[Federal Register Volume 85, Number 220 (Friday, November 13, 2020)]
[Proposed Rules]
[Pages 72584-72608]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2020-24903]


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

  Federal Register / Vol. 85, No. 220 / Friday, November 13, 2020 / 
Proposed Rules  

[[Page 72584]]



SMALL BUSINESS ADMINISTRATION

13 CFR Part 121

RIN 3245-AG91


Small Business Size Standards: Professional, Scientific and 
Technical Services; Management of Companies and Enterprises; 
Administrative and Support and Waste Management and Remediation 
Services

AGENCY: U.S. Small Business Administration.

ACTION: Proposed rule.

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

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 Professional, 
Scientific and Technical Services; Management of Companies and 
Enterprises; Administrative and Support and Waste Management and 
Remediation Services. SBA proposes to increase size standards for 46 
industries in those sectors, including 27 industries in NAICS Sector 54 
(Professional, Scientific and Technical Services), 2 industries in 
Sector 55 (Management of Companies and Enterprises), and 17 industries 
in Sector 56 (Administrative and Support and Waste Management and 
Remediation Services). 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 
January 12, 2021.

ADDRESSES: Identify your comments by RIN 3245-AG91 and submit them by 
one of the following methods: (1) Federal eRulemaking Portal: 
www.regulations.gov. Follow the instructions for submitting comments; 
or (2) Mail/Hand Delivery/Courier: Khem R. Sharma, Ph.D., Chief, Office 
of Size Standards, 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:

Discussion of Size Standards

    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 and refining 
capacity, in addition to employees, for the petroleum refining industry 
to measure business size. In addition, SBA's Small Business Investment 
Company (SBIC), Certified Development Company (504), and 7(a) Loan 
Programs use either the industry-based size standards or tangible net 
worth and net income-based alternative size standards to determine 
eligibility for those programs.
    In September 2010, Congress passed the Small Business Jobs Act of 
2010 (Pub. L. 111-240, 124 Stat. 2504, September 27, 2010) (``Jobs 
Act''), requiring SBA to review all size standards every 5 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, SBA reviewed the 
receipts-based size standards for 45 industries and 3 exceptions within 
NAICS Sector 54 (Professional, Scientific and Technical Services), 2 
industries within Sector 55 (Management of Companies and Enterprises), 
and 44 industries in Sector 56 (Administrative and Support and Waste 
Management and Remediation Services). These reviews of receipts-based 
size standards occurred during October 2010 to December 2013. SBA's 
analyses of the relevant industry and Federal contracting data 
available at that time supported increasing size standards for 37 
industries and maintaining current size standards for 11 industries in 
Sector 54 (77 FR 10943, February 10, 2012), increasing size standards 
for 2 industries in Sector 55 (78 FR 37409, June 20, 2013), and 
increasing size standards in 37 industries and retaining existing size 
standards in 7 industries in Sector 56 (77 FR 72291, December 6, 2012). 
Table 1, Size Standards Revisions During the First 5-Year Review, 
provides a summary of these revisions by NAICS sector.

                        Table 1--Size Standards Revisions During the First 5-Year Review
----------------------------------------------------------------------------------------------------------------
                                                     Number of       Number of       Number of       Number of
          Sector                 Sector name      size standards  size standards  size standards  size standards
                                                      reviewed       increased       decreased       maintained
----------------------------------------------------------------------------------------------------------------
54........................  Professional,                     48              37               0              11
                             Scientific and
                             Technical Services.
55........................  Management of                      2               2               0               0
                             Companies and
                             Enterprises.

[[Page 72585]]

 
56........................  Administrative and                44              37               0               7
                             Support and Waste
                             Management and
                             Remediation
                             Services.
                                                 ---------------------------------------------------------------
    Total.................  ....................              94              76               0              18
----------------------------------------------------------------------------------------------------------------

    Currently, there are 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). 16 of these size 
levels are based on average annual receipts, 9 are based on average 
number of employees, and 2 are based on other measures.
    SBA also adjusts its monetary-based size standards for inflation at 
least once every 5 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 every 5 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 the OMB's 2017 NAICS revisions to 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 grouping industries within various NAICS sectors that 
use the same size measure (i.e., employees or receipts). 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 of Federal contract 
dollars relative to the small business share of total industry 
receipts. When necessary, SBA also considers other secondary factors 
that 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, edition 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, edition 
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 cited 
above.
    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 in the Industry 
Analysis section below. For a more detailed explanation, please see the 
revised Methodology at www.sba.gov/size.
    Additionally, as the fifth factor, SBA evaluates the difference 
between the small business share of Federal contract dollars and the 
small business share of total industry 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 in the Industry Analysis 
section below.
    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 
Methodology is available on its website at www.sba.gov/size.

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

[[Page 72586]]

Administrator.'' Accordingly, the economic structure of an industry is 
the 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 size 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 first 5-year comprehensive review of 
size standards under the Jobs Act, $7.0 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 $23.0 million and 
$35.5 million, with the weighted average size standard for the group 
equaling $29.0 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, and 
other program factors). 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 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 for 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

[[Page 72587]]

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 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 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, which 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 attributable 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 proportion'' 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 
total receipts within an industry. 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 
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 
for evaluating industry characteristics and developing size standards 
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. 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 Sector (2-
digit), Subsector (3-digit), or Industry Group (4-digit) 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

[[Page 72588]]

(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 asset-based size standards, SBA 
examines the data from the Statistics on Depository Institutions (SDI) 
database (www5.fdic.gov/sdi/main.asp) of the Federal Depository 
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 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 two exceptions in Sector 11 and one exception in Sector 23, 
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 (SAM) (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 the 
SBA Administrator. SBA considers as part of its evaluation whether a 
business concern at a proposed size standard would be dominant in its 
field of operation. For this, SBA generally examines the industry's 
market share of firms at the proposed 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 2009 Methodology, which 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 of the National Defense Authorization Act for Fiscal Year 
2013 (``NDAA 2013'') (Pub. L. 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, SBA calculates a separate size standard 
for each NAICS industry. However, to account for errors and limitations 
associated with various data that SBA evaluates in the size standards 
analysis, SBA rounds 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 is 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 continues to maintain the minimum and 
maximum levels for both receipts 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 
$6.0 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 in 
SBA's existing size standards. The industry data suggests that $6.0 
million minimum and $41.5 million maximum size standards would be too 
high for agricultural industries. Accordingly, SBA has established $1.0 
million as the minimum size standard and $5.0 million as the maximum 
size standard for industries in Subsector 111 (Crop Production) and 
Subsector 112 (Animal Production and Aquaculture).

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: Average firm size, average 
assets size as a proxy for 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

[[Page 72589]]

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.

                                Table 2--20th and 80th Percentiles of Industry Factors for Receipts-Based Size Standards
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                  Simple average   Weighted average   Average assets       4-Firm
                     Industries/percentiles                       receipts size   receipts size  ($      size  ($      concentration    Gini 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 $12.5 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% 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 of 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 on 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.

[[Page 72590]]



               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:
    < $15.0 million..................  No change..............  Increase 30%...........  Increase 60%.
    $15.0 million to < $25.0 million.  No change..............  Increase 20%...........  Increase 40%.
    $25.0 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% went to small businesses, and if that small businesses 
accounted for 40% of total receipts of that industry, the small 
business share of total Federal contract dollars would be 25% less than 
the small business share of total industry receipts (40%-15%). 
According to the adjustment above, 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 the 61 industries covered by this proposed rule--31 in 
Sector 54, and 30 in Sector 56--that 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 28 of these industries, prompting an upward adjustment of 
their existing size standards based on that factor. For the remaining 
33 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. For 
industries with less than $20 million in average annual contract 
dollars, no size standard was calculated for the Federal contracting 
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 on its website 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), 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 (the size 
standard for average firm size is an average of size standards 
supported by simple average firm size and weighted average firm size), 
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 on its website 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     Four-firm       Gini       Federal        size         size
NAICS code NAICS industry title        Type        firm size    firm size   assets size    ratio %    coefficient    contract   standard ($  standard ($
                                                  ($ million)  ($ million)  ($ million)                             factor (%)    million)     million)
(1)                              (2)............          (3)          (4)          (5)          (6)          (7)          (8)          (9)         (10)
--------------------------------------------------------------------------------------------------------------------------------------------------------
541110 Offices of Lawyers......  Factor.........         $1.5       $223.3         $0.3          2.7        0.775        -20.8        $13.5        $12.0
                                 Size Std.......         10.5         15.0          8.0         $6.0        $24.0        $15.5
541191 Title Abstract and        Factor.........          1.3        278.1          0.5         27.5        0.763  ...........         17.0         12.0
 Settlement Offices.             Size Std.......          9.5         16.5          8.5        $23.5        $22.0
541199 All Other Legal Services  Factor.........          1.1         95.9          0.4         29.6        0.792        -38.8         18.0         12.0
                                 Size Std.......          9.0         10.5          8.0        $25.0        $27.5        $19.0
541211 Offices of Certified      Factor.........          1.4      2,879.6          0.5         37.2        0.782        -14.0         23.5         22.0
 Public Accountants.             Size Std.......         10.5         41.5          8.5        $31.0        $25.5        $26.5
541213 Tax Preparation Services  Factor.........          0.3        641.9          0.2  ...........        0.708  ...........         12.0         22.0
                                 Size Std.......          6.0         28.5          7.0                     $12.0
541214 Payroll Services........  Factor.........          6.5      2,094.0          2.9         49.6        0.854  ...........         34.5         22.0
                                 Size Std.......         30.5         41.5         22.5        $40.5        $38.5
541219 Other Accounting          Factor.........          0.5        282.8          0.2         18.8        0.751        -35.3         17.5         22.0
 Services.                       Size Std.......          6.5         17.0          7.0        $16.5        $20.0        $31.0
541310 Architectural Services..  Factor.........          1.4         54.8          0.5          5.8        0.748        -12.8         11.0          8.0
                                 Size Std.......         10.5          9.0          9.0         $6.5        $19.5        $10.5
541320 Landscape Architectural   Factor.........          0.6          4.3          0.2          4.5        0.642  ...........          6.5          8.0
 Services.                       Size Std.......          7.0          7.5          7.0         $6.0         $6.0
541330 Engineering Services....  Factor.........          4.5      1,396.0          1.7         13.1        0.839          0.1         22.5         16.5
                                 Size Std.......         23.0         41.5         16.0        $12.0        $36.0        $16.5

[[Page 72591]]

 
Except Military and Aerospace    Factor.........      3,225.7     70,551.0      1,271.8         35.7        0.883         12.6         39.0         41.5
 Equipment and Military Weapons. Size Std.......         41.5         41.5         41.5        $30.0        $41.5        $41.5
Except Contracts and             Factor.........  ...........  ...........  ...........  ...........  ...........  ...........         39.0         41.5
 Subcontracts for Engineering    Size Std.......
 Services Awarded Under the
 National Energy Policy Act of
 1992.
Except Marine Engineering and    Factor.........      2,639.7       73,130      1,055.9         52.5        0.882          3.4         41.5         41.5
 Naval Architecture.             Size Std.......         41.5         41.5         41.5        $41.5        $41.5        $41.5
541340 Drafting Services.......  Factor.........          0.4          2.9          0.1          7.2        0.673  ...........          7.0          8.0
                                 Size Std.......          6.0          7.5          7.0         $7.5         $6.0
541350 Building Inspection       Factor.........          0.4         18.1          0.1         12.5        0.702        -65.2         10.0          8.0
 Services.                       Size Std.......          6.0          8.0          7.0        $11.5        $11.0        $13.0
541360 Geophysical Surveying     Factor.........          4.5        201.6          1.7         43.2        0.861         -3.5         25.0         16.5
 and Mapping Services.           Size Std.......         22.5         14.0         15.5        $35.5        $40.0        $16.5
541370 Surveying and Mapping     Factor.........          0.7         57.4          0.3         16.6        0.730        -42.3         14.0         16.5
 (except Geophysical) Services.  Size Std.......          7.5          9.5          7.5        $15.0        $16.0        $23.0
541380 Testing Laboratories....  Factor.........          3.0        111.5          1.3         13.2        0.766        -16.8         16.5         16.5
                                 Size Std.......         16.5         11.0         13.5        $12.0        $22.5        $20.0
541410 Interior Design Services  Factor.........          0.7          4.6          0.2          2.4        0.640  ...........          6.5          8.0
                                 Size Std.......          7.5          7.5          7.0         $6.0         $6.0
541420 Industrial Design         Factor.........          1.2         37.4          0.5         24.3        0.756  ...........         15.0          8.0
 Services.                       Size Std.......          9.5          8.5          8.5        $21.0        $21.0
541430 Graphic Design Services.  Factor.........          0.5          6.7          0.2          3.5        0.688         16.5          7.5          8.0
                                 Size Std.......          6.5          7.5          7.0         $6.0         $8.5         $8.0
541490 Other Specialized Design  Factor.........          0.8         14.7          0.3         15.3        0.741  ...........         12.0          8.0
 Services.                       Size Std.......          8.0          8.0          7.5        $14.0        $18.0
541511 Custom Computer           Factor.........          2.0        616.8          0.7         11.8        0.813         -7.3         20.5         30.0
 Programming Services.           Size Std.......         12.5         28.0          9.5        $11.0        $31.0        $30.0
541512 Computer Systems Design   Factor.........          4.3      3,438.4          1.3         24.4        0.859          8.0         27.0         30.0
 Services.                       Size Std.......         22.0         41.5         13.0        $21.0        $39.5        $30.0
541513 Computer Facilities       Factor.........          5.8      7,617.4          1.7         59.2        0.866         27.1         32.5         30.0
 Management Services.            Size Std.......         28.0         41.5         15.5        $41.5        $40.5        $30.0
541519 Other Computer Related    Factor.........          1.9        268.0          0.5         20.1        0.829         11.6         21.0         30.0
 Services.                       Size Std.......         12.0         16.5          9.0        $17.5        $34.0        $30.0
541611 Administrative            Factor.........          1.6      2,532.2          0.5         27.9        0.824          4.8         21.5         16.5
 Management and General          Size Std.......         11.0         41.5          9.0        $23.5        $33.0        $16.5
 Management Consulting Services.
541612 Human Resources           Factor.........          2.6      1,154.7          0.7         42.7        0.843         20.8         25.5         16.5
 Consulting Services.            Size Std.......         15.0         41.5         10.0        $35.0        $36.5        $16.5
541613 Marketing Consulting      Factor.........          1.1         95.4          0.4          8.1        0.781        -28.1         14.5         16.5
 Services.                       Size Std.......          9.0         10.5          8.0         $8.0        $25.5        $20.0
541614 Process, Physical         Factor.........          2.0        113.9          0.7         15.3        0.814        -11.2         17.5         16.5
 Distribution, and Logistics     Size Std.......         12.5         11.0         10.0        $13.5        $31.0        $20.0
 Consulting Services.
541618 Other Management          Factor.........          0.6         17.8          0.2          9.8        0.735        -42.9         13.0         16.5
 Consulting Services.            Size Std.......          7.5          8.0          7.5         $9.5        $17.0        $23.0
541620 Environmental Consulting  Factor.........          1.5         51.8          0.6          8.4        0.773          3.2         13.5         16.5
 Services.                       Size Std.......         11.0          9.0          9.5         $8.5        $24.0        $16.5
541690 Other Scientific and      Factor.........          1.2        135.7          0.4         11.6        0.787        -22.9         15.5         16.5
 Technical Consulting Services.  Size Std.......          9.5         12.0          8.5        $11.0        $26.5        $20.0
541720 Research and Development  Factor.........          3.5        208.8          2.4         31.9        0.830        -21.7         24.5         22.0
 in the Social Sciences and      Size Std.......         19.0         14.5         19.0        $26.5        $34.0        $26.5
 Humanities.
541810 Advertising Agencies....  Factor.........          2.9        896.3          0.9         30.1        0.801        -20.8         22.5         16.5
                                 Size Std.......         16.0         37.0         11.0        $25.5        $29.0        $20.0
541820 Public Relations          Factor.........          1.3        137.2          0.4         21.6        0.757          5.6         15.0         16.5
 Agencies.                       Size Std.......         10.0         12.0          8.0        $18.5        $21.0        $16.5
541830 Media Buying Agencies...  Factor.........          8.4        283.3          2.6         35.7        0.838  ...........         28.5         16.5
                                 Size Std.......         38.5         17.0         20.5        $30.0        $35.5
541840 Media Representatives...  Factor.........          2.3         79.4          0.8         26.0        0.807  ...........         18.5         16.5
                                 Size Std.......         14.0         10.0         10.5        $22.0        $30.0
541850 Outdoor Advertising.....  Factor.........          3.3        622.5          2.8         54.8        0.842  ...........         30.5         16.5
                                 Size Std.......         18.0         28.0         21.5        $41.5        $36.5
541860 Direct Mail Advertising.  Factor.........          3.8        265.8          1.4         24.4        0.781  ...........         19.5         16.5
                                 Size Std.......         20.0         16.0         14.0        $21.0        $25.5
541870 Advertising Material      Factor.........          3.8        156.6          1.5         41.4        0.839  ...........         25.0         16.5
 Distribution Services.          Size Std.......         20.0         12.5         14.0        $34.0        $36.0
541890 Other Services Related    Factor.........          1.8         89.4          0.6         13.1        0.780        -42.3         16.0         16.5
 to Advertising.                 Size Std.......         12.0         10.5          9.0        $12.0        $25.0        $23.0
541910 Marketing Research and    Factor.........          3.6        339.8          1.3         21.6        0.815         11.4         20.0         16.5
 Public Opinion Polling.         Size Std.......         19.5         18.5         13.5        $18.5        $31.5        $16.5
541921 Photography Studios,      Factor.........          0.4        129.9          0.2         28.3        0.727  ...........         14.0          8.0
 Portrait.                       Size Std.......          6.5         11.5          7.0        $24.0        $15.5
541922 Commercial Photography..  Factor.........          0.5          5.4          0.2          7.9        0.674        -50.2          8.0          8.0
                                 Size Std.......          6.5          7.5          7.0         $8.0         $6.0        $13.0
541930 Translation and           Factor.........          1.9        218.3          0.6         39.3        0.840          1.3         20.0          8.0
 Interpretation Services.        Size Std.......         12.0         14.5          9.5        $32.5        $36.0         $8.0
541940 Veterinary Services.....  Factor.........          1.1        106.9          0.3          9.2        0.529        -64.5          9.0          8.0
                                 Size Std.......          9.0         11.0          7.5         $9.0         $6.0        $13.0
541990 All Other Professional,   Factor.........          1.0        194.6          0.3         19.1        0.784        -34.1         17.0         16.5
 Scientific and Technical        Size Std.......          8.5         14.0          8.0        $17.0        $26.0        $23.0
 Services.
551111 Offices of Bank Holding   Factor.........         10.1        402.8          5.9  ...........        0.818  ...........         34.0         22.0
 Companies.                      Size Std.......         41.5         21.0         39.0                     $32.0
551112 Offices of Other Holding  Factor.........         10.8      2,312.4         13.5  ...........        0.848  ...........         40.0         22.0
 Companies.                      Size Std.......         41.5         41.5         41.5                     $37.5
561110 Office Administrative     Factor.........          1.5         25.7          0.6          2.1        0.761         32.7         11.0          8.0
 Services.                       Size Std.......         10.5          8.0          9.5         $6.0        $21.5         $8.0
561210 Facilities Support        Factor.........         13.8        665.1          3.8         25.6        0.841         -5.2         32.5         41.5
 Services.                       Size Std.......         41.5         29.5         27.5        $22.0        $36.0        $41.5
561311 Employment Placement      Factor.........          2.0        242.2          0.4         23.7        0.797        -21.8         21.0         30.0
 Agencies.                       Size Std.......         12.5         15.5          8.0        $20.5        $28.0        $34.5

[[Page 72592]]

 
561312 Executive Search          Factor.........          1.0         61.7          0.2         17.9        0.726  ...........         12.0         30.0
 Services.                       Size Std.......          8.5          9.5          7.0        $16.0        $15.5
561320 Temporary Help Services.  Factor.........          9.0      1,130.0          1.7         14.0        0.819         48.5         26.5         30.0
                                 Size Std.......         41.0         41.5         15.5        $13.0        $32.0        $30.0
561330 Professional Employer     Factor.........         30.7      5,898.1          4.9         43.6        0.865         80.2         36.5         30.0
 Organizations.                  Size Std.......         41.5         41.5         33.5        $36.0        $40.5        $30.0
561410 Document Preparation      Factor.........          0.8         74.8          0.3         26.6        0.790         40.9         16.5         16.5
 Services.                       Size Std.......          8.0         10.0          7.5        $22.5        $27.0        $16.5
561421 Telephone Answering       Factor.........          1.5         42.7          0.7         24.0        0.740  ...........         14.5         16.5
 Services.                       Size Std.......         10.5          9.0          9.5        $20.5        $18.0
561422 Telemarketing Bureaus     Factor.........          6.1        312.0          2.0         21.2        0.827        -19.9         22.5         16.5
 and Other Contact Centers.      Size Std.......         29.5         17.5         17.0        $18.5        $33.5        $20.0
561431 Private Mail Centers....  Factor.........          0.5         15.1          0.2         13.5        0.526  ...........          8.5         16.5
                                 Size Std.......          6.5          8.0          7.0        $12.5         $6.0
561439 Other Business Service    Factor.........          2.1        452.9          0.7         43.0        0.805  ...........         23.5         16.5
 Centers (including Copy Shops). Size Std.......         13.5         22.5         10.0        $35.5        $29.5
561440 Collection Agencies.....  Factor.........          3.1        123.3          1.1         15.2        0.792         43.6         17.0         16.5
                                 Size Std.......         17.0         11.5         12.0        $13.5        $27.5        $16.5
561450 Credit Bureaus..........  Factor.........         19.3        824.1          6.7         59.9        0.878         22.4         36.0         16.5
                                 Size Std.......         41.5         35.0         41.5        $41.5        $41.5        $16.5
561491 Repossession Services...  Factor.........          0.8          7.6          0.2         17.1        0.663  ...........          9.0         16.5
                                 Size Std.......          8.0          7.5          7.0        $15.0         $6.0
561492 Court Reporting and       Factor.........          0.6         35.1          0.2         22.5        0.743         27.3         14.0         16.5
 Stenotype Services.             Size Std.......          7.0          8.5          7.5        $19.5        $18.5        $16.5
561499 All Other Business        Factor.........          2.3        138.8          1.0         23.7        0.810        -17.6         19.0         16.5
 Support Services.               Size Std.......         14.0         12.0         11.5        $20.5        $30.5        $20.0
561510 Travel Agencies.........  Factor.........          1.4        303.8          0.5         25.8        0.798         10.4         19.0         22.0
                                 Size Std.......         10.5         17.5          8.5        $22.0        $28.5        $22.0
561520 Tour Operators..........  Factor.........          2.0         52.5          0.9         15.4        0.741  ...........         13.5         22.0
                                 Size Std.......         13.0          9.0         11.0        $14.0        $18.0
561591 Convention and Visitors   Factor.........          1.7         28.5          0.5         19.3        0.745  ...........         13.5         22.0
 Bureaus.                        Size Std.......         11.5          8.5          9.0        $17.0        $18.5
561599 All Other Travel          Factor.........          8.6        469.4          3.7         31.9        0.840         67.1         28.5         22.0
 Arrangement and Reservation     Size Std.......         39.5         23.0         27.0        $26.5        $36.0        $22.0
 Services.
561611 Investigation Services..  Factor.........          1.1        318.4          0.3         36.2        0.810        -27.2         21.5         22.0
                                 Size Std.......          9.0         18.0          7.5        $30.0        $30.5        $26.5
561612 Security Guards and       Factor.........          3.8        908.2          0.8         35.1        0.845          1.3         25.5         22.0
 Patrol Services.                Size Std.......         20.0         37.5         10.5        $29.5        $37.0        $22.0
561613 Armored Car Services....  Factor.........         22.7        509.9          5.1         89.6        0.871  ...........         38.0         22.0
                                 Size Std.......         41.5         24.5         35.0        $41.5        $41.5
561621 Security Systems          Factor.........          2.7        479.5          1.2         23.9        0.797          0.2         20.5         22.0
 Services (except Locksmiths).   Size Std.......         15.5         23.5         12.5        $20.5        $28.0        $22.0
561622 Locksmiths..............  Factor.........          0.5          5.0          0.2          8.3        0.603  ...........          7.0         22.0
                                 Size Std.......          6.5          7.5          7.0         $8.5         $6.0
561710 Exterminating and Pest    Factor.........          0.9        328.1          0.3         28.1        0.752         21.5         15.5         12.0
 Control Services.               Size Std.......          8.5         18.5          7.5        $24.0        $20.0        $12.0
561720 Janitorial Services.....  Factor.........          0.7        201.8          0.2         11.2        0.785         26.6         15.0         19.5
                                 Size Std.......          7.5         14.0          7.0        $10.5        $26.0        $19.5
561730 Landscaping Services....  Factor.........          0.6        168.6          0.2          9.6        0.688         11.3          8.5          8.0
                                 Size Std.......          7.0         13.0          7.0         $9.5         $8.5         $8.0
561740 Carpet and Upholstery     Factor.........          0.4         14.3          0.1          9.4        0.673  ...........          7.5          6.0
 Cleaning Services.              Size Std.......          6.5          8.0          7.0         $9.0         $6.0
561790 Other Services to         Factor.........          0.5         13.0          0.2          7.1        0.645        -46.7          8.0          8.0
 Buildings and Dwellings.        Size Std.......          6.5          8.0          7.0         $7.5         $6.0        $13.0
561910 Packaging and Labeling    Factor.........          4.0         59.3          1.5         14.0        0.781        -13.8         17.0         12.0
 Services.                       Size Std.......         21.0          9.5         14.5        $13.0        $25.5        $15.5
561920 Convention and Trade      Factor.........          2.6        287.8          0.9         24.0        0.800         46.7         17.5         12.0
 Show Organizers.                Size Std.......         15.5         17.0         11.0        $20.5        $28.5        $12.0
561990 All Other Support         Factor.........          1.7        119.3          0.8         10.9        0.779        -28.2         14.5         12.0
 Services.                       Size Std.......         11.5         11.5         10.5        $10.5        $25.0        $15.5
562111 Solid Waste Collection..  Factor.........          5.4      3,163.1          3.2         46.6        0.821         38.2         34.0         41.5
                                 Size Std.......         26.5         41.5         23.5        $38.5        $32.5        $41.5
562112 Hazardous Waste           Factor.........          7.0        129.9          4.1         43.5        0.789         33.3         31.0         41.5
 Collection.                     Size Std.......         33.0         11.5         29.0        $36.0        $27.0        $41.5
562119 Other Waste Collection..  Factor.........          2.1        103.4          1.2         41.4        0.779        -26.1         25.0         41.5
                                 Size Std.......         13.0         11.0         13.0        $34.0        $25.0        $41.5
562211 Hazardous Waste           Factor.........         15.6        569.0         10.4         49.9        0.840        -10.2         39.0         41.5
 Treatment and Disposal.         Size Std.......         41.5         26.5         41.5        $41.0        $36.0        $41.5
562212 Solid Waste Landfill....  Factor.........          7.5        834.7          6.8         64.6        0.845  ...........         39.0         41.5
                                 Size Std.......         35.0         35.0         41.5        $41.5        $37.0
562213 Solid Waste Combustors    Factor.........         56.6      1,040.3         43.5         92.5        0.863  ...........         41.0         41.5
 and Incinerators.               Size Std.......         41.5         41.5         41.5        $41.5        $40.0
562219 Other Nonhazardous Waste  Factor.........          3.4         29.0          2.8         40.2        0.711        -22.5         24.5         41.5
 Treatment and Disposal.         Size Std.......         18.5          8.5         21.5        $33.5        $12.5        $41.5
562910 Remediation Services....  Factor.........          4.3        128.5          2.0         13.3        0.774         -8.3         18.5         22.0
                                 Size Std.......         22.0         11.5         17.0        $12.0        $24.0        $22.0
562920 Materials Recovery        Factor.........          5.2        276.0          2.5         28.8        0.753  ...........         21.5         22.0
 Facilities.                     Size Std.......         25.5         16.5         20.0        $24.5        $20.5
562991 Septic Tank and Related   Factor.........          0.8         16.1          0.4         11.4        0.642          9.2          8.0          8.0
 Services.                       Size Std.......          8.0          8.0          8.0        $10.5         $6.0         $8.0
562998 All Other Miscellaneous   Factor.........          1.7         45.4          0.9         26.2        0.714  ...........         14.5          8.0
 Waste Management Services.      Size Std.......         11.5          9.0         11.0        $22.5        $13.0
--------------------------------------------------------------------------------------------------------------------------------------------------------


[[Page 72593]]

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 three 
(3) exceptions covered by this proposed rule using the procedures 
described in the revised SBA's Methodology. The results of that 
analysis are discussed in the following subsection.
Exceptions to NAICS 541330: Military and Aerospace Equipment and 
Military Weapons; Contracts and Subcontracts for Engineering Services 
Awarded Under the National Energy Policy Act of 1992; Marine 
Engineering and Naval Architecture
    Currently, NAICS 541330 has four size standards that apply to 
Federal contracts for different types of engineering services. The 
$16.5 million size standard is for general engineering services, while 
the $41.5 million size standard for the three exceptions apply to 
specialized types of engineering services that the Federal Government 
procures. These exceptions apply only to Federal contracts for those 
services. In the prior comprehensive review, 16 commenters addressed 
SBA's proposal to retain the then current $27.0 million size standard 
for the exceptions. All believed that the $27.0 million size standard 
was too low and needed to be increased. Commenters expressed concern 
that small firms that exceed this size standard would not be able to 
compete with the midsize and very large firms that exist in this 
market. Commenters also pointed out that contracts for the exceptions 
tend to be large already and were trending upwards each year.
    SBA agreed with commenters that the size standard for the two 
engineering ``exceptions'' (Military and Aerospace Equipment and 
Military Weapons, and Marine Engineering and Naval Architecture) should 
be increased, and as such, SBA adopted a size standard of $35.5 million 
for all three of the exceptions.\1\ Thereafter, to account for 
inflation during the period, SBA increased the $35.5 million size 
standard for the three exceptions to $38.5 Million in 2014 (79 FR 
33647, June 12, 2014), and to the current maximum size level of $41.5 
in 2019 (84 FR 34261, July 18, 2019).
---------------------------------------------------------------------------

    \1\ As required by law, SBA also adopted the $35.5 million size 
standard for the third ``exception'' to NAICS 541330 (Contracts and 
Subcontracts for Engineering Services Awarded Under the National 
Energy Policy Act of 1992). Section 3021(b)(1) of Public Law 102-
486, the National Energy Policy Act of 1992 (106 Stat. 2776, 3133) 
states that ``for purposes of contracts and subcontracts requiring 
engineering services (awarded under this Act) the applicable size 
standard shall be that established for Military and Aerospace 
Equipment and Military Weapons.''
---------------------------------------------------------------------------

    As noted previously, the data from the Economic Census special 
tabulation are limited down to the 6-digit NAICS industry level and 
hence do not provide data to assess economic characteristics at the 
subindustry level. For example, the Economic Census data for NAICS 
541330 are aggregates of both general engineering services and 
specialized engineering services under the three ``exceptions.'' The 
lack of relevant data at the subindustry level makes it challenging to 
determine whether these size standards (``exceptions'') should be 
revised or left unchanged. Thus, the results based on the Economic 
Census data may not accurately reflect the characteristics of 
businesses providing specialized services included under those 
``exceptions.''
    To determine whether the Agency should propose revising the three 
exceptions under NAICS 541330, SBA evaluated the data from FPDS-NG and 
SAM. From FPDS-NG, SBA first identified Product Service Codes (PSCs) 
that correspond to each specific subindustry activity or ``exception'' 
under that NAICS code and then identified firms that are active in 
Federal contracting involving those PSCs. Including the exceptions, SBA 
identified a total of 1,257 PSCs corresponding to the activity of 
engineering services. The total average contract dollars obligated 
under these PSCs was $29.9 billion. From this group, SBA identified a 
subgroup of 168 PSCs corresponding to the Military and Aerospace 
Equipment and Military Weapons exception, and 40 PSCs corresponding to 
the Marine Engineering and Naval Architecture exception. The total 
average contract dollars obligated under these PSCs was $3.2 billion 
and $1.9 billion, respectively.
    The data for fiscal year 2018 showed numerous firms doing contracts 
under Military and Aerospace Equipment and Military Weapons and Marine 
Engineering and Naval Architecture. SBA analyzed those firms' revenue 
and employment data from SAM and contract dollars from FPDS-NG to 
evaluate industry and Federal procurement factors. These results, 
presented in Table 4 of this proposed rule, support a size standard of 
$39.0 million for the Military and Aerospace Equipment and Military 
Weapons Exception and $41.5 million for the Marine Engineering and 
Naval Architecture. The FPDS-NG showed very few actions involving 
Contracts and Subcontracts for Engineering Services Awarded Under the 
National Energy Policy Act of 1992. However, for purposes of contracts 
and subcontracts, the National Energy Policy Act of 1992 requires that 
the applicable size standard must be established for Military and 
Aerospace Equipment and Military Weapons (106 Stat. 2776, 3133).

Summary of Calculated Size Standards

    Of the 91 industries and 3 subindustries (i.e. 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 46 industries, 
decreasing size standards for 43 industries and 3 subindustries, and 
maintaining size standards for 6 industries. Table 5, Summary of 
Calculated Size Standards, summarizes these results by NAICS sector.

                                  Table 5--Summary of Calculated Size Standards
----------------------------------------------------------------------------------------------------------------
                                                  Number of size  Number of size  Number of size  Number of size
          Sector                 Sector name         standards       standards       standards       standards
                                                     reviewed        increased       decreased      maintained
----------------------------------------------------------------------------------------------------------------
54........................  Professional,                     48              27              18               3
                             Scientific and
                             Technical Services.
55........................  Manag6ment of                      2               2               0               0
                             Companies and
                             Enterprises.
56........................  Administrative and                44              17              24               3
                             Support and Waste
                             Management and
                             Remediation
                             Services.
                                                 ---------------------------------------------------------------
    Total.................  ....................              94              46              42               6
----------------------------------------------------------------------------------------------------------------


[[Page 72594]]

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 proposed 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 proposed rule, more than 98.8% 
of 7(a) and 504 loans in fiscal years 2016-2018 went to businesses 
below the current or calculated size standards.

Proposed Changes to Size Standards

    Based on the analytical results in Table 4 and considerations of 
the impacts of calculated size standards in terms of access by 
currently small businesses to SBA's loans, as discussed above, of a 
total of 94 industries or subindustries (exceptions) with receipts-
based size standards in Sectors 54, 55, and 56 that are covered by this 
proposed rule, and considering the current situation due to the COVID-
19 related national emergency and its impacts on small businesses and 
the overall economy, SBA proposes to increase size standards for 46 
industries, and retain the current size standards for the remaining 48 
industries or subindustries in those sectors.
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 signed 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% 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 by COVID-19. On April 24, 
2020, additional funding for the CARES Act, including for the PPP, was 
provided. The Paycheck Protection Program and Health Care Enhancement 
Act, Public Law 116-139 (April 24, 2020).
    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 
homestay-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%, and the personal consumption in 
goods and services decreased 6.9% in the first quarter of 2020. The 
Bureau of Economic Analysis (BEA) third estimate for the second quarter 
of 2020 shows that the GDP decreased 31.4%, and the personal 
consumption in goods and services decreased 33.2%; In August 2020, 
personal income decreased 2.7%, after having decreased by a lower 
percentage in June (1.2%) and slightly increased in July 2020 (0.5%). 
In September 2020, the unemployment rate declined to 7.9% from August 
2020, when the unemployment rate was 8.4%. After reaching 14.7% in 
April 2020, the unemployment rate has been decreasing from May to 
September 2020, but still it is greater than in February 2020 when it 
was 3.5%. For the month of September 2020, non-farm payroll increased 
661,000 from August 2020, but the decrease in employment since February 
2020 is about 10.5 million. Specifically, for the sectors evaluated in 
this proposed rule, more recent data in September 2020 shows that the 
unemployment rate for professional and technical services was 5.0%; 
management, administrative, and waste services was 10.0%; and 
administrative and support services was 10.2%. In September 2019, the 
unemployment rates for these sectors were 2.5%, 4.7% and 4.9%, 
respectively.\2\ The latest Federal Reserve Board's Monetary Policy 
Report shows that in general the most impacted firms in these sectors 
are the small businesses.\3\
---------------------------------------------------------------------------

    \2\ Bureau of Labor Statistics, Table A-31, Unemployed persons 
by industry, class of worker, and sex. See https://www.bls.gov/cps/cpsaat26.htm.
    \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, see https://portal.census.gov/pulse/data. The latter 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 
PPP.
---------------------------------------------------------------------------

    Accordingly, in view of the 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 
adopt increases to size standards for 46 industries and retain the 
current size standards for 48 industries or subindustries for a vast 
majority of which analytical results suggested their size standards 
could be lowered.
    The proposed size standards are presented in Table 6, Proposed Size 
Standards Revisions. Also presented in Table 6 are current and 
calculated size standards for comparison.

                                   Table 6--Proposed Size Standards Revisions
----------------------------------------------------------------------------------------------------------------
                                                                    Calculated     Proposed size   Current size
            NAICS code                  NAICS industry title       size standard    standard ($     standard ($
                                                                    ($ million)      million)        million)
----------------------------------------------------------------------------------------------------------------
541110............................  Offices of Lawyers..........           $13.5           $13.5           $12.0
541191............................  Title Abstract and                      17.0            17.0            12.0
                                     Settlement Offices.

[[Page 72595]]

 
541199............................  All Other Legal Services....            18.0            18.0            12.0
541211............................  Offices of Certified Public             23.5            23.5            22.0
                                     Accountants.
541213............................  Tax Preparation Services....            12.0            22.0            22.0
541214............................  Payroll Services............            34.5            34.5            22.0
541219............................  Other Accounting Services...            17.5            22.0            22.0
541310............................  Architectural Services......            11.0            11.0             8.0
541320............................  Landscape Architectural                  6.5             8.0             8.0
                                     Services.
541330............................  Engineering Services........            22.5            22.5            16.5
541340............................  Drafting Services...........             7.0             8.0             8.0
541350............................  Building Inspection Services            10.0            10.0             8.0
541360............................  Geophysical Surveying and               25.0            25.0            16.5
                                     Mapping Services.
541370............................  Surveying and Mapping                   14.0            16.5            16.5
                                     (except Geophysical)
                                     Services.
541380............................  Testing Laboratories........            16.5            16.5            16.5
541410............................  Interior Design Services....             6.5             8.0             8.0
541420............................  Industrial Design Services..            15.0            15.0             8.0
541430............................  Graphic Design Services.....             7.5             8.0             8.0
541490............................  Other Specialized Design                12.0            12.0             8.0
                                     Services.
541511............................  Custom Computer Programming             20.5            30.0            30.0
                                     Services.
541512............................  Computer Systems Design                 27.0            30.0            30.0
                                     Services.
541513............................  Computer Facilities                     32.5            32.5            30.0
                                     Management Services.
541519............................  Other Computer Related                  21.0            30.0            30.0
                                     Services.
541611............................  Administrative Management               21.5            21.5            16.5
                                     and General Management
                                     Consulting Services.
541612............................  Human Resources Consulting              25.5            25.5            16.5
                                     Services.
541613............................  Marketing Consulting                    14.5            16.5            16.5
                                     Services.
541614............................  Process, Physical                       17.5            17.5            16.5
                                     Distribution, and Logistics
                                     Consulting Services.
541618............................  Other Management Consulting             13.0            16.5            16.5
                                     Services.
541620............................  Environmental Consulting                13.5            16.5            16.5
                                     Services.
541690............................  Other Scientific and                    15.5            16.5            16.5
                                     Technical Consulting
                                     Services.
541720............................  Research and Development in             24.5            24.5            22.0
                                     the Social Sciences and
                                     Humanities.
541810............................  Advertising Agencies........            22.5            22.5            16.5
541820............................  Public Relations Agencies...            15.0            16.5            16.5
541830............................  Media Buying Agencies.......            28.5            28.5            16.5
541840............................  Media Representatives.......            18.5            18.5            16.5
541850............................  Outdoor Advertising.........            30.5            30.5            16.5
541860............................  Direct Mail Advertising.....            19.5            19.5            16.5
541870............................  Advertising Material                    25.0            25.0            16.5
                                     Distribution Services.
541890............................  Other Services Related to               16.0            16.5            16.5
                                     Advertising.
541910............................  Marketing Research and                  20.0            20.0            16.5
                                     Public Opinion Polling.
541921............................  Photography Studios,                    14.0            14.0             8.0
                                     Portrait.
541922............................  Commercial Photography......             8.0             8.0             8.0
541930............................  Translation and                         20.0            20.0             8.0
                                     Interpretation Services.
541940............................  Veterinary Services.........             9.0             9.0             8.0
541990............................  All Other Professional,                 17.0            17.0            16.5
                                     Scientific and Technical
                                     Services.
551111............................  Offices of Bank Holding                 34.0            34.0            22.0
                                     Companies.
551112............................  Offices of Other Holding                40.0            40.0            22.0
                                     Companies.
561110............................  Office Administrative                   11.0            11.0             8.0
                                     Services.
561210............................  Facilities Support Services.            32.5            41.5            41.5
561311............................  Employment Placement                    21.0            30.0            30.0
                                     Agencies.
561312............................  Executive Search Services...            12.0            30.0            30.0
561320............................  Temporary Help Services.....            26.5            30.0            30.0
561330............................  Professional Employer                   36.5            36.5            30.0
                                     Organizations.
561410............................  Document Preparation                    16.5            16.5            16.5
                                     Services.
561421............................  Telephone Answering Services            14.5            16.5            16.5
561422............................  Telemarketing Bureaus and               22.5            22.5            16.5
                                     Other Contact Centers.
561431............................  Private Mail Centers........             8.5            16.5            16.5
561439............................  Other Business Service                  23.5            23.5            16.5
                                     Centers (including Copy
                                     Shops).
561440............................  Collection Agencies.........            17.0            17.0            16.5
561450............................  Credit Bureaus..............            36.0            36.0            16.5
561491............................  Repossession Services.......             9.0            16.5            16.5
561492............................  Court Reporting and                     14.0            16.5            16.5
                                     Stenotype Services.
561499............................  All Other Business Support              19.0            19.0            16.5
                                     Services.
561510............................  Travel Agencies.............            19.0            22.0            22.0
561520............................  Tour Operators..............            13.5            22.0            22.0
561591............................  Convention and Visitors                 13.5            22.0            22.0
                                     Bureaus.
561599............................  All Other Travel Arrangement            28.5            28.5            22.0
                                     and Reservation Services.
561611............................  Investigation Services......            21.5            22.0            22.0
561612............................  Security Guards and Patrol              25.5            25.5            22.0
                                     Services.
561613............................  Armored Car Services........            38.0            38.0            22.0
561621............................  Security Systems Services               20.5            22.0            22.0
                                     (except Locksmiths).

[[Page 72596]]

 
561622............................  Locksmiths..................             7.0            22.0            22.0
561710............................  Exterminating and Pest                  15.5            15.5            12.0
                                     Control Services.
561720............................  Janitorial Services.........            15.0            19.5            19.5
561730............................  Landscaping Services........             8.5             8.5             8.0
561740............................  Carpet and Upholstery                    7.5             7.5             6.0
                                     Cleaning Services.
561790............................  Other Services to Buildings              8.0             8.0             8.0
                                     and Dwellings.
561910............................  Packaging and Labeling                  17.0            17.0            12.0
                                     Services.
561920............................  Convention and Trade Show               17.5            17.5            12.0
                                     Organizers.
561990............................  All Other Support Services..            14.5            14.5            12.0
562111............................  Solid Waste Collection......            34.0            41.5            41.5
562112............................  Hazardous Waste Collection..            31.0            41.5            41.5
562119............................  Other Waste Collection......            25.0            41.5            41.5
562211............................  Hazardous Waste Treatment               39.0            41.5            41.5
                                     and Disposal.
562212............................  Solid Waste Landfill........            39.0            41.5            41.5
562213............................  Solid Waste Combustors and              41.0            41.5            41.5
                                     Incinerators.
562219............................  Other Nonhazardous Waste                24.5            41.5            41.5
                                     Treatment and Disposal.
562910............................  Remediation Services........            18.5            22.0            22.0
562920............................  Materials Recovery                      21.5            22.0            22.0
                                     Facilities.
562991............................  Septic Tank and Related                  8.0             8.0             8.0
                                     Services.
562998............................  All Other Miscellaneous                 14.5            14.5             8.0
                                     Waste Management Services.
----------------------------------------------------------------------------------------------------------------

    Table 7, Summary of Proposed Size Standards Revisions by Sector, 
below, summarizes the proposed changes to size standards by NAICS 
sector.

                         Table 7--Summary of Proposed Size Standards Revisions by Sector
----------------------------------------------------------------------------------------------------------------
                                                     Number of       Number of       Number of       Number of
          Sector                 Sector name      size standards  size standards  size standards  size standards
                                                      reviewed       increased       decreased       maintained
----------------------------------------------------------------------------------------------------------------
54........................  Professional,                     48              27               0              21
                             Scientific and
                             Technical Services.
55........................  Management of                      2               2               0               0
                             Companies and
                             Enterprises.
56........................  Administrative and                44              17               0              27
                             Support, Waste
                             Management and
                             Remediation
                             Services.
                                                 ---------------------------------------------------------------
    Total.................  ....................              94              46               0              48
----------------------------------------------------------------------------------------------------------------

Evaluation of Dominance in Field of Operation

    SBA has determined that for the industries 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 would be, on 
average, 0.4 percent, varying from 0.005% to 4.8%. 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 COVID-19 
emergency and resultant economic impacts on small businesses, all 
current size standards where the data suggested lowering is 
appropriate.
    Nonetheless, SBA considered two other alternatives. Alternative 
Option One was to propose changes exactly as suggested by the 
analytical results. In other words, option one would entail increasing 
size standards for 46 industries, decreasing them for 42 industries, 
and retaining them at their current levels for 6 industries. 
Alternative Option Two was to retain all current size standards.
    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. 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 option one, SBA also considered increasing 46 size 
standards as suggested by the analytical results and mitigating the 
impact of the decreases to size standards by adjusting the calculated 
sizes considering the impact on small business access to Federal 
contracting and 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 
the impacts of adopting the analytical results without

[[Page 72597]]

adjustment in Alternative Option One and proposes to retain all size 
standards for which the evaluation of principal factors suggested 
reductions, and to adopt only the increases suggested by the 
evaluation. SBA will adopt this approach temporarily and may reevaluate 
this approach as the economic situation evolves.
    Under option two, 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 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 46 increases and retaining 48 size standards. 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 46 size 
standards and retain 48 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 the 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 the 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, instead of not 
lowering any size standards at all.
    4. 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.
    5. 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 proposed rule is not a 
``major rule'' under the Congressional Review Act, 5 U.S.C. 800.

Regulatory Impact Analysis

1. What is the 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 5 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 proposed 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 establishes numerical size 
standards by industry to identify businesses that are deemed small.
    The proposed revisions to the existing size standards for 94 
industries or subindustries in NAICS Sectors 54, 55, 56 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

[[Page 72598]]

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 94 industries in Sectors 54, 55, and 56 that 
have receipts-based size standards, SBA proposes to increase size 
standards for 46 industries and maintain current size standards for the 
remaining 48 industries (including 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 1,096,800 businesses in industries in Sectors 54, 55, 
and 56, 97.9% are considered small under the current size standards. 
That percentage varies from 65.3 percent% in Sector 55 to 98.4 percent% 
in Sector 54. Based on the data from FPDS-NG for fiscal years 2016-
2018, about 39,844 unique firms in those industries received at least 
one Federal contract during that period, of which 82.8 percent% were 
small under the current size standards. A total of $134.1 billion in 
average annual contract dollars were awarded to businesses in those 
industries during the period of evaluation, and 32.8% of the dollars 
awarded went to small businesses. For these sectors, providing contract 
dollars to small business through set-asides is quite important. From 
the total small business contract dollars awarded during the period 
considered, 71.2% were awarded through various small business set-aside 
programs and 28.8% were awarded through non-set set-aside contracts. 
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 9,664 7(a) and 504 loans in that period, totaling 
about $2.9 billion, of which 86.3% was issued through the 7(a) program 
and 13.7% was issued through the 504/CDC program. During fiscal years 
2016-2018, small businesses in those industries also received 585 loans 
through the SBA's Economic Injury Disaster Loan (EIDL) program, 
totaling about $36.2 million on an annual basis. Table 8, Baseline for 
All Industries, below, provides these baseline results by sector.

                                      Table 8--Baseline for All Industries
----------------------------------------------------------------------------------------------------------------
                                                     Sector 54       Sector 55       Sector 56         Total
----------------------------------------------------------------------------------------------------------------
Baseline All Industries (current size standards)              48               2              44              94
Total firms (Economic Census)...................         760,701           7,544         328,522       1,096,767
Total small firms under current size standards           748,170           4,926         320,672       1,073,769
 (Economic Census)..............................
Small firms as % of total firms.................            98.3            65.3            97.6            97.9
Total contract dollars ($ million) (FPDS-NG            $96,050.0           $0.18       $38,089.1      $134,139.3
 FY2016-2018)...................................
Total small business contract dollars under            $34,208.0            $0.0        $9,816.8       $44,025.0
 current standards ($ million) (FPDS-NG FY2016-
 2018)..........................................
Small business dollars as % of total dollars               35.6%            0.6%           25.8%           32.8%
 (FPDS-NG FY2016-2018)..........................
Total No. of unique firms getting contracts               26,673               3          15,709          39,844
 (FPDS-NG FY2016-2018)..........................
Total No. of unique small firms getting small             21,318               1          13,349          32,996
 business contracts (FPDS-NG FY2016-2018).......
Small business firms as % of total firms........           79.9%           33.3%           85.0%           82.8%
No. of 7(a) and 504/CDC loans (FY 2016-2018)....           6,415              64           3,185           9,664
Amount of 7(a) and 504 loans ($ million) (FY            $2,056.8           $41.9          $796.0        $2,894.7
 2016-2018).....................................
No. of EIDL loans (FY 2016-2018)................             406               1             178             585
Amount of EIDL loans ($ million) (FY 2016-2018).           $25.2            $0.0           $11.0           $36.2
----------------------------------------------------------------------------------------------------------------

Increases to Size Standards
    As stated above, of 94 receipts-based size standards in Sectors 54, 
55, and 56 that are reviewed in this proposed 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, SBA 
proposes to increase 46 size standards. Below are descriptions of the 
benefits, costs and transfer impacts of these proposed increases to 
size standards.
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 SBA's various

[[Page 72599]]

business development and contracting programs. These include the 8(a)/
BD (Business Development) Program, the Small Disadvantaged Businesses 
(SDB) Program, the Historically Underutilized Business Zones (HUBZone) 
Program, the Women-Owned Small Businesses (WOSB) Program, the 
Economically Disadvantaged Women-Owned Small Businesses (EDWOSB) 
Program, and the Service-Disabled Veteran-Owned Small Businesses 
(SDVOSB) Program.
    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 the 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 46 industries in NAICS Sectors 54, 55, and 56 for which it has 
proposed to increase size standards, about 2,600 firms (see Table 9, 
below), 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 0.4% 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 34.7% to 37.0%.
    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 464 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 $752.6 million annually. That represents a 4.0% increase 
to small business dollars from the sector baseline.
    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 
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 26 SBA 7(a) and 504 
loans totaling about $10.6 million could be made to these newly-
qualified small businesses in those industries under the proposed size 
standards. That represents a 0.4% 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 three (3) EIDL 
loans, totaling about $0.15 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 9, Impacts of Proposed Increases to Size 
Standards, provides these results by NAICS sector.

                            Table 9--Impacts of Proposed Increases to Size Standards
----------------------------------------------------------------------------------------------------------------
                                                     Sector 54       Sector 55       Sector 56         Total
----------------------------------------------------------------------------------------------------------------
No. of industries with proposed increases to                  27               2              17              46
 size standards.................................
Total current small businesses in industries             462,890           4,926         176,504         644,321
 with Proposed increases to size standards
 (Economic Census 2012).........................
Additional firms qualifying as small under                 1,345             527             710           2,582
 proposed standards (2012 Economic Census)......
Percentage of additional firms qualifying as                0.3%           10.7%            0.4%            0.4%
 small relative to current small businesses in
 industries with proposed increases to size
 standards......................................
No. of current unique small firms getting small           13,151               1           4,180          16,732
 business contracts in industries with proposed
 increases to size standards (FPDS-NG FY2016-
 2018) \1\......................................
Additional small business firms getting small                412               0              99             464
 business status (FPDS-NG FY2016-2018)..........
% increase to small businesses relative to                  3.1%              0%            2.4%            2.8%
 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 dollars under             16,182.3             0.0         2,851.0        19,033.0
 current standards in industries with proposed
 increases to size standards ($ million) (FPDS-
 NG FY2016-2018)................................
Estimated small business dollars available to              651.4             0.0           101.2           752.6
 newly-qualified small firms (Using avg dollars
 obligated to SBs) ($ million) FPDS-NG FY 2016-
 2018) \2\......................................

[[Page 72600]]

 
% increase to small business dollars relative to            4.0%             0.0            3.5%            4.0%
 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 small                   3,795              64           1,680           5,539
 business in industries with proposed increases
 to size standards (FY 2016-2018)...............
Total amount of 7(a) and 504 loans to small             $1,402.3           $41.9          $390.7        $1,834.9
 businesses in industries with proposed
 increases to size standards ($ million) (FY
 2016-2018).....................................
Estimated no. of 7(a) and 504 loans to newly-                 12               7               7              26
 qualified small firms..........................
Estimated 7(a) and 504 loan amount to newly-                $4.4            $4.6            $1.6           $10.6
 qualified small firms ($ million)..............
% increase to 7(a) and 504 loan amount relative             0.2%           10.9%            0.4%            0.6%
 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 businesses in               247               1              92             340
 industries with proposed increases to size
 standards (FY 2016-2018).......................
Total amount of EIDL loans to small businesses             $17.0            $0.0            $5.3           $22.3
 in industries with proposed increases to size
 standards ($ million) (FY 2016-2018)...........
Estimated no. of EIDL loans to newly-qualified                 1               1               1               3
 small firms....................................
Estimated EIDL loan amount to newly-qualified              $0.07           $0.02           $0.06            0.15
 small firms ($ million)........................
% increase to EIDL loan amount relative to the              0.4%          100.0%            1.1%            0.7%
 total amount of EIDL loans in industries with
 proposed increases to size standards...........
----------------------------------------------------------------------------------------------------------------
\1\ Total impact represents total unique number of firms impacted to avoid double counting as some firms are
  participating in more than one industry.
\2\ 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 contracting
  officer's size designation.

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 the Federal Government must 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 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 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's loans, more firms eligible for enrollment in the 
Dynamic Small Business Search (DSBS) database or in certify.sba.gov, 
more firms seeking certification as 8(a)/BD or HUBZone firms or 
qualifying for small business, 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% decline. 
Among those newly-defined small businesses seeking SBA's loans, there 
could be some additional costs associated with 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.

[[Page 72601]]

Transfer Impacts of Increases to Size Standards
    The proposed increases to size standards, if adopted, may result in 
some redistribution of Federal contracts 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 that 
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 larger 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 alternative to the proposed rule, would propose adopting size 
standards based solely on the analytical results. In other words, the 
size standards of 46 industries for which the analytical results 
suggest raising size standards would be raised. However, the size 
standards of 42 industries or subindustries for which the analytical 
results suggest lowering size standards would be lowered. For the 6 
remaining industries or subindustries, size standards 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 at the beginning of this section 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 
ongoing second 5-year comprehensive size standards review as well.
    The primary benefit of adopting this alternative 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 46 
size standards. Below we discuss the benefits and costs of decreasing 
42 size standards.
Benefits of Decreases to Size Standards
    The most significant benefit to businesses from decreases to size 
standards when 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, 
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 that 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 $24,762 million in small 
business contracts in those 42 industries for which this Option 
considered decreasing size standards. Table 10, Impacts of Decreases to 
Size Standards Under Alternative Option Option One, below shows that 
lowering size standards in 42 industries and subindustries would reduce 
Federal contract dollars awarded to small businesses by $1,027 million 
or about 4.1 percent % relative to the baseline level. Because of the 
importance of these sectors for the Federal procurement, SBA may adopt 
mitigating measures to reduce the negative impact under the assumptions 
of Option One. SBA could adopt one or more of the

[[Page 72602]]

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, 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. However, SBA estimates an almost null impact or 
non-significant reduction in dollars obligated to small businesses, if 
mitigation measures are adopted. 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, SBA estimates that about 11 
of SBA's 7(a) and 504 loans with total amounts of $2.8 million could 
not be made to those small businesses that would lose eligibility under 
the reduced size standards (before mitigation). That represents about 
0.3% decrease of the loan amounts compared to the baseline. Table 10, 
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 the 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.

                  Table 10--Impacts of Decreases to Size Standards Under Alternative Option One
----------------------------------------------------------------------------------------------------------------
                                                     Sector 54       Sector 55       Sector 56         Total
----------------------------------------------------------------------------------------------------------------
No. of industries for which SBA considered                    18               0              24              42
 decreasing size standards (2012 Economic
 Census)........................................
Total current small businesses in industries for         276,751               0         125,106         401,857
 which SBA considered decreasing size standards
 (EC 2012)......................................
Estimated no. of firms losing small status for               676               0             375           1,051
 which SBA considered decreasing size standards
 (2012 Economic Census).........................
% of Firms losing small status relative to                  0.2%               0            0.3%            0.3%
 current small businesses in industries for
 which SBA considered decreasing size standards.
No. of current unique small firms getting small           10,016               0           8,885          18,280
 business contracts in industries for which SBA
 considered decreasing size standards (FPDS-NG
 FY 2016-2018) \1\..............................
Estimated number of small business firms that                291               0             145             397
 would have lost small business status in the
 decreases that SBA considered..................
% decrease to small business firms relative to              2.9%               0            1.6%            2.2%
 current unique small firms getting small
 business contracts in industries for which SBA
 considered decreasing size standards (FPDS-NG
 FY 2016-2018) \1\..............................
Total small business contract dollars under            $17,914.2               0        $6,847.8       $24,762.0
 current size standards in industries for which
 SBA considered decreasing size standards ($
 million) (FPDS-NG FY 2016-2018)................
Estimated small business dollars not available            $824.7               0          $201.8        $1,026.6
 to firms losing small business status (Using
 avg dollars obligated to SBs) ($ million) \ 2\
 (FPDS-NG FY 2016-2018).........................
% decrease to small business dollars relative to            4.6%               0            2.9%            4.1%
 total small business contract dollars under
 current size standards in industries for which
 SBA considered decreasing size standards.......
Total no. of 7(a) and 504 loans to small                   2,519               0           1,230           3,749
 businesses in industries for which SBA
 considered decreasing size standards (FY 2016-
 2018)..........................................
Total amount of 7(a) and 504 loans to small               $617.4               0          $335.2          $952.6
 businesses in industries for which SBA
 considered decreasing size standards ($
 million) (FY 2016-2018)........................
Estimated no. of 7(a) and 504 loans not                       -7               0              -4             -11
 available to firms that would have lost small
 business status................................
Estimated 7(a) and 504 loan amount not available           -$1.7  ..............           -$1.1           -$2.8
 to firms that would have lost small status ($
 million).......................................
% decrease to 7(a) and 504 loan amount relative            -0.3%               0           -0.3%           -0.3%
 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 businesses in               151               0              71             222
 industries for which SBA considered decreasing
 size standards (FY 2016-2018)..................
Total amount of EIDL loans to small businesses              $7.4               0            $4.8           $12.3
 in industries for which SBA considered
 decreasing size standards ($ million) (FY 2016-
 2018)..........................................

[[Page 72603]]

 
Estimated no. of EIDL loans not available to                  -1               0              -1              -2
 firms that would have lost small business
 status.........................................
Estimated EIDL loan amount not available to               -$0.05               0          -$0.07          -$0.12
 firms that would have lost small business
 status ($ million).............................
% decrease to EIDL loan amount relative to the             -0.7%               0           -1.4%           -1.0%
 baseline.......................................
----------------------------------------------------------------------------------------------------------------
\1\ 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.
\2\ Additional dollars are calculated multiplying average small business dollars obligated per DUNS times change
  in number of firms.

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 their small business status and large businesses and 
between small businesses losing their 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 the 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 on an unrestricted basis. As a result, large businesses may 
have more Federal contracting opportunities. However, because agencies 
are still required by law to award 23% 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 9 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 size standards were already shown in Table 9 above. 
Table 10 (above) and Table 11, 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 88 
industries in NAICS Sectors 54, 55, and 56 for which the analytical 
results suggested to change size standards, about 1,530 firms (see 
Table 11, below), would become small under the Option One. That 
represents about 0.1% 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 67 active firms in Federal contracting in those industries 
would lose small business status under Alternative Option One, most of 
them from Sector 56. This represents a decrease of about 0.2% 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 $274.0 million of Federal procurement dollars would not be 
available to firms losing their small status. This represents a 
decrease of 0.6% from the Group's baseline. A large amount of the 
losses are accounted for by Sector 54.
    Based on the SBA's loan data for fiscal years 2016-2018, the total 
number of 7(a) and 504 loans may increase by about 15 loans, and the 
loan amounts by about $7.8 million. This represents a 0.3% increase 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 the total number 
of EIDL loans may increase by about 1 loan, and the loan amount by 
about $.03 million. This represents a 0.1% increase of the loan amounts 
relative to the Group baseline. Table 11, below, provides these results 
by NAICS sector.

                  Table 11--Net Impacts of Size Standards Changes Under Alternative Option One
----------------------------------------------------------------------------------------------------------------
                                                     Sector 54       Sector 55       Sector 56         Total
----------------------------------------------------------------------------------------------------------------
No. of industries with proposed changes to size               45               2              41              88
 standards......................................
Total no. of small business under the current            739,641           4,926         301,609       1,046,177
 size standards (2012 Economic Census)..........
Additional firms qualifying as small under                   670             527             334           1,531
 proposed size standards (2012 Economic Census).
% of additional firms qualifying as small                   0.1%           10.7%            0.1%            0.1%
 relative to total current small businesses.....
No. of current unique small firms getting small           20,601               1          12,384          31,395
 business contracts (FPDS-NG FY 2016-2018) \1\..

[[Page 72604]]

 
Additional small firms getting small business                 48               0             -75             -67
 status (FPDS-NG FY 2016-2018)..................
% increase to small firms relative to current               0.2%            0.0%           -0.6%           -0.2%
 unique small firms getting small business
 contracts (FPDS-NG FY 2016-2018) \1\...........
Total small business small business contract            34,096.4             0.0           9,700          43,795
 dollars under current size standards ($
 million) (FPDS-NG FY 2016-2018)................
Estimated small business dollars available to             -173.3               0            -101          -274.0
 newly-qualified small firms ($ million) FPDS-NG
 FY 2016-2018) \2\..............................
% increase to dollars relative to total small              -0.5%            0.0%           -1.0%           -0.6%
 business contract dollars under current size
 standards......................................
Total no. of 7(a) and 504 loans to small                   6,415              64           3,185           9,664
 businesses (FY 2016-2018)......................
Total amount of 7(a) and 504 loans to small             $2,056.8           $41.9          $796.0        $2,894.7
 businesses (FY 2016-2018)......................
Estimated no. of additional 7(a) and 504 loans                 5               7               3              15
 to newly-qualified small firms.................
Estimated additional 7(a) and 504 loan amount to            $2.7            $4.6            $0.5            $7.8
 newly-qualified small firms ($ million)........
% increase to 7(a) and 504 loan amount relative             0.1%           10.9%            0.1%            0.3%
 to the total amount of 7(a) and 504 loans to
 small businesses...............................
Total no. of EIDL loans to small businesses (FY              406               1             178             585
 2016-2018).....................................
Total amount of EIDL loans to small businesses             $25.2            $0.0           $11.0           $36.2
 (FY 2016-2018).................................
Estimated no. of additional EIDL loans to newly-               0               1               0               1
 qualified small firms..........................
Estimated additional EIDL loan amount to newly-            $0.02           $0.02          -$0.01           $0.03
 qualified small firms ($ million)..............
% increase to EIDL loan amount relative to the              0.1%          100.0%          -0.12%            0.1%
 total amount of EIDL loans to small businesses.
----------------------------------------------------------------------------------------------------------------
\1\ 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.
\2\ Additional dollars are calculated multiplying average small business dollars obligated per DUNS times change
  in number of firms.

Alternative Option Two: To Retain All Current Size Standards
    Under this option, given the current COVID-19 pandemic, as 
discussed elsewhere, SBA considered retaining the current levels of all 
size standards even though the analytical results 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 increasing 46 size 
standards and retaining 48 with this alternative approach, the benefits 
for small businesses of adopting the proposal will not be attained, so 
SBA is not proposing the Alternative Option Two.

Executive Order 13771

    SBA has determined, subject to the approval of the Office of 
Information and Regulatory Affairs (OIRA) of the Office of Management 
and Budget (OMB), that this proposed rule is not subject to the 
requirements of E.O. 13771 because most of the proposed 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 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 proposed 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 is the need for and objective of the rule?; (2) 
What is SBA's description and estimate of the number of small 
businesses to which the rule will apply?; (3) What are the projected 
reporting, record keeping, and other compliance requirements of the 
rule?; (4) What are the relevant Federal rules that may duplicate, 
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.

[[Page 72605]]

2. What is 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 1.05 million 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 1,530 businesses will be defined as 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. Changes in small 
business size standards do not result in additional 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 that 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 46 size standards and maintain 48 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 46 industries for which the analytical results 
suggest raising size standards would be raised. However, the size 
standards of 42 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, particularly in sectors 54 and 56 (please see table 10). 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 46 size standards 
and decreasing 42. Retaining all size standards at their current levels 
would be more onerous for small businesses than the option of adopting 
46 increases and retaining the rest of the size standards.

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 5 years, thereafter. SBA had already 
launched a comprehensive review of size standards in 2007. In 
accordance with the Jobs 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 proposed rule

[[Page 72606]]

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 by:
0
a. Revising the heading to Sector 56.
0
b. Revising entries ``541110,'' ``541191,'' ``541199,'' ``541211,'' 
``541214,'' ``541310,'' ``541330,'' ``541350,'' ``541360,'' ``541420,'' 
``541490,'' ``541513,'' ``541611,'' ``541612,'' ``541614,'' ``541720,'' 
``541810,'' ``541830,'' ``541840,'' ``541850,'' ``541860,'' ``541870,'' 
``541910,'' ``541921,'' ``541930,'' ``541940,'' ``541990,'' ``551111,'' 
``551112,'' ``561110,'' ``561330,'' ``561422,'' ``561439,'' ``561440,'' 
``561450,'' ``561499,'' ``561599,'' ``561612,'' ``561613,'' ``561710,'' 
``561730,'' ``561740,'' ``561910,'' ``561920,'' ``561990,'' and 
``562998'' to 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    Size standards
                 NAICS codes                     NAICS U.S. industry title     in millions of     in number of
                                                                                   dollars          employees
----------------------------------------------------------------------------------------------------------------
 
                                                  * * * * * * *
----------------------------------------------------------------------------------------------------------------
                           Sector 54--Professional, Scientific and Technical Services
                         Subsector 541--Professional, Scientific and Technical Services
----------------------------------------------------------------------------------------------------------------
541110......................................  Offices of Lawyers............             $13.5  ................
541191......................................  Title Abstract and Settlement               17.0  ................
                                               Offices.
541199......................................  All Other Legal Services......              18.0  ................
541211......................................  Offices of Certified Public                 23.5  ................
                                               Accountants.
 
                                                  * * * * * * *
541214......................................  Payroll Services..............              34.5  ................
 
                                                  * * * * * * *
541310......................................  Architectural Services........              11.0  ................
 
                                                  * * * * * * *
541330......................................  Engineering Services..........              22.5  ................
 
                                                  * * * * * * *
541350......................................  Building Inspection Services..              10.0  ................
541360......................................  Geophysical Surveying and                   25.0  ................
                                               Mapping Services.
 
                                                  * * * * * * *
541420......................................  Industrial Design Services....              15.0  ................
 
                                                  * * * * * * *
541490......................................  Other Specialized Design                    12.0  ................
                                               Services.
 
                                                  * * * * * * *
541513......................................  Computer Facilities Management              32.5  ................
                                               Services.
 
                                                  * * * * * * *
541611......................................  Administrative Management and               21.5  ................
                                               General Management Consulting
                                               Services.
541612......................................  Human Resources Consulting                  25.5  ................
                                               Services.
 
                                                  * * * * * * *
541614......................................  Process, Physical                           17.5  ................
                                               Distribution, and Logistics
                                               Consulting Services.
 
                                                  * * * * * * *
541720......................................  Research and Development in                 24.5  ................
                                               the Social Sciences and
                                               Humanities.
541810......................................  Advertising Agencies \10\.....         \10\ 22.5  ................
 
                                                  * * * * * * *
541830......................................  Media Buying Agencies.........              28.5  ................
541840......................................  Media Representatives.........              18.5  ................
541850......................................  Outdoor Advertising...........              30.5  ................
541860......................................  Direct Mail Advertising.......              19.5  ................
541870......................................  Advertising Material                        25.0  ................
                                               Distribution Services.
 

[[Page 72607]]

 
                                                  * * * * * * *
541910......................................  Marketing Research and Public               20.0  ................
                                               Opinion Polling.
541921......................................  Photography Studios, Portrait.              14.0  ................
 
                                                  * * * * * * *
541930......................................  Translation and Interpretation              20.0  ................
                                               Services.
541940......................................  Veterinary Services...........               9.0  ................
541990......................................  All Other Professional,                     17.0  ................
                                               Scientific and Technical
                                               Services.
----------------------------------------------------------------------------------------------------------------
                               Sector 55--Management of Companies and Enterprises
                             Subsector 551--Management of Companies and Enterprises
----------------------------------------------------------------------------------------------------------------
551111......................................  Offices of Bank Holding                     34.0  ................
                                               Companies.
551112......................................  Offices of Other Holding                    40.0  ................
                                               Companies.
----------------------------------------------------------------------------------------------------------------
               Sector 56--Administrative and Support and Waste Management and Remediation Services
                               Subsector 561--Administrative and Support Services
----------------------------------------------------------------------------------------------------------------
561110......................................  Office Administrative Services              11.0  ................
 
                                                  * * * * * * *
561330......................................  Professional Employer                       36.5  ................
                                               Organizations.
 
                                                  * * * * * * *
561422......................................  Telemarketing Bureaus and                   22.5  ................
                                               Other Contact Centers.
 
                                                  * * * * * * *
561439......................................  Other Business Service Centers              23.5  ................
                                               (including Copy Shops).
561440......................................  Collection Agencies...........              17.0  ................
561450......................................  Credit Bureaus................              36.0  ................
 
                                                  * * * * * * *
561499......................................  All Other Business Support                  19.0  ................
                                               Services.
 
                                                  * * * * * * *
561599......................................  All Other Travel Arrangement                28.5  ................
                                               and Reservation Services.
 
                                                  * * * * * * *
561612......................................  Security Guards and Patrol                  25.5  ................
                                               Services.
561613......................................  Armored Car Services..........              38.0  ................
 
                                                  * * * * * * *
561710......................................  Exterminating and Pest Control              15.5  ................
                                               Services.
 
                                                  * * * * * * *
561730......................................  Landscaping Services..........               8.5  ................
561740......................................  Carpet and Upholstery Cleaning               7.5  ................
                                               Services.
 
                                                  * * * * * * *
561910......................................  Packaging and Labeling                      17.0  ................
                                               Services.
561920......................................  Convention and Trade Show              \10\ 17.5  ................
                                               Organizers \10\.
561990......................................  All Other Support Services....              14.5  ................
----------------------------------------------------------------------------------------------------------------
                            Subsector 562--Waste Management and Remediation Services
----------------------------------------------------------------------------------------------------------------
 
                                                  * * * * * * *
562998......................................  All Other Miscellaneous Waste               14.5  ................
                                               Management Services.
 
                                                  * * * * * * *
----------------------------------------------------------------------------------------------------------------
Footnotes
 * * * * * * *
\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 revenue.
 * * * * * * *



[[Page 72608]]

Jovita Carranza,
Administrator.
[FR Doc. 2020-24903 Filed 11-12-20; 8:45 am]
BILLING CODE 8026-03-P