.5 0.776
--------------------------------------------------------------------------------------------------------------------------------------------------------
Source: FRB and FDIC (table https://www.fdic.gov/regulations/resources/minority/mdi-history.xlsx).
During the 2011 to 2018 span, as shown on Table 7, above, the
financial industry continued to show a decrease in the total number of
depository institutions in 2018 as compared to 2011. The total number
of all financial depository institutions decreased by 26.5 percent from
7,366 in 2011 to 5,415 in 2018, while their total assets (measured in
2018 dollars) increased by 15.0 percent during the same period. The
average firm size (measured in total assets) also increased from 2011
to 2018, with their simple average firm size increasing by a factor of
1.56 and the weighted average firm size increasing by a factor of 1.09.
The four largest institutions' share of total assets (also referred to
as four-firm concentration ratio or CR4) slightly decreased (from 41.0%
to 39.4%), but the Gini coefficient value slightly increased from 0.907
in 2011 to 0.911 in 2018. Overall, the values of these factors confirm
an increase over time in average size of the depository institutions,
and an increase in concentration. The average firm size and Gini
coefficient value for the minority owned banks on Table 8 also
confirmed the continuation of the trend of increased concentration in
the financial industry, even more than for the total industry as
reflected on Table 7. For example, the four firm concentration ratio
for minority depository institutions increased from 40.6 in 2011 to
47.5 in 2018. This is an increase by a factor of 1.17, although the
Gini coefficient decreased slightly.
For the five assets-based industries listed above, Federal
contracting dollars averaged about $130 million per year during fiscal
years 2016-2018. This reflects a large increase in dollars awarded to
those industries when compared to fiscal years 2008-2010, when the
average total dollars obligated to them was about $22 million. Of those
five industries, NAICS 522110, Commercial Banking, accounts for 99.6
percent of the average total dollars obligated. Thus, under SBA's
methodology, different than the first comprehensive review, Federal
contracting is a significant factor for reviewing the assets-based size
standard for the industries.
The current structure of the financial industry relative to that
for 2011, as
[[Page 62385]]
discussed above, strongly supports increasing the current $600 million
assets-based size standard. The changes in industry factors for all
financial institutions on Table 7 as well as the results for the
minority-owned institutions in Table 8 support a size standard in the
range of $700 million to $1 billion in total assets. SBA is proposing
$750 million as it would include about 81 percent of the financial
institutions and 5.3 percent of total assets of all financial
institutions as compared to 77.3 percent of institutions and about 4.6
percent of total assets under the current $600 million. Similarly, it
would include about 75.2 percent of institutions and 12.08 percent of
the total assets of all minority owned institutions, as compared to
71.4 percent of institutions and 10.4 percent of total assets under the
current $600 million.
The proposed $750 million assets-based size standard would apply to
the following four industries within NAICS Subsector 522, Credit
Intermediation and Related Activities: NAICS 522110 (Commercial
Banking), NAICS 522120 (Savings Institutions), NAICS 522190 (Other
depository Credit Intermediation), and NAICS 522210 (Credit Card
Issuing).
NAICS 522130, Credit Unions
A credit union is a cooperative, not-for-profit financial
institution owned and controlled by its members. Credit unions are
established and operated for the purpose of promoting thrift and
providing credit at competitive rates and other financial services to
their membership. Generally, they could be corporate credit unions,
Federal, or State credit unions. Because this industry includes only
not-for-profit institutions, SBA does not consider them small business
concerns for Federal government assistance. The small business
regulations state that a business concern eligible for assistance from
SBA as a small business is a business entity organized for profit, with
a place of business located in the United States (see 13 CFR
121.05(a)(1)). However, SBA determines size standard for this industry
because it is useful for other purposes, such as rulemaking. Table 9,
Calculated Industry Factors for Credit Unions, provides the calculated
factors for Credit Unions. Between 2011 and 2018, the total number of
concerns diminished by 24 percent, but at the same time the total
assets increased by a factor of 1.34. The simple average almost doubled
(1.77) between 2011 and 2018 in real terms, and the weighted average
grew by a factor of more than 1.5. The four firm concentration ratio
increased by a factor of 1.24. Gini coefficient did not change
significantly during the period. All these factors support an increase
of size standard for Credit Unions and SBA proposes $750 million as
well. With this size standard, the percentage of small firms will
increase to 92.8 percent compared to 91.2 percent with the current $600
million size standard. Similarly, the share of small business assets
will increase to about 30 percent from 25.7 percent.
Table 9--Calculated Industry Factors for Credit Unions
[All monetary values are in millions of 2018 dollars]
--------------------------------------------------------------------------------------------------------------------------------------------------------
Simple Weighted
Year Number of Total assets average firm average firm Four-firm Gini
institutions size size ratio (%) coefficient
--------------------------------------------------------------------------------------------------------------------------------------------------------
2011.................................................... 7,240 $1,096,069.7 $151.4 $3,720.2 9.8 0.828
2018.................................................... 5,492 1,470,839.4 267.8 5,687.5 12.2 0.833
--------------------------------------------------------------------------------------------------------------------------------------------------------
Source: NCUA,https://www.ncua.gov/analysis/credit-union-corporate-call-report-data/quarterly-dat.
Special Considerations
NAICS Subsector 525, Funds, Trusts and Other Financial Vehicles
As noted earlier, the 2012 Economic Census special tabulation
includes data only for two NAICS codes within NAICS Subsector 525:
NAICS 525910, Open-End Investment Funds, and NAICS 525990, Other
Financial Vehicles. Because all industries in that Subsector currently
share the same $35.0 million receipts-based size standard, SBA applies
the results based on data for NAICS 525910 and 525990, as shown in
Table 4 (above), to all remaining industries within this Subsector and
initially proposes the same common size standard of $32.5 million in
average annual receipts for all six industries in Subsector 525. While
that represents a slight decrease from the current $35.0 million level,
this would have virtually no impacts on the number of small firms nor
on the amount of Federal contract dollars awarded to small firms under
the current size standards. However, while lowering size standards
would cause no or very little impact on small businesses in those
industries, in response to the COVID-19 emergency and its impacts on
small businesses and the overall economy, SBA is proposing to maintain
the size standards for those industries at their current levels. SBA
seeks comments on this proposal as well as suggestion on alternative
data sources, if any, to evaluate those industries.
NAICS 524126, Direct Property and Causality Insurance Carriers
The current size standard for NAICS 524126, Direct Property and
Causality Insurance, is 1,500 employees, which SBA has not reviewed in
this proposed rule. SBA will review this size standard together with
other employee-based size standards at a later date. Until then, SBA
proposes to retain the current 1,500-employee size standard for NAICS
524126.
Summary of Calculated Size Standards
Of the one hundred-twenty four (124) industries and two (2)
subindustries (exceptions) reviewed in this proposed rule, the results
from analyses of the latest available data on the five primary factors
from Table 4, Size Standards Supported by Each Factor for Each Industry
(millions of dollars), above, would support increasing size standards
for forty five (45) industries, decreasing size standards for sixty-
nine (69) industries, and retaining size standards for 9 industries and
2 subindustries. Additionally, SBA retained the size standard for one
industry that the Economic Census does not cover. Table 10, Summary of
Calculated Size Standards, summarizes these results by NAICS sector.
[[Page 62386]]
Table 10--Summary of Calculated Size Standards
----------------------------------------------------------------------------------------------------------------
Number of size Number of size Number of size Number of size
NAICS sector Sector name standards standards standards standards
reviewed increased decreased unchanged
----------------------------------------------------------------------------------------------------------------
48-49................ Transportation 43 18 23 2
and Warehousing.
51................... Information...... 19 8 9 2
52................... Finance and 39 * 10 24 5
Insurance.
53................... Real Estate and 25 9 13 3
Rental and
Leasing *.
-----------------------------------------------------------------------
All Sectors...... ................. 126 45 69 12
----------------------------------------------------------------------------------------------------------------
* Includes five assets-based size industries.
Evaluation of SBA Loan Data
Before proposing or deciding on an industry's size standard
revision, SBA also considers the impact of size standards revisions on
SBA's loan programs. Accordingly, SBA examined its internal 7(a) and
504 loan data for fiscal years 2016-2018 to assess whether the
calculated size standards in Table 4 above need further adjustments to
ensure credit opportunities for small businesses through those
programs. For the industries reviewed in this rule, the data shows that
it is mostly businesses much smaller than the current or proposed size
standards that receive SBA's 7(a) and 504 loans. For example, for
industries covered by this rule, more than 99.0 percent of 7(a) and 504
loans in fiscal years 2016-2018 went to businesses below the current or
proposed size standards.
Proposed Changes to Size Standards
Based on the analytical results in Table 4 and considerations of
impacts of calculated size standards in terms of access by currently
small businesses to SBA's loans, as discussed above, of a total of one
hundred twenty six (126) industries or subindustries (exceptions) with
monetary-based size standards in Sectors 48-49, 51, 52 and 53 that are
covered by this rule, and considering the current emergency situation
due to the COVID-19 pandemic and its impacts on small businesses and
the overall economy, SBA proposes to increase size standards for 45
industries, and retain the current size standards for the remaining 81
industries.
Special Considerations
On March 13, 2020, the ongoing Coronavirus Disease 2019 (COVID-19)
was declared a pandemic of enough severity and magnitude to warrant an
emergency declaration for all states, territories, and the District of
Columbia. With the COVID-19 emergency, many small businesses nationwide
are experiencing economic hardship as a direct result of the Federal,
State, and local public health measures that are being taken to
minimize the public's exposure to the virus. These measures, some of
which are government-mandated, are being implemented nationwide and
include the closures of restaurants, bars, and gyms. In addition, based
on the advice of public health officials, other measures, such as
keeping a safe distance from others or even stay-at-home orders, are
being implemented, resulting in a dramatic decrease in economic
activity as the public avoids malls, retail stores, and other
businesses.
The Coronavirus Aid, Relief, and Economic Security Act (the CARES
Act or the Act) (Pub. L. 116-136) was enacted on March 27, 2020, to
provide emergency assistance and health care response for individuals,
families, and businesses affected by the coronavirus pandemic. Section
1102 of the Act temporarily permits SBA to guarantee 100 percent of
7(a) loans under a new program titled the Paycheck Protection Program
(PPP). Section 1106 of the Act provides for forgiveness of up to the
full principal amount of qualifying loans guaranteed under the PPP. The
PPP and loan forgiveness are intended to provide economic relief to
small businesses nationwide adversely impacted under the COVID-19. On
April 24, 2020, additional funding for the CARES Act, including for the
PPP, was provided.
The Agency is following closely the development of the pandemic and
the economic situation and recovery. The consequence of the initial
response of the public to the COVID-19 pandemic as well as the
different measures taken by the Government to contain it (e.g. stay at
home orders, social distancing, etc.) have resulted in the present
economic decline. A variety of economic indicators such as the Gross
Domestic Product (GDP) and the unemployment rate shows that this
recession is significantly worse than any other recession since World
War II. The GDP decreased nearly 5 percent, and the Personal
consumption in goods and services decreased 6.8 percent in the first
quarter of 2020; in May 2020, personal income decreased 4.2 percent and
the unemployment rate increased from 3.5 percent in February 2020 to
11.1 percent in June 2020, and also for the month of June 2020, Non-
farm payroll decreased by 15 million since February 2020. Specifically
for the sectors evaluated in this proposed rule, more recent data in
June 2020 shows that the unemployment rate for Transportation and
Utilities was 12.9 percent, for the sector of Information 12.0 percent
and for the Financial Activities, 5.1 percent. In June 2019, the
unemployment rates for these sectors were 3.7, 2.7 and 2 percent,
respectively. The latest Federal Reserve Board's Monetary Policy Report
shows that in general the most impacted firms in these sectors are
small businesses.\3\.
---------------------------------------------------------------------------
\3\ Board of Governors of the Federal Reserve System (June
2020), Monetary Policy Report, p. 24 (see https://www.federalreserve.gov/monetarypolicy/files/20200612_mprfullreport.pdf) and U.S. Census Bureau, Small Busines
Pulse Survey (https://portal.census.gov/pulse/data). The latest is a
recent survey created by the Census Bureau to provide high-
frequency, detailed information on participation in small business-
specific initiatives such as the Paycheck Protection Program.
---------------------------------------------------------------------------
Accordingly, in view of above impacts on small businesses from the
COVID-19 pandemic and Federal government efforts to provide relief to
small businesses and support to the overall economy, SBA proposes to
increase size standards for 45 industries, and retain the current size
standards for 81 industries even though analytical results suggest that
69 of those 81 size standards could be lowered.
The proposed size standards are presented in Table 11, Proposed
Size Standards Revisions. Also presented in Table 11 are current and
calculated size standards for comparison.
[[Page 62387]]
Table 11--Proposed Size Standards Revisions
----------------------------------------------------------------------------------------------------------------
Calculated size Proposed size Current size
NAICS codes NAICS U.S. industry standard ($ standard ($ standard ($
title million) million) million)
----------------------------------------------------------------------------------------------------------------
481219.............. Other Nonscheduled Air $22.0 $22.0 $16.5
Transportation.
484110.............. General Freight 9.0 30.0 30.0
Trucking, Local.
484121.............. General Freight 22.0 30.0 30.0
Trucking, Long-
Distance, Truckload.
484122.............. General Freight 38.0 38.0 30.0
Trucking, Long-
Distance, Less Than
Truckload.
484210.............. Used Household and 21.0 30.0 30.0
Office Goods Moving.
484220.............. Specialized Freight 15.0 30.0 30.0
(except Used Goods)
Trucking, Local.
484230.............. Specialized Freight 22.0 30.0 30.0
(except Used Goods)
Trucking, Long-Distance.
485111.............. Mixed Mode Transit 25.5 25.5 16.5
Systems.
485112.............. Commuter Rail Systems... 41.5 41.5 16.5
485113.............. Bus and Other Motor 28.5 28.5 16.5
Vehicle Transit Systems.
485119.............. Other Urban Transit 33.0 33.0 16.5
Systems.
485210.............. Interurban and Rural Bus 28.0 28.0 16.5
Transportation.
485310.............. Taxi Service............ 13.0 16.5 16.5
485320.............. Limousine Service....... 12.5 16.5 16.5
485410.............. School and Employee Bus 26.5 26.5 16.5
Transportation.
485510.............. Charter Bus Industry.... 13.0 16.5 16.5
485991.............. Special Needs 13.0 16.5 16.5
Transportation.
485999.............. All Other Transit and 16.0 16.5 16.5
Ground Passenger
Transportation.
486210.............. Pipeline Transportation 36.5 36.5 30.0
of Natural Gas.
486990.............. All Other Pipeline 31.5 40.5 40.5
Transportation.
487110.............. Scenic and Sightseeing 18.0 18.0 8.0
Transportation, Land.
487210.............. Scenic and Sightseeing 12.5 12.5 8.0
Transportation, Water.
487990.............. Scenic and Sightseeing 22.0 22.0 8.0
Transportation, Other.
488111.............. Air Traffic Control..... 30.5 35.0 35.0
488119.............. Other Airport Operations 25.5 35.0 35.0
488190.............. Other Support Activities 27.5 35.0 35.0
for Air Transportation.
488210.............. Support Activities for 30.0 30.0 16.5
Rail Transportation.
488310.............. Port and Harbor 38.0 41.5 41.5
Operations.
488320.............. Marine Cargo Handling... 39.0 41.5 41.5
488330.............. Navigational Services to 26.5 41.5 41.5
Shipping.
488390.............. Other Support Activities 23.5 41.5 41.5
for Water
Transportation.
488410.............. Motor Vehicle Towing.... 7.0 8.0 8.0
488490.............. Other Support Activities 16.0 16.0 8.0
for Road Transportation.
488510.............. Freight Transportation 17.5 17.5 16.5
Arrangement.
488991.............. Packing and Crating..... 17.5 30.0 30.0
488999.............. All Other Support 22.0 22.0 8.0
Activities for
Transportation.
491110.............. Postal Services......... 8.0 8.0 8.0
492210.............. Local Messengers and 10.5 30.0 30.0
Local Delivery.
493110.............. General Warehousing and 25.0 30.0 30.0
Storage.
493120.............. Refrigerated Warehousing 32.0 32.0 30.0
and Storage.
493130.............. Farm Product Warehousing 13.5 30.0 30.0
and Storage.
493190.............. Other Warehousing and 32.0 32.0 30.0
Storage.
511210.............. Software Publishers..... 40.0 41.5 41.5
512110.............. Motion Picture and Video 33.0 35.0 35.0
Production.
512120.............. Motion Picture and Video 26.0 34.5 34.5
Distribution.
512131.............. Motion Picture Theaters 39.5 41.5 41.5
(except Drive-Ins).
512132.............. Drive-In Motion Picture 11.0 11.0 8.0
Theaters.
512191.............. Teleproduction and Other 19.5 34.5 34.5
Postproduction Services.
512199.............. Other Motion Picture and 25.0 25.0 22.0
Video Industries.
512240.............. Sound Recording Studios. 9.5 9.5 8.0
512290.............. Other Sound Recording 20.0 20.0 12.0
Industries.
515111.............. Radio Networks.......... 41.5 41.5 35.0
515112.............. Radio Stations.......... 36.0 41.5 41.5
515120.............. Television Broadcasting. 41.5 41.5 41.5
515210.............. Cable and Other 41.5 41.5 41.5
Subscription
Programming.
517410.............. Satellite 38.5 38.5 35.0
Telecommunications.
517919.............. All Other 33.0 35.0 35.0
Telecommunications.
518210.............. Data Processing, 33.0 35.0 35.0
Hosting, and Related
Services.
519110.............. News Syndicates......... 32.0 32.0 30.0
519120.............. Libraries and Archives.. 18.5 18.5 16.5
519190.............. All Other Information 26.5 30.0 30.0
Services.
522110.............. Commercial Banking...... 750 million in 750 million in 600 million in
assets assets assets
522120.............. Savings Institutions.... 750 million in 750 million in 600 million in
assets assets assets
522130.............. Credit Unions........... 750 million in 750 million in 600 million in
assets assets assets
522190.............. Other Depository Credit 750 million in 750 million in 600 million in
Intermediation. assets assets assets
522210.............. Credit Card Issuing..... 750 million in 750 million in 600 million in
assets assets assets
[[Page 62388]]
522220.............. Sales Financing......... 38.0 41.5 41.5
522291.............. Consumer Lending........ 41.5 41.5 41.5
522292.............. Real Estate Credit...... 40.0 41.5 41.5
522293.............. International Trade 31.0 41.5 41.5
Financing.
522294.............. Secondary Market 41.5 41.5 41.5
Financing.
522298.............. All Other Nondepository 35.5 41.5 41.5
Credit Intermediation.
522310.............. Mortgage and Nonmortgage 13.0 13.0 8.0
Loan Brokers.
522320.............. Financial Transactions 39.5 41.5 41.5
Processing, Reserve,
and Clearinghouse
Activities.
522390.............. Other Activities Related 25.0 25.0 22.0
to Credit
Intermediation.
523110.............. Investment Banking and 41.0 41.5 41.5
Securities Dealing.
523120.............. Securities Brokerage.... 37.0 41.5 41.5
523130.............. Commodity Contracts 32.5 41.5 41.5
Dealing.
523140.............. Commodity Contracts 26.5 41.5 41.5
Brokerage.
523210.............. Securities and Commodity 33.0 41.5 41.5
Exchanges.
523910.............. Miscellaneous 27.0 41.5 41.5
Intermediation.
523920.............. Portfolio Management.... 35.5 41.5 41.5
523930.............. Investment Advice....... 27.5 41.5 41.5
523991.............. Trust, Fiduciary, and 41.5 41.5 41.5
Custody Activities.
523999.............. Miscellaneous Financial 41.5 41.5 41.5
Investment Activities.
524113.............. Direct Life Insurance 37.5 41.5 41.5
Carriers.
524114.............. Direct Health and 38.5 41.5 41.5
Medical Insurance
Carriers.
524127.............. Direct Title Insurance 41.5 41.5 41.5
Carriers.
524128.............. Other Direct Insurance 39.0 41.5 41.5
(except Life, Health,
and Medical) Carriers.
524130.............. Reinsurance Carriers.... 39.5 41.5 41.5
524210.............. Insurance Agencies and 13.0 13.0 8.0
Brokerages.
524291.............. Claims Adjusting........ 18.0 22.0 22.0
524292.............. Third Party 40.0 40.0 35.0
Administration of
Insurance and Pension
Funds.
524298.............. All Other Insurance 27.0 27.0 16.5
Related Activities.
525110.............. Pension Funds........... 32.5 35.00 35.0
525120.............. Health and Welfare Funds 32.5 35.0 35.0
525190.............. Other Insurance Funds... 32.5.0 35.0 35.0
525910.............. Open-End Investment 31.5 35.0 35.0
Funds.
525920.............. Trusts, Estates, and 32.5.0 35.0 35.0
Agency Accounts.
525990.............. Other Financial Vehicles 32.5 35.0 35.0
531110.............. Lessors of Residential 23.5 30.0 30.0
Buildings and Dwellings.
531120.............. Lessors of 28.0 30.0 30.0
Nonresidential
Buildings (except
Miniwarehouses).
531130.............. Lessors of 20.5 30.0 30.0
Miniwarehouses and Self-
Storage Units.
531190.............. Lessors of Other Real 16.0 30.0 30.0
Estate Property.
531210.............. Offices of Real Estate 13.0 13.0 8.0
Agents and Brokers.
531311.............. Residential Property 11.0 11.0 8.0
Managers.
531312.............. Nonresidential Property 17.0 17.0 8.0
Managers.
531320.............. Offices of Real Estate 8.5 8.5 8.0
Appraisers.
531390.............. Other Activities Related 17.0 17.0 8.0
to Real Estate.
532111.............. Passenger Car Rental.... 41.5 41.5 41.5
532112.............. Passenger Car Leasing... 41.0 41.5 41.5
532120.............. Truck, Utility Trailer, 41.5 41.5 41.5
and RV (Recreational
Vehicle) Rental and
Leasing.
532210.............. Consumer Electronics and 40.5 41.5 41.5
Appliances Rental.
532281.............. Formal Wear and Costume 12.5 22.0 22.0
Rental.
532282.............. Video Tape and Disc 31.0 31.0 30.0
Rental.
532283.............. Home Health Equipment 36.0 36.0 35.0
Rental.
532284.............. Recreational Goods 7.5 8.0 8.0
Rental.
532289.............. All Other Consumer Goods 11.0 11.0 8.0
Rental.
532310.............. General Rental Centers.. 7.5 8.0 8.0
532411.............. Commercial Air, Rail, 40.0 40.0 35.0
and Water
Transportation
Equipment Rental and
Leasing.
532412.............. Construction, Mining, 34.0 35.0 35.0
and Forestry Machinery
and Equipment Rental
and Leasing.
532420.............. Office Machinery and 32.5 35.0 35.0
Equipment Rental and
Leasing.
532490.............. Other Commercial and 30.0 35.0 35.0
Industrial Machinery
and Equipment Rental
and Leasing.
533110.............. Lessors of Nonfinancial 35.0 41.5 41.5
Intangible Assets
(except Copyrighted
Works).
----------------------------------------------------------------------------------------------------------------
[[Page 62389]]
Table 12, Summary of Proposed Size Standards Revisions by Sector,
below, summarizes the proposed changes to size standards in Table 11
(above) by NAICS sector.
Table 12--Summary of Proposed Size Standards Revisions by Sector
----------------------------------------------------------------------------------------------------------------
Size standards Size standards Size standards
NAICS Sector Sector name increased lowered maintained
----------------------------------------------------------------------------------------------------------------
48-49................................. Transportation and 18 0 25
Warehousing (1).
51.................................... Information............. 8 0 11
52*................................... Finance and Insurance 10 0 29
(2).
53.................................... Real Estate and Rental 9 0 16
and Leasing (3).
-----------------------------------------------
All Sectors (3)....................... ........................ 45 0 81
----------------------------------------------------------------------------------------------------------------
Evaluation of Dominance in Field of Operation
SBA has determined that for the industries which it has evaluated
in this proposed rule, no individual firm at or below the proposed size
standard would be large enough to dominate its field of operation. At
the proposed size standards levels, if adopted, the small business
share of total industry receipts among those industries was, on
average, 1.9 percent, varying from 0.01 percent to 33.3 percent. Also,
at the proposed asset-based size standards levels, banks and thrifts
have a share of 0.004 percent, with the minority institutions having a
share of 0.32 percent. Credit unions have a market share of 0.05
percent. These market shares effectively preclude a firm at or below
the proposed size standards from exerting control on any of the
industries.
Alternatives Considered
By law, SBA is required to develop numerical size standards for
establishing eligibility for Federal small business assistance programs
and to review every five years all size standards and make necessary
adjustments to reflect the current industry structure and Federal
market conditions. Other than varying the levels of size standards by
industry and changing the measures of size standards (e.g., using
annual receipts vs. the number of employees), no practical alternatives
exist to the systems of numerical size standards.
The proposal is to increase size standards where the data suggested
increases are warranted, and to retain, in response to the COVID-19
national emergency and resultant economic impacts on small businesses,
all current size standards where the data suggested lowering is
appropriate.
Nonetheless, SBA also considered two other alternatives. The
alternative option one was to propose changes exactly as suggested by
the analytical results. The alternative option two was to retain all
current size standards.
The first option would cause a substantial number of currently
small businesses to lose their small business status and hence to lose
their access to Federal small business assistance, especially small
business set-aside contracts and SBA's financial assistance in some
cases. During the first 5-year review of size standards, some
commenters had expressed concerns about the SBA's policy of not
lowering size standards based on the analytical results.
As part of the option one, SBA considered but is not proposing to
increase 45 size standards as suggested by analytical results and
mitigate the impact of the decreases to size standards, by adjusting
the calculated sizes considering the impact on small business access to
Federal contracting and SBA loans. However, in the present situation
with the global COVID-19 pandemic resulting in high levels of risk and
dramatic reductions in economic activity of unprecedented nature, SBA
presents only the impacts of adopting the analytical results without
adjustment in alternative option one. SBA will adopt this approach
temporarily and may reevaluate this approach as the economic situation
evolves.
Under the second option, given the current COVID-19 pandemic, SBA
considered retaining the current level of all size standards even
though the current analysis may suggest changing them. SBA considers
that the option of retaining all size standards at this moment provides
the opportunity to reassess the economic situation once the economic
recovery starts. Under this option, as the current situation develops,
SBA will be able to assess new data available on economic indicators,
federal procurement, and SBA loans as well, before adopting changes to
size standards. However, SBA is not adopting option two because the
Regulatory Impact Analysis shows that retaining all size standards at
their current levels is more onerous for the small businesses than the
option of adopting increases of size standards and retaining the rest.
SBA may reevaluate this approach as the current economic situation
evolves.
Request for Comments
SBA invites public comments on this proposed rule, especially on
the following issues:
1. SBA seeks feedback on whether SBA's proposal to increase 45 size
standards and retain 81 size standards is appropriate given the results
from the latest available industry and Federal contracting data of each
industry and subindustry (exception) reviewed in this proposed rule,
along with ongoing uncertainty and dramatic contraction in economic
activity due to the global COVID-19 pandemic. SBA also seeks
suggestions, along with supporting facts and analysis, for alternative
standards, if they would be more appropriate than the proposed size
standards.
2. SBA also seeks comments on whether SBA should not lower any size
standards in view of COVID-19 pandemic and its adverse impacts on small
businesses as well as on the overall economic situation when analytical
results suggest some size standards could be lowered. SBA believes that
lowering size standards under the current economic environment would
run counter to what Congress and Federal government are doing to aid
and provide relief to the nation's small businesses impacted by the
COVID-19 pandemic.
3. Given the uncertainty produced by the global COVID-19 pandemic
and the economic consequences, SBA would like to receive comments from
the public on the possibility of lowering size standards while
mitigating the consequences of the lower standards.
4. Given the lack of industry data at the sub-industry level, SBA
has
[[Page 62390]]
proposed to leave the size standard for Non-Vessel Owning Common
Carriers and Household Good Forwarders (``exception'' under NAICS
488510) at its current level. SBA invites comments, along with
supporting information, on this proposal. Alternatively, in view of
insignificant Government contracting, SBA also welcomes comments on
whether it should continue to have a higher size standard for Non-
Vessel Owning Common Carriers and Household Good Forwarders as an
``exception'' under NAICS 488510 or should it apply the same $17.5
million proposed size standard for the overall industry. Finally, given
the lack of industry data at the sub-industry level to accurately
evaluate the size standard, SBA seeks comments on whether it should
eliminate the exception and apply the overall size standard for NAICS
488510.
5. Because of the lack of data to review the industry structure,
SBA has proposed to leave the size standard for Postal Service (NAICS
491110) at the current level of $8 million in average annual revenue.
SBA invites comments on this proposal as well as suggestions, along
with supporting information, if a different size standard is more
appropriate.
6. As noted earlier, the 2012 Economic Census special tabulation
includes data only for two NAICS codes within NAICS Subsector 525:
NAICS 525910, Open-End Investment Funds, and NAICS 525990, Other
Financial Vehicles. Because all industries in that Subsector currently
share the same $35.0 million receipts based size standard, SBA applies
the results based on data for NAICS 525910 and 525990, as shown in
Table 4 (above), to all remaining industries within this Subsector,
obtaining a common size standard of $32.5 million. While the reduced
size standard represents a slight decrease from the current $35.0
million level, SBA decided to retain the current size standards,
although this would have virtually no impacts on the number of small
firms nor on the amount of Federal contract dollars awarded to small
firms under the current size standards. SBA invites comments or
suggestions along with supporting information with respect to the
following:
a. Whether SBA should adopt common size standards for those
industries or establish a separate size standard for each industry, and
b. Whether the reduced common size standards for those industries
are at the correct levels or what would be more appropriate if what SBA
has proposed are not appropriate.
7. Similarly, SBA proposes a $750 million common assets-based size
standard for four industries within NAICS Industry Group 5221,
Depository Credit Intermediation (i.e., NAICS 522110, 522120, 522130,
and 522190) and on industry in NAICS 5222. Nondepository Credit
Intermediation (i.e., NAICS 522210). SBA invites comments or
suggestions along with supporting information with respect to whether
SBA should adopt common size standards for those industries or
establish a separate size standard for each industry.
8. In calculating the overall industry size standard, SBA has
assigned equal weight to each of the five primary factors in all
industries and subindustries covered by this proposed rule. SBA seeks
feedback on whether it should assign equal weight to each factor or on
whether it should give more weight to one or more factors for certain
industries or subindustries. Recommendations to weigh some factors
differently than others should include suggested weights for each
factor along with supporting facts and analysis.
9. Finally, SBA seeks comments on data sources it used to examine
industry and Federal market conditions, as well as suggestions on
relevant alternative data sources that the Agency should evaluate in
reviewing or modifying size standards for industries covered by this
proposed rule.
Public comments on the above issues are very valuable to SBA for
validating its proposed size standards revisions in this proposed rule.
Commenters addressing size standards for a specific industry or a group
of industries should include relevant data and/or other information
supporting their comments. If comments relate to the application of
size standards for Federal procurement programs, SBA suggests that
commenters provide information on the size of contracts in their
industries, the size of businesses that can undertake the contracts,
start-up costs, equipment and other asset requirements, the amount of
subcontracting, other direct and indirect costs associated with the
contracts, the use of mandatory sources of supply for products and
services, and the degree to which contractors can mark up those costs.
Compliance With Executive Orders 12866 and 13771, the Regulatory
Flexibility Act (5 U.S.C. 601-612), Executive Orders 13563, 12988, and
13132, and the Paperwork Reduction Act (44 U.S.C. Ch. 35)
Executive Order 12866
The Office of Management and Budget (OMB) has determined that this
proposed rule is a significant regulatory action for purposes of
Executive Order 12866. Accordingly, in the next section SBA provides a
Regulatory Impact Analysis of this proposed rule, including: (1) A
statement of the need for the proposed action, (2) an examination of
alternative approaches, and (3) an evaluation of the benefits and
costs--both quantitative and qualitative--of the proposed action and
the alternatives considered. However, this rule is not a ``major rule''
under the Congressional Review Act, 5 U.S.C. 800.
Regulatory Impact Analysis
1. What is a need for this regulatory action?
Under the Small Business Act (Act) (15 U.S.C. 632(a)), SBA's
Administrator is responsible for establishing small business size
definitions (or ``size standards'') and ensuring that such definitions
vary from industry to industry to reflect differences among various
industries. The Jobs Act requires SBA to review every five years all
size standards and make necessary adjustments to reflect current
industry and Federal market conditions. This proposed rule is part of
the second 5-year review of size standards in accordance with the Jobs
Act. The first 5-year review of size standards was completed in early
2016. Such periodic reviews of size standards provide SBA with an
opportunity to incorporate ongoing changes to industry structure and
Federal market environment into size standards and to evaluate the
impacts of prior revisions to size standards on small businesses. This
also provides SBA with an opportunity to seek and incorporate public
input to the size standards review and analysis. SBA believes that
proposed size standards revisions for industries being reviewed in this
rule will make size standards more reflective of the current economic
characteristics of businesses in those industries and the latest trends
in Federal marketplace.
SBA's mission is to aid and assist small businesses through a
variety of financial, procurement, business development and counseling,
and disaster assistance programs. To determine the actual intended
beneficiaries of these programs, SBA
[[Page 62391]]
establishes numerical size standards by industry to identify businesses
that are deemed small.
The proposed revisions to the existing size standards for 126
industries in NAICS Sectors 48-49, 51, 52 and 53 are consistent with
SBA's statutory mandates to help small businesses grow and create jobs
and to review and adjust size standards every five years. This
regulatory action promotes the Administration's goals and objectives as
well as meets the SBA's statutory responsibility. One of SBA's goals in
support of promoting the Administration's objectives is to help small
businesses succeed through fair and equitable access to capital and
credit, Federal Government contracts and purchases, and management and
technical assistance. Reviewing and modifying size standards, when
appropriate, ensures that intended beneficiaries are able to access
Federal small business programs that are designed to assist them to
become competitive and create jobs.
2. What are the potential benefits and costs of this regulatory
action?
OMB directs agencies to establish an appropriate baseline to
evaluate any benefits, costs, or transfer impacts of regulatory actions
and alternative approaches considered. 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 promulgating
modifications to an existing regulation (such as modifying the existing
size standards), a baseline assuming no change to the regulation (i.e.,
making no changes to current size standards) generally provides an
appropriate benchmark for evaluating benefits, costs, or transfer
impacts of proposed regulatory changes and their alternatives.
Proposed Changes to Size Standards
Based on the results from analyses of latest industry and Federal
contracting data, as well as consideration of the impact of size
standards changes on small businesses and significant adverse impacts
of the COVID-19 emergency on small businesses and the overall economic
activity, of the total of 126 industries and exceptions in Sectors 48-
49, 51, 52 and 53 that have monetary-based size standards, SBA proposes
to increase size standards for 45 industries, and maintain current size
standards for remaining 79 industries and 2 exceptions.
The Baseline
For purposes of this regulatory action, the baseline represents
maintaining the ``status quo,'' i.e., making no changes to the current
size standards. Using the number of small businesses and levels of
benefits (such as set-aside contracts, SBA's loans, disaster
assistance, etc.) they receive under the current size standards as a
baseline, one can examine the potential benefits, costs and transfer
impacts of proposed changes to size standards on small businesses and
on the overall economy.
Based on the 2012 Economic Census (the latest available), of a
total of about 700,544 businesses in industries in Sectors 48-49, 51,
52 (excluding assets-based size standards), and 53 for which SBA
evaluated their current receipt based size standards, 97.2 percent are
considered small under the current size standards. That percentage
varies from 95.8 percent in Sector 51 to 97.9 percent in Sector 53.
Additionally, based on the data from FDIC and National Credit Union
Administration (NCUA), from a total of about 5,415 depository
institutions. 77.3 percent corresponds to small depository
institutions, and from a total of 5,492 credit unions, 91.2 percent are
small under the current assets-based size standards. Based on the data
from FPDS-NG for fiscal years 2016-2018, about 13,964 unique firms in
those industries with receipts-based size standards received at least
one Federal contract during that period, of which 76.8 percent were
small under the current size standards. For these sectors, of $19.5
billion in total average annual contract dollars awarded to businesses
during that period, 21.2 percent went to small businesses. From the
total small business contract dollars awarded during the period
considered, 45.5 percent were awarded through various small business
set-aside programs and 54.5 percent were awarded through non-set aside
contracts. Based on the FDIC and NCUA data respectively, from a total
of $18,034.4 billion in assets, 4.6 percent are owned by small
depository institutions. With respect to Credit Unions, from a total of
$1,470.8 billion in assets, 25.7 percent are owned by small credit
unions.
Based on the SBA's internal data on its loan programs for fiscal
years 2016-2018, small businesses in those industries received, on an
annual basis, a total of nearly 7,232 7(a) and 504 loans in that
period, totaling about $2.7 billion, of which 84.6 percent was issued
through the 7(a) program and 15.4 percent was issued through the 504/
CDC program. During fiscal years 2016-2018, small businesses in those
industries also received 2,544 loans through the SBA's Economic Injury
Disaster Loan (EIDL) program, totaling about $208.6 million on an
annual basis. Table 13, Baseline for All Industries, below, provides
these baseline results by sector, for receipts-based size standards
industries and assets-based size standards industries.
Increases to Size Standards
As stated above, of 126 monetary based size standards in Sectors
48-49, 51, 52, and 53 that are reviewed in this rule, based on the
results from analyses of latest industry and Federal market data as
well as impacts of size standards changes on small businesses, in this
rule, SBA proposes to increase 45 size standards, of which 40 are
receipts-based and five assets-based. Below are descriptions of the
benefits, costs, and transfer impacts of these proposed increases to
size standards.
Table 13--Baseline for All Industries
----------------------------------------------------------------------------------------------------------------
Sector 48-49 Sector 51 Sector 52 Sector 53 Total
----------------------------------------------------------------------------------------------------------------
Baseline All Industries (current 43 19 39 25 126
size standards)..................
Total firms (Economic Census). 162,147 45,821 220,860 271,716 700,544
Total small firms under 156,173 43,915 214,790 265,977 680,855
current size standards
(Economic Census)............
Small firms as % of total 96.3% 95.8% 97.3% 97.9% 97.2%
firms........................
Total contract dollars ($ $8,190.0 $7,210.6 $2,997.6 $1,256.8 $22,522.6
million) (FPDS-NG FY2016-
2018)........................
Total small business contract $1238.0 $1861.9 $382.0 $668.6 $4,530.5
dollars under current
standards ($ million) (FPDS-
NG FY2016-2018)..............
Small business dollars as % of 15.1% 25.8% 12.2% 53.2% 20.1%
total dollars (FPDS-NG FY2016-
2018)........................
[[Page 62392]]
Total No. of unique firms 4,017 5,634 572 4,276 14,005
getting contracts (FPDS-NG
FY2016-2018).................
Total No. of unique small 3,117 4,058 309 3,432 10,691
firms getting small business
contracts (FPDS-NG FY2016-
2018)........................
Small business firms as % of 77.5% 72.0% 54.04% 80.3 76.3%
total firms..................
No. of 7(a) and 504/CDC loans 3,662 524 1,280 1,766 7,232
(FY 2016-2018)...............
Amount of 7(a) and 504 loans $828.5 $210.5 $519.6 $1,135.6 $2,694.2
($ million) (FY 2016-2018)...
No. of EIDL loans (FY 2016- 186 31 71 2,256 2,544
2018)........................
Amount of EIDL loans $12.5 $3.3 $3.6 $189.2 $208.6
($million) (FY 2016-2018)....
Total Number of Depository .............. .............. 5,415 .............. ...........
Institutions (FDIC, SDI)
(2018).......................
Number of Small Depository .............. .............. 4,188 .............. ...........
Institutions (FDIC, SDI)
(2018).......................
Small firms as % of total .............. .............. 77.3% .............. ...........
Depository Institutions
(2018).......................
Total Assets of Depository .............. .............. $18,034,370.50 .............. ...........
Institutions ($ million)
(FDIC, SDI) (2018)...........
Total Assets of Small .............. .............. $837,835.6 .............. ...........
Depository Institutions ($
million) (FDIC, SDI) (2018)..
SB Assets as % of Total Assets .............. .............. 4.6% .............. ...........
Total Number of Credit Unions .............. .............. 5,492 .............. ...........
(NCUA) (2018)................
Number of small Credit Unions .............. .............. 5,010 .............. ...........
(NCUA) (2018)................
Small firms as % of total .............. .............. 91.2% .............. ...........
Depository Institutions......
Total Assets of Credit Unions .............. .............. $1,470,838.7 .............. ...........
($ million) (NCUA) (2018)....
Total Assets of Small Credit .............. .............. $377,619.2 .............. ...........
Unions ($ million) (NCUA)
(2018).......................
SB Assets as % of Total Assets .............. .............. 25.67% .............. ...........
of Credit Unions.............
----------------------------------------------------------------------------------------------------------------
Benefits of Increases to Size Standards
The most significant benefit to businesses from proposed increases
to size standards is gaining eligibility for Federal small business
assistance programs or retaining that eligibility for a longer period.
These include SBA's business loan programs, EIDL program, and Federal
procurement programs intended for small businesses. Federal procurement
programs provide targeted, set-aside opportunities for small businesses
under the SBA's various business development and contracting programs,
such as 8(a)/BD (business development), small disadvantaged businesses
(SDB), small businesses located in Historically Underutilized Business
Zones (HUBZone), women-owned small businesses (WOSB), economically
disadvantaged women-owned small businesses (EDWOSB), and service-
disabled veteran-owned small businesses (SDVOSB).
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 government. However, SBA has no data
to estimate the number of small businesses receiving such benefits.
Based on the 2012 Economic Census (latest available SBA estimates
that in 40 industries in NAICS Sectors 48-49, 51, 52, and 53 for which
it has proposed to increase receipts-based size standards, more than
1,790 firms (see Table 13 above), not small under the current size
standards, will become small under the proposed size standards
increases and therefore become eligible for these programs. That
represents about 0.5 percent of all firms classified as small under the
current size standards in industries for which SBA has proposed
increasing size standards. If adopted, proposed size standards would
result in an increase to the small business share of total receipts in
those industries from 29.9 percent to 32.7 percent.
With more businesses qualifying as small under the proposed
increases to size standards, 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 higher size standards,
thereby enabling them to continue to benefit from the small business
programs.
Based on the FPDS-NG data for fiscal years 2016-2018, SBA estimates
that about 60-65 firms that are active in Federal contracting in those
industries would gain small business status under the proposed size
standards. Based on the same data, SBA estimates that those newly
qualified small businesses under the proposed increases to size
standards, if adopted, could receive Federal small business contracts
totaling about $30.0 million annually. That represents a 3.4 percent
increase to small business dollars from the sector baseline.
Based on the FDIC data for fiscal year 2018, SBA estimates that
about 200 depository institutions would gain small institutions status
under the proposed increases to size standards with an additional
$132.4 billion or 15.8 percent increase in small depository
institutions' assets. Also, based on the NCUA data for fiscal year
2018, SBA estimates that about 85 credit unions would gain small
business status under the proposed increases to size standards, with an
additional $56 billion in assets or 14.9 percent increase for small
credit unions.
The added competition from more businesses qualifying as small can
result in lower prices to the 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 the availability of a larger pool of small businesses
under the proposed increases to size standards, HUBZone firms might
[[Page 62393]]
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 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.
Under SBA's 7(a) and 504 loan programs, based on the data for
fiscal years 2016-2018, SBA estimates up to about 14 7(a) and 504 loans
totaling about $5.7 million could be made to these newly qualified
small businesses in those industries under the proposed size standards.
That represents a 0.2 percent increase to the loan amount compared to
the Group baseline.
Newly qualified small businesses 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
increases to size standards, if adopted, could receive 5 EIDL loans,
totaling about $0.4 million. Additionally, the newly defined small
businesses would also benefit through reduced fees, less paperwork, and
fewer compliance requirements that are available to small businesses
through the Federal government, but SBA has no data to quantify this
impact. Table 14, Impacts of Proposed Increases to Size Standards,
provides these results by NAICS sector.
Table 14--Impacts of Proposed Increases to Size Standards
----------------------------------------------------------------------------------------------------------------
Sector 48-49 Sector 51 Sector 52 Sector 53 Total
----------------------------------------------------------------------------------------------------------------
No. of industries with proposed 18 8 10 9 45
increases to size standards......
Total current small businesses in 27,255 5,368 135,774 150,404 318,800
industries with proposed
increases to size standards
(Economic Census 2012)...........
Additional firms qualifying as 184 13 623 970 1,790
small under proposed standards
(2012 Economic Census)...........
Percentage of additional firms 0.7% 0.2% 0.5% 0.6% 0.6%
qualifying as small relative to
current small businesses in
industries with proposed
increases to size standards......
No. of current unique small firms 520 334 101 1,605 2,553
getting small business contracts
in industries with proposed
increases to size standards (FPDS-
NG FY2016-2018) \1\..............
Additional small business firms 32 4 7 21 63
getting small business status
(FPDS-NG FY2016-2018)............
% increase to small businesses 6.2% 1.2% 6.9% 1.3% 2.5%
relative to current unique small
firms getting small business
contracts in industries with
proposed increases to size
standards (FPDS-NG FY2016-2018)
\1\..............................
Total small business contract $238.5 $149.6 $160.8 $330.8 $879.7
dollars under current standards
in industries with proposed
increases to size standards ($
million) (FPDS-NG FY2016-2018)...
Estimated additional small $7.0 $2.0 $6.1 $15.0 $30.1
business dollars available to
newly qualified small firms
(Using avg dollars obligated to
SBs) ($ million) (FPDS-NG FY 2016-
2018) \1\........................
% increase to small business 2.9% 1.3% 3.8% 4.5% 3.4%
dollars relative to total small
business contract dollars under
current standards in industries
with proposed increases to size
standards........................
Total no. of 7(a) and 504 loans to 412 58 726 745 1,941
small business in industries with
proposed increases to size
standards (FY 2016-2018).........
Total amount of 7(a) and 504 loans $160.6 $22.5 $246.0 $230.8 $659.9
to small businesses in industries
with proposed increases to size
standards ($ million) (FY 2016-
2018)............................
Estimated no. of 7(a) and 504 4 1 4 5 14
loans to newly qualified small
firms............................
Estimated 7(a) and 504 loan $2.4 $0.4 $1.4 $1.5 $5.7
amounts to newly qualified small
firms ($ million)................
% increase to 7(a) and 504 loan 0.3% 0.2% 0.3% 0.1% 0.2%
amounts relative to the total
amount of 7(a) and 504 loans in
industries with proposed
increases to size standards......
Total no. of EIDL loans to small 57 9 0 127 193
businesses in industries with
proposed increases to size
standards (FY 2016-2018).........
Total amount of EIDL loans to $4.9 $0.4 $2.2 $11.8 $19.3
small businesses in industries
with proposed increases to size
standards ($ million) (FY 2016-
2018)............................
Estimated no. of EIDL loans to 2 1 1 1 5
newly qualified small firms......
Estimated EIDL loan amount to $0.20 $0.04 $0.05 $0.09 $0.4
newly qualified small firms ($
million).........................
% increase to EIDL loan amount 1.6% 1.2% 1.4% 0.0% 0.2%
relative to the total amount of
EIDL loans in industries with
proposed increases to size
standards........................
Total current small businesses in 4,188 .............. ...........
industries with Proposed
increases to size standards
(FDIC) (2018)....................
[[Page 62394]]
Additional firms qualifying as 198 .............. ...........
small under proposed standards
(FDIC)...........................
% Increase small institutions with 4.7% .............. ...........
proposed increases to size
standards........................
Total Assets of Small Depository $837,835.6
Institutions ($ million) (FDIC,
SDI) (2018)......................
Estimated increase in total assets $132,439.9
of Small Depository Institutions
($ million)......................
% increase in total assets of 15.8%
small depository institutions....
Number of small Credit Unions 5,010
(NCUA) (2018)....................
Additional small Credit Unions 84
(NCUA)...........................
% Increase small institutions with 1.7%
proposed increases to size
standards........................
Total Assets of small Credit $377,619.2
Unions ($ million) (NCUA) (2018).
Estimated increase in total assets $56,326.8
of small Credit Unions ($
million).........................
% increase in total assets of 14.9%
small Credit Unions..............
----------------------------------------------------------------------------------------------------------------
\1\ Additional dollars are calculated multiplying average small business dollars obligated per DUNS times change
in number of firms. Numbers of firms are calculated using the SBA current size standard, not the CO Size Std-
These calculations do not include assets-based industries.
\2\ Total impact represents total unique number of firms impacted to avoid double counting as some firms are
participating in more than one industry. These calculations do not include assets-based industries.
Costs of Increases to Size Standards
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 as a result of increases to size standards. All businesses
willing to do business with 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 and update their SAM profiles annually. More importantly, this
proposed rule does not establish the new size standards for the very
first time; rather it just intends to modify the existing size
standards in accordance with a statutory requirement and the latest
data and other relevant factors.
To the extent that the newly qualified small businesses (not
depository institutions or credit unions) could become active in
Federal procurement, the proposed increases to size standards, if
adopted, may entail some additional administrative costs to the
government as a result of more businesses qualifying as small for
Federal small business programs. For example, there will be more firms
seeking SBA 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, SDB, WOSB, EDWOSB, and SDVOSB status, and more firms
applying for SBA's 8(a)/BD and all small business mentor-
prot[eacute]g[eacute] programs. With an expanded pool of small
businesses, it is likely that Federal agencies would set aside more
contracts for small businesses under the proposed increases to size
standards. 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 shows
that the number of size protests decreased following the increases to
receipts-based size standards as part of the first 5-year review of
size standards. Specifically, on an annual basis, the number of size
protests fell from about 600 during fiscal years 2011-2013 (review of
most receipts-based size standards was completed by the end of FY
2013), as compared to about 500 during fiscal years 2014-2016 when size
standards increases were in effect. That represents a 17 percent
decline. 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 standards 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 due to the
proposed increases to size standards, Federal agencies may choose to
set aside more contracts for competition among small businesses only
instead of using a 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 size standards. 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, SDB, 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.
Transfer Impacts of Increases to Size Standards
The proposed increases to size standards, if adopted, may result in
some redistribution of Federal contracts
[[Page 62395]]
between the newly qualified small businesses and large businesses and
between the newly qualified small businesses and small businesses under
the current standards. However, it would have no impact on the overall
economic activity since total Federal contract dollars available for
businesses to compete for will not change with changes to size
standards. While SBA cannot quantify with certainty the actual outcome
of the gains and losses from the redistribution 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 increases to size standards, some
unrestricted Federal contracts which would otherwise be awarded to
large businesses may be set aside for small businesses. As a result,
large businesses may lose some Federal contracting opportunities.
Similarly, some small businesses under the current size standards may
obtain fewer set-aside contracts due to the increased competition from
more advanced businesses qualifying as small under the proposed
increases to size standards. This impact may be offset by a greater
number of procurements being set aside for all small businesses. With
larger businesses qualifying as small under the higher size standards,
smaller small businesses could face some disadvantage in competing for
set aside contracts against their larger counterparts. However, SBA
cannot quantify these impacts.
3. What alternatives have been considered?
Under OMB Circular A-4, SBA is required to consider regulatory
alternatives to the proposed changes in the proposed rule. In this
section, SBA describes and analyzes two such alternatives to the
proposed rule. Alternative Option One to the proposed rule, a more
stringent option to the proposed rule, would propose adopting size
standards based solely on the analytical results. In other words, the
size standards of 45 industries for which the analytical results
suggest raising size standards would be raised, and the size standards
of 69 industries for which the analytical results suggest lowering size
standards would be lowered. Size standards for the remaining 12
industries would be maintained at their current levels. Alternative
Option Two, would propose retaining all size standards for all
industries, given the uncertainty generated by the ongoing COVID-19
pandemic. Below, SBA discusses and presents the net impacts of each
option.
Alternative Option One: Consider Adopting All Calculated Size Standards
As discussed elsewhere in this proposed rule, Alternative Option
One would cause a substantial number of currently small businesses to
lose their small business status and hence to lose their access to
Federal small business assistance, especially small business set-aside
contracts and SBA's financial assistance in some cases. These
consequences could be mitigated. For example, in response to the 2008
Financial Crisis and economic conditions that followed, SBA adopted a
general policy in the first 5-year comprehensive size standards review
to not lower any size standard (except to exclude one or more dominant
firms) even when the analytical results suggested the size standard
should be lowered. Currently, because of the economic challenges
presented by the COVID-19 pandemic and the measures taken to protect
public health, SBA has decided to propose the same general policy of
not lowering size standards in the second 5-year comprehensive size
standards review as well.
The primary benefit of adopting Alternative Option One is that
SBA's procurement, management, technical and financial assistance
resources would be targeted to the most appropriate beneficiaries of
such programs according to the analytical results. Adopting the size
standards suggested by the analytical results would also promote
consistency with analytical results in SBA's exercise of its authority
to determine size standards. SBA seeks public comment on the impact of
adopting the size standard as suggested by the analytical results.
As explained in the Size Standards Methodology White Paper, in
addition to adopting all results of the primary analysis, SBA evaluates
other relevant factors as needed such as the impact of the reductions
or increases of size standards on the distribution of contracts awarded
to small businesses, and may adopt different results with the intention
of mitigating potential negative impacts.
We have discussed already the benefits and costs of increasing 45
size standards. Below we discuss the benefits and costs of decreasing
69 size standards.
Benefits of Decreases to Size Standards
The most significant benefit to businesses from decreases to size
standards when the SBA's analysis suggests such decreases is to ensure
that size standards are more reflective of latest industry structure
and Federal market trends and that Federal small business assistance is
more effectively targeted to its intended beneficiaries. 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
business development programs, such as small business, 8(a)/BD, SDB
HUBZone, WOSB, EDWOSB, and SDVOSB programs. The adoption of smaller
size standards when the results support them diminishes the risk of
awarding contracts to firms which are not small anymore.
Decreasing size standards may reduce the administrative costs of
the government, because the risk of awarding contracts to other than
small businesses may diminish when the size standards reflect better
the structure of the market. The risks of providing SBA's loans to
firms that are not needing them the most, or allowing firms that are
not eligible for small business set-asides or to participate on the SBA
procurement programs will provide for a better chance for smaller firms
to grow and benefit from the opportunities available on the Federal
market, and strengthen the small business industrial base for the
Federal Government.
Costs of Decreases to Size Standards
With fewer businesses qualifying as small under the decreases to
size standards, Federal agencies will have a smaller pool of small
businesses from which to draw for their small business procurement
programs. For example, in Option One, during fiscal years 2016-2018,
agencies awarded, on an annual basis, about $3,118 million in small
business contracts in those 69 industries for which this Option
considered decreasing size standards. Table 15, Impacts of Decreases of
Size Standards Under Alternative Option One, below shows that lowering
69 size standards would reduce Federal contract dollars awarded to
small businesses by $59.0 million or about 1.9 percent relative to the
baseline level, of which more than 50 percent are accounted for by the
Transportation and Warehousing sector (NAICS 48-49). Because of the
importance of this sector for Federal procurement, SBA would adopt
mitigating measures to reduce the negative impact under the assumptions
of Option One. SBA could adopt one or more of the following three
actions: 1. to accept decreases in size standards as suggested by the
analytical results, 2. to decrease size standards by a smaller amount
than the calculated threshold,
[[Page 62396]]
and 3. to retain the size standards at their current levels.
Nevertheless, since Federal agencies are still required to meet the
statutory small business contracting goal of 23 percent, actual impacts
on the overall set aside activity is likely to be smaller as agencies
are likely to award more set aside contracts to small businesses that
continue to remain small under the reduced size standards.
With fewer businesses qualifying as small, the decreased
competition can also result in higher prices to the Government for
procurements set aside or reserved for small businesses, but SBA cannot
quantify this impact. Decreases to size standards would have a very
minor impact on small businesses applying for SBA's 7(a) and 504 loans
because a vast majority of such loans are issued to businesses that are
far below the reduced size standards. For example, based on the loan
data for fiscal years 2016-2018, Option One estimates that about 36
7(a) and 504 loans with total amounts of $10.7 million could not be
available to those small businesses that would lose eligibility under
the reduced size standards. That represents about a 0.5 percent
decrease of the loan amounts compared to the baseline. Table 15 below
shows these results by sector. However, the actual impact could be much
less as businesses losing small business eligibility under the
decreases to industry-based size standards could still qualify for
SBA's loans under the tangible net worth and net income based
alternative size standard.
Businesses losing small business status would also be impacted in
terms of access to loans through the SBA's EIDL program. However, SBA
expects such impact to be minimal as only a small number of businesses
in those industries received such loans during fiscal years 2016-2018.
Additionally, all those businesses were below the reduced size
standards. Since this program is contingent on the occurrence and
severity of a disaster in the future, SBA cannot make a meaningful
estimate of this impact.
Small businesses becoming other than small if size standards were
decreased might lose benefits through reduced fees, less paperwork, and
fewer compliance requirements that are available to small businesses
through Federal government, but SBA has no data to quantify this
impact. However, if agencies determine that SBA's size standards do not
adequately serve such purposes, they can establish a different size
standard with an approval from SBA if they are required to use SBA's
size standards for their programs.
Transfer Impacts of Decreases to Size standards
If the size standards were decreased under Alternative Option One,
it may result in a redistribution of Federal contracts between small
businesses losing the small business status and large businesses and
between small businesses losing the small business status and small
businesses remaining small under the reduced size standards. However,
as under the proposed increases to size standards, it would have no
impact on the overall economic activity since total Federal contract
dollars available for businesses to compete for will stay the same.
While SBA cannot estimate with certainty the actual outcome of the
gains and losses among different groups of businesses from contract
redistribution resulting from decreases to size standards, it can
identify several probable impacts. With a smaller pool of small
businesses under the decreases to size standards, some set-aside
Federal contracts to be otherwise awarded to small businesses may be
competed in unrestricted basis. As a result, large businesses may have
more Federal contracting opportunities. However, because agencies are
still required by law to award 23 percent of dollars to small
businesses, SBA expects the movement of set-aside contracts to
unrestricted competition to be limited. For the same reason, small
businesses remaining small under the reduced size standards are likely
to obtain more set aside contracts due to the reduced competition from
fewer businesses qualifying as small under the decreases to size
standards. With some larger small businesses losing small business
status under the decreases to size standards, smaller small businesses
would likely become more competitive in obtaining set aside contracts.
However, SBA cannot quantify these impacts.
Net Impact of Alternative Option One
To estimate the net impacts of Alternative Option One, SBA followed
the same methodology used to evaluate the impacts of the proposed size
standards (see Table 14 above). However, under Alternative Option One,
SBA used the calculated size standards instead of the proposed ones to
determine the impacts of changes to current thresholds. The impact of
the increases of the calculated size standards were already shown in
Table 14 above. Table 15 above and Table 16, Net Impacts of Size
Standards Changes under Alternative Option One, below present the
impact of the decreases of size standards and the net impact of
adopting the calculated results under Alternative Option One,
respectively.
Based on the 2012 Economic Census, SBA estimates that in 114
industries in NAICS Sectors 48-49, 51, 52 and 53 for which the
analytical results suggested to change size standards, about 52 firms
(see Table 16, below), would become small under the Option One. That
represents about 0.01 percent of all firms classified as small under
the current size standards.
Based on the FPDS-NG data for fiscal years 2016-2018, SBA estimates
that about 89 active firms in Federal contracting in those industries
would lose small business status under Alternative Option One, most of
them from the Transportation and Warehousing Sector (NAICS 48-49). This
represents a decrease of about 0.9 percent of the total number of small
businesses participating in Federal contracting under the current size
standards. Based on the same data, SBA estimates that about $29.2
million of Federal procurement dollars would not be available to firms
losing their small status. This represents a decrease of 0.7 percent
from the Group's baseline. Again, most of the losses are accounted for
by the NAICS 48-49 Sector.
Based on the SBA's loan data for fiscal years 2016-2018, the total
number of 7(a) and 504 loans may decrease by about 22 loans, and the
loan amounts by about $5.0 million. This represents a 0.4 percent
decrease of the loan amounts relative to the Group baseline.
Firms' Participation under the SBA's EIDL program will be affected
as well. 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 net impact of the Option One on additional firms is a
reduction of five (5) loans, and a reduction of loans amounts by $0.45
million for the Group relative to the baseline. Table 16 provides these
results by NAICS sector.
[[Page 62397]]
Table 15--Impacts of Decreases of Size Standards Under Alternative Option One
----------------------------------------------------------------------------------------------------------------
Sector 48-49 Sector 51 Sector 52 Sector 53 Total
----------------------------------------------------------------------------------------------------------------
No. of industries for which SBA 23 9 24 13 69
considered decreasing size
standards (2012 Economic Census).
Total current small businesses in 133,032 39,030 76,036 114,495 510,777
industries for which SBA
considered decreasing size
standards (2012 Economic Census).
Estimated no. of firms losing 1,086 72 246 234 1,738
small status for which SBA
considered decreasing size
standards (2012 Economic Census).
% of Firms losing small status 0.50% 0.19% 0.34% 0.21% 0.92%
relative to current small
businesses in industries for
which SBA considered decreasing
size standards...................
No. of current unique small firms 2,668 3,592 155 1,652 7,942
getting small business contracts
in industries for which SBA
considered decreasing size
standards (FPDS-NG FY2016-2018)
\1\..............................
Estimated number of small business 89 19 6 36 143
firms that would have lost small
business status in the decreases
that SBA considered..............
% decrease to small business firms 3.3% 0.5% 3.9% 2.2% 1.8%
relative to current unique small
firms getting small business
contracts in industries for which
SBA considered decreasing size
standards (FPDS-NG FY2016-2018)
\1\..............................
Total small business contract $995 $1,697 $106.0 $320.0 $3,118
dollars under current size
standards in industries for which
SBA considered decreasing size
standards ($ million) (FPDS-NG
FY2016-2018).....................
Estimated small business dollars $30 $14 $8 $7 $59
not available to firms that would
have lost business status (Using
avg dollars obligated to SBs) ($
million) \1\ (FPDS-NG FY 2016-
2018)............................
% decrease to small business 3.0% 0.8% 7.8% 2.2% 1.9%
dollars relative to total small
business contract dollars under
current size standards in
industries for which SBA
considered decreasing to size
standards........................
Total no. of 7(a) and 504 loans to 3,250 457 516 964 5,187
small businesses in industries
for which SBA considered
decreasing size standards (FY
2016-2018).......................
Total amount of 7(a) and 504 loans $668.0 $183.0 $262.5 $883.0 $1,996.5
to small businesses in industries
for which SBA considered
decreasing size standards ($
million) (FY 2016-2018)..........
Estimated no. of 7(a) and 504 30 1 2 3 36
loans not available to firms that
would have lost small business
status...........................
Estimated 7(a) and 504 loan $6.5 $0.4 $1.0 $2.7 $10.7
amounts not available to firms
that would have small status ($
million).........................
% decrease to 7(a) and 504 loan 1.0% 0.2% 0.4% 0.3% 0.5%
amounts relative to the total
amount of 7(a) and 504 loans in
industries for which SBA
considered decreasing size
standards........................
Total no. of EIDL loans to small 129 21 21 2,124 2,295
businesses in industries for
which SBA considered decreasing
size standards (FY 2016-2018)....
Total amount of EIDL loans to $7.6 $2.7 $1.3 $176.9 $188.5
small businesses in industries
for which SBA considered
decreasing size standards ($
million) (FY 2016-2018)..........
Estimated no. of EIDL loans not 3 1 1 5 10
available to firms that would
have lost small business status..
Estimated EIDL loan amount not $0.2 $0.1 $0.1 $0.4 $0.8
available to firms that would
have lost small business status
($ million)......................
% decrease to EIDL loan amount 3.0% 4.8% 4.8% 0.2% 0.4%
relative to the baseline.........
----------------------------------------------------------------------------------------------------------------
\1\ Additional dollars are calculated multiplying average small business dollars obligated per DUNS times change
in number of firms.
\2\ Total impact represents total unique industries impacted to avoid double counting as some industries have
large firms gaining small business status and small firms extending small business status.
Table 16--Net Impacts of Size Standards Changes Under Alternative Option One
----------------------------------------------------------------------------------------------------------------
Sector 48-49 Sector 51 Sector 52 Sector 53 Total
----------------------------------------------------------------------------------------------------------------
No. of industries with proposed 41 17 34 22 114
changes to size standards........
Total no. of small businesses 156,173 42,803.4 208,456 265,559 669,991
under the current size standards
(2012 Economic Census)...........
Additional firms qualifying as -1,002 -60 377 736 52
small under proposed size
standards (2012 Economic Census).
% of additional firms qualifying -0.64% -0.14% 0.18% 0.3% 0.01%
as small relative to total
current small businesses.........
[[Page 62398]]
No. of current unique small firms 3,100 3,872 257 3,215 10,264
getting small business contracts
(FPDS-NG FY2016-2018) \1\........
Additional small firms getting -60 -14 1 -16 -89
small business status (FPDS-NG
FY2016-2018).....................
% increase to small firms relative -1.9% -0.4% 0.4% -0.5% -0.9%
to current unique small firms
getting small business contracts
(FPDS-NG FY2016-2018) \1\........
Total small business contract $1,234.2 $1,846.0 $267.3 $650.6 $3,999
dollars under current size
standards ($ million) (FPDS-NG
FY2016-2018).....................
Estimated small business dollars -$23.5 -$11.5 -$2.02 7.9 -$29.2
available to newly qualified
small firms ($ million) (FPDS-NG
FY 2016-2018) \1\................
% increase to dollars relative to 1.9% 0.63% 0.75% 1.21% -0.73%
total small business contract
dollars under current size
standards........................
Total no. of 7(a) and 504 loans to 3,662 524 1,280 1,766 7,232
small businesses (FY 2016-2018)..
Total amount of 7(a) and 504 loans $828.5 $210.5 $519.6 $1,135.6 $2,694.2
to small businesses (FY 2016-
2018)............................
Estimated no. of additional 7(a) -26 0 2 2 -22
and 504 loans to newly qualified
small firms......................
Estimated additional 7(a) and 504 -$4.1 $0.0 $0.3 -$1.2 -$5.0
loan amount to newly qualified
small firms ($ million)..........
% increase to 7(a) and 504 loan -0.5% 0.0% 0.07% -0.11% -0.4%
amount relative to the total
amount of 7(a) and 504 loans to
small businesses.................
Total no. of EIDL loans to small 186 31 71 2,256 2,544
businesses (FY 2016-2018)........
Total amount of EIDL loans to $12.5 $3.3 $3.6 $189.2 $208.6
small businesses (FY 2016-2018)..
Estimated no. of additional EIDL -1 0 0 -4 -5
loans to newly qualified small
firms............................
Estimated additional EIDL loan -$0.03 -$0.1 $0.0 -$0.3 -$0.45
amount to newly qualified small
firms ($ million)................
% increase to EIDL loan amount -0.2% -2.7% -0.3% -0.2% -0.2%
relative to the total amount of
EIDL loans to small businesses...
Total current small businesses in .............. .............. 4,188 .............. ...........
industries with Proposed
increases to size standards
(FDIC) (2018)....................
Additional firms qualifying as .............. .............. 198 .............. ...........
small under proposed standards
(FDIC)...........................
% Increase small institutions with .............. .............. 4.7% .............. ...........
proposed increases to size
standards........................
Total Assets of Small Depository .............. .............. $837,835.6 .............. ...........
Institutions (FDIC, SDI) (2018)..
Estimated increase in total assets .............. .............. $132,439.90 .............. ...........
of Small Depository Institutions.
% increase in total assets of .............. .............. 15.8% .............. ...........
Small depository institutions....
Number of small Credit Unions .............. .............. 5,010 .............. ...........
(NCUA) (2018)....................
Additional small Credit Unions .............. .............. 84 .............. ...........
(NCUA)...........................
% Increase small institutions with .............. .............. 1.7% .............. ...........
proposed increases to size
standards........................
Total Assets of small Credit .............. .............. $377,619.2 .............. ...........
Unions (NCUA) (2018).............
Estimated increase in total assets .............. .............. $56,326.80 .............. ...........
of Small Credit Unions...........
% increase in total assets of .............. .............. 14.9% .............. ...........
small Credit Unions..............
----------------------------------------------------------------------------------------------------------------
\1\ Additional dollars are calculated multiplying average small business dollars obligated per DUNS times change
in number of firms.
\2\ Total impact represents total unique industries impacted to avoid double counting as some industries have
large firms gaining small business status and small firms extending small business status.
Alternative Option Two: To Retain all Current Size Standards
Under this alternative, given the current COVID-19 pandemic, as
discussed elsewhere, SBA considered retaining the current level of all
size standards even though the current analysis may suggest changing
them. SBA considers that the option of retaining all size standards at
this moment provides the opportunity to reassess the economic situation
once the economic recovery starts. Under this option, as the current
situation develops, SBA will be able to assess new data available on
economic indicators, federal procurement, and SBA loans as well. SBA
estimates a net impact of zero for this option, when compared to the
baseline. However, if we compare the proposal of adopting 45 increases
to size standards with this alternative approach, the benefits for
small businesses of adopting the former will not be attained.
Executive Order 13771
This proposed rule is not subject to the requirements of E.O. 13771
because SBA has determined that most of the rule's impacts are income
transfers between small and other than small businesses. According to
the E.O. 13771 guidance in OMB M-17-21, dated April 5, 2017 (``E.O.
13771 Guidance''), ``transfers'' are not covered by E.O. 13771. The
E.O. 13771 Guidance also states that ``in some cases, [transfer rules]
may impose requirements apart
[[Page 62399]]
from transfers, or transfers may distort markets causing
inefficiencies. In those cases, the actions would need to be offset to
the extent they impose more than de minimis costs.'' SBA estimates that
this rulemaking would impose only de minimis costs on small businesses
and would result in negligible compliance costs. Thus, SBA has
determined that this rulemaking is exempt from the requirements of E.O.
13771. Details on the estimated costs of this proposed rule can be
found in the Regulatory Impact Analysis above.
Initial Regulatory Flexibility Analysis
According to the Regulatory Flexibility Act (RFA), 5 U.S.C. 601-
612, when an agency issues a rulemaking, it must prepare a regulatory
flexibility analysis to address the impact of the rule on small
entities.
This proposed rule, if adopted, may have a significant impact on a
substantial number of small businesses in the industries covered by
this proposed rule. As described above, this rule may affect small
businesses 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 addressing the following
questions: (1) What are the need for and objective of the rule?; (2)
What are SBA's description and estimate of the number of small
businesses to which the rule will apply?; (3) What are the projected
reporting, record keeping, and other compliance requirements of the
rule?; (4) What are the relevant Federal rules that may duplicate,
overlap, or conflict with the rule?; and (5) What alternatives will
allow the Agency to accomplish its regulatory objectives while
minimizing the impact on small businesses?
1. What is the need for and objective of the rule?
Changes in industry structure, technological changes, productivity
growth, mergers and acquisitions, and updated industry definitions have
changed the structure of many the industries covered by this proposed
rule. Such changes can be enough to support revisions to current size
standards for some industries. Based on the analysis of the latest data
available, SBA believes that the revised standards in this proposed
rule more appropriately reflect the size of businesses that need
Federal assistance. The 2010 Jobs Act also requires SBA to review all
size standards and make necessary adjustments to reflect market
conditions.
2. What are SBA's description and estimate of the number of small
businesses to which the rule will apply?
Based on data from the 2012 Economic Census, SBA estimates that
there are about 319,000 small firms covered by this rulemaking under
industries with proposed changes to size standards. If the proposed
rule is adopted in its present form, SBA estimates that an additional
1,790 businesses will become small.
3. What are the projected reporting, record keeping and other
compliance requirements of the rule?
The proposed size standard changes impose no additional reporting
or record keeping requirements on small businesses. However, qualifying
for Federal procurement and a number of other programs requires that
businesses register in SAM and 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 the access to SBA's programs that assist small
businesses but does not impose a regulatory burden because they neither
regulate nor control business behavior.
4. What are the relevant Federal rules, which may duplicate,
overlap or conflict with the rule?
Under 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.
However, SBA considered two alternatives to its proposal to
increase 45 size standards and maintain 81 size standards at their
current levels. The first alternative SBA considered was adopting size
standards based solely on the analytical results. In other words, the
size standards of 45 industries for which the analytical results
suggest raising size standards would be raised. However, the size
standards of 69 industries for which the analytical results suggest
lowering size standards would be lowered. This would cause a
significant number of small businesses to lose their small business
status. Under the second alternative, in view of the COVID-19 pandemic,
SBA considered retaining all size standards at the current levels, even
though the analytical results may suggest increasing 45 size standards
and decreasing 69. Retaining all size standards at their current levels
would be more onerous for the small businesses than the option of
adopting 45 increases and retaining the rest of size standards, as
proposed.
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 Regulatory Impact Analysis under Executive Order 12866.
Additionally, Executive Order 13563, section 6, calls for retrospective
analyses of existing rules.
The review of size standards in the industries covered by this
proposed rule is consistent with section 6 of Executive Order 13563 and
the 2010 Jobs Act which requires SBA to review all size standards and
make necessary adjustments to reflect market conditions. Specifically,
the 2010 Jobs Act requires SBA to review at least one-third of all size
standards during every 18-month period from the date of its enactment
(September 27, 2010) and to review all size standards not less
frequently than once every five years, thereafter. SBA had already
launched a comprehensive review of size standards in 2007. In
accordance with the Jobs
[[Page 62400]]
Act, SBA completed the comprehensive review of the small business size
standard for each industry, except those for agricultural enterprises
previously set by Congress, and made appropriate adjustments to size
standards for a number of industries to reflect current Federal and
industry market conditions. The first comprehensive review was
completed in 2015. Prior to 2007, the last time SBA conducted a
comprehensive review of all size standards was during the late 1970s
and early 1980s.
SBA issued a White Paper entitled ``Size Standards Methodology''
and published a notice in the April 11, 2019, edition of the Federal
Register (84 FR 14587) to advise the public that the document is
available for public review and comments. The ``Size Standards
Methodology'' White Paper explains how SBA establishes, reviews, and
modifies its receipts-based and employee-based small business size
standards. SBA gave appropriate consideration to all input,
suggestions, recommendations, and relevant information obtained from
industry groups, individual businesses, and Federal agencies in
developing size standards for those industries covered by this proposed
rule.
Executive Order 12988
This action meets applicable standards set forth in sections 3(a)
and 3(b)(2) of Executive Order 12988, Civil Justice Reform, to minimize
litigation, eliminate ambiguity, and reduce burden. The action does not
have retroactive or preemptive effect.
Executive Order 13132
For purposes of Executive Order 13132, SBA has determined that this
proposed rule will not have substantial, direct effects on the States,
on the relationship between the national government and the States, or
on the distribution of power and responsibilities among the various
levels of government. Therefore, SBA has determined that this proposed
rule has no federalism implications warranting preparation of a
federalism assessment.
Paperwork Reduction Act
For the purpose of the Paperwork Reduction Act, 44 U.S.C. Ch. 35,
SBA has determined that this rule will not impose any new reporting or
record keeping requirements.
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), 636(a)(36), 662, and
694a(9); Pub. L. 116-136, Section 1114.
0
2. In Sec. 121.201 amend the table ``Small Business Size Standards by
NAICS Industry'' as follows:
0
a. Revise entries ``481219'', ``484122'', ``485111'' through
``485113'', ``485119'', ``485210'', ``485410'', ``486210'', Subsector
487, entries ``488210'', ``488490'', ``488510'', ``488510 sub-entry'',
``488999'', ``493120'', ``493190'', ``512132'', ``512199'', ``512240'',
``512290'', ``515111'', ``517410'', ``519110'', ``519120'', ``522110'',
``522120'', ``522130'', ``522190'', ``5222210'', ``522310'',
``522390'', ``524210'', ``524292'', ``524298'', ``531210'', ``531311'',
``531312'', ``531320'', ``531390'', ``532282'', ``532283'', ``532289'',
and ``532411'' and
0
b. Revise footnote 10.
The revisions read as follows:
Sec. 121.201 What size standards has SBA identified by North American
Industry Classification System codes?
* * * * *
Small Business Size Standards by NAICS Industry
----------------------------------------------------------------------------------------------------------------
Size standards in
NAICS codes NAICS U.S. industry title millions of dollars Size standards in number of employees
----------------------------------------------------------------------------------------------------------------
* * * * * * *
----------------------------------------------------------------------------------------------------------------
Sectors 48-49--Transportation and Warehousing
Subsector 481--Air Transportation
----------------------------------------------------------------------------------------------------------------
* * * * * * *
481219............. Other Nonscheduled Air $22.0................
Transportation.
* * * * * * *
----------------------------------------------------------------------------------------------------------------
Subsector 484--Truck Transportation
----------------------------------------------------------------------------------------------------------------
* * * * * * *
484122............. General Freight Trucking, $38.0................
Long-Distance, Less Than
Truckload.
* * * * * * *
----------------------------------------------------------------------------------------------------------------
Subsector 485--Transit and Ground Passenger Transportation
----------------------------------------------------------------------------------------------------------------
485111............. Mixed Mode Transit Systems. $25.5................
485112............. Commuter Rail Systems...... $41.5................
485113............. Bus and Other Motor Vehicle $28.5................
Transit Systems.
485119............. Other Urban Transit Systems $33.0................
485210............. Interurban and Rural Bus $28.0................
Transportation.
[[Page 62401]]
* * * * * * *
485410............. School and Employee Bus $26.5................
Transportation.
* * * * * * *
----------------------------------------------------------------------------------------------------------------
Subsector 486--Pipeline Transportation
----------------------------------------------------------------------------------------------------------------
* * * * * * *
486210............. Pipeline Transportation of $36.5................
Natural Gas.
* * * * * * *
----------------------------------------------------------------------------------------------------------------
Subsector 487--Scenic and Sightseeing Transportation
----------------------------------------------------------------------------------------------------------------
487110............. Scenic and Sightseeing $18.0................
Transportation, Land.
487210............. Scenic and Sightseeing $12.5................
Transportation, Water.
487990............. Scenic and Sightseeing $22.0................
Transportation, Other.
----------------------------------------------------------------------------------------------------------------
Subsector 488--Support Activities for Transportation
----------------------------------------------------------------------------------------------------------------
* * * * * * *
488210............. Support Activities for Rail $30.0................
Transportation.
* * * * * * *
488490............. Other Support Activities $16.0................
for Road Transportation.
488510............. Freight Transportation $17.5 \10\...........
Arrangement \10\.
488510 (Exception). Non-Vessel Owning Common $30.0................
Carriers and Household
Goods Forwarders.
* * * * * * *
488999............. All Other Support $22.0................
Activities for
Transportation.
* * * * * * *
----------------------------------------------------------------------------------------------------------------
Subsector 493--Warehousing and Storage
----------------------------------------------------------------------------------------------------------------
* * * * * * *
493120............. Refrigerated Warehousing $32.0................
and Storage.
* * * * * * *
493190............. Other Warehousing and $32.0................
Storage.
----------------------------------------------------------------------------------------------------------------
Sector 51--Information
----------------------------------------------------------------------------------------------------------------
* * * * * * *
----------------------------------------------------------------------------------------------------------------
Subsector 512--Motion Picture and Sound Recording Industries
----------------------------------------------------------------------------------------------------------------
* * * * * * *
512132............. Drive-In Motion Picture $11.0................
Theaters.
* * * * * * *
512199............. Other Motion Picture and $25.0................
Video Industries.
* * * * * * *
512240............. Sound Recording Studios.... $9.5.................
* * * * * * *
512290............. Other Sound Recording $20.0................
Industries.
----------------------------------------------------------------------------------------------------------------
Subsector 515--Broadcasting (except Internet)
----------------------------------------------------------------------------------------------------------------
515111............. Radio Networks............. $41.5................
----------------------------------------------------------------------------------------------------------------
[[Page 62402]]
* * * * * * *
----------------------------------------------------------------------------------------------------------------
Subsector 517--Telecommunications
----------------------------------------------------------------------------------------------------------------
* * * * * * *
----------------------------------------------------------------------------------------------------------------
517410............. Satellite $38.5................
Telecommunications.
----------------------------------------------------------------------------------------------------------------
* * * * * * *
----------------------------------------------------------------------------------------------------------------
Subsector 519--Other Information Services
----------------------------------------------------------------------------------------------------------------
519110............. News Syndicates............ $32.0................
519120............. Libraries and Archives..... $18.5................
* * * * * * *
----------------------------------------------------------------------------------------------------------------
Sector 52--Finance and Insurance
Subsector 522--Credit Intermediation and Related Activities
----------------------------------------------------------------------------------------------------------------
522110............. Commercial Banking \8\..... $750 million in
assets \8\.
522120............. Savings Institutions \8\... $750 million in
assets \8\.
522130............. Credit Unions \8\.......... $750 million in
assets \8\.
522190............. Other Depository Credit $750 million in
Intermediation \8\. assets \8\.
522210............. Credit Card Issuing \8\.... $750 million in
assets \8\.
* * * * * * *
522310............. Mortgage and Nonmortgage $13.0................
Loan Brokers.
* * * * * * *
522390............. Other Activities Related to $25.0................
Credit Intermediation.
* * * * * * *
----------------------------------------------------------------------------------------------------------------
Subsector 524--Insurance Carriers and Related Activities
----------------------------------------------------------------------------------------------------------------
* * * * * * *
524210............. Insurance Agencies and $13.0................
Brokerages.
* * * * * * *
524292............. Third Party Administration $40.0................
of Insurance and Pension
Funds.
524298............. All Other Insurance Related $27.0................
Activities.
* * * * * * *
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Sector 53--Real Estate and Rental and Leasing
Subsector 531--Real Estate
----------------------------------------------------------------------------------------------------------------
* * * * * * *
531210............. Offices of Real Estate $13.0 \10\...........
Agents and Brokers \10\.
531311............. Residential Property $11.0................
Managers.
531312............. Nonresidential Property $17.0................
Managers.
531320............. Offices of Real Estate $8.5.................
Appraisers.
531390............. Other Activities Related to $17.0................
Real Estate.
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Subsector 532--Rental and Leasing Services
----------------------------------------------------------------------------------------------------------------
* * * * * * *
----------------------------------------------------------------------------------------------------------------
532282............. Video Tape and Disc Rental. $31.0................
532283............. Home Health Equipment $36.0................
Rental.
[[Page 62403]]
* * * * * * *
532289............. All Other Consumer Goods $11.0................
Rental.
* * * * * * *
532411............. Commercial Air, Rail, and $40.0................
Water Transportation
Equipment Rental and
Leasing.
* * * * * * *
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Footnotes
* * * * *
\8\ NAICS Codes 522110, 522120, 522130, 522190, and 522210--A financial institution's assets are determined by
averaging the assets reported on its four quarterly financial statements for the preceding year. ``Assets''
for the purposes of this size standard means the assets defined according to the Federal Financial
Institutions Examination Council 041 call report form for NAICS Codes 522110, 522120, 522190, and 522210 and
the National Credit Union Administration 5300 call report form for NAICS code 522130.
* * * * *
\10\ NAICS codes 488510 (excluding the exception), 531210, 541810, 561510, 561520 and 561920--As measured by
total revenues, but excluding funds received in trust for an unaffiliated third party, such as bookings or
sales subject to commissions. The commissions received are included as revenues.
* * * * *
Jovita Carranza,
Administrator.
[FR Doc. 2020-21593 Filed 10-1-20; 8:45 am]
BILLING CODE 8026-03-P