The Energy Policy and Conservation Act, as amended (“EPCA”), 1 authorizes DOE to regulate the energy efficiency of a number of consumer products and certain industrial equipment. (42 U.S.C. 6291-6317) Title III, Part B  2 of the EPCA, established the Energy Conservation Program for Consumer Products Other Than Automobiles. (42 U.S.C. 6291-6309) These products include GSLs.

EPCA directs DOE to conduct two rulemaking cycles to evaluate energy conservation standards for GSLs. (42 U.S.C. 6295(i)(6)(A)-(B)) GSLs are defined in EPCA to include general service incandescent lamps (“GSILs”), compact fluorescent lamps (“CFLs”), general service light-emitting diode (“LED”) lamps and organic light emitting diode (“OLED”) lamps, and any other lamps that the Secretary of Energy (Secretary) determines are used to satisfy lighting applications traditionally served by general service incandescent lamps. (42 U.S.C. 6291(30)(BB)(i)) The term “general service lamp” does not include any of the 22 lighting applications or bulb shapes explicitly not included in the definition of “general service incandescent lamp,”  3 or any general service fluorescent lamp or incandescent reflector lamp. (42 U.S.C. 6291(30)(BB)(ii))

For the first rulemaking cycle, EPCA directs DOE to initiate a rulemaking process prior to January 1, 2014, to consider two questions: (1) Whether to amend energy conservation standards for general service lamps and (2) whether “the exemptions for certain incandescent lamps should be maintained or discontinued.” (42 U.S.C. 6295(i)(6)(A)(i)) Further, if the Secretary determines that the standards in effect for GSILs should be amended, EPCA provides that a final rule must be published by January 1, 2017, with a compliance date at least 3 years after the date on which the final rule is published. (42 U.S.C. 6295(i)(6)(A)(iii)) In developing such a rule, DOE must consider a minimum efficacy standard of 45 lm/W. (42 U.S.C. 6295(i)(6)(A)(ii)) If DOE fails to complete a rulemaking in accordance with 42 U.S.C. 6295(i)(6)(A)(i)-(iv) or a final rule from the first rulemaking cycle does not produce savings greater than or equal to the savings from a minimum efficacy standard of 45 lm/W, the statute provides a “backstop” under which DOE must prohibit sales of GSLs that do not meet a minimum 45 lm/W standard. (42 U.S.C. 6295(i)(6)(A)(v))

EPCA further directed DOE to initiate a second rulemaking cycle by January 1, 2020, to determine whether standards in effect for GSILs, a subset of GSLs, should be amended with more stringent requirements and whether the exemptions for certain incandescent lamps should be maintained or discontinued. (42 U.S.C. 6295(i)(6)(B)(i)) The scope of this rulemaking is also not limited to incandescent lamp technologies. (42 U.S.C. 6295(i)(6)(B)(ii))

DOE initiated the first GSL standards rulemaking process by publishing in the Federal Register a notice of public meeting and availability of the framework document. 78 FR 73737 (Dec. 9, 2013); see also 79 FR 73503 (Dec. 11, 2014) (notice of public meeting and availability of preliminary technical support document) (“December 2014 Preliminary Analysis”). DOE later issued a notice of proposed rulemaking (“NOPR”) to propose amended energy conservation standards for GSLs (“March 2016 NOPR”). 81 FR 14528, 14629-14630 (Mar. 17, 2016). The March 2016 NOPR focused on the first question that Congress directed DOE to consider—whether to amend energy conservation standards for GSLs. (42 U.S.C. 6295(i)(6)(A)(i)(I)) In the March 2016 NOPR proposing energy conservation standards for GSLs, DOE stated that it would be unable to undertake any analysis regarding GSILs and other incandescent lamps because of a then-applicable congressional restriction (“the Appropriations Rider”)  4 on the use of appropriated funds to implement or enforce 10 CFR 430.32(x). 81 FR 14528, 14540-14541 (Mar. 17, 2016). Notably, the Appropriations Rider originally was adopted in 2011 and was readopted and extended continuously in multiple subsequent legislative actions, and expired on May 5, 2017, when the Consolidated Appropriations Act of 2017 was enacted. 5

In response to comments on the March 2016 NOPR, DOE conducted additional research and published a notice of proposed definition and data availability (“NOPDDA”), which proposed to amend the definitions of GSIL, GSL, and related terms (“October 2016 NOPDDA”). 81 FR 71794, 71815 (Oct. 18, 2016). DOE explained that the October 2016 NOPDDA related to the second question that Congress directed DOE to consider—whether “the exemptions for certain incandescent lamps should be maintained or discontinued”—and stated explicitly that the NOPDDA was not a rulemaking to establish an energy conservation standard for GSLs. (42 U.S.C. 6295(i)(6)(A)(i)(II)); see also 81 FR 71798. The relevant “exemptions,” DOE explained, referred to the 22 categories of incandescent lamps that are statutorily excluded from the definitions of GSIL and GSL. 81 FR 71798. In the October 2016 NOPDDA, DOE clarified that it was defining what lamps constitute GSLs so that manufacturers could understand how any potential energy conservation standards might apply to the market. Id.

On January 19, 2017, DOE published two final rules concerning the definitions of GSL, GSIL, and related terms (“January 2017 Definition Final Rules”). 82 FR 7276; 82 FR 7322. The January 2017 Definition Final Rules amended the definitions of GSIL and GSL by bringing certain categories of lamps that had been excluded by statute from the definition of GSIL within the definitions of GSIL and GSL. These two rules were issued simultaneously, with the first rule maintaining the existing exemption for incandescent reflector lamps (“IRLs”) in the definition of GSL and the second rulemaking determining to discontinue the exemption from the GSL definition for IRLs. Like the October 2016 NOPDDA, DOE stated that the January 2017 Definition Final Rules related only to the second question that Congress directed DOE to consider, regarding whether to maintain or discontinue certain “exemptions.” (42 U.S.C. 6295(i)(6)(A)(i)(II)). That is, neither of the two final rules issued on January 19, 2017, established energy conservation standards applicable to GSLs. DOE explained that the Appropriations Rider prevented it from establishing, or even analyzing, standards for GSILs. 82 FR 7276, 7278. Instead, DOE explained that it may impose standards for GSLs in the future, and if it does not, then GSLs would be subject to the statutory backstop of 45 lm/W. 82 FR 7276, 7277-7278. The two final rules were to become effective as of January 1, 2020.

With the removal of the Appropriations Rider in the Consolidated Appropriations Act, 2017, DOE was no longer restricted from undertaking the analysis and decision-making required to address the first question presented by Congress, i.e., whether to amend energy conservation standards for general service lamps, including GSILs. Thus, on August 15, 2017, DOE published a notice of data availability and request for information (“NODA”) seeking data for GSILs and other incandescent lamps (“August 2017 NODA”). 82 FR 38613.

The purpose of the August 2017 NODA was to assist DOE in making a decision on the first question posed to DOE by Congress; i.e., a determination regarding whether standards for GSILs should be amended. Comments submitted in response to the August 2017 NODA also led DOE to re-consider the decisions it had already made with respect to the second question presented to DOE— i.e., whether the exemptions for certain incandescent lamps should be maintained or discontinued. As a result of the comments received in response to the August 2017 NODA, DOE also re-assessed the legal interpretations underlying certain decisions made in the January 2017 Definition Final Rules.

On February 11, 2019, DOE published a NOPR proposing to withdraw the revised definitions of GSL, GSIL and other related terms that were to go into effect on January 1, 2020 (“February 2019 Definition NOPR”). 84 FR 3120. In a final rule published September 5, 2019, DOE finalized the withdrawal of the definitions in the January 2017 Definition Final Rules and instead maintained the existing regulatory definitions of GSL and GSIL, which are the same as the statutory definitions of those terms (“September 2019 Definition Final Rule”). 84 FR 46661. In the September 2019 Definition Final Rule, DOE stated that the obligation to issue a final rule prescribing standards by a date certain applies if, and only if, the Secretary makes a determination that standards in effect for GSILs need to be amended. 84 FR 46661, 46663. DOE further stated that, since it had not yet made the predicate determination on whether to amend standards for GSILs, the obligation to issue a final rule by a date certain did not yet exist and, as a result, the condition precedent to the potential imposition of the backstop requirement did not yet exist and no backstop requirement has yet been imposed. 84 FR 46661, 46664.

DOE initiated a rulemaking to determine whether standards for GSILs should be amended by publishing a notice of proposed determination (“NOPD”) on September 5, 2019 (“September 2019 NOPD”). 84 FR 46830. In a final determination published on December 27, 2019, DOE determined that amending energy conservation standards for GSILs was not economically justified (“December 2019 Final Determination”). 84 FR 71626. DOE also concluded in the December 2019 Final Determination that, because it had made the predicate determination not to amend standards for GSILs, there was no obligation to issue a final rule by January 1, 2017, and thus the backstop sales prohibition had not been triggered and was not in effect. 84 FR 71626, 71636.

On January 20, 2021, President Biden issued Executive Order (“E.O.”) 13990, “Protecting Public Health and the Environment and Restoring Science to Tackle the Climate Crisis.” 86 FR 7037 (Jan. 25, 2021). Section 1 of that Order lists a number of policies related to the protection of public health and the environment, including reducing greenhouse gas emissions and bolstering the Nation's resilience to climate change. Id. at 86 FR 7037, 7041. Section 2 of the Order instructs all agencies to review “existing regulations, orders, guidance documents, policies, and any other similar agency actions promulgated, issued, or adopted between January 20, 2017, and January 20, 2021, that are or may be inconsistent with, or present obstacles to, [these policies].” Id. Agencies are then directed, as appropriate and consistent with applicable law, to consider suspending, revising, or rescinding these agency actions and to immediately commence work to confront the climate crisis. Id.

In accordance with E.O. 13990, DOE is re-evaluating its understanding of the backstop requirement

As described in section I.A of this document, EPCA specifies several criteria that DOE must adhere to in its first rulemaking cycle for GSLs. ( See 42 U.S.C. 6295(i)(6)(A)(i)-(iv)) Under the backstop requirement, if DOE fails to complete a rulemaking in accordance with the statutory criteria, or if the final rule does not produce a certain amount of energy savings, the Secretary must prohibit the sale of GSLs that do not meet a minimum efficacy standard. (42 U.S.C. 6295(i)(6)(A)(v)) Were DOE to determine that DOE did not fulfill the criteria in paragraphs (i)-(iv) of section 6295, the sales prohibition under the backstop requirement would affect any lamp type that is defined as a GSL. As such, DOE requests certain information about the lamp types discussed in the following sections, including whether a phased implementation would be appropriate for certain lamp types.

DOE's regulatory definition for GSL is consistent with the statutory definition for GSL. GSL is defined in EPCA to include GSILs, CFLs, general service LED lamps and OLED lamps, and any other lamps that the Secretary determines are used to satisfy lighting applications traditionally served by GSILs. 10 CFR 430.2. ( See also, 42 U.S.C. 6291(30)(BB)(i)) DOE's regulatory definition of “general service lamp” does not include any of the 22 lighting applications or bulb shapes explicitly not included in the definition of “general service incandescent lamp,” or any general service fluorescent lamp or incandescent reflector lamp. 10 CFR 430.2. ( See also, 42 U.S.C. 6291(30)(BB)(ii))

By comparison, the definition of GSL as amended by the January 2017 Definition Final Rules was broader than the statutory definition. The January 2017 Definition Final Rules defined a GSL as a lamp that had an ANSI base; was able to operate at a voltage of 12 volts or 24 volts, at or between 100 to 130 volts, at or between 220 to 240 volts, or of 277 volts for integrated lamps, or was able to operate at any voltage for non-integrated lamps; had an initial lumen output of greater than or equal to 310 lumens (or 232 lumens for modified spectrum general service incandescent lamps) and less than or equal to 3,300 lumens; was not a light fixture; was not an LED downlight retrofit kit; and was used in general lighting applications. General service lamps included, but were not limited to, general service incandescent lamps, compact fluorescent lamps, general service light-emitting diode lamps, and general service organic light-emitting diode lamps. General service lamps did not include:

See 82 FR 7276, 7321 and 82 FR 7322, 7333.

Similarly, the definition of GSIL as amended by the January 2017 Definition Final Rules was also broader than the statutory definition. The January 2017 Definition Final Rules defined a GSIL as a standard incandescent or halogen type lamp that was intended for general service applications; had a medium screw base; had a lumen range of not less than 310 lumens and not more than 2,600 lumens or, in the case of a modified spectrum lamp, not less than 232 lumens and not more than 1,950 lumens; and was capable of being operated at a voltage range at least partially within 110 and 130 volts; however this definition did not apply to the following incandescent lamps—

See 82 FR 7276, 7321.

EPCA provides that, if DOE does not complete a rulemaking that meets certain criteria, DOE is required to prohibit the sale of any GSL that does not meet a minimum efficacy standard of 45 lm/W. DOE recognizes that this prohibition would present different implementation challenges than most DOE standards, which are based on the date of manufacturing. Notably, specifying a date beyond which certain GSLs can no longer be sold could possibly lead to stranded inventory. DOE recognizes that manufacturers, distributors, and retailers would need to take steps to account for the supply chain to avoid inventory that could not be sold legally.

For these reasons, DOE is publishing an RFI seeking comment and information on the availability of GSLs that have an efficacy of at least 45 lm/W. DOE is also requesting comment and information on the availability of lamp types excluded from the definition of GSL that have an efficacy of at least 45 lm/W. To the extent that such lamps are not currently available, DOE is seeking information on the expected availability of such lamps and the expected timetable to bring such lamps to the market.

Issue 1: DOE requests information on the availability of lamps defined as GSLs that have a minimum efficacy of 45 lm/W. To the extent available, DOE requests information for all lumen outputs, voltages, and base types included in the GSL definition.

Issue 2: DOE requests information of the availability of lamps excluded from the definition of GSL that have a minimum efficacy of 45 lm/W. To the extent available, DOE requests information for all lumen outputs, voltages, and base types of such lamps.

Issue 3: To the extent that any lamp type within the definition of GSL or any lamp type excluded from the definition of GSL already performs at a minimum efficacy of 45 lm/W, DOE requests information on the percent of the market of that lamp type represented by the 45 lm/W lamps.

Issue 4: If a lamp type within the definition of GSL or a lamp type excluded from the definition of GSL does not currently have units with an efficacy of at least 45 lm/W, DOE requests information on whether it is possible to create lamps in that category that perform at such a level and how long it would take for those products to be sold at retail locations.

Issue 5: Given normal stock levels, how long does it take for a store to sell through its inventory of lamps ( i.e. from when the lamp arrives at the store to when the store sells it to a customer)?

Issue 6: What steps would manufacturers/retailers need to take to avoid stranded inventory for lamps that do not have an efficacy of at least 45 lm/W? How long would each step take ( i.e., how early must a manufacturer/retailer know that a lamp cannot be sold to avoid stranded inventory)?

Issue 7: If manufacturers/retailers end up with stranded inventory, what will they do with it ( e.g., will it be destroyed or exported)? What are the costs associated with handling the stranded inventory?

DOE invites all interested parties to submit in writing by the date specified in the DATES section of this document, comments and information on matters addressed in this document and on other matters relevant to DOE's consideration of how, if triggered, the backstop requirement for GSLs could be implemented.

Submitting comments via https://www.regulations.gov. The https://www.regulations.gov web page requires you to provide your name and contact information. Your contact information will be viewable to DOE Building Technologies Office staff only. Your contact information will not be publicly viewable except for your first and last names, organization name (if any), and submitter representative name (if any). If your comment is not processed properly because of technical difficulties, DOE will use this information to contact you. If DOE cannot read your comment due to technical difficulties and cannot contact you for clarification, DOE may not be able to consider your comment.

However, your contact information will be publicly viewable if you include it in the comment or in any documents attached to your comment. Any information that you do not want to be publicly viewable should not be included in your comment, nor in any document attached to your comment. If this instruction is followed, persons viewing comments will see only first and last names, organization names, correspondence containing comments, and any documents submitted with the comments.

Do not submit to https://www.regulations.gov information for which disclosure is restricted by statute, such as trade secrets and commercial or financial information (hereinafter referred to as Confidential Business Information (“CBI”)). Comments submitted through https://www.regulations.gov cannot be claimed as CBI. Comments received through the website will waive any CBI claims for the information submitted. For information on submitting CBI, see the Confidential Business Information section.

DOE processes submissions made through https://www.regulations.gov before posting. Normally, comments will be posted within a few days of being submitted. However, if large volumes of comments are being processed simultaneously, your comment may not be viewable for up to several weeks. Please keep the comment tracking number that https:// www.regulations.gov provides after you have successfully uploaded your comment.

Submitting comments via email. Comments and documents submitted via email also will be posted to https://www.regulations.gov. If you do not want your personal contact information to be publicly viewable, do not include it in your comment or any accompanying documents. Instead, provide your contact information on a cover letter. Include your first and last names, email address, telephone number, and optional mailing address. The cover letter will not be publicly viewable as long as it does not include any comments.

Include contact information each time you submit comments, data, documents, and other information to DOE. No faxes will be accepted.

Comments, data, and other information submitted to DOE electronically should be provided in PDF (preferred), Microsoft Word or Excel, WordPerfect, or text (ASCII) file format. Provide documents that are not secured, written in English and free of any defects or viruses. Documents should not contain special characters or any form of encryption and, if possible, they should carry the electronic signature of the author.

Campaign form letters. Please submit campaign form letters by the originating organization in batches of between 50 to 500 form letters per PDF or as one form letter with a list of supporters' names compiled into one or more PDFs. This reduces comment processing and posting time.

Confidential Business Information. Pursuant to 10 CFR 1004.11, any person submitting information that he or she believes to be confidential and exempt by law from public disclosure should submit via email two well-marked copies: One copy of the document marked confidential including all the information believed to be confidential, and one copy of the document marked “non-confidential” with the information believed to be confidential deleted. DOE will make its own determination about the confidential status of the information and treat it according to its determination.

It is DOE's policy that all comments may be included in the public docket, without change and as received, including any personal information provided in the comments (except information deemed to be exempt from public disclosure).

DOE considers public participation to be a very important part of the process for developing energy conservation standards. DOE actively encourages the participation and interaction of the public during the comment period in this process. Interactions with and between members of the public provide a balanced discussion of the issues and assist DOE. Anyone who wishes to be added to the DOE mailing list to receive future notices and information about this process or would like to request a public meeting should contact Appliance and Equipment Standards Program staff at (202) 287-1445 or via email at ApplianceStandardsQuestions@ee.doe.gov.

This document of the Department of Energy was signed on May 20, 2021, by Kelly Speakes-Backman, Principal Deputy Assistant Secretary and Acting Assistant Secretary for Energy Efficiency and Renewable Energy, pursuant to delegated authority from the Secretary of Energy. That document with the original signature and date is maintained by DOE. For administrative purposes only, and in compliance with requirements of the Office of the Federal Register, the undersigned DOE Federal Register Liaison Officer has been authorized to sign and submit the document in electronic format for publication, as an official document of the Department of Energy. This administrative process in no way alters the legal effect of this document upon publication in the Federal Register .

PTACs and PTHPs are included in the list of “covered equipment” for which DOE is authorized to establish and amend energy conservation standards and test procedures. (42 U.S.C. 6311(1)(I)) DOE's test procedures for PTACs and PTHPs are prescribed at title 10 of the Code of Federal Regulations (“CFR”), subpart F of part 431. See 10 CFR 431.96. The following sections discuss DOE's authority to establish and amend test procedures for PTACs and PTHPs, as well as relevant background information regarding DOE's consideration of test procedures for this equipment.

The Energy Policy and Conservation Act, as amended (“EPCA”), 1 authorizes DOE to regulate the energy efficiency of a number of consumer products and certain industrial equipment. (42 U.S.C. 6291-6317) Title III, Part C of EPCA, 2 added by the National Energy Conservation Policy Act, Public Law 95-619 (Nov. 9, 1978), Title IV, section 441(a) (42 U.S.C. 6311-6317 as codified), established the Energy Conservation Program for Certain Industrial Equipment, which sets forth a variety of provisions designed to improve industrial equipment energy efficiency. The equipment addressed under these provisions includes PTACs and PTHPs, the subjects of this RFI. (42 U.S.C. 6311(1)(I))

The energy conservation program under EPCA consists essentially of four parts: (1) Testing, (2) labeling, (3) Federal energy conservation standards, and (4) certification and enforcement procedures. Relevant provisions of EPCA include definitions (42 U.S.C. 6311), test procedures (42 U.S.C. 6314), labeling provisions (42 U.S.C. 6315), energy conservation standards (42 U.S.C. 6313), and the authority to require information and reports from manufacturers (42 U.S.C. 6316).

Federal energy efficiency requirements for covered equipment established under EPCA generally supersede State laws and regulations concerning energy conservation testing, labeling, and standards. (42 U.S.C. 6316(a) and 42 U.S.C. 6316(b); 42 U.S.C. 6297). DOE may, however, grant waivers of Federal preemption for particular State laws or regulations, in accordance with the procedures and other provisions of EPCA. (42 U.S.C. 6316(b)(2)(D)).

The Federal testing requirements consist of test procedures that manufacturers of covered equipment must use as the basis for: (1) Certifying to DOE that their equipment complies with the applicable energy conservation standards adopted pursuant to EPCA (42 U.S.C. 6316(b); 42 U.S.C. 6296), and (2) making representations about the efficiency of that equipment (42 U.S.C. 6314(d)). Similarly, DOE uses these test procedures to determine whether the equipment complies with relevant standards promulgated under EPCA.

Under 42 U.S.C. 6314, EPCA sets forth the criteria and procedures DOE must follow when prescribing or amending test procedures for covered equipment. EPCA requires that any test procedures prescribed or amended under this section must be reasonably designed to produce test results that reflect the energy efficiency, energy use or estimated annual operating cost of a given type of covered equipment during a representative average use cycle and requires that test procedures not be unduly burdensome to conduct. (42 U.S.C. 6314(a)(2))

EPCA requires that the test procedures for PTACs and PTHPs be those generally accepted industry testing procedures or rating procedures developed or recognized by the Air-Conditioning, Heating, and Refrigeration Institute (“AHRI”) or by the American Society of Heating, Refrigerating and Air-Conditioning Engineers (“ASHRAE”), as referenced in ASHRAE Standard 90.1, “Energy Standard for Buildings Except Low-Rise Residential Buildings” (“ASHRAE Standard 90.1”). (42 U.S.C. 6314(a)(4)(A)) If such an industry test procedure is amended, DOE must update its test procedure to be consistent with the amended industry test procedure, unless DOE determines, by rule published in the Federal Register and supported by clear and convincing evidence, that the amended test procedure would not meet the requirements in 42 U.S.C. 6314(a)(2) and (3) related to representative use and test burden. (42 U.S.C. 6314(a)(4)(B) and 42 U.S.C. 6314(a)(4)(C))

EPCA also requires that, at least once every 7 years, DOE review test procedures for all types of covered equipment, including PTACs and PTHPs, to determine whether amended test procedures would more accurately or fully comply with the requirements for the test procedures be reasonably designed to produce test results that reflect energy efficiency, energy use, and estimated operating costs during a representative average use cycle and to not be unduly burdensome to conduct. (42 U.S.C. 6314(a)(1)) In addition, if the Secretary determines that a test procedure amendment is warranted, the Secretary must publish proposed test procedures in the Federal Register , and afford interested persons an opportunity (of not less than 45 days' duration) to present oral and written data, views, and arguments on the proposed test procedures. (42 U.S.C. 6314(b)). If DOE determines that test procedure revisions are not appropriate, DOE must publish its determination not to amend the test procedures. DOE is publishing this RFI to collect data and information to inform its decision in satisfaction of the 7-year review requirement specified in EPCA. (42 U.S.C. 6314(a)(1))

On December 8, 2020, DOE published an early assessment review RFI in which it sought data and information pertinent to whether amended test procedures would (1) more accurately or fully comply with the requirement that the test procedure produces results that measure energy use during a representative average use cycle for the equipment without being unduly burdensome to conduct, or (2) reduce testing burden. See 85 FR 78967 (“December 2020 Early Assessment RFI”). DOE received comments in response to the December 2020 Early Assessment RFI from the interested parties listed in Table I.1. A parenthetical reference at the end of a comment quotation or paraphrase provides the location of the item in the public record. 3

Based on DOE's review of the test procedures for PTACs and PTHPs and the comments received, as discussed in the following sections, DOE has determined it is appropriate to continue the test procedure rulemaking after the early assessment process. Specific comments are discussed in the sections that follow.

In the following sections, DOE has identified a variety of issues on which it seeks input to determine whether, and if so how, an amended test procedure for PTACs and PTHPs would (1) more accurately or fully comply with the requirements in EPCA that test procedures be reasonably designed to produce test results which reflect energy use during a representative average use cycle, without being unduly burdensome to conduct, or (2) reduce testing burden. (42 U.S.C. 6314(a)(2))

Additionally, DOE welcomes comments on any aspect of the existing test procedures for PTACs and PTHPs that may not specifically be identified in this document.

This RFI covers PTACs and PTHPs. “Packaged terminal air conditioner” is defined at 10 CFR 431.92 as a wall sleeve and a separate un-encased combination of heating and cooling assemblies specified by the builder and intended for mounting through the wall, and that is industrial equipment. It includes a prime source of refrigeration, separable outdoor louvers, forced ventilation, and heating availability by builder's choice of hot water, steam, or electricity. “Packaged terminal heat pump” is defined at 10 CFR 431.92 as a packaged terminal air conditioner that utilizes reverse cycle refrigeration as its prime heat source, that has a supplementary heat source available, with the choice of hot water, steam, or electric resistant heat, and that is industrial equipment. Further, relevant to PTACs and PTHPs, DOE defines “standard size” to mean a packaged terminal air conditioner or packaged terminal heat pump with wall sleeve dimensions having an external wall opening of greater than or equal to 16 inches high or greater than or equal to 42 inches wide, and a cross-sectional area greater than or equal to 670 square inches. 10 CFR 431.92. “Non-standard size” means a packaged terminal air conditioner or packaged terminal heat pump with existing wall sleeve dimensions having an external wall opening of less than 16 inches high or less than 42 inches wide, and a cross-sectional area less than 670 square inches. Id.

DOE notes that the current Federal test procedure and energy conservation standards at 10 CFR 431.96 and 431.97 apply to both standard size and non-standard size PTACs and PTHPs with cooling capacities less than 760,000 British thermal unit (“Btu”)/hour. 10 CFR 431.96(b).

Issue 1: DOE requests comment on the definitions of PTACs and PTHPs and whether any of the terms should be amended, and if so, how the terms should be amended. In particular, DOE requests comment on whether the terms are sufficient to identify which equipment is subject to the test procedure and whether any test procedure amendments are required to ensure that all such equipment can be appropriately tested in accordance with the test procedure.

In a final rule published on July 21, 2015, DOE amended the energy conservation standards for PTACs and PTHPs. 80 FR 43161 (“July 2015 Final Rule”). Comments offered during the public meeting conducted for development of the July 2015 Final Rule indicate that the majority of PTAC and PTHP units are installed in hotel applications. 4 In hotel installations, the PTAC or PTHP unit provides cooling and heating to individual rooms or suites within the hotel; hotel hallways and common areas are usually serviced by a separate air conditioning system. In older building designs, fresh air ventilation is supplied to hotel rooms via the corridors to which the rooms are connected. In these designs, air is exhausted from each hotel room by a bathroom exhaust fan and is replaced by “make-up” air supplied via the corridor and conditioned by the heating, ventilation, and air conditioning (“HVAC”) system that serves the corridor. Make-up air from the corridor enters the hotel rooms by passing through an undercut or grill in the hotel room door.

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/CDC), 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 this comprehensive review of size standards, SBA is reviewing industry size standards by groups of NAICS sectors. During the previous 5-year comprehensive review, SBA generally reviewed NAICS sectors independently and by their employee- based or receipt-based size standard. Thus, during the previous comprehensive review, the review of size standards for the industries covered by this proposed rule was conducted under two separate rulemakings: One for receipts-based size standards in Sector 44-45 (75 FR 61597, October 6, 2010) and one for employee-based size standards in Sector 42 and two employee-based industries in Sector 44-45 (81 FR 3941, January 25, 1016). Under these rulemakings, SBA reviewed the size standards for 71 industries within NAICS Sector 42 (Wholesale Trade) and 74 industries within NAICS Sector 44-45 (Retail Trade). These reviews of size standards occurred during October 2009 to January 2016. SBA's analyses of the relevant industry data available at that time supported increasing employee-based size standards for 46 industries and maintaining current size standards for 25 industries in Sectors 42 and 44-45 (81 FR 3941) and increasing receipts-based size standards for 46 industries, maintaining current size standards for 27 industries and replacing the type of size standard from receipts-based to employee-based size standards for 1 industry in Sector 44-45 (75 FR 61597). Table 1, Size Standards Revisions During the First 5-Year Review, provides a summary of these revisions by NAICS sector.

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). Of these size levels, 16 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 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 comment 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 employee-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 $20.0 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.

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 of this proposed rule. 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 NAICS codes in the Wholesale Trade and Retail Trade sectors cannot be used to classify Government acquisitions for supplies, and only the applicable manufacturing code can be applied (13 CFR 121.402(b)(2)), the Federal contracting factor is not considered in evaluating industry based size standards for these sectors. SBA's Methodology is available on its website at www.sba.gov/size.

Congress granted SBA's Administrator discretion to establish detailed small business size standards (15 U.S.C. 632(a)(2)). Specifically, section 3(a)(3) of the Small Business Act (15 U.S.C. 632(a)(3)) requires that “. . . the [SBA] Administrator shall ensure that the size standard varies from industry to industry to the extent necessary to reflect the differing characteristics of the various industries and consider other factors deemed to be relevant by the Administrator.” Accordingly, the economic structure of an industry is the basis for 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, including the Retail Trade industries, 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.

For Wholesale Trade and Retail Trade industries using the employee-based size standards, SBA used a different approach. The anchor approach was difficult to implement in reviewing the size standards of industries in Wholesale Trade because all the industries in the sector were sharing the same 100-employee size standard. SBA used a quintile approach in which industries were ranked and compared using each industry factor based on where the factor of that industry falls within the five ranked quintiles. The five implied size standard levels were 50 employees, 100 employees, 150 employees, 200 employees, and 250 employees. If the value of an industry factor fell in the first quintile ( i.e., less than the 20th percentile), that factor would support a size standard of 50 employees. If the value fell in the second quintile ( i.e., the 20th to less than the 40th percentile), it would support 100 employees. Similarly, if the value falls in the fifth quintile ( i.e., the 80th or higher percentile), the factor would support 250 employees. 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.

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.

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 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.

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 those for most other industries.

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 attributed to a single firm, the Gini coefficient will equal one.

SBA compares the degree of inequality of distribution for an industry under review with other industries with the same type of size standards. If an industry shows a higher degree of inequality of distribution (hence, a higher Gini coefficient value) compared to most other industries in the group, this would, all else being equal, warrant a size standard that is higher than the size standards assigned to most other industries. Conversely, an industry with lower degree of inequality ( i.e., a lower Gini coefficient value) than most others will be assigned a lower size standard relative to others.

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 the industry's total receipts. In general, if the share of Federal contract dollars awarded to small businesses in an industry is significantly smaller than the small business share of total industry 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. In addition to the impact on Federal contracting, SBA also examines impacts on SBA's loan programs both under the current and revised size standards.

As explained above, the Federal contracting factor is not evaluated for Sectors 42 and 44-45, because the NAICS codes in these sectors cannot be used to classify Government acquisitions for supplies, and only the applicable manufacturing NAICS codes can be applied (13 CFR 121.402(b)(2)).

SBA used a tabulation of the Economic Census from the U.S. Census Bureau as its primary source of industry data to evaluate industry characteristics and develop size standards for this proposed rule ( www.census.gov/programs-surveys/economic-census.html ). The tabulation based on the 2012 Economic Census was the latest available at the time this proposed rule was developed. 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 (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 ( https://rmau.org ). To evaluate Federal contracting trends and evaluate exceptions or sub-industries under different 6-digit NAICS industries, SBA examined the data on Federal prime contract awards from the Federal Procurement Data System—Next Generation (FPDS-NG) ( www.fpds.gov ). To assess the impact on financial assistance to small businesses, SBA examined its internal data on 7(a) and 504 loan programs. 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.

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.

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 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. Similarly, the calculated value for an employee-based size standard is rounded to the nearest 50 employees for industries in manufacturing and other sectors (except Wholesale Trade and Retail Trade) and to the nearest 25 employees for industries in Wholesale Trade and Retail Trade. 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 employee-based size standards, SBA has established 250 employees and 1,500 employees, respectively, as the minimum and maximum size standard levels for Manufacturing and other industries (excluding Wholesale and Retail Trade).

The industry data suggests that a 250 employee minimum and 1,500 employee maximum size standards would be too high for Wholesale and Retail Trade industries. Accordingly, SBA has established 50 employees as the minimum size standard and 250 employees as the maximum size standard for Wholesale and Retail Trade industries.

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 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 an employee-based size standard is rounded to the nearest 50 employees for industries in manufacturing and other sectors (except Wholesale Trade and Retail Trade) and to the nearest 25 employees for industries in Wholesale Trade and Retail Trade. 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.

Table 2, 20th and 80th Percentiles of Industry Factors for Receipts-Based Size Standards, and Table 3, 20th and 80th Percentiles of Industry Factors for Employee-Based Size Standards, show 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 receipt-based and employee-based size standards, respectively.

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} * 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.

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 50 employees for Sector 42, Wholesale Trade and 2 industries from sector 44-45, Retail Trade that have employee-based size standards. 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 250 employees. 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 firm size in number of employees is 19 employees, that would support a size standard of 125 employees. According to Table 3, the 20th percentile and 80th percentile values of average number of employees are 12.6 and 27.9 employees, respectively. The 19 employee average firm size is 41.8% between the 20th percentile value (12.6 employees) and the 80th percentile value (27.9 employees) of simple average firm size in number of employees ((19 employees − 12.6 employees) ÷ (250 employees − 50 employees) = 0.4183 or 41.8%). Applying this percentage to the difference between the 20th percentile value (50 employees) and 80th percentile (250 employees) value of size standards and then adding the result to the 20th percentile size standard value (50 employees) yields a calculated size standard value of 125 employees ([{250 employees − 50 employees} * 0.4183] + 50 employees = 134 employees). The final step is to round the calculated 134 employee size standard to the nearest 25 employees, which in this example yields 125 employees. 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.

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 $20.0 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. However, since NAICS codes in the Wholesale Trade and Retail Trade sectors cannot be used to classify Government acquisitions for supplies, and only the applicable manufacturing code can be applied, the Federal contracting factor is not considered in evaluating industry-based size standards for these sectors (13 CFR 121.402(b)). For a detail explanation of the evaluation of the Federal Contracting Factor, see the SBA Methodology at www.sba.gov/size.

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). As discussed in more detail above, the Federal contracting factor is not considered in evaluating the Wholesale Trade and Retail Trade sectors. 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.

Table 5 and Table 6 below, Size Standards Supported by Each Factor for Each Industry (Employees) and Size Standards Supported by Each Factor for Each Industry (Receipts), show the results of analyses of industry by measure of size for each industry covered by this proposed rule. NAICS industries in columns 3, 4, 5, 6 and 7 show two numbers. The upper number is the value for the industry factor on the top of the column and the lower number is the size standard supported by that factor (number of employees in Table 5 and receipts in Table 6). Column 8 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 25 employees for industries using employee-based size standards in Wholesale Trade and Retail Trade, and to the nearest $500,000 for industries in retail trade using receipts-based size standards. 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 9 of Table 5 and Table 6.

Of the 137 industries reviewed in this proposed rule, the results from analyses of the latest available data on the four primary industry factors ( i.e., average firm size, average assets size, four-firm ratio, and Gini coefficient) from Table 5 and Table 6 above support increasing size standards for 49 industries, decreasing size standards for 66 industries, and maintaining size standards for 22 industries. Table 7, Summary of Calculated Size Standards, summarizes these results by NAICS sector.

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 5 and Table 6 need further adjustments to ensure credit opportunities for small businesses through those programs. For the industries reviewed in this rule, the data shows that it is mostly businesses much smaller than the current or proposed size standards that receive SBA's 7(a) and 504 loans. For example, for industries covered by this rule, more than 96.9% of 7(a) and 504 loans in fiscal years 2016-2018 went to businesses below the current or proposed size standards.

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. 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 (see The Paycheck Protection Program and Health Care Enhancement Act, Pub. L. 116-139). On December 27, 2020, Congress passed the Economic Aid to Hard-Hit Small Businesses, Nonprofits, and Venues Act as part of the Consolidation Appropriations Act, approving additional funding for the PPP loans program and allowing the hardest-hit small businesses to receive a second draw PPP loan (Pub. L. 116-260). Additionally, the law approved grants for shuttered-venue operators. On March 11, 2021, the American Rescue Plan Act of 2021 (Pub. L. 117-2) was signed into law. This act provides additional relief for the nation's small businesses and hard-hit industries by adding new support to the recovery effort, including additional funding for the Paycheck Protection Program and the Shuttered Venue Operators Grant program. The act also adds additional funding for targeted Economic Injury Disaster Loan (EIDL) Advance payments.

The Agency is following closely the development of the pandemic and the economic situation. A variety of economic indicators such as the Gross Domestic Product (GDP) and the unemployment rate show that this recession is significantly worse than any other recession since World War II. According to the Bureau of Economic Analysis (BEA), real GDP decreased 5% and real personal consumption in goods and services decreased 6.9% in the first quarter of 2020. In the second quarter, real GDP decreased 31.4% and real personal consumption in goods and services decreased 33.2%. In the third quarter, real GDP increased 33.4%, and real personal consumption in goods and services increased 41.0%. Real GDP showed a more moderate increase of 4.3% and real personal consumption expenditures increased 2.3% in the fourth quarter of 2020. Real GDP decreased 3.5% in 2020 from 2019 (from the 2019 annual level to the 2020 annual level), compared with an increase of 2.2 percent in 2019 from 2018. According to the BEA's `advance' estimate, real GDP increased 6.4% and real personal consumption expenditures increased 10.7% in the first quarter of 2021.

In April 2021, both the unemployment rate, at 6.1%, and the number of unemployed persons, at 9.8 million, were little changed from the previous month. These measures are down considerably from their April 2020 highs (14.8% and 23.1 million, respectively) but remain well above their pre-pandemic levels in February 2020 (3.5% and 5.7 million, respectively). Specifically, for the sectors evaluated in this proposed rule, in April 2021, the unemployment rate for the Wholesale Trade sector was 3.3%, and the unemployment rate for the Retail Trade sector was 6.8%. In April 2020, the unemployment rates for these sectors were 9.9% and 18.6%, respectively. The Federal Reserve Board's Monetary Policy Report, published in June 2020, shows that, in general, the most impacted firms in these sectors are small businesses. 1

Accordingly, in view of the analytical data discussed above and the economic impacts of the COVID-19 pandemic, SBA proposes to adopt increases to size standards for 49 industries and to retain the current size standards for 88 industries.

The proposed size standards are presented by measure of size in Table 8, Proposed Size Standards Revisions (Employees) and Table 9, Proposed Size Standards Revisions (Receipts). Also presented in Table 8 and Table 9 are current and calculated size standards for comparison.

The FAA invites you to send any written relevant data, views, or arguments about this proposal. Send your comments to an address listed under ADDRESSES . Include “Docket No. FAA-2021-0377; Project Identifier MCAI-2021-00380-R” at the beginning of your comments. The most helpful comments reference a specific portion of the proposal, explain the reason for any recommended change, and include supporting data. The FAA will consider all comments received by the closing date and may amend this proposal because of those comments.

Except for Confidential Business Information (CBI) as described in the following paragraph, and other information as described in 14 CFR 11.35, the FAA will post all comments received, without change, to https://www.regulations.gov, including any personal information you provide. The agency will also post a report summarizing each substantive verbal contact received about this NPRM.

CBI is commercial or financial information that is both customarily and actually treated as private by its owner. Under the Freedom of Information Act (FOIA) (5 U.S.C. 552), CBI is exempt from public disclosure. If your comments responsive to this NPRM contain commercial or financial information that is customarily treated as private, that you actually treat as private, and that is relevant or responsive to this NPRM, it is important that you clearly designate the submitted comments as CBI. Please mark each page of your submission containing CBI as “PROPIN.” The FAA will treat such marked submissions as confidential under the FOIA, and they will not be placed in the public docket of this NPRM. Submissions containing CBI should be sent to Hal Jensen, Aerospace Engineer, Operational Safety Branch, Compliance & Airworthiness Division, FAA, 950 L'Enfant Plaza N SW, Washington, DC 20024; telephone (202) 267-9167; email hal.jensen@faa.gov . Any commentary that the FAA receives which is not specifically designated as CBI will be placed in the public docket for this rulemaking.

Transport Canada, which is the aviation authority for Canada, has issued Canadian AD CF-2017-36, dated December 15, 2017 (Canadian AD CF-2017-36), to correct an unsafe condition for Bell Helicopter Textron Canada Limited (BHTCL) (now Bell Textron Canada Limited) Model 505 helicopters serial numbers 65011 through 65023, 65025 through 65028, 65030 through 65032, 65034, and 65036. Transport Canada advises of three occurrences of metallic debris in the engine oil lubrication system of the Model 505 helicopter causing the Garmin Engine Airframe (GEA) 12 VDC reference voltage to be shorted to ground. This short to ground results in loss of display of important flight information including the main rotor rotations per minute (Nr), fuel quantity, and transmission oil pressure and temperature, and the generator voltage and ammeter parameters are marked invalid with a red “X” on the primary flight display (PFD) and the multi-function display (MFD). This condition, if not addressed, could result in loss of caution, advisory, and system performance indications for multiple helicopter systems, particularly when the initiating event may be the activation of the engine chip detector.

Accordingly, Canadian AD CF-2017-36 requires replacing relay panel assembly part number (P/N) SLS-075-002-107 with relay panel assembly P/N SLS-075-002-109.

These helicopters have been approved by the aviation authority of Canada and are approved for operation in the United States. Pursuant to the FAA's bilateral agreement with Canada, Transport Canada, its technical representative, has notified the FAA of the unsafe condition described in its AD. The FAA is proposing this AD after evaluating all known relevant information and determining that an unsafe condition is likely to exist or develop on other helicopters of the same type design.

The FAA reviewed Bell Helicopter Alert Service Bulletin 505-17-04, dated December 6, 2017 (ASB 505-17-04). ASB 505-17-04 specifies procedures for replacing relay panel assembly P/N SLS-075-002-107 with relay panel assembly P/N SLS-075-002-109. ASB 505-17-04 also specifies procedures for accomplishing a functional test of the two engine electrical magnetic plugs and provides a notice to ensure 505-FM-1 (TR-2) is inserted into the flight manual.

This service information is reasonably available because the interested parties have access to it through their normal course of business or by the means identified in the ADDRESSES section.

This proposed AD would require replacing relay panel assembly P/N SLS-075-002-107 with relay panel assembly P/N SLS-075-002-109.

Canadian AD CF-2017-36 requires replacing the relay panel assembly within 25 hours air time or 30 days, whichever occurs first, whereas this proposed AD would require that replacement within 25 hours time-in-service instead. Canadian AD CF-2017-36 applies to certain serial-numbered Model 505 helicopters, where as this proposed AD would apply to certain serial-numbered Model 505 helicopters with relay panel assembly P/N SLS-075-002-107 installed instead.

The FAA estimates that this proposed AD would affect 3 helicopters of U.S. Registry. The FAA estimates that operators may incur the following costs in order to comply with this proposed AD. Labor costs are estimated at $85 per work-hour.

Replacing each relay panel assembly would take about 3 work-hours and parts would cost $7,079 for an estimated cost of $7,334 per helicopter and $22,002 for the U.S. fleet.

Title 49 of the United States Code specifies the FAA's authority to issue rules on aviation safety. Subtitle I, section 106, describes the authority of the FAA Administrator. Subtitle VII: Aviation Programs, describes in more detail the scope of the Agency's authority.

The FAA is issuing this rulemaking under the authority described in Subtitle VII, Part A, Subpart III, Section 44701: General requirements. Under that section, Congress charges the FAA with promoting safe flight of civil aircraft in air commerce by prescribing regulations for practices, methods, and procedures the Administrator finds necessary for safety in air commerce. This regulation is within the scope of that authority because it addresses an unsafe condition that is likely to exist or develop on products identified in this rulemaking action.

The FAA determined that this proposed AD would not have federalism implications under Executive Order 13132. This proposed AD would not have a substantial direct effect 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.

For the reasons discussed, I certify this proposed regulation:

(1) Is not a “significant regulatory action” under Executive Order 12866,

(2) Would not affect intrastate aviation in Alaska, and

(3) Would not have a significant economic impact, positive or negative, on a substantial number of small entities under the criteria of the Regulatory Flexibility Act.

Accordingly, under the authority delegated to me by the Administrator, the FAA proposes to amend 14 CFR part 39 as follows:

The FAA invites you to send any written relevant data, views, or arguments about this proposal. Send your comments to an address listed under ADDRESSES . Include “Docket No. FAA-2021-0375; Project Identifier MCAI-2020-01245-R” at the beginning of your comments. The most helpful comments reference a specific portion of the proposal, explain the reason for any recommended change, and include supporting data. The FAA will consider all comments received by the closing date and may amend this proposal because of those comments.

Except for Confidential Business Information (CBI) as described in the following paragraph, and other information as described in 14 CFR 11.35, the FAA will post all comments received, without change, to https://www.regulations.gov, including any personal information you provide. The agency will also post a report summarizing each substantive verbal contact received about this NPRM.

CBI is commercial or financial information that is both customarily and actually treated as private by its owner. Under the Freedom of Information Act (FOIA) (5 U.S.C. 552), CBI is exempt from public disclosure. If your comments responsive to this NPRM contain commercial or financial information that is customarily treated as private, that you actually treat as private, and that is relevant or responsive to this NPRM, it is important that you clearly designate the submitted comments as CBI. Please mark each page of your submission containing CBI as “PROPIN.” The FAA will treat such marked submissions as confidential under the FOIA, and they will not be placed in the public docket of this NPRM. Submissions containing CBI should be sent to Ronnea Derby, Aerospace Engineer, Denver ACO Branch, Compliance & Airworthiness Division, FAA, 26805 E 68th Ave., Mail Stop: Room 214; Denver, CO 80249; telephone (303) 342-1093; email Ronnea.L.Derby@faa.gov. Any commentary that the FAA receives which is not specifically designated as CBI will be placed in the public docket for this rulemaking.

EASA, which is the Technical Agent for the Member States of the European Union, has issued EASA AD 2015-0172, dated August 21, 2015 (EASA AD 2015-0172), to correct an unsafe condition for AgustaWestland S.p.A (formerly Agusta S.p.A.), AgustaWestland Philadelphia Corporation (formerly Agusta Aerospace Corporation) (now Leonardo S.p.a.) Model AB139 and AW139 helicopters with an EFS installed. EASA advises of two events of uncommanded EFS deployment during flight. Subsequent investigation revealed that these conditions had been caused by improper design of the EFS control panel part numbers (P/Ns) 3G9560V00556 (for use with night vision goggle) and 3G9560V00557 (standard). This condition, if not addressed, could result in reduced control of the helicopter.

Accordingly, EASA AD 2015-0172 requires replacing EFS control panel P/Ns 3G9560V00556 and 3G9560V00557 with EFS control panel P/Ns 3G9560V00559 and 3G9560V00558, respectively. EASA AD 2015-0172 also prohibits installing EFS control panel P/Ns 3G9560V00556 and 3G9560V00557 on any helicopter.

These helicopters have been approved by EASA and are approved for operation in the United States. Pursuant to the FAA's bilateral agreement with the European Union, EASA has notified the FAA about the unsafe condition described in its AD. The FAA is proposing this AD after evaluating all known relevant information and determining that the unsafe condition described previously is likely to exist or develop on other helicopters of these same type designs.

The FAA reviewed AgustaWestland Bollettino Tecnico No. 139-374, dated July 6, 2015. This service information specifies procedures for replacing EFS control panel P/Ns 3G9560V00556 and 3G9560V00557 with EFS control panel P/Ns 3G9560V00559 and 3G9560V00558, respectively. This service information also notes that EFS control panel P/Ns 3G9560V00556 and 3G9560V00557 can be upgraded by following Sirio Panel Service Bulletin 6WS-MI100135 Ed.01 and 6WS-MI100134 Ed.01.

This proposed AD would require replacing EFS control panel P/Ns 3G9560V00556 and 3G9560V00557 with EFS control panel P/Ns 3G9560V00559 and 3G9560V00558, respectively. This proposed AD would also prohibit installing EFS control panel P/Ns 3G9560V00556 and 3G9560V00557 on any helicopter.

EASA AD 2015-0172 applies to Model AB139 and AW139 helicopters with an EFS installed, whereas this proposed AD would apply to those model helicopters with EFS control panel P/N 3G9560V00556 (for use with night vision goggle) or 3G9560V00557 (standard) installed instead. EASA AD 2015-0172 specifies replacing an affected EFS control panel within a compliance time of flight hours or months, whichever occurs first, based on helicopter configuration, whereas this proposed AD would require that replacement within a shorter compliance time in hours time-in-service but the same number of months, based on helicopter configuration instead.

The FAA estimates that this AD, if adopted as proposed, would affect up to 133 helicopters of U.S. Registry. Labor rates are estimated at $85 per work-hour. Based on these numbers, the FAA estimates the following costs to comply with this proposed AD.

Replacing an EFS control panel would take about 1 work-hour and parts would cost about $12,342 for an estimated cost of $12,427 per helicopter and up to $1,652,791 for the U.S. fleet.

Title 49 of the United States Code specifies the FAA's authority to issue rules on aviation safety. Subtitle I, section 106, describes the authority of the FAA Administrator. Subtitle VII: Aviation Programs, describes in more detail the scope of the Agency's authority.

The FAA is issuing this rulemaking under the authority described in Subtitle VII, Part A, Subpart III, Section 44701: General requirements. Under that section, Congress charges the FAA with promoting safe flight of civil aircraft in air commerce by prescribing regulations for practices, methods, and procedures the Administrator finds necessary for safety in air commerce. This regulation is within the scope of that authority because it addresses an unsafe condition that is likely to exist or develop on products identified in this rulemaking action.

The FAA determined that this proposed AD would not have federalism implications under Executive Order 13132. This proposed AD would not have a substantial direct effect 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.

For the reasons discussed, I certify this proposed regulation:

(1) Is not a “significant regulatory action” under Executive Order 12866,

(2) Would not affect intrastate aviation in Alaska, and

(3) Would not have a significant economic impact, positive or negative, on a substantial number of small entities under the criteria of the Regulatory Flexibility Act.

Accordingly, under the authority delegated to me by the Administrator, the FAA proposes to amend 14 CFR part 39 as follows:

The DoD may contract for private security functions to fulfill non-combat requirements for security in contingency operations, humanitarian or peace operations, and other military operations or exercises. Private security functions include guarding of personnel, facilities, designated sites, or property of a Federal agency, a contractor or subcontractor, or a third party. It is DoD policy that PSCs must be established, registered, well regulated, rigidly disciplined, and properly staffed with carefully selected operating personnel. This policy reflects U.S. law and is implemented through this rule, DoD Directives, DoD Instructions, and acquisition policies and regulations, to include the use of rigorous and verifiable business and operational standards.

This regulatory action proposes changes to the current rule in order to provide clarification to PSCs supporting DoD in support of contingency operations, humanitarian or peace operations, or other military operations or exercises outside of the U.S. The proposed changes include additional citations for guidance on inherently governmental functions and PSC compliance with DoD approved national and international recognized quality assurance management standards. PSCs must also cooperate with DoD on all government investigations. DoD is responsible for providing the appropriate contract administration oversight of PSCs. Finally, for clarification, this regulatory action proposes to add the definitions on total force and arming authorities to ensure compliance with statutory requirements.

The proposed updates to this rule are required to meet the mandate of Section 862 of the 2008 NDAA, as amended by Section 813 of the 2010 NDAA and Section 832 of the 2011 NDAA.

The rule was initially published as an interim final rule in the Federal Register (74 FR 34691) on July 17, 2009, because there was insufficient policy and guidance regulating the actions of DoD and other governmental PSCs and their employees' movements in operational areas. The final rule, published in the Federal Register (74 FR 49650) on September 11, 2011, established policy, assigned responsibilities and provided procedures for the regulation of the selection, accountability, training, equipping and conduct of personnel performing private security functions under a covered contract during contingency operations, combat operations, or other significant military operations. It also assigned responsibilities and established procedures for incident reporting, use of and accountability for equipment, rules for the use of force, and a process for administrative action or the removal, as appropriate, of PSCs and PSC personnel.

The corresponding internal DoD policy is captured in DoD Instruction 3020.50, “Private Security Contractors (PSCs) Operating in Contingency Operations, Humanitarian or Peace Operations, or Other Military Operations or Exercises,” published on July 22, 2009, and last updated on August 31, 2018. For additional information, DoD Instruction 3020.50 can be accessed at https://www.esd.whs.mil/Portals/54/Documents/DD/issuances/dodi/302050p.pdf.